Monthly Archives: April 2019
“We find the correlations strong enough to allow the use of DSI [Daily Sentiment Index] as a leading indicator and as a timing tool,’ [Jake] Bernstein declares. He’s quick to point out that DSI isn’t the end-all, be-all of market indicators. ‘DSI is not perfect. However, it does have immense value as a warning system. Perfect or not, the DSI for gold has been sounding a klaxon for more than a month. Small traders have turned bearish on bullion in a big way. Just look at the DSI’s three-day moving average in the chart below. It submerged below 25 in early May and has been under water ever since.”
USAGOLD note: This is an interesting observation and indicator from Jake Bernstein. For months we have been following the consistent global involvement in the gold market among funds and institutions as buyers and wondered why private investors remained on the sidelines. Underneath it all, in our estimation, the chief driving factor to the complacency is not so much that the public is bearish on bullion. It is more the belief that modern trading systems will allow a quick exit from the stock market when that particular klaxon rings (as in, for example, a 1987-style market crash). . . . . and an equally quick entrance into the gold market.
Investors should consider that they may be able to get out of stocks, but at what price? And that they might be able to get into gold and silver, but once again – at what price? Modern online trading systems might end up working just fine, but the offered bid and ask prices might be something else again. Back offices will adjust quickly to failing market conditions. The institutions and funds through long experience are well aware of how quickly bids can drop during a general market breakdown and are planning accordingly. The public, for better or worse, is oblivious putting their faith in technologies that in the end will fundamentally still mirror market conditions. . . .and in a New York nanosecond.
Repost from 7-2-2018
“The great euphoria emanating from these near-record-high stock markets is breathtaking. Traders are again convinced stocks do nothing but rally indefinitely. That everything-is-awesome mindset has stunted gold’s latest upleg, since there’s no perceived need for prudently diversifying stock-heavy portfolios. But that psychology can change fast, as we saw a half-year ago. Gold investment roars back as stocks roll over.”
USAGOLD note: This article by an old friend, Adam Hamilton, explores more deeply a point we made in a post yesterday about the prevailing psychology among stock market investors, not just in the United States but globally.
Repost from 4-24-2019
“The metal has in the past proved to be a highly effective portfolio diversifier that helps reduce volatility, when added to a portfolio of stocks, bonds and USD denominated assets. Money manager positioning data supports this hypothesis. Considering the balance of risks for equity markets should tilt towards a correction and away from another substantial bull run and that the USD is poised to weaken longer term, there will likely be a motivation to increase gold’s relative weighting in money manager allocations.”
USAGOLD note: Institutions have been accumulating physical gold off and on over the last few years. Since the start of 2019, however, institutional acquisitions have slowed as reflected in ETF stockpiles – the favored vehicle among professional money managers. (Shown in the first chart below) TDS Securities is now saying that all of that is about to change for the reasons outlined above. In turn, the gold price has tracked the ebb and flow in ETF stockpiles over the longer run (Shown in the second chart below).
Chart courtesy of GoldChartsRUs
Repost from 4-25-2019
“Congressional Republicans are led on a short leash by a president who, as a candidate, vowed to not touch entitlement programs that are significant drivers of the deficit, and who breezily promised to eliminate the national debt (currently $22 trillion) in eight years. (Today, that would mean eight reductions of $2.75 trillion, a sum equal to 63% of the fiscal 2019 budget.) Republicans, now thoroughly disarmed concerning the issue of fiscal probity, struggle to frighten the 2020 electorate with the specter of spendthrift socialists threatening the Republic.”
USAGOLD note: George Will has a point here. . .
Repost from 4-25-2019
(USAGOLD – 4-30-2019) – Gold is priced at $1282 and level with yesterday’s close ahead of today’s Fed meeting. Silver is down 4¢ at $14.90. With oil moving sharply to the upside this morning and the dollar down, the quiet gold market is a bit of an anomaly. Fed Week, though, is typically a drag on the gold price and that might be the dominant mindset in today’s early going. The yellow metal traded firmly in Asia overnight – up $6 at one point – but gave back those gains at the COMEX open.
The gold market (along with financial markets in general) has yet to completely digest completely the unusual GDP/PCE report issued last Thursday, i.e., the one to which it reacted by rising $9 out of the gate. We came across this assessment from Gluskin Sheff’s widely-followed David Rosenberg and thought it worth passing along: “This was a low-quality GDP report. All one-offs – lower imports, higher inventories & Pentagon spending. Real final private sales a puny 1.3%. Removing more lipstick from this pig shows cyclically-adjusted GDP contracting at a 2% annual rate; deepest decline in nearly a decade.”
There will be those sitting around the table at today’s meeting of the Federal Open Market Committee for whom that 2% cyclically-adjusted contraction will have a sobering effect. If a more dovish public posture on the part of the Fed is the result, it could have a positive effect on the gold market.
Quote of the Day
“There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely. Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course. They will get the maximum reward from the increase as it continues; they will be out before the eventual fall. For built into this situation is the eventual and inevitable fall. Built in also is the circumstance that it cannot come gently or gradually. When it comes, it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape.” – John Kenneth Galbraith, A Short History of Financial Euphoria, 1990 (With thanks to John Hussman, Hussman Funds)
Chart of the Day
Chart note: The OECD measures consumer confidence in various economies including the United States. A reading above 100 indicates a positive outlook toward the future economic situation. Values below 100 reflect a more pessimistic outlook. As you can see, we are now at a level in consumer confidence that has signaled downturns in the past. In fact, consumer confidence is now ahead of where it was just before the 2008-2009 recession and just below the level it registered before the dot.com stock market bust in 2000.
Book Review: American Default – The Untold Story of FDR, the Supreme Court, and the Battle over Gold
“The author tells a gripping story exploring justices, politicians and economist. He compares the US action and its impact to Argentina and other counties that have likewise defaulted in debts and depreciated their currency against a pegged or fixed exchange rate. In Argentina’s case it was to the US dollar; in the US case it was to gold. Most interesting of all is the last few chapters. The author asks if the depreciation can happen again. Knowing what we know about public debt on the US, as a % of GNP, and unfunded commitments of welfare programs, it seems that it is only a matter of when, not if. At what point in our future will our debts be too great that the market as a whole will lose faith in the ability of the dollar to provide some price stability compared to other alternative global currencies?”
USAGAOLD note: Or compared to gold. In a fiat money system, like the one under which we function today, currency depreciation is an on-going process rather than a singular event, like Roosevelt’s devaluation. The history of gold since 1971 is testament to its use as a hedge against currency depreciation and provides a window to the future.
Repost from 7-3-2018
“Today, fear of a financial collapse has receded, and so have the prices of both precious metals. Gold sits at about $1,300 and silver languishes a little above $15. Is it time to buy at these bargain prices? The answer is yes, especially silver, but not for the reasons you think.”
USAGOLD note: We at USAGOLD have long advocated adding silver to the mix for portfolio insurance purposes especially at times like the present when the gold-silver ratio is high (now 85 to 1). At the same time, we do not advocate silver at the exclusion of gold, but more as an adjunct through which the investor conceivably can get more bang for his or her buck if silver outperforms gold to the upside.
Image courtesy of © Degussa Goldhandl 2019
Repost from 4-3-2019
“The second part of our forecast in 1981 said that according to our very long-term cycle study, that bear market would be followed by a 30-year rise in gold. We even said we had no idea what would cause it, but the cycles said it should happen. If the forecast I made in 1981 still holds true, gold could have a continued secular bull market until 2030. That means the gold bull market could have about 11 more years to go. Historically, the final phase of a bull market is the most spectacular.”
USAGOLD note: Dohmen’s conclusions are worth noting in that he called the twenty-year bear market for gold that began in 1981 and ended in 2001.
Repost from 4-23-2019
(USAGOLD – 4-29-2019) – Gold opened lower on the COMEX this morning after a listless night overseas. It is trading at $1282.50 – down $3.75 from Friday’s close. Silver is down 9¢ at $14.99. Reuters reported early Friday that gold demand in Asia is picking up at currently low prices. Buying in India is strong for wedding season while bullion premiums in China are at the highest in two years. The event of the week will be the Fed meeting Tuesday and Wednesday. Though no surprises are expected, Friday’s unexpectedly low PCE inflation reading raised a few eyebrows and sent the gold price up $9 on the day. Financial Times says that “inflation’s persistent weakness is troubling the Fed” and a sign that “the economy may be weaker than thought.”
Quote of the Day
“I hear people saying: ‘Maybe the Federal Reserve can use the reduction of interest rates forever. Maybe the central banks can just use quantitative easing forever, continuously buy securities and pop liquidity into the economy. And, maybe we don’t ever have to have a slowdown again.’ Simply put: ‘It’s different this time.’ But how much money would you want to bet on that? Is it really possible that we will never have a recession again? I’m not sold on this because the riskiest thing in the world is to believe that there is no risk. When people sense that the risk of an economic slowdown has been eliminated, they will take steps to ensure that there is plenty of risk present, in particular by bidding up security prices too high. People create risk through their own behavior.” – Howard Marks, the Market NZZ interview
Chart of the Day
Chart courtesy of Sentimentrader.com
Chart note: “Maximum optimism Dumb Money Confidence,” writes Sentimentrader’s Jason Goepfert, “has been climbing steadily for a month, and stocks have so far shrugged off that extreme optimism. Now it has reached its highest level in a decade. Every date that saw this high of a reading in the past 20 years sported a negative return in the S&P 500 at some point between the next 2-8 weeks. This is also one of the handful of times since 1999 when Dumb Money was highly confident about a market rally two weeks into an earnings reporting month.”
“The Fed is clearly preparing for the next episode where it will be called upon to backstop faltering markets. Our central bankers will undoubtedly point to disinflation risk and consumer prices drifting below the Fed’s 2% target. I’ll expect markets to play along. But without the shock effect of spurring a big market reversal – with attendant risk embracement and speculative leveraging – it’s likely that a 25 bps rate cut will have only ephemeral impact on marketplace liquidity. Markets will quickly demand more QE – and Chairman Powell is right back in the hot seat.”
USAGOLD note: It will not be just the market demanding more QE. The sitting president has already publicly made the suggestion. . . . . .
“Oil prices fell 3% on Friday after U.S. President Donald Trump again pressured the Organization of the Petroleum Exporting Countries to raise crude production to ease gasoline prices.”
USAGOLD note: This was the big economic news Friday afternoon. . . . Those with an eye on oil might also want to take a look at the Evans-Pritchard article further down the page.
“On Wednesday the Federal Reserve will make its third monetary policy decision of 2019. With a new GDP print showing another low reading on inflation, the Fed is expected to keep the benchmark interest rate steady at the current target range of 2.25% to 2.50%. In March, the data-dependent Fed signaled no more rate hikes for the year amid tightening financial conditions and geopolitical concerns abroad.
USAGOLD note: Though no suprises are expected, there is always the chance the market for better or worse will read something into the post meeting statement and press conference. More often than not, gold finds Fed Week a challenge. However, with policy for the time being pretty much baked into the cake, the Tuesday/Wednesday conclave could be a non-factor this time around.
Note: Commitment of Traders reports are published Friday with data from the previous Tues
Gold specs pare bullish bets to lowest level since November
Gold Non-Commercial Speculator Positions:
Large precious metals speculators once again lowered their bullish net positions in the Gold futures markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.
The non-commercial futures contracts of Gold futures, traded by large speculators and hedge funds, totaled a net position of 37,395 contracts in the data reported through Tuesday April 23rd. This was a weekly decrease of -18,878 net contracts from the previous week which had a total of 56,273 net contracts.
The week’s net position was the result of the gross bullish position (longs) falling by -6,522 contracts to a weekly total of 176,691 contracts while the gross bearish position (shorts) gained by 12,356 contracts for the week to a total of 139,296 contracts.
The speculative net position has decreased for two straight weeks (by a total of -67,969 contracts over that period) and for three out of the past four weeks. The cool off in speculator sentiment has pushed the current standing to the lowest level since November 27th when positions totaled just 1,871 net contracts.
Gold Commercial Positions:
The commercial traders position, hedgers or traders engaged in buying and selling for business purposes, totaled a net position of -57,396 contracts on the week. This was a weekly advance of 21,034 contracts from the total net of -78,430 contracts reported the previous week.
Over the same weekly reporting time-frame, from Tuesday to Tuesday, the Gold Futures (Front Month) closed at approximately $1273.20 which was a shortfall of $-4.00 from the previous close of $1277.20, according to unofficial market data.
Silver speculators lower their bets into a new bearish position
Silver Non-Commercial Speculator Positions:
Large precious metals speculators continued to reduce their net positions in the Silver futures markets this week into a small bearish standing, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.
The non-commercial futures contracts of Silver futures, traded by large speculators and hedge funds, totaled a net position of -110 contracts in the data reported through Tuesday April 23rd. This was a weekly decrease of -5,995 net contracts from the previous week which had a total of 5,885 net contracts.
The week’s net position was the result of the gross bullish position (longs) declining by -144 contracts to a weekly total of 75,889 contracts while the gross bearish position (shorts) increased by 5,851 contracts on the week to a total standing of 75,999 contracts.
The net speculative position fell for a fourth straight week and for the seventh time out of the past eight weeks. The silver spec standing has now dipped over into bearish territory for the first time since December 4th of 2018 when it ended a streak of seventeen consecutive weeks of bearish positions.
Silver Commercial Positions:
The commercial traders position, hedgers or traders engaged in buying and selling for business purposes, totaled a net position of -19,992 contracts on the week. This was a weekly gain of 3,680 contracts from the total net of -23,672 contracts reported the previous week.
Over the same weekly reporting time-frame, from Tuesday to Tuesday, the Silver Futures (Front Month) closed at approximately $1479.10 which was a fall of $-12.40 from the previous close of $1491.50, according to unofficial market data.
US Dollar Index Speculators edged bullish bets lower
US Dollar Index Speculator Positions
Large currency speculators lowered their bullish net positions in the US Dollar Index futures markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.
The non-commercial futures contracts of US Dollar Index futures, traded by large speculators and hedge funds, totaled a net position of 28,755 contracts in the data reported through Tuesday April 23rd. This was a weekly decline of -183 contracts from the previous week which had a total of 28,938 net contracts.
This week’s net position was the result of the gross bullish position growing by 6,046 contracts to a weekly total of 49,172 contracts but being slightly overcome by a gain in the gross bearish position by 6,229 contracts for the week to a total of 20,417 contracts.
The net speculator position dipped for a second consecutive week after gaining in the previous two weeks. The current standing remains bullish for USD bets but the overall level has now been under the +30,000 net contract level for six weeks in a row. Previously, bets had been above this threshold for thirty-two consecutive weeks through March 12th.
“Donald Trump’s double strangulation of Iran and Venezuela is reducing spare capacity in the global oil markets to wafer-thin levels very fast. If anything goes wrong in the geopolitical cauldron of world energy over the next six months, we will discover whether Saudi Arabia really is capable of cranking up an extra 2 million barrels a day of crude.”
USAGOLD note: Ambrose Evans-Pritchard applies his typically thorough and insightful gift for analysis to the current oil market. . . a must read that includes some surprising speculation on Saudi Arabia’s ability to fill the production gap that would materialize if Venezuela and Iran were indeed out of the picture.
Image: Aramco’s first commercial oil well in Saudi Arabia March 3, 1938.
“The world’s largest market isn’t buying the feel-good narrative that investors have embraced this week with global stocks sitting on the cusp of setting a record high and the riskiest corporate bonds soaring like the world economy is back in synchronized growth mode. But traders in the $5 trillion-a-day foreign-exchange market are flocking to the dollar, yen and Swiss franc, which is a bit odd since those ‘haven’ currencies normally outperform when the outlook is worsening, not improving.”
USAGOLD note: An interesting read. . . . .Maybe the FOREX market is trying to tell us something.
“In the United States, economic security in old age was seen, for a long time, as both a social issue and a national obligation. From the birth of Social Security to the end of the 20th century, the common assumption has been that we have a shared responsibility to secure a decent retirement for our citizens. Yet that notion is weakening rapidly. Instead, we have started to hear echoes of the mantra of self-reliance that characterized welfare “reform” in the 1990s: You alone are in charge of your retirement; if you wind up in poverty in your old age, you have only your own inability to plan, save, and invest to blame.”
USAGOLD note: This article, though substantive with respect to the retirement problem for the middle class, fails to consider the potentially cataclysmic effect of a major and protracted downturn in the stock market. Too many are “all-in” with respect to stocks in their Individual Retirement Accounts hoping to accumulate as much capital as possible without regard to the potential downside. If you are among those who think a hedge is in order, we can help you structure a gold and silver diversification within your retirement plan.
Repost from 4-2-1019
“With the setup for silver now looking at its most healthy for a long time, what do the latest COTs have to tell us? You are invited to directly compare the latest COT chart for silver with its 1-year chart above, which is another reason a 1-year timeframe for one of the silver charts was selected. This is edge of the chair stuff for as we can see silver’s COT is at its most bullish since last November when the silver price was down making the 2nd low of its Double Bottom.There was a big drop in Commercials’ short positions last week and the Large Specs, who love to give up at the bottom, have thrown in the towel and legged it for the hills, which is just what we want to see before a rally.”
USAGOLD note: No rally like a silver rally. . . .We have had a steady stream of silver buyers at USAGOLD over the past several weeks buying both bars and bullion coins. Maund offers TA insights at the link above . . . .
Image courtesy of DeGussaGoldHandl
Repost from 4-23-2019
(USAGOLD – 4-26-2019) – Gold was ambling along lazily this morning until the Bureau of Economic Analysis announced GDP (an unexpectedly strong +3.2%) and PCE (a very weak 1.3%) numbers. Gold’s immediate response was to go sharply lower, then it turned on a dime and went sharply higher. Obviously, it registered a stronger response to the downbeat PCE report, the Fed’s preferred inflation gauge, than it did to the upbeat GDP number, the widely-followed measure of general economic performance. All, in the hearts and minds of Wall Street’s best and brightest, rests upon what the Fed might or might not do next. As it stands, gold is up $6 on the day $1285. Silver is up 8¢ at $15.05.
ThomsonReuters-Zawya reports that “[t]he record levels of gold buying by central banks which bolstered the price of the yellow metal in 2018 (Please see our Chart of the Day below) has continued into the first couple of months of 2019, with 51 tonnes bought in February alone. Speaking at the Dubai Precious Metals Conference earlier this month, Ross Norman, CEO of London-based gold bullion broker Sharps Pixley, said that demand from central banks in January and February ‘amounted to 90 tonnes of fresh buying’, which is 61 percent higher than the 56 tonnes bought in the first two months of 2018, and the highest rate of growth since the first two months of 2008.” India announced recently that it plans to add 46.7 tonnes of gold to its reserves in 2019. India’s additions are part of “a wider picture across developing economies that are looking at de-dollarizing their foreign-exchange reserves,” according to SP Angel, the commodities brokerage (as reported at Scrap Register).
Quote of the Day
“At the quarter-century mark of 1925, the great bull market was under way, and Graham*, then 31, developed what he later described as a ‘bad case of hubris.’ During an early-1929 conversation with business associate Bernard Baruch (about whom he disparagingly observed, ‘He had the vanity that attenuates the greatness of some men’), both agreed that the market had advanced to ‘inordinate heights, that the speculators had gone crazy, that respected investment bankers were indulging in inexcusable high jinks, and that the whole thing would have to end up one day in a major crash.’ Several years later he lamented, ‘What seems really strange now is that I could make a prediction of that kind in all seriousness, yet not have the sense to realize the dangers to which I continued to subject the Account’s capital.’ In mid-1929, the equity in the ‘Account’ was a proud $2,500,000; by the end of 1932, it had shrunk to a mere $375,000.” – Frank K. Martin, A Decade of Delusions
Chart of the Day
Chart note: “Central bank net purchases reached 651.5t in 2018, 74% higher year over year,” says the World Gold Council in its year-end gold demand report. “This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. These institutions now hold nearly 34,000 tonnes of gold. Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets.”
“Argentine financial assets tumbled for a second day, amid mounting political worries about the future of President Mauricio Macri’s government as it struggles to grapple with record-high inflation, slowing growth and a weakening currency.”
USAGOLD note: Argentina has been on and off the watch list for a good many years now. Lately, it is back “on” with repercussions in the banking business beyond its borders. The government’s struggle with inflation, a weak economy and a currency that few would consider a savings instrument is the citizen’s struggle. In that respect, there is little doubt that the demand for gold is strong among the citizenry at this point in time. On the other hand, Argentina, the country, is a gold seller having recently reduced its holdings by seven tonnes.
Chart courtesy of TradingEconomics.com
“With permanent dovish policies they give the political sphere license to not address issues and keep the illusion of growth and prosperity alive all the while realizing ever expanding wealth inequality and accumulating systemic debt setting the stage for the next financial crisis. But don’t count on citizens rising up in discontent. Everybody is distracted, glued to screens and attention spans are waning.”
USAGOLD note: Henrich hits on a number of points that concern many of us. . . .The graphic on What Happens in an Internet Minute is worth the visit alone, but the discussion about waning attention spans and how, by absorbing more and more information, we are becoming actually less and less informed is an attention-grabber.
“Capital flows from emerging markets to developed countries have occurred because central banks and private investors have sought the liquidity and superior credit ratings only offered by the dominant reserve currency markets. The inherent weakness of this ‘non-system’ is clear, however, which may explain why many emerging market central banks are increasing their allocation to gold. It is liquid and has neither credit nor default risk.”
USAGOLD note: Nation states line their portfolios with gold for the same reason private investors do – for long-term asset preservation and as a protection against currency failure.
Repost from 7-10-2018
“What I referred to in 2014 and what El-Erian refers to today is that central bank policy in both countries has been completely ineffective at restoring long-term trend growth or solving the steady accumulation of unsustainable debt. In Japan this problem began in the 1990s, and in the U.S. the problem began in 2009, but it’s the same problem with no clear solution.”
USAGOLD note: More and more, analysts are migrating to a realization that the economy is gripped by a powerful, seemingly inescapable, disinflationary undertow. In such an environment, the greatest danger is to the financial system itself, i.e., systemic risks and the possibility of another financial system breakdown similar to what happened in 2008.
Repost from 4-18-2019
“The fact that golden cross remained untouched for some people is a clear sign of divine protection of Our Lady Blessed Virgin Mary. Without prejudging the matter, let’s note the unique nature of the yellow metal, which helped the golden cross to survive intact even though the wooden roof burned down. You see, wood burns at around 600°C, while the melting point of gold is about 1064°C. The flames could not harm gold.”
USAGOLD note: A cleverly written essay that ends with the thought that “Healthy societies consist of responsible people who accumulate and preserve wealth.”
Repost from 4-19-2019
“However, with the sector backed by supportive economic conditions, including low real interest rates, high debt levels, policy uncertainty and robust physical demand, it seems only a matter of time before the precious metal breaks above this level and the gold sector enters the next phase of its recovery cycle.”
USAGOLD note: London-based Baker Steel Capital sees the gold sector as “positioned for a breakout performance” pushed by a reversal in overall market sentiment.
(USAGOLD – 4-25-2019) – Gold edged higher in a somewhat confused reaction to conflicting reports on the economy and another strong surge in the oil price. It is trading at $1277 and up $2.50 on the day. Silver is down 2¢ at $14.90. The Labor Department reported an unexpected uptick in applications for unemployment, the biggest rise in 19 months. Contrasting that, durable goods [refrigerators, washing machines, etc] orders rose 2.7%, the largest increase in eight months. As we go to post today’s report, it seems that oil’s rise is winning the day in the gold market. After a brief drop following the durable goods report, it is back to the upside.
Bert Dohmen, Dohmen Capital Research, offers some contrarian perspective on recent weakness in the gold price. “In 2018, bullish sentiment for gold and silver was at a multi-year low,” he says. “Very few people were interested. That’s usually the time to take a fresh look, technical and fundamental. If everything lines up, my analysis would go against the bearish majority. The chart below [not shown] shows the exposure to gold of managed money in gold futures and options. It shows that the allocation to gold was at its lowest point on this chart in October 2018, at least since 2006. Also important is that in spite the extremely low interest in gold, the gold price (yellow line) in 2018 was higher than at the gold low in 2016. I call this a very important long-term, bullish divergence.”
Quote of the Day
“The ‘threat’ is best seen through the emergence of exchange-traded funds (ETFs), which allow investors to get a proxy physical gold exposure through an investment via their stockbroker. In truth, these products are, in many cases, more expensive than trading and storing physical gold (especially for larger investors with a long-term investment time frame), have less trading flexibility, and are less secure than owning real physical gold.” – Jordan Eliseo, ABC Bullion/Australia
Chart of the Day
Chart note: J.P. Morgan Asset Management released a report recently ranking investments over the past twenty years. It shows gold as the second best performer over the period at a 7.7% average gain annually. REITs were number one at a 9.9% gain. Stocks ranked fourth at 5.6%.
“This increased Russia’s total gold reserves to 69,700,000 ounces or 2,167.9 tonnes, the central bank stated. Gold represents around 18% of the central bank’s total reserves. During the first quarter of 2019, Russia acquired 56 tonnes of the precious metal, buying 37.3 tonnes of that in January and February.”
USAGOLD note: It is unclear at this juncture if all of the additions to Russia’s reserves are coming from its gold mining sector. There has been speculation among some analysts that in addition Russia has been purchasing gold on the open market.
“India’s central bank is likely to join counterparts in Russia and China scooping up gold this year, adding to its record holdings and lending support to worldwide bullion demand as top economies diversify their reserves.”
USAGOLD note: The article reports that India may purchase 1.5 million ounces in 2019 or 46.7 tonnes – a big number when you consider it will come from open market purchases. China and Russia are adding to central bank reserves but the additions are coming from internal production not open market purchases. This article expands on the rationale behind the purchases from the perspective of developing countries.
“Tell me how this ends? was the despairing question attributed to American generals as they contemplated the quagmires in Vietnam and Iraq. The same question needs to be asked by US policymakers now, as they consider the escalating tensions between America and China.”
USAGOLD note: Gideon Rachman does a good job of boiling down what’s at stake for the United States and China in their developing trade and geopolitical conflict. China, he says, needs to consider that the attitude toward China is bipartisan and likely to outlast the Trump administration. The United States, for its part, needs to realize that it cannot stop China’s rise. But those two considerations are a simplification of a much more complicated and detailed analysis at the link above.
Repost from 12-18-2019
The road to confetti is long and winding
“Does the deployment of helicopter money not entail some meaningful risk of the loss of confidence in a currency that is, after all, undefined, uncollateralized and infinitely replicable at exactly zero cost? Might trust be shattered by the visible act of infusing the government with invisible monetary pixels and by the subsequent exchange of those images for real goods and services? . . . To us, it is the great question. Pondering it, as we say, we are bearish on the money of overextended governments. We are bullish on the alternatives enumerated in the Periodic table. It would be nice to know when the rest of the world will come around to the gold-friendly view that central bankers have lost their marbles. We have no such timetable. The road to confetti is long and winding.” – James Grant, Grant’s Interest Rate Observer
Dr. MoneyWise says. . . .Some think it takes an advanced degree in economics to understand the merits of a diversification in gold and silver when all it takes is a little common sense. Common sense ownership of physical metal saved the skeptical saver in the time of the French assignat inflation in 1789, the nightmare German inflation in 1923, the global bank collapses in 1932, the American stagflationary breakdown in the 1974 and Venezuela’s inflation in 2019 – even though those episodes span almost 250 years. As old Ben Franklin once said: “A change of fortune hurts a wise Man no more than a change of the Moon.”