Monthly Archives: January 2020
Gold stays steady within range, Dalio tells Davos the metal will be ‘top investment in years to come’
(USAGOLD – 1/22/2020) – Gold stayed steady within a narrow range overnight and early in the US trading session. It is now down $1 on the day at $1556. Silver is registering something of a pulse – up 11¢ at $17.86. Gold was on the minds of Davos attendees yesterday after Bridgewater Associates’ Ray Dalio advised investors flatly that “you have to have a certain amount of gold in your portfolio,” and that “the precious metal will be a top investment in the years to come.” Dalio is not the only billionaire investment manager endorsing gold. In a letter to Greenlight Capital’s clientele, David Einhorn states succinctly why his fund owns the metal:
“U.S. total public debt to GDP is over 100%. With unemployment at record lows, the U.S. is running an almost $1 trillion annual deficit. The bipartisan consensus is that deficits don’t matter – it implies we can always print our way out of trouble. Meanwhile, although the Federal Reserve Bank’s balance sheet is very large and interest rates are already low, the Fed has cut interest rates and begun expanding its balance sheet again. All told, we can count on aggressive fiscal and monetary policies in both good times and bad. Gold continues to be a hedge in our portfolio against adverse outcomes related to those policies.”
Chart of the Day
Chart note: “With the significant decline in the US Monetary Base since 2016,” says Elliot Wave analyst Hubert Moolman, “there are some serious threats facing the monetary system. These are setting up really favourable conditions for Silver prices and the position it has in the international monetary system. The expectation for much higher Silver prices are certainly reflected in the charts. I have previously presented this chart (now updated) to show how the current bottoming process (2015 to 2018) is similar to that of 2001 to 2003 . . .” He goes on to say that “this time we will likely see far greater price increases in a shorter period, especially given the serious threats facing the monetary system.” Though Moolman’s thesis is intriguing to say the least, we feel the necessity to caution once again that past performance is no guarantee of future results. His chart is reproduced with permission.
“’You have to have balance … and I think you have to have a certain amount of gold in your portfolio,’ Dalio said, reiterating his call last year that the precious metal will be a top investment in the years to come.”
USAGOLD note: Dalio says ‘cash is trash’ in this era of negative real rates of return and says gold is the way to go instead. He also rejects bitcoin as an alternative to gold: “There’s two purposes of money, a medium of exchange and a store hold of wealth, and bitcoin is not effective in either of those cases now.”
“’We are just again in this craziest monetary and fiscal mix in history. It’s so explosive. It defies imagination,’ Jones said . . at the World Economic Forum in Davos, Switzerland. ‘It reminds me a lot of the early ’99. In early ’99 we had 1.6% PCE, 2.3% CPI. We have the exact same metrics today.’”
USAGOLD note: Like Ray Dalio, Paul Tudor Jones advocates a portfolio diversification with gold.
“Trump took his biggest swipe yet at the Federal Reserve, saying that his economic achievements, which have helped the U.S. remain ‘by far the strongest economic power in the world,’ came despite the central bank’s policies holding back the U.S. economy.”
USAGOLD note: According to this article, some in the audience at Davos were stunned at the president’s comments which included an endorsement of negative interest rates. Some nations, he said, get paid to borrow money, “something I could get used to very quickly.”
“‘Gold is a place you want to be. I think that it’s partly because it’s inversely correlated with interest rates. But it’s also an insurance policy when things go wrong,’ he said. ‘There’s no such thing as a no-brainer, but this is close.’”
USAGOLD note: David Rosenberg was chief economist at Gluskin Sheff & Associates when he became a well-known market analyst. Now he heads his own advisory firm. In this article, in which he cites the need for gold as a portfolio asset, he also warns about the Fed’s end game, i.e., the “magical money tree.”
“Although tensions between the US and Iran appear to have receded for now, global geopolitical uncertainty remains high. One asset class above all looks set to benefit from this turbulence: gold.”
USAGOLD note: This article concentrates on geopolitical concerns and low yields as the two primary factors likely to drive global gold demand in 2020 and beyond.
“Speculation also has swirled over whether Shelton may be Trump’s pick for chair after Jerome Powell’s term expires.”
USAGOLD note: Shelton, an advocate of the gold standard and Fed critic, is one of two nominees put forward last week by the Trump administration for seats on the Fed’s Board of Governors.
Common IRA rollover mistakes
“Have you thought about rolling your traditional IRAs from one financial institution to another? Maybe you’re looking for higher returns, more investment selections or better service. If you roll over your traditional IRA, there are some common mistakes you should avoid. ‘IRA rules can be tricky and some have even changed over the years, so you need to be careful, otherwise you could pay income tax and penalties,’ says Dan Stewart, CFA, president, Revere Asset Management, Inc., in Dallas, Texas. In this article, we’ll give you an overview of IRA rollover rules and discuss how to avoid breaking them.” – Mary Hall, Investopedia
We have a steady stream of new clients who come to us for help with rollovers from existing retirement plans into gold and silver inclusive IRAs. The rules can be confusing and somewhat cumbersome, but they are not difficult to manage. The link above will guide you through the most common, out-of-the-gate stumbling blocks.
Beyond the problems investors encounter with the mechanics, we continue to receive inquiries from investors who have included graded modern gold and silver bullion coins, modern proof gold and silver coins and modern commemorative coins in their plans at hefty premiums wanting to know if we can help them with what turned out to be a bad situation. At about the time that these investors receive their first evaluation from a trust company, they discover too late that they paid far more for their gold and/or silver than they should have. Don’t let that happen to you. For the best results, we continue to strongly advise IRA investors to stick with the ungraded, ordinary gold and silver bullion coins (like the gold and silver American Eagle pictured above) that sell at standard market prices. You will be glad that you did.
“Indeed, the enthusiasm of the systematic strategies exceeds that of the humans to a greater extent than at any point in the last decade. As the importance of systematic investing has only risen throughout this period, that suggests that we should take the current overweighting seriously.”
USAGOLD note: We are in uncharted waters when it comes to the overall influence of machine trading on stock market values . . . and by extension the human counterparts who own the same stocks as the machines. Can we rely on silicon-based buyers materializing to counter the silicon-based sellers?
Repost from 1-14-2020
“The battle continued in 2019, and rarely has the disparity been this sharp. And what do we mean? Well, on one hand, you have real physical gold. This is gold that you store yourself or at a trusted vaulting company. This is gold that you can actually hold in your hands. This is the gold that is demanded at record levels by central banks around the globe. On the other hand, we have pretend gold. This is the domain of the bullion banks. They offer futures contracts, unallocated accounts, and ETFs…all as an alternative to the real thing and as a way of increasing the total supply of ‘gold’ in what amounts to a modern day alchemy.”
USAGOLD note: For real physical gold, check out our Safe Storage Program or simply take delivery like the majority of our clients. Hemke goes on to detail the differences between real and virtual gold at the link.
Image courtesy of Visual Capitalist
Repost from 1-15-2020
“‘I’m no insect,’ the 57-year-old businessman jokes. ‘Gold is a great way to make a lot of money.’”
USAGOLD note: The billionaire gold investor discusses his passion for wildlife preservation, particularly big cats. We featured a riveting Bloomberg interview of Thomas Kaplan some time ago. It is available here. Coincidentally, that interview occurred at the end of May just before gold began its run from just under $1300 to current levels. Kaplan said gold is on the cusp of launching a ten-year bull market that would take it between $3000 and $5000 per ounce. That link and the MarketWatch link above are both highly recommended. . . . .
Repost from 10-22-2019
“Sam Zell, the founder of Equity Group Investments, says he bought gold for the first time in his life because ‘it’s a good hedge.'”
USAGOLD note: Billionaire Sam Zell is not the first property mogul to become a gold owner, nor will he be the last. He adds his name to a long list of renowned money men who have made their interest in gold public over the past several months.
Repost from 1-19-2019
“‘Gold miners always outperform about two to three times whatever the underlying commodity does, and that’s both up and down,’ [Stuart Frankel’s Steve] Grasso said.”
USAGOLD note: The anomaly mentioned in the headline notes has to do with the volatility inherent to buying gold stocks. The fact of the matter is that buying gold stocks – though in and of itself something that can be a profitable undertaking – is not the same as buying coins and bullion for asset preservation purposes. Gold stocks are stocks first and gold second, whereas there is no doubt as to what you are getting when you purchase the physical metal – the time-honored safe haven hedge against economic and financial uncertainties.
Repost from 1-14-2020
Gold Trends and Indicators
Our Gold Trends and Indicators page was first constructed many years ago to serve a specific need. At the time, there was no single place a client, or prospective client, could go to monitor statistical categories and correlations relevant to gold ownership. This page filled that need with interactive, automatically updating charts that featured gold’s annual returns; one-year, ten-year, and long-term price charts; correlations like gold and the purchasing power of the dollar, gold and the S&P 500 and gold and the volatility index (to name a few); and, real rates of return over the long term on gold and the dollar. It remains a favorite reference among serious investors and students of the gold market to this day. We believe it to be particularly useful to the prospective gold buyer who wants to understand the history of gold under various circumstances as part of the due diligence process.
Gold Trends and Indicators is another of the quiet pages at USAGOLD that garners significant global interest particularly when the market is moving or breaking news warrants more than average interest. We also invite you to return here regularly – to this Live Daily Newsletter page – for up-to-the-minute gold market news, opinion, and analysis as it happens.
Gold Trends and Indicators
Charts offered in conjunction with the St. Louis Federal Reserve and the ICE Benchmark Administration
“Despite a resiliently strong & compressed US$ and a lack of (sustained) US equity volatility, Gold made a statement breakout in summer 2019. It became sensitive to geopolitical and trade risk and the repricing was (smartly) aligned with a shift in Fed policy. There are technical similarities between the repricing higher in 2019 (into a bull market) versus repricing in 2013 (into a bear market), which should be respected.”
USAGOLD note: We made reference to this Scotia Bank report in yesterday’s DMR. We repost it here for those who might have missed it. The very fact that gold has begun to respond so forcefully to periods of market duress is a matter of interest to Scotia Bank, one of the principal traders of the precious metal in international markets.
Repost from 1-15-2020
(USAGOLD – 1/21/2020) – Gold gave up some of last week’s gains after reaching the $1567 in overnight trade. The metal is priced now at $1550 – down $11 on the day. Silver is down 39¢ at $17.67. With little in the way of news to explain the downside, we will lay the blame, at least for now, on sympathetic selling relative to palladium’s significant drop this morning – down $84 (about 3.5%) from record highs. Platinum is also down sharply. Reuters is reporting a sharp drop in China’s gold consumption last year due, according to the China Gold Association, “to downward pressure on the Chinese economy and rising prices for the metal in the second half of last year.” Gold jewelry demand was down 8.2% for 2019. Coin and bar demand was down 27%. Reports of a new and highly contagious coronavirus showing up in China are not helping matters this morning.
Despite the poor showing for 2019, the World Gold Council’s Ray Jia sees Chinese physical gold demand getting off to a fast start in 2020 as the January 25 lunar New Year approaches. In a report posted yesterday, he says “buying ‘something gold’ is a long-standing new year tradition in China. Firstly, gold has been considered a sign of good luck or fortune for millennia, something significant as many look forward to what the new year will bring. . . Secondly, driven by year-end bonuses, Chinese consumers’ purchasing power is usually the highest before Lunar New Year. This is supported by our 2019 global consumer research findings, which indicate that higher incomes lead to higher gold consumption.” China’s gold market, says Jia, is “in a festive mood” for the Year of the Rat – the zodiac animal representing wealth and surplus.
Chart of the Day
Visualization courtesy of HowMuch.net
Chart note: “The U.S. remains by far the richest country in the world,” says HowMuch.net, “controlling some $105.99T of wealth, or almost 30% of the entire world’s net worth. Taken together, countries in Asia have a higher net worth than the U.S. at $141.21T, or about 39% of the world’s total. The poverty of underdeveloped countries is also obvious in our visual. Africa and Latin America only control 1.14% and 2.75% of the world’s wealth, respectively. The U.S., Europe and China control comparable amounts of the world’s wealth, indicating how important trade relationships are to the global economy.”
“Gold coin and minted gold bar sales from December showed a 45% uptick compared to the previous month. There was a total of 78,912 ounces of gold coins and minted bars sold in December, marking the highest monthly increase since October 2016, The Perth Mint said last week. The year-over-year comparison shows that sales were up 170%.”
USAGOLD note: This article raises two items of more than passing interest among gold owners and advocates. One is the Perth MInt’s experiencing very strong demand for its bullion coin production – in stark contrast to the U.S. Mint’s dismal numbers. The other is the source of that demand. At first blush, one would think that the reason for the differentiation is Far Eastern demand given the Perth Mint’s location. Surprisingly, though, Germany, according to the mint, is the source of that demand where investors are concerned about a developing economic slowdown.
“Speaking at the Peterson Institute of International Economics in Washington, Kristalina Georgieva said new IMF research, which compares the current economy to the ‘roaring 1920s’ that culminated in the great market crash of 1929, revealed that a similar trend was already underway.”
USAGOLD note: Georgieva’s dire warning is the second in less than a week from a major international financial institution. The World Bank warned last week of an oncoming global debt crisis fueled by excessive debt accumulation.
USAGOLD note: Nieuwenhuijs goes on to say that he believes that “the Peoples Bank of China holds at least twice the amount of gold officially disclosed” (1948 tonnes).” This article delves into China’s crucial role in the physical gold market.
“I get calls all the time from chartists warning me of ‘significant’ market formations signaling imminent shifts – I usually don’t pay much attention and ignore what I struggle to understand. But, late last week, no less than 3 of the chartists I’ve come to trust all called with the same warning: the charts all point to something significant about to happen.”
USAGOLD note: London-based Blain passes along a heads-up in Monday’s Morning Porridge. “This week,” he says, “could be a shocker.” These dark warnings rarely materialize as forecast, but we thought Blain’s latest worth passing along nevertheless.