Monthly Archives: September 2020
“However, in the midst of the ‘mania,’ things like valuation, revenue, or even viable business models didn’t matter. It was the ‘Fear Of Missing Out,’ which sucked investors into the fray without regard for the underlying risk. Though South Sea Company shares were skyrocketing, the company’s profitability was mediocre at best, despite abundant promises of future growth by company directors.”
USAGOLD note: Sound familiar? There is one major difference between the 1720 South Seas Bubble and today. Only one company’s shares were affected in the 18th-century version. Today hundreds of companies are similarly affected many of them bearing the distinction of zombie companies in the modern parlance. Lance Roberts offers some interesting perspective and background at the link above.
(Click image to enlarge.)
Repost from 9-21-2020
The top three official mints sold a great deal of retail silver bullion products in the first half of 2020. However, the sales figure could have been a great deal higher if the various government mints weren’t forced to shut down production. The top three official mints in retail silver bullion sales are the U.S. Mint, Royal Canadian Mint, and the Perth Mint.
USAGOLD note: It’s been a good year for silver sales at USAGOLD – strong and steady. Below is chart accompanying St. Angelo’s article showing 40.4 million ounces of silver sold compared to 27.3 million ounces in 2019 – a 48% gain. Note that the reporting period for the U.S. Mint is January through August, January through June for the Canadian Mint and January through July for the Perth Mint. Two additional factors to keep in mind: First, there were slowdowns and shutdowns for the major mints in 2020. Second, these numbers do not include demand satisfied by bullion coins acquired in the secondary/resale market.
Repost from 9-19-2020
“The ongoing stalemate in Congress on the next relief package adds to concerns about what lies ahead in a situation of shrinking income support from the government, a less dynamic labor market, and continued business investment hesitancy. The outlook for the rest of the world provides little relief for this bleak picture.”
USAGOLD note: This article was published before last week’s Fed meeting. It anticipated the muted response from the Fed citing “the limited effectiveness” of monetary policy in addressing the economic impact of the pandemic. As we mentioned in a DMR following the FOMC meeting, after all is said and done, the Fed appears content, at least for now, to let the tincture of time do its work while implicitly shifting the responsibility to the federal government for the next round of stimulus.
Repost from 9/22/2020
“Swiss exports of gold to the United States all but halted in August while shipments to China and India rose, customs data showed on Thursday, suggesting a big transfer of bullion to New York that followed the coronavirus outbreak has run its course.”
USAGOLD note: We would have ended that sentence with the words “for now.” Historically, the West tended to buy gold when it was rising. The East bought when it dropped. Those cultural tendencies, though, are undergoing a change. The record shows that American funds and institutions, as reflected in ETF flows, were big buyers beginning in 2019 when this rally began.
Repost from 9-21-2020
(USAGOLD –9/25/2020) – After a failed attempt to regain its footing yesterday, gold is back to the downside again this morning as technical trading and profit-taking appear to outweigh all else. Gold is down $10 on the day at $1860. Silver is down another 44¢ at $22.79. On the week gold and silver look headed for their worst performances in over a month – down 4.75% and 16% respectively. Much of the downside is driven by concerns about Congress meeting Fed Chairman Powell’s appeal for some fiscal help to go along with the monetary stimulus already applied. There are rumblings from various analysts that the economy is sliding back into a ditch – yesterday’s woeful jobs number being the primary indicator.
Chart of the Day
Chart note: The gravitational pull of disinflation was a constant in the economy even before the coronavirus. Now it is fully asserting itself – at least in the short term. Debt becomes an enormous weight under such conditions with threats to the stability of the financial system multiplying accordingly. The last crisis was essentially a disinflationary breakdown. Gold, as you can see by the chart, rose to the occasion.
“Uncertainty over the contest and delays about the outcome may ‘be under-appreciated by precious metals markets,’ analysts including Aakash Doshi said in a quarterly commodities outlook. The bank’s forecast implies a surge of more than $200 for bullion futures from current levels.”
USAGOLD note: If Citigroup is correct, it would not be the first time this year that events have suddenly reversed a gold market downtrend. This article will resonate with investors who equate corrections with opportunity.
“We’re starting to see a second wave of layoffs as the Payroll Protection Plan money runs out and the economy doesn’t recover as hoped. Meanwhile, states and cities are also planning huge layoffs in the coming weeks as tax revenues dry up and the costs of riots and looting begin to add up. Putting all of this together reveals that unemployment may actually rise, starting now, after declining from May through August.”
USAGOLD note: Rickards sees the improving numbers on the employment front the past couple of months as a false spring and says “we’re looking at disinflation and deflation for now, despite all the money creation we’re seeing.”
Repost from 9-19-2020
“We are very bullish on gold. We think that the prices will go higher and what is interesting is we think it will stay higher for longer than expected.” – Yeoh Choo Guan, UBS head of Asean Global markets
USAGOLD note: Generally speaking, the big financial institutions tend to keep their gold forecasts low, then push them up as the markets meet their target levels. That is one of the reasons why the Bank of America’s $3000 forecast earlier this year got so much attention in the financial media.
Repost from 9-21-2020
“This brings us to today. ‘It’s a yellow rock!’ scream legions of PhD-bearing central banker wannabees. True —and that yellow rock has been wiping the floor with the likes of you since the beginnings of recorded history. Actually, the funny-money people destroy themselves, while gold just sits quietly inert. We say of things that are stable, solid and reliable, that they are ‘like a rock.’ This is a good thing. This is what we want money to be, and gold is the best approximation of this ideal that we have — and approximation that, while never perfect, has always been Good Enough.”
USAGOLD note: An engaging walk through monetary history that includes stops in ancient Greece, the Byzantine Empire, China, the British empire, the 17th and 18th-century European continent, and the golden age of the United States. For those who have little knowledge of the history of paper money and gold, Lewis’ article will be an eye-opener and a source of some solid grounding on the principles of money and inflation.
Repost from 8-14-2020
“[S]o far we’ve seen two major resets of the system. One back in 1933 when FDR confiscated gold and reset the system. The other one in 1971. Again, at the root of that was a reset of the gold price. Because that is the anchor to finance. It is the anchor to the financial system and it’s the only…I call it the apex predator in a presentation I did last year.”
USAGOLD note: Williams follows up that historical reference with the conclusion that a return to the gold standard is not something financial authorities will implement by choice but something that is “imposed on them by a total breakdown of the monetary system.” We recall that the European Union made gold part of its reserves, not so much because it believed in its transcendence as an asset, but as a means to instilling public confidence in the euro.
Repost from 12-30-2019
Seeking Alpha/Peter Krauth
“They say patience is a virtue. Well, if anyone is virtuous these days, it has to be silver bulls. They also say good things come to those who wait. I believe those good things will be coming… in spades. Silver reached just shy of $50 back in April 2011. A decade later, we’re still just barely above half that level. But that’s all about to change.”
USAGOLD note: Encouraging words on silver from the Canadian analyst with expertise in precious metals and mining/energy stocks. He forecasts the white metal to reach $37 by year-end.
Repost from 9-18-2020
“Goldman Sachs expects the onshore Chinese yuan to strengthen to 6.5 per dollar over the next 12 months, according to Timothy Moe, co-head of Asia macro research and chief Asia-Pacific equity strategist at Goldman Sachs.”
USAGOLD note: This could help gold in the coming months.
Repost from 9-17-2020
Gold, silver continue their descent; an interesting take on the level of commitment to precious metals in a well-balanced portfolio
(USAGOLD – 9/24/2020) – Gold continued its descent but the rate of decline seemed to be slowing this morning. It is down $10 at $1856 (after yesterday’s $40 decline). Silver’s descent, however, continues at a more virulent pace. It is down 82¢ at $22.03 – a roughly 3.5% decline from yesterday (and a nearly 25% decline from its peak of $29 in early August.) We note a pick-up in the number of orders at our online purchasing portal the past two days for both gold and silver – a reminder that there are always safe-haven investors with a longer-term profile who see corrections as buying opportunities.
Investors often ask about the percentage commitment one should make to precious metals in a well-balanced investment portfolio. Analyst Michael Fitzsimmons offered an interesting take on that subject in a recent Seeking Alpha editorial, “Assuming a well-diversified portfolio (which does include cash for emergencies),” he says, “my belief is that middle-class investors (net worth under $1 million), should own at least 5-10% in gold. I also believe that as an American investor’s net worth climbs, the higher that percentage should be because, in my opinion, he or she simply has more to lose by a falling US$. For instance, an investor with a net worth of $2-5 million might have a 15-20% exposure to gold; $10 million, perhaps a 30-40% exposure.” (More on Fitzsimmons thinking in the “Chart note” below.)
Chart of the Day
Aggregate National Debt
Chart courtesy of TradingEconomics.com • • • Click to enlarge
Chart note: “The basic thesis of the interview* is that America has not been a good steward of the benefits of capitalism,” writes analyst Michael Fitzsimmons at Seeking Alpha (quoted and linked above), “which has increasingly gone to fewer and fewer people even as the U.S. has created a mountain of debt. That leads to a loss of productivity and reduced opportunity for the country’s citizens. And, as Dalio puts it, ‘Wealth cannot be created by creating debt and money.’ The result, Dalio believes, is that the world is likely to change in ‘shocking ways’ over the next five years, including a loss of faith in the U.S. dollar: ‘Within the next five years you could see a situation in which foreigners who have been lending money to the United States won’t want to.’”
*Ray Dalio interview at MarketWatch (9/18/2020)
“These near-real-time measures don’t track the entire economy, such as manufacturing, oil-and-gas drilling, financial services, insurance, and many other aspects. But the data show that certain physical aspects of the economy – where people are physically going to do business in some manner – are still very far from the ‘old normal.'”
USAGOLD note: Wolf offers a walk down Main Street America in 2020 – a report card on how we are doing six months into the pandemic with some very down-to-earth, real economy numbers and analysis we found revealing.
Repost from 9-17-2020
“The world’s largest gold exchange-traded fund is seeing withdrawals after a ferocious run.”
USAGOLD note: After a run to new record highs in a very short period of time, one might expect some profit-taking and caution from buyers.
Repost from 9-16-2020
“The truth is, gold’s price adjusted for inflation is still 48% below its 1980 high at $875.Today, that price would equal $2,900. In the grand scheme, it still looks cheap. With the tens of trillions of dollars unleashed globally in the Covid-19 pandemic’s wake, gold’s just getting started. Although you might be a speculator without wanting or intending to, that doesn’t mean you have to take huge risks and can’t be intelligent about your allocations.”
USAGOLD note: It escapes most investors – particularly those who avoid economics at all costs – that even savings are a speculation because the currency saved can depreciate in value. That does not make the reality, though, any less real. That is why portfolio balance is so important – as Krauth explains briefly and effectively at the link above.
Repost from 8-7-2020
“… [P]olicymakers now see their primary task as staving off downturns and boosting growth and inflation. Central bankers have come out and said governments need to do more to stimulate growth with fiscal policy. The way to invest for unexpected bursts of fiscal stimulus might be assets that have largely been out of favor in recent years, such as value stocks of financial and non-U.S. companies, and perhaps commodities.”
USAGOLD note: First, we disagree with the notion that the baby boomer investing era is coming to an end. To the contrary, we see it as being in its formative years. Generally speaking, investors do not suddenly stop being investors arbitrarily at 70 years of age. Second, the headline to this article, in all fairness, belies the content. What it is really about is the changing investment landscape from one dominated by disinflation to one potentially featuring inflation (perhaps even runaway inflation) – a paradigm change that, should it occur, will need to be taken into account in the investment portfolio.
Repost from 6-19-2020
“My conclusion is simple. The evidence shows the coronavirus is not what we feared it might be. It is not the Medical Armageddon we closed down our economy to avoid. As a result we just shot our Economy in the foot. Lockdowns probably achieved very little – aside from wrecking whole swathes of industry, business and commerce. Covid-19 is serious, it makes many people very ill, and it has culled large number of vulnerable people. Many people remain in danger. But it is not the Big One. It is not a repeat of the 1918 Spanish Flu or the Black Death.”
USAGOLD note: October looms. Will the mistakes of the past nine months come home to roost? Blain offers some reasonable, multi-faceted thinking at the link above.
Cartoon courtesy of MichaelPRamirez.com
Repost from 9-17-2020
“While we do not feel that gold will reach these exalted levels in the short to medium term, we do admit that in the ultra long term such peaks may be achievable. Lassonde has, for many years, predicted that the gold price will eventually achieve parity with the Dow Jones Industrial Average (currently at around 28,000), suggesting a huge increase in the gold price coupled with a sharp reduction in the DJIA index. This is a pattern we would concur with, although something that could take several years to come about.”
USAGOLD note: A more likely scenario would be for the Dow to retreat while gold advances and they meet somewhere in the middle. In this era of extravagant money printing, however, a phenomenon which raises all boats, it could unfold the way Lassonde predicts. At the moment, the Dow/gold ratio is at roughly 13.5, i.e. 13.5 ounces of gold buys the Dow. The last crossover came in late 1979.
Dow to Gold Ratio
(1970 to present)
Chart courtesy of Macrotrends.net • • • Click to enlarge
Repost from 9-16-2020