Gold bolts higher on Fed chair testimony – up $16 on strong COMEX volumes
(USAGOLD – 7/10/2019) – Gold bolted higher this morning on a clear, unambiguous statement from Fed chairman Powell that investment and the economy were slowing and that the central bank would act accordingly. The metal is up $16 at $1411.50. Silver is up 19¢ at $15.31. “Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened,” said Powell. “Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.” Morgan Stanley, in addition, forecasted that the FOMC would cut interest rates by 0.5% at its July meeting – a prediction that will take many by surprise following last week’s healthy jobs report. Volume shot notably higher on the COMEX August gold contract as result with the price advancing quickly once again over the $1400 mark.
Quote of the Day
“If we don’t quite know what the future holds, there is little point in getting carried away by very fancy mathematical calculations of optimal portfolios. Don’t rely on past data to be a good guide. Try to think through what mix of assets gives you the best chance of surviving some big event. That must mean including assets that are negatively correlated or uncorrelated in your portfolio. And I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.” – Mervyn King, former Governor, the Bank of England
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)