Gold sharply higher on China withdrawal from trade negotiations

(USAGOLD – 5/23/2019) – Gold rose sharply in early U.S. trading on a statement from China’s Ministry of Commerce that China was formally withdrawing from trade negotiations with the United States.  The yellow metal is up $7 as this posted at $1281. Silver is up 7¢ at $14.52. Though the markets anticipated further volleys from both sides, a complete halt with China taking the proactive role in breaking negotiations comes as a jolt. The concurrent complete breakdown in Washington involving Trump, Pelosi and Schumer raises the question of whether or not the federal government too might come to a full stop.

Stocks are down 235 and the yield on the 30-year bond hit its lowest level in over a year. Bloomberg’s Richard Breslow seemed to capture the prevailing mood: “It has been a sloppy day all around. The litany of discouraging news is there for all to see. It doesn’t feel particularly helpful to run down the list again. Suffice to say it’s an understatement that the people in charge are hardly distinguishing themselves. And that is a reality playing out all over the globe. If there is one word to describe the mood it would be, ‘discouraged.’”

“Gold prices and silver prices will go up,” says Charles Nenner, a well-known cycle and geopolitical analyst in a USAWatchdog interview.  “It’s early, and it’s better to get in early instead of when it’s exploding, and everybody knows you have to now be in gold. It’s always the clever money that is basing their money into gold stocks. The price is going much higher. Remember, my upside price target is $2,500. Right now, it is $1,270, and $2,500 is a substantial move in gold.”

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’s4 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

* Benjamin Grahm, “The father of value investing”, 1894-1976, Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949).
Chart of the Day

Chart note:  Whether or not China will begin unloading its very large hoard of U.S. debt is a subject of much concern, but its intentions are one part of the much larger global de-dollarization puzzle. This chart shows the change in U.S. debt held by foreigners and international investors in billions of dollars from 1970 to present.  The level of ownership grew proportionately over time in concert with the overall issuance of U.S. debt until 2015, when it began to fall off.  The problem is not just that foreign investment in U.S. Treasuries is on the wane.  It is that the retreat has come at a time when U.S. borrowing needs are expected to consistently exceed $1 trillion per year. The question becomes, “How is the U.S. federal debt going to get financed?”  (For more detail, please see The $12 trillion federal debt bombshell –  A NEWS & VIEWS SPECIAL REPORT)

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