Monthly Archives: October 2019
(USAGOLD – 10/30/2019) – Gold reversed course during European trading hours and held that upside at the COMEX open. It is trading at $1493 – up $5.50 on the day. Silver is up 4¢ at $17.86. Though the upcoming election in the UK, in which Brexit will be the centerpiece, seems to have added some impetus to the price this morning, the greater influence is probably some cautious betting that the FOMC will present a future policy stance favoring more stimulus. The FOMC is scheduled to release the results of its meeting at 2 pm ET. Chairman Jerome Powell’s press conference is scheduled for 2:30 pm ET.
Consensus opinion has it that the Fed will lower rates by a quarter-point to the 1.5% to 1.75% range. If there is going to be any real drama resulting from this meeting, it will likely come during the post-meeting press conference. The Fed chairman is likely to be pressed on any future cuts and what is behind the surprise repo liquidity operations that began in September. J.P. Morgan’s fixed income analyst Joshua Younger recently warned that “[w]ith year-end coming up, this [repo liquidity problem] is all likely to get much worse, in our view, before it gets better.”
Quote of the Day:
“As we have forecasted, due to growing recession risks, central banks are about to conduct a big ‘monetary U-turn.’ Expect more QE, lower rates and MMT-style policies like ‘QE for the people.’ The erosion of trust in many areas plays into gold’s hands. An end to these crises of trust is not in sight. The steady buying of gold and the repatriation of central bank gold indicates rising mutual distrust among central banks.” – Ronald-Peter Stoeferle Mark J. Valek, Incrementum Chart Book
Chart of the Day
Chart note: Alistair Hewitt, Head of Market Intelligence at the World Gold Council, offers this bottom-line assessment not often raised these days in gold-market analysis: “. . .[O]pportunity cost has been the most important factor driving the gold price up in 2019. As shown above, interest rates have been lowered and the stock of negative-yielding bonds has grown rapidly, lowering the opportunity cost for holding gold. Falling rates and negative returns have made government debt less attractive and have increased the possibility of higher inflation and currencies depreciation in the future.” [Link to full analysis]
” . . . 63% believe the Fed will pause in its rate cuts for the remainder of the year. On average, the respondents, who include fund managers, economists and strategists, think the next cut will come in February. Still, 40% believe the Fed is done cutting at least through 2020.”
USAGOLD note: As we all know by now, the prevailing view on Fed policy today – even among those at the central bank itself – might not be Fed policy a few months from now. Who would have known last July that come October the Fed would be pumping liquidity into the repo market with a fire hose?
He warned the Fed might lose control over a $2 trillion interest-rate market — Now he says it might happen again
“Mark Cabana was warning of the emerging strains in short-term U.S. money markets as early as last year, well before daily funding markets seized up last month and forced the Federal Reserve to dust off tools it hadn’t used since the 2008 financial crisis.”
USAGOLD note: Prior to moving to the Bank of America/Merrill Lynch, Cabana worked in the markets group at the New York Fed.
“He added that the US would suffer a ‘financial armageddon’ if its central bank – the Federal Reserve – lacked the necessary firepower to combat another episode similar to the sub-prime mortgage sell-off.”
USAGOLD note: Mervyn King served as governor of the Bank of England during the financial crisis in 2007-2008. His views are highly respected in both the UK and the United States. King issued his warning during the annual IMF meeting in Washington D.C. last week.
Repost from 10-25-2019
Federal Reserve Bank of New York
“In accordance with the most recent Federal Open Market Committee (FOMC) directive, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct a series of overnight and term repurchase agreement operations (repos) at least through January of next year to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation.”
USAGOLD note: The previous limit was $75 billion. There is something going on here that not a lot of people understand – including Wall Streeters. Why are these numbers soaring? The Fed remains notably silent.
Repost from 10-25-2019
The naughty boy who blurts out unpleasant truths
“In the first place, the ‘classic’ writers, without neglecting other cases, reasoned primarily in terms of an unfettered international gold standard. There were several reasons for this but one of them merits our attention in particular. An unfettered international gold standard will keep (normally) foreign-exchange rates within specie points and impose an ‘automatic’ link between national price levels and interest rates. The modern mind dislikes this automatism, as much for political as for economic reasons: it dislikes the fetters this automatism clasps on government management of the economic process – dislikes gold, the naughty boy who blurts out unpleasant truths. But most of the economists of the period under survey liked it for precisely the same reasons. Though they compromised in practice as in theory and though they admitted central-bank management, the automatism – a phrase beloved by Lord Overstone [Samuel Jones Loyd, 1st Baron Overstone] – was for them, who are neither nationalists nor etatistes, a moral as well as an economic ideal.” –– Joseph Schumpeter, History of Economic Analysis (1954) Published posthumously
Dr. MoneyWise says. . . .And to Dr. Schumpeter’s well-considered discourse on the practical merits of the gold standard, I will add a simple thought of my own: Absent the gold standard, the prudent investor who stores gold benefits in concert with the blurting of those unpleasant truths.
“But Jason Zweig, Warren Buffett and other notable gold critics who complain about the metal “just sitting there” fail to understand the flaw in their basic assertion. What they believe to be a potent argument against gold is, itself, one of its great attributes. An asset which can ‘just sit there’ forever, largely impervious to outside political and economic.”
USAGOLD note: A very sound and sensible argument on gold’s attributes worth the visit. . . .
Image courtesy of Visual Capitalist
Repost from 10-25-2019
“Following a strong first eight months of the year, the precious-metals complex may be in the process of offering investors one final chance to enter on attractive terms before lurking systemic risks erupt into breakaway price action.”
USAGOLD note: Hathaway goes on the list seven warnings investors should consider. He says that “We would guess another four to six weeks before an important bottom. However, we suggest that investors keep their eye on the big picture and take advantage of any possible near-term weakness to build exposure. This is a dip that needs to be bought.” Highly recommended. . . . . .
Image courtesy of Visual Capitalist
Respost from 10/7/2019
(USAGOLD – 10/30/2019) – Gold continued to push in southerly direction on day two of Fed Week as markets fretted over what the Fed might or might not do at its meeting beginning today and what its chairman might or might not say tomorrow in the aftermath. The metal is down $3 at $1489. Silver is down 12¢ at $17.71.
Saxo Bank ‘s Ole Hansen neatly summed up the gold market’s stubborn dynamics at this juncture in a report released yesterday. “Gold’s rangebound trading behaviour around $1500/oz,” he writes, “extended into an 11th week with the market in need of a spark to kick it back to life. Trading up by 17% year-to-date and with the GDX ETF tracking major miners up by 30% it is only natural to see some caution emerging ahead of year-end. Gone for now is the roaring bond engine, which back in June and August helped the yellow metal break above $1380/oz and outside of its multi-year range. But despite seeing bond yields stabilize following their rapid descent, U.S. stocks near a record high and the outline of a trade deal emerging, gold has managed to avoid a major correction as the underlying demand remains.”
Quote of the Day
“Following a strong first eight months of the year, the precious-metals complex may be in the process of offering investors one final chance to enter on attractive terms before lurking systemic risks erupt into breakaway price action.” – John Hathaway, Tocqueville
Chart of the Day
Chart note: The chart above illustrates the real rate of return of the dollar since 2000. “Geopolitics, monetary policy and a slowing economy,” says Sam Bourghi at CCN Markets, “have all been cited as primary factors behind gold’s bullish breakout in 2019. While these catalysts cannot be discounted, the real reason gold is surging and why it will continue to do so is the trend in real interest rates relative to inflation.”
“India’s central bank hasn’t sold any gold recently nor is trading in the metal, the monetary authority said in a tweet on Sunday.”
USAGOLD note: For the record. . . . As a matter of fact, it is a greater likelihood that India would be a buyer given the pull of contemporary geopolitics and economics. At the moment, India is experiencing a general economic malaise that affects gold purchases in India as much as it does everything else. Whether or not, overall demand will come down at a time when the rupee is losing value against other currencies (including the dollar) remains an open question.
“[T]he tide of angst about the unintended consequences is rising. While much of the opprobrium heaped on central banks is unfair — there is no God-given right to earn a fat return from safe bonds, and central banks must do what they think best to support their economies — some of the fears are well-founded.”
USAGOLD note: As the headline to this article suggests, the pension funds are the most directly aggrieved by low to negative rates followed closely by the commercial banks. As Mark Twain marvelled about the weather: “Everyone complains about it, but no one seems to do anything.” We are indeed entering, as we have said often here, uncharted waters.
“It [U.S. Treasury Department] needn’t agonize just yet, however. For the next few months the Federal Reserve will be scooping bills out of the market — part of its effort to calm the repo market — about as fast as the government can pour them in.”
USAGOLD note: We used to call it printing money. Then we called it monetizing the debt. After that, we called it quantitative easing. Now the Fed calls it providing liquidity for a stretched repo market.
“‘If you are bullish on gold’s future prospects, silver is going to provide you with upside leverage with relatively low risks at these price levels,’ says Peter Spina, president of silver news and analysis provider SilverSeek.com. ‘The risk-to-reward appeal in silver is one of the best opportunities in a decade.’”
USAGOLD note: Over the past few years, we have seen gold investors increasingly adding silver to their holdings. Investors interested in larger positions in many cases are opting for our safe storage program which addresses the logistical (weight) problems associated with silver ownership.
Account Form – Precious Metals Storage Account
“In the current rally investment demand has been at the fore and this has been driven by expectation of major monetary easing by various central banks (particularly the Fed) leading to plummeting bond yields. This has led to an explosion in negative yielding debt, to over $17 trillion, which has turned on its head a traditional drawback of investing in gold – namely that it has no yield.”
USAGOLD note: This article features the thinking of Capital Economics’ Ross Strachan (quoted above from that article).
Repost from 10-25-2019
“My foundation is gold. . .”
USAGOLD note: Kiyosaki is a man after our own heart – one who believes in gold as a means to long-term asset preservation.
Repost from 10-25-2019
“Households in India may have piled up around 24,000-25,000 tonnes of gold, remaining the world’s largest holders of the precious metal, Somasundaram PR, managing director (India) of the London-headquartered World Gold Council (WGC), has told FE. At Friday’s international price, the value of the holdings (25,000 tonne) would be as much as $1,135 billion, or equivalent of more than 40% of India’s nominal gross domestic product (GDP) in FY19.”
USAGOLD note: To give you an idea just how much gold the people of India own in the overall scheme of things, the total amount of gold held by governments and central banks globally is 33,976 tonnes, according to World Gold Council statistics.
Repost from 5-20-2019
Bloomberg/Yuliya Fedorinova and Anna Andrianova
“The country quadrupled gold reserves in the past decade as it diversified away from U.S. assets, a move that has paid off recently as haven demand sent prices to a six-year high. In the past year, the value of the nation’s gold jumped 42% to $109.5 billion and the metal now makes up the biggest share of Russia’s total reserves since 2000.”
USAGOLD note: Russia’s reserve gains via appreciation of the precious metal will not be lost on a whole host of other countries looking to move in the same direction. This is an interesting article. . . .
Repost from 9-9-2019
“Wall Street is getting worried that the Federal Reserve’s aggressive efforts to control short-term borrowing rates have run into some potholes, with more danger ahead.”
USAGOLD note: This article tells how the Fed and financial markets could get blind-sided – particularly in December as we near year’s end.
Repost from 10-23-2019
Gold coins, hoofs found in 2,000 year old Chinese tomb
“Chinese archaeologists. . . discovered 75 gold coins and hoof-shaped ingots in an aristocrat’s tomb that dates back to the Western Han Dynasty (206 BC – 24 AD). The gold objects — 25 gold hoofs and 50 very large gold coins — are the largest single batch of gold items ever found in a Han Dynasty tomb. They were unearthed from the tomb of the first ‘Haihunhou’ (Marquis of Haihun) in east China’s Jiangxi Province. The coins weigh about 250 grams each, while the hoofs’ weights vary from 40 to 250 grams, said Yang Jun, who leads the excavation team.” – Xinhuanet/11-17-2015
USAGOLD note: These gold artifacts were found along with a portrait of Confucius, perhaps the oldest known. Wisdom and gold make easy company. Confucius once said something that has current applicability: “In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.” Or at the very least, well-hedged . . . . . . . .
“Dimon joins the ranks of an increasing number of business executives and economists speaking up against adopting such a policy for long, as central banks around the world try to boost growth by continuing to slash interest rates, some into negative territory.”
USAGOLD note: Dimon echoes concerns expressed by other bankers and institutional money managers, particularly in Europe where the effects are already a reality. “Negative interest rates are crazy,” says former Credit Suisse CEO Oswald Grueber. “That means money is not worth anything anymore.”
Repost from 10-22-2019