Monthly Archives: October 2020

Could 2021 be the year of gold?

Forbes/Jeff Opdyke/10-26-2020

graphic image of 2021 the year of gold with 1799 U.S. gold $10 gold piece“But let’s assume that’s not the case and gold has a fairly uneventful final two months of the year. That brings forth 2021 and either a new administration in the White House, or the same administration. And either administration will very likely mean higher gold prices as the approaching year unfolds.”

USAGOLD note:  While most analysts are choosing a winner and offering an opinion how gold is likely to respond, Opdyke says no matter who wins the White House gold will be a winner.

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Real-world situation in $4 trillion U.S. municipal bond market alarming, says FT’s Gillian Tett

Financial Times/Gillian Tett

graphic image collapsing house of cards“But while the muni bond market might seem peaceful, the real-world situation in cities and municipalities is alarming. Not only could the current fiscal squeeze eventually raise default rates, deficits are undermining the civic services needed to support recovery.”

USAGOLD note: Another quiet crisis – along with the destruction of Main Street small businesses – knocking on the door of the U.S. economy …… The two, of course, are related since cities depend upon sales taxes to operate. With so much else to worry about, however, this brewing disaster has not received a great deal of attention. Tett lays out her worries at the link above and ends with the admonition that Washington’s political “dysfunction” is “a reason for investors to feel nervous.”


Repost from 10-26-2020

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Gold: The never normal

Maisson Placements Canada/John Ing

cartoon of lemming going over a cliff, one has a gold parachute“Without confidence in the dollar, the world has no valid reserve currency. Gold is an alternative to the dollar. As for the pandemic, gold is a perfect hedge. It is risky either way. If the virus persists or the inevitable ‘deadly second wave’ occurs, gold will rise on the effects. If a vaccine is found, gold will rise on the hangover of the cure.”

USAGOLD note:  We’ve had the “new normal,” the “new-new normal” and the “new abnormal” (in recent weeks). Now John Ing warns of a debt-ridden future that is “never normal.”


Repost from 5-18-2020

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Inflation risk to fuel bull market for gold and oil, says Goldman

CNBC/Natasha Turak

graphic image of a bull looking ready to charge“Goldman Sachs is forecasting a bull market for commodities in 2021 based on its outlook for a weaker dollar, inflation, and the prospect of further economic and fiscal stimulus.”

USAGOLD note: The investment bank is calling for a 30% twelve-month return on the Goldman Sach’s Commodities Index based on the return of an old bullish narrative – Chinese demand. It is recommending long positions in silver and gold among a group of commodities for inflation hedging purposes.


Repost from 10-24-2020

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Gold bounces back on election concerns, unexpected return of safe-haven appeal

(USAGOLD – 10/30/2020) – Gold bounced back as we close the week on election concerns and an unexpected return of its safe-haven appeal. It is up $19 at $1889. Silver is up 53¢ at $23.86. (If you are curious why gold’s safe-haven appeal might return to the forefront at this juncture, please see this post and accompanying  note published Wednesday.) U.S. Global Investors’ Frank Holmes is among those who see gold as the clear winner no matter the outcome of Tuesday’s election. “Today, we have synchronized money printing to fight COVID-19. There is not one country printing money faster than another,” he says in an interview at Streetwise Reports. “They’re all taking turns at it. If we take a look at the Federal Reserve’s balance sheet and how it’s exploded under this cycle compared to 2008–2009, simple math would suggest in the next three years gold could be $4,000 an ounce.”

Chart of the Day

bar chart showing percentage returns on gold month over monthSources: St. Louis Federal Reserve [FRED], ICE Benchmark Administration • • • Click to enlarge

Chart note: Gold has delivered some impressive returns in 2020 when shown as the percent change from the same month one year ago with several months in the 25% range and one (July 2020) at 36%.

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Economic ‘zombification’ here to stay

CNBC/Vicky McKeever/10-28-2020

“Agathe Demarais, global forecasting director of the Economist Intelligence Unit, suggested that those ‘zombie’ features previously associated with the ‘Japanese economy — slow growth, low inflation, and high debt — will become common across advanced economies’ following the pandemic.”

USAGOLD note:  Zombification is here to stay because from the perspective of the Federal Reserve and much of Wall Street there is no alternative. Let them go and they will take the economy with them ……

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Goldman says commodities headed for bull market in 2021 on inflation fears

Reuters/Staff

graphic image red sticker with the word "inflation"“The bank forecast a return of 28% over a 12-month period on the S&P/Goldman Sachs Commodity Index (GSCI), with a 17.9% return for precious metals, 42.6% for energy, 5.5% for industrial metals and a negative return of 0.8% for agriculture.”

USAGOLD note:  Goldman sticks with its bullish commodities forecast – continues to see a strong market for gold and silver.


Repost from 10-22-2020

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50% of Europe small business faces bankruptcy according to McKinsey report

ZeroHedge/Tyler Durden

cartoon showing shutting down the government might not be bad idea“McKinsey found 20% of SMEs in Italy and France could file for bankruptcy within the next six months. Like the US, European SMEs account for two-thirds of the workforce and at least half of economic value-added. A further collapse of SMEs is a warning sign of an economic recovery that doesn’t resemble a ‘V-shaped’ recovery.”

USAGOLD note:  A disturbing trend that will find its way to every nook and cranny of Europe’s economy. Rabobank’s Piotr Matys is quoted as saying that the pandemic storm never left:  “We were in the eye of the storm, I think.” Meanwhile, back in Washington DC the politicians have their own idea of how to go about addressing America’s most pressing problems, as suitably illustrated in the Ramirez cartoon above.


Cartoon courtesy of MichaelPRamirez.com


Repost from 10-22-2020

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Silver ETF flows triple over past year

The Silver Institute/Staff

“Investors sought security in silver-backed Exchange-Traded Products (ETPs) in the first nine months of 2020, nearly tripling the amount amassed compared to the comparable period in 2019. Investors have also had a strong appetitite for investment in silver bullion coins and bars during the first three quarters of this year. Overall, this reflects both silver’s role as a safe haven asset and as a leveraged play on gold, as some investors expect silver to outperform the yellow metal.”

USAGOLD note:  Silver demand has been strong and steady at USAGOLD in 2020. Most of the volume is in the American Eagle bullion coin with the Canadian Maple Leaf in the number two position.


Repost from 10-18-2020

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Gold as a hedge against asset inflation

NASDAQ/Guest Contributors

graphic image of gold flags“One of the most damaging drops in GDP in history, record unemployment, and impending inflation signals tragedy for the U.S. economy. And with the U.S. Federal Reserve reiterating its dovish stance and refusing to acknowledge inflation in the form of a soon-to-rupture asset bubble, things could be about to get worse.”

USAGOLD note: This article goes on to say that Warren Buffett’s recent foray into gold is not surprising once you understand what might be driving it – the metal’s well-earned reputation as a hedge against stagflation and the declining purchasing power of the dollar.


Repost from 9-15-2020

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Food price inflation hits emerging markets hard

Bloomberg/Max DeHaldevang

graphic image of canary on swing“Rising food costs are hitting emerging markets with a double whammy: driving millions into hunger, and thwarting central banks as they try to end the worst slump in decades.”

USAGOLD note:  The canary in the inflation coal mine?  Needless to say, developing countries, needless to say, will not be immune to the problem. In a separate article, Bloomberg tells the story of a hunger crisis in Latin America under the ominous headline: No meat, no milk, no bread: Hunger Crisis rocks Latin America.


Repost from 10-22-2020

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Standard Chartered sees dollar as vulnerable to ‘significant depreciation’

CNBC/Eustance Huang

“The [Standard Chartered] analyst said a victory for former Vice President Joe Biden would mean any dollar depreciation is set to be ‘very clear and very pronounced.’ If President Donald Trump is reelected, Robertsen said it will be ‘a little bit more messy in the short term.'”

USAGOLD note:  Standard Chartered is not alone when it registers concern about the dollar. This article ends with a reminder that Stephen Roach, the highly respected Yale economist, forecasts a 35% decline for the dollar in 2021.  If so, gold is likely to experience heavy demand. As the chart below shows, gold and the dollar index rose together in the first stages of the pandemic when both were seen as safe havens within the investment community. Beginning in June, they parted company (gold higher, the dollar lower) as worries about the dollar began to surface at the launch of the Fed’s stimulus program.

overlay chart showing the dollar index and gold 2017 to presentClick to enlarge


Repost from 10-22-2020

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Gold shows signs of further weakness amidst election confusion, fatigue

(USAGOLD – 10/29/2020) – Gold continues to show signs of weakness this morning after yesterday’s more than $30 rout. With Washington now in pre-election political lockdown and concern growing that the impasse over a stimulus package could continue even after November 3rd, the markets look confused and suffering from fatigue – precious metals included. The yellow metal is down $7 in the early going at $1872. Silver is down 54¢ at $22.93. Some analysts see this extended period of consolidation for gold – that has gone on for over a month now – as a hopeful sign.

“[I]t’s possible the metal has already bottomed,” says analyst Taylor Dart posting at the ETF Trends website, “and is simply shaking out more weak hands while we await the Presidential Election results. For investors bullish on the metal long-term, there is no reason to give up positions because of a run-of-the-mill 11% correction. In fact, we typically see corrections of this magnitude on gold twice a year, and even during bull markets. Some investors might have forgotten this after being hypnotized by calls of $3,000/oz by year-end. However, I find it very encouraging that the usual suspects slapping lofty price targets on gold have quieted down, and many investors have begun to turn bearish just because gold is consolidating.”

Chart of the Day

map showing locations of the world's largest operating gold minesChart courtesy of Statista.com • • • Click to enlarge

Chart note:  A little known fact – the highest production globally comes from mines located in the state of Nevada, according to this Statista article. “The levels of demand for gold,” says Statista, “are now prompting questions about whether reserves of the commodity are being exhausted and if humanity has reached ‘peak gold’. Some experts believe we have indeed reached that point, a view that is supported by annual gold production statistics. Mining has largely leveled off in recent years.” Though in pre-production development for what might amount to many years, Russian producer Polyus recently announced the world’s largest in-ground gold reserve located in Siberia. When brought into production, it could challenge Nevada output. Even so, it is not likely to appreciably alter the ‘peak gold’ argument.

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Silver investment demand will power silver to a new all-time high

Seeking Alpha/Bob Kirtley

graphic image of gold and silver complementary crowns“Try to avoid the day to day and even the week to week oscillations in the silver market as this is no more than a distraction from the emerging bull market in the precious metals space. Concentrate on the big picture, the impending recession and the non-stop printing of money for these are two of the main drivers behind the realization that hard assets are the place to be. Prosperity is blood, sweat and tears and the ‘money from thin air story’ will end in sorry for many of us. If this is a new sector of the market for you, then read as widely as possible in order to gain a broad but thorough understanding of why you need to own some silver and some gold if your budget will stretch that far.”

USAGOLD note:  We concur …… And that is why we populate this page each day with the top gold and silver news and opinion from a variety of sources.  We encourage your visit.  We encourage your bookmark.


Repost from 10-21-2020

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The return of inflation

Capital & Conflict/Boaz Shoshan

cartoon showing bad money drives out good as Gresham pointed out“With inflation on the up and rates trudging new lows, gold looks to be a safe bet for investors wanting to park their money. As a general rule, gold likes cheap money. It’s a safe port in a storm, so can rally sharply when central banks are pumping out free money and inflation is rising. A full analysis of gold’s investment properties – its role as money through history and its supply and demand dynamics today – is beyond the scope of this report. For now, just know that when it comes to financial repression – low interest rates and high inflation – gold is exactly what you want to own”

USAGOLD note: The shifting dynamics of global economic policy evolving are something to consider in this context. Please see the full run of posts on this page early Monday – October 19th.


Repost from 10-20-2020

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Gold sells off on virus surge in U.S. and Europe. March redux?

(USAGOLD – 10/29/2020) – It’s a day in October, but it’s beginning to look like a day from this past March when the markets got the first inkling of the financial danger that could accompany some deadly new virus originating in China. Gold and stocks sold off together then, and the dollar firmed. Today gold is down $25 at $1885. Silver is down 63¢ at $23.85. Global stock markets are also down sharply. The dollar index is up sharply. With rising case counts headline news in Europe and the United States, the virus is once again the culprit.

The ZeroHedge website posted some interesting observations from Greenlight Capital’s David Einhorn yesterday. “It isn’t difficult,” he says, “to envision this tempest exploding after the election, no matter which side wins. … A poll by Rasmussen Reports found that 34% of likely voters believe a civil war is likely in the next 5 years. While this is probably too pessimistic, it likely reflects a rising tail risk…The only common ground between the two parties seems to be money-printing. Over $3.3 trillion has been printed year-to-date, which represents nearly 22% of all U.S. dollars in existence at the end of 2019. Unsurprisingly, gold is outperforming. Investors who have argued against gold for decades are now buying some.” Einhorn, some of you might recall, was introduced to gold by his grandfather, an ardent advocate of the metal. His grandson built on that legacy and never abandoned the family attachment to the metal.

Charts of the Day

Euro Area Central Bank Balance Sheet


Source: tradingeconomics.com

Japan Central Bank Balance Sheet


Source: tradingeconomics.com

United States Central Bank Balance Sheet

 
Source: tradingeconomics.com

China Central Bank Balance Sheet


Source: tradingeconomics.com

Chart note:  For the record, the charts on quantitative easing in various economies from 2000 to present. The most notable feature for Europe, Japan, and the United States is the pandemic-related surge in 2020. China is lagging on a relative basis and that might be one of the reasons why the Chinese yuan has been in an upswing over the past few months.

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The new massive

Credit Bubble Bulletin/Doug Noland/10-23/2020

graphic image of hand holding pin about to prick balloon“We’re drifting ever deeper into dangerous territory. The economy sopped up last year’s $3.1 TN federal deficit like water into a dry sponge. The conventional narrative holds that the pre-COVID economy was robust and healthy. It was neither. Instead, years of loose finance cultivated a “Bubble Economy” – a maladjusted structure that evolved into a ferocious Credit Glutton. This has become much more than some theoretical precept from Austrian economics. It’s a pressing reality, with momentous ramifications for politics, the markets and American society more generally.”

USAGOLD note:  This more detailed treatment of the credit bubble fits nicely with the shorter analysis from Thorsten Polleit highlighted and linked below.  Noland also throws out some speculation on how a Democrat “clean sweep” might differ from what we have now.

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Silver could explode within weeks

Daily Reckoning/James Ricards/10-23-2020

Photo stacks of silver bullion coins“This is why I call silver ‘the once and future money,’ because silver’s role as money in the future is simply a return to silver’s traditional role as money throughout history. In short, silver is as much a monetary metal as gold, and has just as good a pedigree when it comes to use in coinage. Silver has supported the economies of empires, kingdoms and nation states throughout history. Before the Renaissance, world money existed as precious metal coins or bullion. Caesars and kings hoarded gold and silver, dispensed it to their troops, fought over it, and stole it from each other.”

USAGOLD note:  As reported previously, silver sales at USAGOLD have been consistently strong all year. To be sure, investor interest began to heat up even before the pandemic became an urgent matter based on the perception that it was cheap when compared to gold. That interest and perception is still present today.  Some investors take delivery of their silver orders. Others – particularly those taking a larger position – open depository storage accounts. If you see the current price lull as an opportunity, we can help you confirm your order quickly over the telephone (1-800-869-5115 x100) or through our Online Order Desk.

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Clarida says uncercainty, lengthy recovery ahead

Bloomberg/Christopher Condon/

photo of key members in meeting of the Federal Reserve Board

“’It will take some time to return to the levels of economic activity and employment that prevailed at the business cycle peak in February, and additional support from monetary — and likely fiscal — policy will be needed,’ [Fed Vice-Chairman Richard] Clarida said Monday in a speech to an online event hosted by the American Bankers Association. ‘The economic outlook is unusually uncertain.'”

USAGOLD note:  Seems like the monetary establishment globally is putting on the full-court press ……with the United States and Europe front and center.


Repost from 10-21-2020

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