Monthly Archives: November 2019
(USAGOLD – 11/14/2019) – Gold continued to recover from recent lows in overseas trading as progress in the trade talks stalled, according to reports, and signs of deepening global slowdown emerged in China and Germany. Those tentative gains carried over to the COMEX open where the yellow metal is now trading at $1468 – up $4 on the day. Silver is level on the day at $16.96.
Lombardi Letter’s Moe Zulfiqar writes that there are two large gold buyers in the gold market “worth paying attention to” – central banks and gold ETFs. He reminds us that central banks are on a pace in 2019 to surpass 2018’s record purchases, the largest in fifty years. “In the third quarter of 2019,” he says, “central banks purchased 156 tonnes of gold for their reserves. Year-to-date in 2019, central banks have purchased 547.5 tonnes of gold. This is 12% higher than in the same period of 2018.* How significant is this? According to the U.S. Geological Survey, global mine production in 2018 was 3,260 tonnes.** So, in the first three quarters of 2019, central banks purchased nearly 17% of the total global gold mine production.”
Quote of the Day
“Argentinians unfortunately are accustomed to this drama, having seen years of high inflation, hyperinflation in 1989-1990, a severe economic crisis in 2001-2002, and many instances of rapid loss of value and confidence in their currency, the peso. For example, during the hyperinflationary period in 1989, prices in Argentina rose by an annualized 5000%. During the 2001-2002 crisis, the peso lost three-quarters of its value at the same time that bank accounts across Argentina (in both US dollars and pesos) were more or less frozen. With the local population accustomed to rapidly escalating prices, evaporating savings and a plummeting peso, Argentinians have on a number of occasions done what everyone across the world eventually does when confronted with this same problem: they buy hard currencies and gold.” – Ronan Manly, Bullion Star
Chart of the Day
Chart courtesy of the St. Louis Federal Reserve [FRED]
Source: Board of Governors Federal Reserve System [US]
Precious Metals Summit Conference/Video/Grant Williams/11-12-2019
“Trust me when I tell you that none of this is going to make gold less attractive in the coming years.” – Grant Williams
USAGOLD note: “None of this” refers to a series of charts and commentary Grant Williams delivered at the recent Precious Metals Summit Conference in Zurich. Williams makes a thorough and captivating presentation on the merits of gold ownership and some “tailwinds blowing up a storm.”
Image courtesy of Visual Capitalist
“And then, with the new year upon us and deteriorating economic conditions bringing even lower interest rates, both COMEX metals will rally in 2020Q1. At this time, I expect COMEX gold to reach toward $1650 and COMEX silver to trade above $20 sometime before Saint Patrick’s Day.”
USAGOLD note: Hemke offers some interesting analysis to back up his forecast at the link above.
USAGOLD note: Has Hong Kong reached the breaking point? Will China be forced to intervene militarily? Hong Kong has deep ties to the West. As a result, it is unclear what the response would be if there were a crackdown like Tiananmen Square in 1989.
“Gold exchange-traded fund investors are selling off holdings as a more positive global outlook decreases their interest in haven assets.”
USAGOLD note: There are a couple of things going on here that need to be pointed out. First, the gold price is up about 20% since 2016 so it is a kind of an apples-to-oranges comparison. If gold were still $1250 per ounce, the $620.7 nominal value of the liquidations would be significantly lower. Second, we are talking about roughly 13 tonnes of gold here. . . . .a small number relative to the 2855 metric tonnes stockpiled collectively at the ETFs. In short, these sales are a minor, perhaps even healthy, event. If the sales develop into a trend, we will take a closer look at it.
“The high-stakes trade negotiations between the U.S. and China hit a snag over Chinese purchases of American agriculture products and other core issues, according to the Wall Street Journal.”
USAGOLD note: Gold pushed higher on this report. The other issues have to do with “tech transfer restrictions” and a “strong enforcement mechanism,” according to the WSJ report.
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“We have been purchasing Gold And Silver from USA Gold for about two years now The staff is extremely knowledgeable , coin quality is extraordinary, delivery is fast / dependable. I read there newsletter everyday. Actually several times a day – the links in the articles offer a wealth of information that have helped me navigate / stay on course through the ups and downs of Gold / Silver ownership.”
USAGOLD Recommendation: The precious metals industry is unique in the financial industry in that it is not subject to oversight or regulation by third-party government entities like the SEC or CFTC. As such, marketplace forums and feedback sites often serve as a replacement for investors attempting due diligence. While several options can be found, by far the most impartial and least susceptible to vested influence is the Better Business Bureau. When looking at a company’s BBB profile, don’t focus solely on the rating. To be honest, pretty much everybody has an ‘A’ or ‘A+’ rating. What is far more important to assess is the number and nature of complaints, number and caliber of positive and negative reviews, longevity with the BBB, as well as the number of ‘stars’ given a company through the actual customer review system.
“Stocks may be at record highs as the year winds down, but Wall Street has already started issuing warnings about a host of threats to the markets in 2020. Deutsche Bank’s chief economist, Torsten Slok, sent out a list to clients on Friday of 20 risks to the economy and markets next year. CNBC was granted permission to publish the full list.”
USAGOLD note: Many of the items on the list have a political component in a year in which politics is likely to have great effect on market psychology.
Repost from 11-11-2019
“Finally, my impression is that many investors are vastly overestimating their tolerance for risk. The argument that ‘well, the stock market might go down, but it always comes back’ seems to be an increasingly popular way of dismissing risk entirely. Unfortunately, that argument only works on the way up to hypervaluation. It does not work on the way down.”
USAGOLD note: In a scholarly way, Hussman gets down to the nitty-gritty in his latest newsletter. We keep coming back to a footnote to modern economic history: Following the crash of 1929, it took 26 years for the stock market to return to the high registered just before the crash.
Repost from 11-7-2019
“The question of whether precious metals have a place in one’s portfolio is a never-ending debate, but an equally important yet often overlooked question is ‘how much’? Ned Naylor-Leyland of Merian Global Investors discusses the role that gold and silver can play, and the important differences between sizing bullion versus sizing mining stocks.”
USAGOLD note: Naylor-Leyland has been an articulate advocate of gold and silver ownership for a good many years. In this interesting seminar, he covers the basics offering in the process a good starting point for new investors and a solid refresher for those who already own the metals and are looking to perhaps add more at this point in time. “Gold is money, ” he says, “and everything else is credit.”
Repost from 10-14-2019
Why the U.S. needs to encourage
Americans to hold gold
We have always believed that citizen ownership of physical gold is in the national best interest, not just the best interest of its accumulators. In the event of a worldwide economic breakdown or a realignment of the global monetary system, it would be good for the country to have a storehouse of gold held by the populace. China encourages citizen gold ownership for precisely that reason.
“With a growing number of countries encouraging their central banks and citizens to acquire gold,” writes The Federalist‘s Sean Fieler, “it is increasingly reasonable to assume that gold will be part of the world’s monetary future, not just its past. The U.S. Treasury should embrace policies that will attract more of the world’s gold to America and better position our citizens and our nation for whatever the monetary future may hold.”
“Rapidly rising competition is one problem. The number of hedge funds has exploded from 530 in 1990 to 8,200 today, with their aggregate assets under management (AUM) skyrocketing from $39 billion to $3.2 trillion.”
USAGOLD note: Trouble in Hedgefundville. . . .Kolakowski’s article linked above provides a robust overview of the primary causes.
Repost from 11-6-2019
(USAGOLD – 11-13-2019) – Gold is in recovery mode after hitting a low of $1446 yesterday morning and the trade negotiations pendulum swung back again to the negative. Now trading at $1462, the precious metal is up $16 from yesterday’s lows and $3.50 on the day. Silver is up 6¢ at $16.88. Gold rose immediately after President Trump delivered a warning before the New York Economic Club that the administration would raise tariffs on China “substantially” in the absence of a deal. For a good measure, he threw out a warning of substantial tariffs to other countries as well. Yesterday’s market action serves as a further reminder of how rapidly psychology and price direction can change in today’s tightly wound market environment.
Quote of the Day
“We should hold our gold. Gold still represents the ultimate form of payment in the world. Germany in 1944 could buy materials during the war only with gold. Fiat money in extremis is accepted by nobody. Gold is always accepted.” – Alan Greenspan, in testimony to the House Banking Committee (1999)
Chart of the Day
Chart courtesy of the World Gold Council
Chart note: “On a net basis, reported year-to-date purchases – of a tonne or more – now total over 450t,” writes the World Gold Council’s Krishan Gopaul. “Of this, a total of 14 central banks have increased their gold reserves so far in 2019, compared to only two that have decreased their gold reserves. Should central banks remain net purchasers this year – which is looking like a racing certainty – it’ll also mark a decade since they switched from being net sellers.”
“Federal Reserve Chairman Jerome Powell is likely to signal again this week that monetary policy is on hold, buttressing the belief that he may steer clear of action through 2020. Surprisingly, that would be an historic anomaly for a U.S. presidential election year.”
USAGOLD note: The question will be raised if an accommodative policy will be meant to accommodate the president or accommodate a weakening economy. From the president’s point of view no accommodation is likely to be enough – this being an election year and all. . . . . .
“‘If we don’t make a deal, we’re going to substantially raise those tariffs,’ he said Tuesday in a speech to the Economic Club of New York. ‘They’re going to be raised very substantially. And that’s going to be true for other countries that mistreat us too.’”
USAGOLD note: This is much different picture of the ongoing trade negotiations than the one painted by the press and China over the past several days. Interesting to note that the president took the opportunity to offer a tariff reminder to other countries as well.
“Fifty-five percent of more than 3,400 high net worth investors surveyed by UBS expect a significant drop in the markets at some point in 2020. Amid intensifying geopolitical risks, the super rich have increased their cash holding to 25% of their average assets, the survey showed.
USAGOLD note: We have alluded a few times to reports of significant capital movement into money market funds over the past few weeks and the latest issue of News & Views we show the correlation between MZM money supply growth and the price of gold with a comment. In the post immediately below Mark Mobius raises the issue as well.
“‘I am bullish on gold. I am not saying that gold is not going to go down because it is going to fluctuate, but people should have at least 10 percent of their portfolio in physical gold,’ he said.”
USAGOLD note: Mobius sticks with his 10% recommendation and his bullish call on the yellow metal.
“A comparison between iShares 20+ Year Treasury Bond ETF and State Street’s SPDR Gold Trust shows that, on a percentage return basis, gold and bonds have tracked each other quite well.”
USAGOLD note: So what is it that bonds and gold have in common? We would reduce it to both being a destination for safe-haven capital. The difference between the two? Gold is a safe-haven asset that is not simultaneously someone else’s liability. Bonds, on the other hand, by definition are assets that rely completely on the performance of someone else (and the value of the currency in which they are denominated).
Not a day goes by, that one gold ETF or another is reporting on the gains to its stockpile. Most of those gains come from financial institutions and hedge funds boosting their portfolio positions. We do not in any way denigrate the importance of this Wall Street move to gold. In fact, their presence in the gold market has been one of the market mainstays over the past few years and a welcome addition to the ranks of gold owners.
At the same time, for the Main Street safe-haven investor ownership through an ETF might not be the best approach. Gold ETFs, says Simon Black of the SovereignMan website, are “purely a financial product that defeats the entire purpose of owning gold to begin with. Why turn one of the best, longest-standing physical assets in the history of the world into a paper asset? With this type of debt instrument, you don’t actually own the gold yourself. You become a creditor with nothing more than a claim on someone else’s gold.” At USAGOLD, we have an answer for that . . .
The Precious Metals Safe Storage Advantage
It only takes a few minutes to complete a Precious Metals Safe Storage account opening form, but it could mean all the difference for the investor seeking a superior alternative to gold and silver ETFs. We use the word “superior” because depository storage accounts come with an option not readily available in most ETF accounts – You can take delivery of the metal in your account, or any portion of it, whenever you wish.
At the same time, given the exclusive preferred referral storage rate you receive by opening your storage account through USAGOLD, the annual cost to maintain your holdings is comparable (and often lower) to what most ETF vendors charge in annual fees. All the while, your metal is stored safely and fully insured at one of America’s oldest, largest and respected independent depositories – a firm with which we personally have done business for decades. To get started, we invite you to go to the link immediately below and fill out the application.
Account Form – Precious Metals Storage Account
“It is true you can’t ‘time the market,’ but you can manage risk by adjusting market exposure at times when risk outweighs the potential for further reward. What’s important to avoid is the ‘time loss’ required to ‘get back to even.’ In the long run, the mitigation of risk should allow the portfolio to reach your investment goals.”
USAGOLD note: Lance Roberts once again offers some solid common sense advice for the ordinary citizen/investor. One of the three broad hedging strategies he lists is “holding a negatively correlated asset” – as in something negatively correlated to the stock market. One of the best known and widely used options in this grouping is gold coins and bullion, followed by silver.
Repost from 11-6-2019