Monthly Archives: October 2020
“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.
“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
“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
“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
When the United States owned
most of the gold on Earth
Chart courtesy of GoldChartsRUs
Few Americans know that just after World War II the United States owned most of the official sector gold bullion on earth – about 22,000 metric tonnes or 80% of the world total. As part of the 1944 Bretton Woods Agreement, though, the United States allowed unrestricted redemptions from its reserves at the benchmark rate of $35 per ounce. In the 1960s, a group of European countries, led by Germany and France, got the idea that U.S. trade and fiscal deficits had undermined the dollar, making gold a bargain at the $35 benchmark price. Steadily over the next decade, they exchanged dollars for gold at the U.S. Treasury’s gold window. By the early 1970s, 14,000 tonnes of gold – or 64% of the stockpile – had departed the U.S. Treasury never to return (See the chart above).
The transfer of gold finally ended in 1971 when President Nixon halted redemptions, devalued the dollar and freed the greenback to float against other currencies. The era of global fiat money with the dollar as its centerpiece had begun. Gold transformed from its official role as backing the dollar to serving as a hedge against its depreciation. Since that role reversal, gold has risen in fits and starts from the $35 official benchmark in 1971 to a peak of over $1900 in 2011. It is trading now in the $1900 range. For the central banks and private investors who redeemed their dollars for gold at $35 per ounce, the gains have been extraordinary – over 5400% at current prices or 8.25% annually compounded over the 49-year period. Simultaneously, the 1971 dollar has lost more than 84% of its purchasing power.
(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
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%.
“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 ……
The coming economic meltdown
USAGOLD note: In this wide-ranging video interview, Rogers covers topics of interest to investors – from stocks, to real estate, to gold and cryptocurrencies (among others). In addition, he offers his opinion on economic issues – particularly debt, the value of money, the great reset, MMT, and inflation. On two occasions, he holds up gold a couple of coins and says “Hang onto your gold. . . .” Highly recommended.
“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
“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
“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
“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
“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
“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.
Repost from 10-22-2020
(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
Chart 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.
“Why own gold? Because it makes sense, within a properly diversified portfolio, to have portfolio insurance. If you own a home, it makes sense to have fire insurance. Your investments are no different. And gold is now back, more relevant than ever. Since the start of the millennium gold, as expressed across a wide variety of currencies, has generated average annualised returns of over 9%.”
“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
“I find quite strong parallels between what John Law attempted exactly 300 years ago in Paris by severing the connection between money and gold by printing a lot of money through the central bank and using that money to purchase shares in the Mississippi Company.”
USAGOLD note: We referenced this interview in yesterday’s DMR and revisit it today for those who may have missed that report. Chancellor is a highly respected investment strategist formerly with GMO and the author of Devil Take the Hindmost, a warning on financial speculation published just before the stock market crash in 1999. He mentions gold in this interview then reveals he has made a heavy commitment to “real assets” – 80% of his wealth.
Repost from 9-14-2020
“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