Monthly Archives: August 2019
Through Tuesday, August 27, 2019
Note: Commitment of Traders reports are published Friday with data from the previous Tuesday.
Gold speculators trimmed their bullish bets slightly this week
Gold Non-Commercial Speculator Positions:
Large precious metals speculators decreased their existing 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 296,838 contracts in the data reported through Tuesday August 27th. This was a weekly decline of -3,155 net contracts from the previous week which had a total of 299,993 net contracts.
The week’s net position was the result of the gross bullish position (longs) advancing by 10,315 contracts (to a weekly total of 362,609 contracts) while the gross bearish position (shorts) increased by a larger amount of 13,470 contracts for the week (to a total of 65,771 contracts).
Gold positions edged very slightly lower for the second time in the past three weeks. Despite the pull back, speculator sentiment has been on fire for gold over the past few months as bullish bets have risen by a total of +210,150 contracts just since June 4th. The current bullish standing (+296,838 contracts) remains very close to the +300,000 net contract level which has not been reached since September 6th of 2016 (a span of 155 weeks).
Gold Commercial Positions:
he commercial traders position, hedgers or traders engaged in buying and selling for business purposes, totaled a net position of -333,806 contracts on the week. This was a weekly gain of 2,444 contracts from the total net of -336,250 contracts reported the previous week.
Over the same weekly reporting time-frame, from Tuesday to Tuesday, the Gold Futures (Front Month) closed at approximately $1551.80 which was an increase of $36.10 from the previous close of $1515.70, according to unofficial market data.
Silver speculators sharply boosted their bullish bets for 2nd week
Silver Non-Commercial Speculator Positions:
Large precious metals speculators once again raised their bullish net positions in the Silver 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 Silver futures, traded by large speculators and hedge funds, totaled a net position of 59,852 contracts in the data reported through Tuesday August 27th. This was a weekly gain of 13,138 net contracts from the previous week which had a total of 46,714 net contracts.
The week’s net position was the result of the gross bullish position (longs) growing by 7,501 contracts (to a weekly total of 103,488 contracts) while the gross bearish position (shorts) lowering by -5,637 contracts for the week (to a total of 43,636 contracts).
Silver speculator bets rose strongly for a second consecutive week after having fallen in the previous two weeks. Speculative positions have now gained in nine out of the past thirteen weeks as sentiment continues to remain strong. The silver net position has advanced from a total of -8,443 contracts on June 4th to a total of +59,852 contracts this week which is a gain of +68,295 contracts over the past thirteen weeks.
Silver Commercial Positions:
The commercial traders position, hedgers or traders engaged in buying and selling for business purposes, totaled a net position of -81,681 contracts on the week. This was a weekly fall of -10,818 contracts from the total net of -70,863 contracts reported the previous week.
Over the same weekly reporting time-frame, from Tuesday to Tuesday, the Silver Futures (Front Month) closed at approximately $1829.80 which was an uptick of $115.00 from the previous close of $1714.80, according to unofficial market data.
US Dollar Index speculators nudged bullish bets up
US Dollar Index Speculator Positions
Large currency speculators lifted 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 29,897 contracts in the data reported through Tuesday August 27th. This was a weekly lift of 398 contracts from the previous week which had a total of 29,499 net contracts.
This week’s net position was the result of the gross bullish position (longs) declining by -961 contracts (to a weekly total of 48,102 contracts) compared to the gross bearish position (shorts) which saw a larger decline by -1,359 contracts on the week (to a total of 18,205 contracts).
US Dollar Index speculators inched up their bullish bets this week following two down weeks. Overall, dollar index speculative positions have risen for seven out of the past ten weeks and maintain their bullish standing right around the +30,000 net contract level.
“The first upside target [for silver] is the 23.6% retracement level at $22.15.”
USAGOLD note: Some interesting technical analysis on silver centered around the Gold to Silver ratio.
Chart courtesy of TradingView.com
“The European Central Bank will launch an ‘open-ended’ quantitative easing program of asset purchases next month as part of a broader package designed to lift the euro-area’s flagging economy and stimulate inflation, according to a prediction by Societe Generale.”
USAGOLD note: The shape of things to come in a confederation of nation states already experiencing strong citizen gold demand. Fascinating video from Wikimedia Commons on printing euros for those with some time on their hands. . . .
“UBS Wealth Management, which oversees $2.5tn for rich clients, has trimmed its core equity recommendation to an ‘underweight’ position for the first time since the height of the eurozone crisis in 2012, on worries that the ongoing trade war and slowing global growth increase the risk of owning stocks.”
USAGOLD note: Over the weekend, we had central bank leadership telling the world that there was not much it could do to counter the ill effects of the trade war. We even had one prominent central banker – Mark Carney, the head of the Bank of England – surprise the financial world by suggesting that perhaps it was time to look for alternatives to the dollar as the world’s reserve currency. UBS’ sell recommendation looks to be a reaction to the negative sentiment global leaders projected at the Jackson Hole and Biarritz meetings this past weekend.
Repost from 8-27-2019
“Gold will extend its winning ways as the U.S.-China standoff harms growth, risking a deeper slowdown and inviting more central-bank easing, according to UBS Group AG, which jacked up price forecasts with a prediction the precious metal may hit $1,600 within three months.”
USAGOLD note: A one two punch from UBS: Sell stocks. Buy gold.
Repost from 8-27-2019
“The goal of Wells Fargo’s statement was clearly to steer clients back into investment vehicles that generate fees and away from precious metals which generally don’t. But the impact on most clients will probably be the opposite, because most clients currently own exactly zero gold. So in reading the above they’re likely to gloss over the cautionary statements and fixate on the stuff Wells Fargo was forced to acknowledge….”
USAGOLD note: Rubino goes on to list those acknowledgments. . .”If you own no gold,” he concludes, “and your bank says you should own some, that amounts to a buy recommendation. Which is what Wells Fargo — and every other major bank — wishes it could avoid but increasingly can’t.”
For those who would like to own gold and/or silver and store it securely, we offer an individualized, allocated storage program that costs less to maintain in most cases than an ETF. You also can take delivery of your metal at any time with a phone call. To learn more, we invite you to contact us. If you would like to take the traditional route and receive delivery, we can help with that too.
“Mark Carney, the Bank of England governor, has said that the world’s reliance on the US dollar ‘won’t hold’ and needs to be replaced by a new international monetary and financial system based on many more global currencies.”
USAGOLD note: The real story is not the global currency of the future – whatever form it might take – but the escalating move to dethrone the dollar as the world’s reserve currency. In the end, dedollarization carries potentially bullish implications for gold in dollar terms. It comes as a surprise that someone the stature of Bank of England’s Mark Carney would promote moving beyond the dollar as the world’s reserve currency.
Repost from 8-25-2019
“Even so, the president thought one thing was needed to make things better: tariffs on America’s trade partners. Many economists and lawmakers argued against this, saying it would hurt trade, kill jobs and slow, if not contract, the economy. The president dismissed their reasoning, and into place the tariffs went. As economic uncertainty mounted, many investors moved into gold, which was perceived as a safe haven (so much so that the Treasury feared it might run out of bullion).
USAGOLD note: That move to gold in the early 1930s had to do with the metal’s safe haven attributes and the growing threat of systemic risks.
Repost from 8-25-2019
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.”
(USAGOLD – 8-30-2019) – Precious metals are a bit subdued as we bring the week and month to a close. Gold is down $2 at $1527. Silver continues to outshine the yellow metal – up 9¢ at $18.40. Gold is up 7.9% for August and 19% on the year. Silver is up 13.1% on the month and 19.1% on the year. (For a performance comparison for the past three months, please see our Chart of the Day directly below.) The Reserve Bank of India reports increasing its gold holdings by 51.93 in the 12-month period through June – a 9.2% gain. India’s purchases are part of an overall trend among central banks to build reserves in the precious metal.
Jim Bianco, macro-strategist at Bianco Research sees opportunity in gold both over the longer term and even before the end of the year. “[I]f rates continue to move lower and negative debt continues to grow, that will be a positive factor for gold and gold will continue to catch a bid. For 5000 years, the problem with gold was that it yields nothing. Today, gold is the high yielding alternative in a world with negative interest rates. As long as we don’t see a bottom in the global economy, no immediate resolution to trade, and the Fed doesn’t get aggressive, I could see the gold price hitting $1700 or $1800 in the fourth quarter and maybe even making a run at the all-time high of $1900 before the end of the year.”
Quote of the Day
“Cash over the long run is the worst-performing asset class and therefore the riskiest asset class. So where do you go? To me, going to any one asset increases risk. So the best way to deal with the challenging environment I foresee is by diversifying well. . . [G]old is just an alternative currency to fiat paper currencies. If your portfolio is likely to perform poorly in the adverse environment I’ve been describing—less effective monetary policy, the need to run larger fiscal deficits and monetize them, and challenging politics—the behavior of gold as alternative cash has some diversifying merit.” – Ray Dalio, Bridgewater Associates (Please see Paradigm Shifts)
Chart of the Day
“Investors holding ‘poor man’s gold’ are suddenly a lot richer, and silver’s rally may still have room to run.”
USAGOLD note: We spend much time on gold and precious little on silver. That is because of the dearth of news and opinion on the sometimes forgotten member of our dynamic duo. This article fills the void – at least for today . . .
“’One of the things that 2019 will be known for is the end of the eight-year bear market in gold and the beginning of a new bull market,’ Maley said Tuesday on CNBC’s Trading Nation.“
USAGOLD note: This article appeared at the CNBC website before yesterday’s sell-off so, we thought we would post it for your consideration. It stresses any pullback as one within an overall bull market. It also cites the longer-term attributes of gold ownership in the current market environment.
“‘The disaster scenario is if yields fall dramatically from here,’ said one strategist. ‘Hypothetically, if the trade situation intensifies, if maybe Hong Kong goes badly and Brexit seems like it results in a hard exit … then what you probably get is a massive rally again in Treasurys.’”
USAGOLD note: As yields are driven ever closer to and possibly through zero, no one is sure of the ramifications to the rest of the financial markets. “Been there, done that” does not apply as the United States has never been there, never done that. Vulnerabilities abound.
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“Gold’s spectacular rally is just getting started if hedge funds have their way. Prices are already at the highest in more than six years, and Goldman Sachs Group Inc. and Citigroup Inc. predict bullion could climb about 6% to $1,600 an ounce in as little as six months. Money managers are going all in, raising their wagers on a rally to the highest since 2016.”
USAGOLD note: We have reported consistently on institutional accumulation of gold over the past several months. This report provides an update of the trend. It is alive and well on Wall Street and tells why some of the larger institutions are predicting even better days ahead.
Bloomberg/Michael McKee, Rich Miller and Matthew Boesler
“‘We are experiencing a period of major political shocks,’ Lowe said, citing developments in the U.S., Brexit, Hong Kong, Italy and elsewhere. ‘Political shocks are turning into economic shocks.'”
USAGOLD note: A few discouraging words are heard from Jackson Hole, Wyoming. In general, the message has been that the central banks have limited ability to deal with the politically generated economic problems at hand – problems that could get worse before they get better. We invite you to take a closer look at the image above from a 1913 edition of Puck magazine. History rhymes. . . .
Related: Gold rally just got what traders said it needed – a new catalyst/Bloomberg/Justina Vasquez and Yvonne Yue Li/8-23-2019
Repost from 8-26-2019
(USAGOLD – 8/29/2019) – Gold recalibrated after a quiet night overseas to post a gain as trading opened in New York today. The metal is trading at $1544.50, up $5.50 on the day. Silver continued to shine – up 28¢ at $18.63. Oddly, the news headlines paint a picture that typically would put a damper on safe-haven demand. China’s Ministry of Commerce said that it would not retaliate against the latest round of tariff increases. Secretary of State Steven Mnuchin said the United States would not intervene in FOREX markets to push the dollar lower. Bond yields are also higher this morning. After so many disappointments and let-downs over the past several months, perhaps investors are reading through the headlines and continuing to hedge their bets.
Bridgewater’s Ray Dalio is one among many acting on that sentiment. Bloomberg quotes him today as saying that the ability of central banks to reverse an economic downturn is coming to an end – that the last time we faced a market dynamic like today’s was in the period 1935-1945. Dailo, as many of our readers already know, advocates a strong portfolio position in gold for what he calls a “paradigm shift” in global markets. “I think these are unlikely to be good real returning investments,” he said in a recent Linked In essay, “and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold.”
Quote of the Day
“Rather than let the market adjust itself, government typically starts the process all over again with a new and larger ‘stimulus package.’ The more often this happens, the more ingrained become the distortions in the way people consume and invest, and the nastier the eventual depression. This is why I predict the Greater Depression will be … well … greater. This is going to be one for the record books. Much different, much longer lasting, and much worse than the unpleasantness of 1929-1946.” – Doug Casey, International Man
Chart of the Day
Chart note: We faithfully reproduced this chart developed by UK’s Colin Seymour in 2001. Posted originally at the USAGOLD website, Seymour’s chart on the 1929 stock market crash and the annotations that went with it caused quite a stir on the internet at the turn of the century and the early stages of gold’s secular bull market. It is still widely referenced and linked on the world wide web. We recently reposted the study as part of a site-wide upgrade to current internet presentation standards. It is as relevant to investors today as it was in 2001. Here is the link to the original article titled Pompous Prognosticators.
“The U.S. yield curve inversion deepened on Tuesday to levels not seen since 2007, rekindling fears of a looming recession that spurred a sell-off on Wall Street and stoked even more safe-haven demand for government bonds.”
USAGOLD note: The growing consensus is that the yield inversion are not like to go away anytime soon. . . . .In fact, top bond market analysts are forecasting it could plunge even further below the zero line as safe haven demand for sovereign debt grows.
“While the U.S. financial system is strong, ‘that doesn’t mean we won’t have a recession,’ Eisman said in a Bloomberg Television interview in Hong Kong on Thursday. ‘And in a recession I think there will be massive losses in the bond markets because there’s a lack of liquidity.’”
USAGOLD note: Eisman, of course, is the investment manager featured in Michael Lewis’ “The Big Short”. When he speaks, people listen. . . . . .You get a sense of what he believes the current big short might be.
Repost from 5-9-2019
“‘I am so afraid of a democracy getting the idea that you can just print money to solve all problems. Eventually I know that will fail,’ Warren Buffett’s longtime investing partner told CNBC’s Becky Quick in an interview. ‘You don’t have to raise taxes, you just print.’”
USAGOLD note: The next thing you know Buffett and Munger will be stocking up on gold [smile]. . . . . . .
Repost from 5-6-2019
“The general theme here is chaos and uncertainty. The system is clearly broken. Again, none of this is supposed to be happening. And that’s what makes gold such a sensible asset to own right now.”
USAGOLD note: A review of some of the radically bizarre aspects of bubble behavior. . . . .
Image courtesy of VisualCapitalist
Repost from 8-22-2019
(USAGOLD – 8/28/2019) – Gold was down about $10 in the overnight market when news began to filter out of the UK that Prime Minister Boris Johnson had asked Queen Elizabeth to suspend Parliament. At that, it promptly reversed course and is now down $2 on the day at $1544. Silver is outperforming its more closely watched companion for the second straight day. It is up another 20¢ at $18.39. Johnson’s suspension of Parliament – seen as an attempt to sideline opposition to the October Brexit deadline – sent the pound reeling. Gold responded by rising £17 to £1267 – an all-time high in sterling terms and up 26% since the start of the year.
Citigroup, as reported by Bloomberg (via Yahoo), is out with a technical report this morning that suggests gold “may extend its impressive rally” based on a key gold-S&P 500 ratio. “It is only a matter of time,” says Shyam Devan, the report’s author and senior technical analysts at the bank, “before a significant bullish break occurs that could trigger a rally to the tune of 25% in favor of gold.” If the forecast comes to fruition, it would add about $375 to the current price putting it near all-time highs.
Quote of the Day
“Debasement was limited at first to one’s own territory. It was then found that one could do better by taking bad coins across the border of neighboring municipalities and exchanging them for good with ignorant common people, bringing back the good coins and debasing them again. More and more mints were established. Debasement accelerated in hyper-fashion until a halt was called after the subsidiary coins became practically worthless, and children played with them in the street, much as recounted in Leo Tolstoy’s short story, Ivan the Fool.” – Charles P. Kindleberger, Manias, Panics and Crashes
Chart courtesy of TradingEconomics.com
Chart note: If you follow the on-going trade war between the United States and China with even passing interest, you have no doubt come across references to the prospect of China selling U.S. Treasuries as its ultimate hole card. It is not well-known that China has been unloading exchange reserves since 2014 when its holdings peaked at nearly $4 trillion. Most of those reductions, which have taken China’s reserves to a little over $3 trillion (a 25% reduction) occurred from 2014 to 2017 and came as part of its policy to smooth the yuan exchange rate against the dollar and prevent wholesale capital flight. It is unclear at this juncture to what extent China would be willing to drain reserves in defense of the yuan at this point in time although there are signs now that China might be deploying a similar now. Trading Economics, as the chart shows, projects further reserve reductions.
“Sterling was the worst performer among major currencies while U.K. government bonds rallied as the market reacted to the threat of a no-deal Brexit increasing.”
USAGOLD note: One would think that the plunging pound would serve as further inducement for gold ownership among British investors.
“A major gold-buying spree by central banks is likely to persist in the coming years, according to Australia & New Zealand Banking Group Ltd., which flagged the potential for further purchases by nations including China.”
USAGOLD note: It used to be that central banks were net sellers of gold and that tended to influence prices to the downside. Now central banks have become net buyers as shown in the chart below:
“‘Our priority is Australia,’ Zhao told Reuters in an interview, adding that his firm was setting up an office in Perth. ‘We are looking for M&A opportunities in Australia, as well as in Canada but the problem in Canada is the political tension’ with China, he explained.”
USAGOLD note: One wonders how much of that production will end up on the world market and how much within China’s borders as national reserves.
“Since the end of May, gold prices have risen about 20%. So, investors might be wondering if it’s still a good time to buy gold. Given the market’s uncertainty, trade tensions, lower interest rate expectations, and political uncertainty, gold might still have a lot of upside left.”
USAGOLD note: Question: What do Gundlach, Dalio, Mobius, Druckenmiller, Tudor-Jones, Einhorn, Sawriris, Singer and Kaplan – some of the greatest financial minds of a generation – all have in common? Answer: An attachment to gold and its presence in their personal financial holdings.
“Hedge fund investors don’t buy the idea that the U.S. economy is headed for a recession in the near term, according to data from Goldman Sachs. The bank studied the holdings of 835 hedge funds with $2.1 trillion of gross equity positions at the start of July, and found that overall these funds are overweight cyclical sectors . . .”
USAGOLD note: An interesting take on invesment flows from Goldman Sachs and an indicator contrary to prevailing opinion. . . .Goldman also says hedge funds are underweight “defensive” stocks.
Repost from 8-22-2019
“In their discussion of policy tools, participants noted that the experience acquired by the Committee with the use of forward guidance and asset purchases has led to an improved understanding of how these tools operate; as a result, the Committee could proceed more confidently and preemptively in using these tools in the future if economic circumstances warranted.” (FOMC minutes, July 30-31, 2019)
USAGOLD note: “In other words,” writes Durden, “Trump should keep up his high-pressure campaign on Powell: it appears to be working.”
Repost from 8-21-2019
USAGOLD note: And keep in mind that this number occurs in the absence of a recession. . . . .The national debt remains the elephant in the room.
Repost from 8-22-2019