Monthly Archives: August 2019
USAGOLD note: There was at time not that long ago when traders believed gold, for better or worse, would track China’s yuan. That does not appear to be the case at this juncture. The two are travelling in opposite directions – testament to gold’s safe-haven status.
Chart courtesy of TradingEconomics.com
“Based on its latest regulatory filings, Sandler increased its stake in the SPDR Gold Trust by nearly 180% to $38 million by the end of the second quarter, making it the biggest position the fund holds. The ramped-up wager could be a defensive play against more market turbulence ahead.”
USAGOLD note: Sandler joins a long list of top funds taking a strong position in the yellow metal – and most are in it for defensive purposes. There are many ways to generate investment gains, but few to protect those gains through times of economic uncertainty and financial risk.
Repost from 8-21-2019
“Gold is likely to be a beneficiary in a deflationary environment. One reason for this, [Wolf Research’s John] Roque noted, is that gold doesn’t cost anything to hold if rates are very low or negative. If this deflationary cycle plays out, Roque believes gold will make a new all-time high during this cycle.”
USAGOLD note: Gold as a deflation hedge – prices decline and gold goes to an all-time high, according to John Roque. Deflation is not what the Federal Reserve wants, and certainly not what the White House wants. Yet, for the moment, the signs point in the direction of disinflation, at least, if not outright deflation. Of course, that could change in a heartbeat. It has in the past. In the early 1920s, for example, Germany went through a deflationary period just before hyperinflation suddenly bubbled to the surface.
Image courtesy of the Visual Capitalist
Repost from 8-19-2019
“I actually think the Fed has triggered hyperinflation, but it’s not in consumer goods. It’s in asset prices and luxury goods. If a company’s share price increases without an underlying increase in its profits, we call it multiple expansion, but in reality, it’s inflation. With QE, central bankers put vast sums of money into the hands of financial investors, who in turn went and bought financial assets and luxury goods driving up the prices.”
USAGOLD note: And where, pray tell, will this vast pool of capital go now that the underpinnings to the stock and bond market values have begun to show signs of fraying? A strong line-up of analysts – including Jim Rickards, Simon Mikhailovich (quoted above) and Heinz Blasnik – join Ronnie Stoferle to delve into the implications for gold and the global economy.
“If the trade war momentarily played second fiddle to Jerome Powell’s Jackson Hole address, it has come crashing back to the forefront of concerns as most markets prepare to re-open for business Monday. Renewed tension between the U.S. and China has strategists betting investors will continue to seek the safety of government bonds, gold and the Japanese yen.”
USAGOLD note: We had two important meetings of major players this weekend – the central bankers’ meeting in Jackson Hole and the G-7 meeting in Biarritz – and neither seems to have worked out that well. In fact, little was done that could be construed as anything close to market damage control. To the contrary, an argument could be made that much additional damage has been inflicted and that both the central bankers and political leaders have pretty much left the markets to their own devices. We could get an inkling what Monday holds in store when Asia opens in a few hours. . . . .
“Gold prices in Vietnam jumped 2 percent Saturday after U.S. President Donald Trump slapped another 5 percent tariff on Chinese goods.”
USAGOLD note: Odds are we are going to see more reports like this one out of Viet Nam. The trade war has an indirect consequence for emerging economies of which Viet Nam is just one. These currencies tend to weaken as the dollar strengthens and dollar strength has become collateral damage in the trade war between the U.S. and China. Gold demand, in turn, strengthens in these countries as the populace heads for shelter against currency depreciation and possible financial system risks.
Note: Commitment of Traders reports are published Friday with data from the previous Tuesday.
Gold speculators raise bullish bets to highest since 2016
Gold Non-Commercial Speculator Positions:
Large precious metals speculators continued to boost 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 299,993 contracts in the data reported through Tuesday August 20th. This was a weekly lift of 9,903 net contracts from the previous week which had a total of 290,090 net contracts.
The week’s net position was the result of the gross bullish position (longs) growing by 6,071 contracts (to a weekly total of 352,294 contracts) while the gross bearish position (shorts) decreased by -3,832 contracts for the week (to a total of 52,301 contracts).
Gold speculators added to their bullish bets following a slightly down week last week and for the fifth time out of the past six weeks. The trend for gold positions has been sharply higher since the beginning of June as bullish bets have increased ten times out of the twelve weeks since June 4th and by a total of +213,305 contracts.
This week’s gain brings the overall net position within a whisker of the +300,000 contract level that has not been breached since September 6th of 2016 (a span of 154 weeks) when positions totaled +307,860 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 -336,250 contracts on the week. This was a weekly decrease of -12,523 contracts from the total net of -323,727 contracts reported the previous week.
Over the same weekly reporting time-frame, from Tuesday to Tuesday, the Gold Futures (Front Month) closed at approximately $1515.70 which was an increase of $1.60 from the previous close of $1514.10, according to unofficial market data.
Silver speculators boost bullish bets after 2 down weeks
Silver Non-Commercial Speculator Positions:
Large precious metals speculators advanced 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 46,714 contracts in the data reported through Tuesday August 20th. This was a weekly rise of 7,445 net contracts from the previous week which had a total of 39,269 net contracts.
The week’s net position was the result of the gross bullish position (longs) lowering by -1,533 contracts (to a weekly total of 95,987 contracts) while the gross bearish position (shorts) declined by -8,978 contracts for the week (to a total of 49,273 contracts).
Silver Commercial Positions:
Silver speculator positions rebounded this week after falling sharply in the previous two weeks by a total of -25,028 contracts.
The speculator positions had been on fire in the past few months as sentiment for gold and silver started surging very sharply in June. From June 6th to July 30th, silver speculator bets gained for seven out of the nine weeks and rose by a total of +86,706 net contracts.
This week’s rise brings the net position back over the +45,000 net contract level for the fourth time out of the last five weeks.
The commercial traders position, hedgers or traders engaged in buying and selling for business purposes, totaled a net position of -70,863 contracts on the week. This was a weekly decline of -5,630 contracts from the total net of -65,233 contracts reported the previous week.
US Dollar Index speculators pare bullish bets for 2nd week
US Dollar Index Speculator Positions
Large currency speculators reduced their bullish positions in the US Dollar Index futures markets this week while raising their Japanese yen positions, 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 29,499 contracts in the data reported through Tuesday August 20th. This was a weekly reduction of -343 contracts from the previous week which had a total of 29,842 net contracts.
This week’s net position was the result of the gross bullish position (longs) growing by 1,189 contracts (to a weekly total of 49,063 contracts) compared to the gross bearish position (shorts) which rose by 1,532 contracts on the week (to a total of 19,564 contracts).
USD Index speculator positions fell slightly for a second straight week following six straight weeks of gains. Despite the recent declines, the overall net position continues to be strongly bullish and just under the +30,000 net contract level. The USD Index position, in fact, has remained remarkably consistent for over a year now as bullish positions have been above the +20,000 net contract level for fifty-seven consecutive weeks dating back to July of 2018.
“I’ve never been a ‘gold bug’ per se – which Keynes called a ‘barbarous relic’ – but the reality is gold is one of the few asset classes that does well in this scenario. The gold price in the last year is certainly trading like it’s anticipating something in the air as interest rates head below zero. Ray Dalio, the godfather of macro hedge funds, certainly thinks so.”
USAGOLD note: Did the president signal yesterday that he is a proponent of MMT? Maybe. A recent Reuters headline says it all: MMT may be Democrats’ economic cure, but only Trump got the memo. This editorial linked above includes a solid intro to Modern Monetary Theory – print money; drop it from helicopters on every city and town in the land.
Repost from 8-20-2019
“But even as high-probability risks — like the U.S.-China trade conflict — capture the minds of investors, there is a growing combination of lower-probability risks, so-called grey swan events, that could individually or in combination create even more heartburn for investors as the third quarter draws to a close.”
USAGOLD note: Ten grey swans. Ten good reasons to hedge your holdings with gold and silver. A wake-up call worth a quick review.
Repost from 8-18-2019
“’I would say this is the probably the most interesting environment for central bankers since the crisis,’ says Raghuram Rajan, a former governor of the Reserve Bank of India, now at the Chicago Booth School of Business.”
USAGOLD note: Global concerns, a short toolset and a divided FOMC up the ante at this year’s Jackson Hole Federal Reserve conclave. Larry Summers, former Secretary of the Treasury, says policy-makers are confronted with “black hole monetary economics.”
‘No-deal’ Brexit could cause shortages of food, drugs, fresh water, secret U.K. government memos warn
“Secret British government documents have warned of serious disruptions across the country in the event that the U.K. leaves the European Union without a trade deal on Oct. 31, according to a report. The Sunday Times newspaper published what it said was what the British government expects in the case of a sudden, ‘no-deal’ Brexit.”
USAGOLD note: Sounds like Y2K all over again. . . . .
“Laboratory tests show that the ultra-thin gold is 10 times more efficient as a catalytic substrate than gold nanoparticles, which are three-dimensional materials with the majority of their atoms residing in the bulk rather than at the surface. The scientists believe the new material could also form the basis for artificial enzymes that could be applied in rapid, point-of-care medical diagnostic tests and water purification systems. They report the 2D gold in a paper in Advanced Science.“
USAGOLD note: At the risk of sounding woefully behind the times, I have to ask: Can something two dimensional exist in physical reality?
“Beijing has previously taken steps to curb capital outflows when its currency weakened. These steps included some restrictions on gold imports in 2016, sources have said. No clear data for capital outflows exist but a measure from China’s balance of payments called errors and omissions points to $88 billion leaving in the first three months of this year, the most on record.”
USAGOLD note: China appears to be dancing around two disparate objectives: reducing capital outflows and building gold stockpiles within its borders to underpin its de-dollarization effort.
“The only way for Millennials to pay for Boomers’ Social Security and Medicare would be for the latter to confiscate 90% of the former’s paychecks. That won’t happen, so something else has to, most likely massive benefit cuts via hidden inflation.”
USAGOLD note: Rubino says the demographic problems of the future will lead to a “purposeful inflation” and “a massive shift of capital out of financial assets like government bonds that depend for their value on the stability of the underlying currency, and into real assets like oil wells, farmland and precious metals which governments can’t create with a mouse click.” The article is worth a read especially for those who suspect demographics might be the root cause of our most intractable economic problems.
Repost from 5-17-2019
“The recent debt deal struck between the White House and Congress virtually guarantees trillion-dollar deficits well into the future as well as continued acceleration of the government’s collective IOU, which is now at $22.3 trillion.”
USAGOLD note: Ponder for a moment the implications of trillion dollar deficits in the context of the trade war and China’s absence as a buyer of U.S. Treasuries. Who wil finance the public debts of the future? And how much buyer interest will there be as yields continue to descend toward zero? “Leading central banks,” says Financial Times, “now own a fifth of their governments’ total debt” – a circumstance that leaves one final question: Can governments survive without quantitative easing?
Repost from 8-15-2019
“For true bullion fans, this will vindicate their long-held view that gold is a safe haven not only in times of inflation but in all uncertain conditions, something disputed over the years by critics of gold as an investment.”
USAGOLD note: One of the more complicated arguments we have seen on why gold makes portfolio sense at this juncture. At the same time, these are not ordinary or average times and there seems to be a ‘new normal’ making headway in financial markets. This article, though brief, sheds light on some of those new dynamics.
USAGOLD note: Three bottom-line reasons to own gold for the coming decade. . . .
Repost from 8-21-2019
“Alan Greenspan is wrong. Zero is very meaningful with negative being even more meaningful. It means central banks have hit a brick wall. They cannot cram any more debt into the system. There is no tolerance for paying interest. That’s the meaning, and the evidence is overwhelming.”
USAGOLD note: Shedlock holds nothing back in this critique of the central banks and zero per cent interest rates. Just as accumulating gold works for hedge funds in a zero yield environment, so it works for ordinary individuals. With gold you get both the prospect for upside potential and a safe haven against the very forces creating below-zero yields in the first place.
“In volume terms, the country imports 800-900 tonnes of gold annually. To mitigate the negative impact of gold imports on trade deficit and CAD, the government increased the import duty on gold to 12.5 per cent from 10 per cent in this year’s Budget.”
USAGOLD note: Strong gold demand continues in India – all related to the weakening rupee. . .Apparently, the 12.5% duty has had only a marginal effect on reducing imports.
Repost from 8-15-2019
“The krona has now depreciated about 15 per cent against the euro since negative rates were introduced in 2015, extending its decline from its post-crisis peak to 24 per cent. Even former prime minister Carl Bildt has weighed in, saying in a tweet: ‘It’s embarrassing and painful to see how the Swedish crown continues to weaken against the Euro. This is not good for our country!’”
USAGOLD note: An interesting in cause and effect in a country already deeply immersed in a negative interest rate regime and perhaps a template of America’s future. I have read in various accounts about how we just don’t know what the effects of negative rates are likely to be under the complicated circumstances in the current monetary system starting with the question – “What are the consequences to the global economy when the world’s reserve currency does not draw a yield?”
Repost from 8-14-2019