Monthly Archives: July 2020
“Gold broke a new high on 28th July, reaching US$1,940.9/oz on the LBMA Gold Price PM and topping US$1,981.3/oz intra-day. This exceeded the previous record of $1,895.0/oz set by the PM Price on 5th September 2011 and the $1,921.2/oz intra-day high the following day during Asian trading hours. On the heels of this milestone, investors are asking two key questions, which we explore in this report: How does this compare to previous highs? Is the price rally sustainable? Gold’s performance so far in 2020 has been remarkable. As of 28th July, it is up by 27%, significantly outpacing all major assets. This move up has been driven by a combination of: 1) high uncertainty, 2) very low interest rates, and 3) positive price momentum – all of which are supportive of investment demand. But there are reasons to believe that we may still be early in the cycle.”
USAGOLD note: Thorough, well-grounded rationale on where we might be headed in the gold market. Particularly useful for those looking into gold for the first time ……The inflation-adjusted high for gold, by the way, is in the vicinity of $2800 per ounce.
“’There was a point in time when we were wondering if the bond market would really ever function again,’ says Nick Maroutsos, co-head of global bonds at Janus Henderson, an investment group. ‘If it continued for a couple of weeks, we were thinking we were looking at doomsday.’”
USAGOLD note: A retrospective that tells how close we came to a full bond market meltdown this past March. The issue, it seems, was liquidity and the Fed filled the gaps. “I understand why the Fed did this, but they basically bailed them out,” says [former New York Fed chief Bill] Dudley. “There’s definitely a moral hazard here.” The bond market is the black hole at the center of the fiat money universe – the focal point around which all else rotates. Smith and Wigglesworth offer a deep weekend read ……
“The dollar has become the world’s punching bag and it’s likely to stay that way for awhile. … Strategists say the dollar’s slide comes as the U.S. lags most of the world in halting the spread of the coronavirus, and some expect the U.S. economic recovery to lag others, including Europe. The dollar is also reacting to the prospect of mounting U.S. deficits and ultra-low U.S. interest rates well into the future.”
USAGOLD note: Suddenly dollar bears are in abundance …… And they are all wearing masks.
Repost from 7-28-2020
“Why is this happening? This behavior is coming particularly from the group labeled ‘other reportable’ in commitment of traders disclosures, which includes family offices and high-net-worth individuals. Worried about protecting the value of their fortunes, they are opting for the perceived safety of physical gold. This creates a specific problem for swap dealers, which are run by the bullion banks that make a market in gold.”
USAGOLD note: For as long as we can remember, USAGOLD has taken the position that the Achilles heel of the paper gold market is investors opting to take delivery of the metal – deliveries the short side of the market would find difficult to meet simply because of the dearth of availability against the amount of capital committed in the market. Now, according to Authers, that day may be upon us.
Repost from 7-28-2020
“Kenneth Rogoff, Harvard professor, former chief economist at the International Monetary Fund, and internationally respected expert on recessions, says this downturn doesn’t fit neatly into any prior models. His 2009 best-selling and widely cited book with Carmen Reinhart, This Time is Different: Eight Centuries of Financial Folly, examines the booms and busts that helped shape today’s global economy. The coronavirus pandemic and ensuing recession have profoundly amplified trends that were already at work in the global economy, but how it evolves from here is the great unknown. This time is certainly different.”
USAGOLD note: This theme – the pandemic as catalyst rather than cause – is a recurring one among prominent analysts. It suggests a deeper wound and longer recovery. Some think the damage permanent with residual high unemployment, resurgent inflation, and weak corporate earnings permanent features of a new, albeit distressed economy.
Repost from 6-18-2020
“It seems that global stock markets have disconnected from the fundamental reality. They have been rising since the end of March despite the collapsing economies and soaring unemployment. Why? And what does it imply for the gold prices?”
USAGOLD note: We’ve had the Great Recession. We’ve explored the Great Reset. Now we have the Great Disconnect. The best recourse? How about the Great Refuge?
Image courtesy of Visual Capitalist
Repost from 6-18-2020
“Dalio said that we are in an ‘ideological civil war’ with the Chinese and that when you combine that with ‘an economic downturn in which there is the printing of money and the creation of money out of thin air,’ it creates larger issues for the U.S. economy. The biggest issue Dalio is worried about is ‘the soundness of our money. ‘You can’t continue to run deficits, sell debt or print money rather than be productive and sustain that over a period of time,’ Dalio said.”
USAGOLD note: This is precisely why some analysts are keeping a very close eye on the deteriorating relations between the U.S. and China. The situation not only carries implications for financial markets in general but for gold, the dollar and the yuan in particular. Dalio has consistently recommended gold ownership over the past few years as a hedge against a breakdown in the relationship.
Repost from 7-27-2020
“Mobius says that investors find themselves in a curious spot where buying stocks and gold are both viewed as ways to preserve capital and avoid erosion from inflation. ‘We’re in a very interesting situation where people are looking at stocks to preserve their capital because stocks will adjust to inflation and also gold. Their sort of hedging their bets.’”
USAGOLD note: Mobius has been a vocal advocate of gold on the interview circuit for over a year now. He points out in this article that mine ouput “should be declining” as a result of COVID-19.
Repost from 7-27-2020
(USAGOLD – 7/31/2020) – Gold regained momentum during Asian trading hours as investors sought refuge from further depreciation in the dollar, a major reduction in U.S. GDP, and accelerating COVID-19 case numbers across the globe. Fed Chairman Powell’s emphasis on fiscal spending during Wednesday’s press conference is also adding to gold’s appeal. There is a direct long-term correlation between growth in the aggregate federal debt and a rising gold price (Please see this morning’s post, “The government put is a tailwind for gold” at our Today’s top gold news and opinion page.) Gold is up $19 on the day – just under 1% – at $1978.
It is silver though that is increasingly catching the attention of traders and market analysts. Now up 76¢ on the day – or 3%, it continues to outpace gold which has posted solid gains in its own right over the past several months. (Please see our Charts of the Day immediately below). Goldman Sachs’ most recent gold forecast has received a great deal of attention over the past few days, but its silver call received only cursory notice. The Jeff Currie-led team of analysts sees the white metal at $30 “on a 3/6/12 month horizon, pulled upward by higher gold prices and better prospects for silver industrial demand.” It suggests the possibility of the gold-silver ratio falling to 77. With its target for gold set at $2300, it “would imply a $30/toz silver price.”
Chart[s] of the Day
Twelve months through July 30, 2020
Year to date through 7/30/2020
Gold-silver ratio through 7/30/2020
Charts courtesy of Trading View.com • • • Click to enlarge
Chart note: The gold-silver ratio has fallen dramatically since the beginning of April but still far above its long-term average indicating there is still some room for improvement. Silver is up 29.03% year to date and 30.36% over the past 12 months. Premiums are rising on silver bullion coins the result of increased demand and curtailed production at world mints. Though silver American Eagle bullion coin premiums have risen significantly over the past few days, silver Canadian Maple Leafs are still available at reasonable premiums. Please call our Trading Desk for details 1-800-869-5115 x #100.
“Gold’s surge to an all-time high is winning over a wider fan base of pension funds, insurance companies and private wealth specialists.”
USAGOLD note: These groups are new to the gold investment arena and bring to the table considerable purchasing power and market savvy – along with an eye to longer-term horizons. One immediate result might be more buying interest on price dips.
Graphic image courtesy of Visual Capitalist
“The Fed wants us to believe that we should believe that there will be no inflation out of all this and to me that is a vast unknown. We have America’s fastest peacetime money-growth coexisting with the all-time 4,000-year record lows in interest rates. It’s a most curious and troubling juxtaposition there. … I think what we have is a monetary moment that is unprecedented and therefore calls for extreme caution and great humility on the parts of all of us.”
USAGOLD note: Interest Rate Oberserver’s Grant goes on to say that he is “confidently bullish on precious metals.”
“Alternatively, with so much uncertainty, risk aversion and deleveraging on the part of corporations, households, and even entire countries could result in a more anemic U-shaped recovery over time. But if the recent surge of COVID-19 cases in the United States and other countries is not controlled, and if a second wave occurs this fall and winter before a safe and effective vaccine is discovered, the economy would likely experience a W-shaped double-dip recession. And with such deep fragilities in the global economy, one cannot rule out an L-shaped Greater Depression by the middle of the decade.”
USAGOLD note: Noriel Roubini is a great black bear watching over a flock of white swans …… of which a few have already landed. “Why,” he asks, “are financial markets blissfully ignoring these risks?”
Repost from 7-29-2020
“I think that the downside in gold is limited. The upside on gold at this point is unlimited. It’s going to be far, far higher than people imagine.”
USAGOLD note: In the past, Lassonde has said that gold will go “over $10,000” in a “tidal wave of buying.” In this interview, he says we are “about halfway through this [gold] bull market and there is a lot more to come” over the next two to five years. Much more to digest at the link above ……
Repost from 7-26-2020
Coverage of David Einhorn’s (Greenlight Capital) client letter
“The deflationists point to Japan as the obvious counter-example. However, Japan never ran these kinds of annual deficits, never had a large negative public plus private national savings rate, and never grew its money supply this quickly. … It might get tricky a few years from now if inflation accelerates further. The Fed has demonstrated it doesn’t have the stomach to slow the economy by reigning in policy. We believe the implied negative real interest rates are bullish for gold and for unlevered real assets with pricing power (home prices will rise, while leveraged commercial real estate will fall from lack of demand).”
USAGOLD note: Einhorn, a long-time advocate of gold ownership, comes down firmly in the inflation camp. Durden quotes extensively from Einhorn’s letter at the link.
Repost from 5-2-2020
“If the economy was booming with stock prices at reasonable levels, we could take comfort that good times really had returned. But I don’t feel able to trust a recovery that is financed by an overpriced stock market. Overpriced stocks makes us feel that it is safe to spend again. But the financial security pushing spending forward is illusory.”
USAGOLD note: A short, sensible assessment of the relationship between today’s stock market values and the economy at large – potentially an elaborate house of cards.
Repost from 10-29-2019
Image courtesy of Visual Capitalist • • • Click to enlarge
USAGOLD note: A screenshot taken from a much larger presentation at the link above.
Repost from 7-24-2020
Of 17th-century tulips, 21st-century stocks
and ageless gold
During the Dutch Tulipmania, the price of one special, rare type of tulip bulb called Semper Augustus sold for 1000 guilders in 1623, 1200 guilders in 1624, 2000 guilders in 1625, and 5500 guilders in 1637. Shortly thereafter, the bottom fell out of the market and prices plummeted to 1/200 of their peak price – a mere 27 guilders. In the artwork above an individual, portrayed in fool’s garment, is shown trading a hefty pouch of gold for a handful of tulip bulbs. It is no mystery who got the better part of that bargain. History teaches us that no era is immune to financial mania including our own. As a matter of fact, a good many believe that we are fully immersed in a stock market mania right now.
Since the earliest days of the USAGOLD website (the mid-1990s), we have enshrined a quote from Thomas Bailey Aldrich at our home page: “The possession of gold has ruined fewer men than the lack of it.” Aldrich’s axiom has held true down through the ages. It applied in ancient Greece and Rome, in 11th century China, in the time of the Medicis, the Dutch Tulipmania, the South Seas Bubble and French fiat money mania, during the long string of panics in the late nineteenth and early 20th centuries (Aldrich’s time), the spate of post World War I and II hyperinflations (Austria, Germany, Greece, Hungary, et al) and it still applies today.
“This is just the beginning of what could turn out to be the biggest gold bull market in history. Gold is within a hair of taking out its previous all-time high of around $1,910. Once it does, I expect gold to skyrocket. Gold is the ultimate form of wealth insurance. For thousands of years, it’s preserved wealth through every kind of crisis imaginable. It will preserve wealth during the next crisis, too. Owning some physical gold – and keeping it in your own possession – is step one. It’s something everyone should do.”
USAGOLD note: Giambruno pulls no punches in this advisory.
Repost from 7-23-2020