Monthly Archives: October 2020
“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.
“’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
“At these levels, why own gold in a portfolio? The combination of low-to-negative government bond yields plus a weakening US dollar, and, most importantly, massive central bank accommodation, supports financial demand. This relationship between gold and real yields has held for the last decade and recent central bank interventions have reinforced the case for holding gold as a portfolio diversification tool. In addition, as investors consider the pandemic’s longer-term implications, they are likely to look harder at their exposure to sovereign debt and the solvency of indebted governments. This further increases the attractiveness of gold, which, even if it produces no income and is costly to store, carries no credit risk.”
USAGOLD note: Lombard Odier, founded in 1796, is a private Swiss banking firm that manages about $250 billion in assets for private individuals and other institutions. It is now recommending gold ownership to its clientele.
Repost from 7-22-2020
“The tweet was born out of several ideas I had for articles to write. One, on the relationship between the gold price, inflation expectations, and the inflation needed to lower the debt burden. Two, on the accounting structure of central banks’ balance sheets, and the ability of using gains in the price of gold to absorb losses on other assets. Three, on restoring financial stability through a new equitable monetary system that incorporates gold. In aggregate, I think gold will be used to get out of the current financial mess.”
USAGOLD note: There is significant reportage on gold being purchased by central banks, but it really is not the major players in the official sector who are doing the buying but the smaller players – led by Turkey and Russia. There has been considerable speculation that China has been a major buyer with Nieuwenthuijs among the researchers advancing the theory. It will be a profoundly different story for the gold market, however, if major central banks begin adding gold to their coffers as a policy maneuver to hedge their overall balance sheets. Competition for available supplies would intensify. The price would likely respond.
Repost from 10-22-2020
“In a week when several major oil and gas reports were released, most notably the IEA World Energy Outlook 2020 and OPEC’s World Oil Outlook, a regional conflict is now on the brink of spiraling out of control. The toxic combination of a military confrontation between Azerbaijan and Armenia, supported by Turkey and Russia respectively, and the confrontational stance that Ankara is taking in the East Med conflict are threatening to upend European energy supplies.”
USAGOLD note: It’s the one that sneaks up on global financial markets that can end up being the most unsettling.
Repost from 10-21-2020
(USAGOLD – 10/27/2020) – Gold continues to tread water in the run-up to next Tuesday’s election. It is up $2 at $1906. Silver is up 16¢ at $24.60. With the Senate now adjourned, it looks like hopes for a stimulus package will go on hold until after the election. While gold remains in a pre-election muddle, some are predicting a strong post-election rally. Standard Chartered’s Suki Cooper thinks gold could still reach $2000 by the end of the year and $2100 early in 2021. “Negative real rates, expectations of a weaker USD and stimulus packages continue to paint a favourable backdrop for gold, but lighter positioning suggests caution ahead of the election,” she said in comments featured at the Kitco website this morning. Gold could get an unexpected lift going into the end of the year from China where demand for the metal was up 28.7% in the third quarter, according to a Reuters report.
Chart of the Day
Chart note: As you can see, the drop in the Weekly Economic Index from early March through mid-April was the worse since the 2008 financial crisis. Since then we have had something of a recovery but the index remains deeply below the zero line. As a matter of interest, we added the price of gold. At the moment, the index is in recovery mode though it still appears a bit weak at this juncture, as it did the first time we ran this chart a month ago. Stay tuned. We will repost this chart at from time to time to see if we get a “V”, “W”, “Nike swish” or “lightning bolt” – and gold’s response. (The Weekly Economic Index incorporates a long list of economic indicators including retail activity, unemployment claims, even railroad traffic and wholesale fuel sales (to name a few) using “timely high-frequency data.”)
“The world reels from the economic aftershocks of the coronavirus pandemic but for the Swiss bankers shepherding the fortunes of the world’s super-rich, it is boom time.”
USAGOLD note: This saga about the rich getting richer the result of the pandemic has a surprise ending: The very rich are putting a lot of those newly gained riches into gold at the advice of their Swiss-based financial advisors – UBS among them. The advice, says FT, was to stay in the stock market but build hedges. “One hedge in particular,” it says, “was pushed by many Swiss bankers and wealth advisers to their clients with great success this year — gold. … Buying it was the corollary to the huge governmental stimuli that buoyed equity markets.”
Image courtesy of VisualCapitlist.com
“Amor fati was Nietzsche’s famous expression. It is a Latin phrase with connections to the Stoic writings of Epictetus and Marcus Aurelius. Literally translated, it means ‘love of fate. It is a white shoe yearning for mud. It is a turkey looking forward to Thanksgiving. Or an investor stoically preparing for a bear market. We use the term to describe the grace and courage you need to meet a complex, unknowable, and uncontrollable future.”
USAGOLD note: Highly recommended deep thinking from Bill Bonner …… As for the unknowable and uncontrollable when it comes to markets, a little gold and silver in the portfolio will go a long way in keeping the wolf from the door.
Repost from 10-20-2020
“On gold’s latest 13-year chart we can see that the giant Bowl pattern has already driven a breakout to new highs in recent months and in this context the minor reaction of recent weeks is a perfectly normal development that unwinds the overbought condition somewhat and rebalances sentiment. The Bowl pattern can also be described as a Cup, and very often a “Handle” forms to complement the Cup before further significant gains are made, which is a period of consolidation that proportion suggests could last a year or two. Should such a Handle now form it would clearly be a source of major annoyance and frustration to investors in the sector as it would mean their holdings would generally go nowhere for a year or two. However, things are deteriorating at such a rapid rate that it is considered most unlikely that gold would get bogged down in this manner. The ongoing exponential rise in money creation to support a collapsing economy that has been made worse by the virus hysteria and disproportionate reaction of governments around the world means that the purchasing power of fiat most everywhere will decline at an accelerating rate, and since gold is “real money” that holds its value no matter what, it must therefore gain in price to compensate. What could therefore happen instead is that, rather than meander around for ages making a Handle, the steeply rising Bowl boundary generates a dramatic slingshot move higher in gold, which the current setup certainly makes possible, especially as it has just broken out to new highs.”
USAGOLD note: The latest from Clive Maund who says “If gold does react back as shown on the chart [to the $1850 level] it will be viewed as presenting a “back up the truck” buying opportunity. The bullishly aligned moving averages and strong Accumulation line certainly bode well for the medium and long-term.”
Chart courtesy of Clive Maund Technical Analysis
Repost from 10-19-2020
The stock market is in a mania fueled by the Federal Reserve and investor speculation that will end badly in coming years, longtime hedge fund manager Stanley Druckenmiller told CNBC on Wednesday. ‘Everybody loves a party … but, inevitably, after a big party there’s a hangover,’ the billionaire CEO of the Duquesne Family Office said in a “Squawk Box” interview. ‘Right now, we’re in an absolute raging mania. We’ve got commentators encouraging companies to do stock splits. Companies then go up 50%, 30%, 40% on stock splits. That brings no value, but the stocks go up.’”
USAGOLD note: Druckenmiller’s surprising assessment brought to mind a quote from another stock market speculator who warned off market mania a long time ago:
“Have you ever seen in some wood, on a sunny quiet day, a cloud of flying midges — thousands of them — hovering, apparently motionless, in a sunbeam? …Yes? …Well, did you ever see the whole flight — each mite apparently preserving its distance from all others — suddenly move, say three feet, to one side or the other? Well, what made them do that? A breeze? I said a quiet day. But try to recall — did you ever see them move directly back again in the same unison? Well, what made them do that? Great human mass movements are slower of inception but much more effective.” – Bernard Baruch, Wall Street financier (1870-1965)
Repost from 9-9-2020
“The answers here are speculative. We lack good data over multiple inflation spells to know for sure how different assets perform as inflation hedges, and of course plenty has changed since the early inflation episodes, such as Egypt under Ptolemy IV (221-204 BC), Rome (from Nero through Claudius II) or China during the Song Dynasty (960-1279). But history tells us that inflation can happen anywhere, typically where rulers choose to spend more than they take in from tax revenue.”
USAGOLD note: Conerly’s point that inflation occurs where rulers’ i.e., governments’ spending exceeds revenue spend fits in nicely with the rest of this morning’s board. As the chart further down the page illustrates that gap is now radially askew. “Gold,” he says, “is the classic inflation hedge……During America’s worst inflationary period, 1968-1982, the Consumer Price Index rose an average of 7.3% per year, while gold gained 17.1% per year.”
Repost from 10-18-2020
(USAGOLD – 10/26/2020) – Gold managed to eke out a small gain in early trading as markets generally weighed a surge in coronavirus cases, the lack of progress in relief negotiations, and uncertainty over the upcoming presidential election. It is up $4 at $1908. Silver is down 36¢ at $24.33. Gold Newsletter‘s Brien Lundin sees the choppy market for gold continuing “perhaps until mid-December.” “10-Year Treasury yields have been trending higher since early August,” he says, “which corresponds neatly with gold’s correction. Along with the 10-year yield, we’ve also seen real rates trace out a similar rise. This has been a headwind for gold and, combined with some uncertainty in the upcoming U.S. presidential election and a fiscal stimulus package, has helped to keep the yellow metal at bay.”
Chart[s] of the Day
Gold, silver and the DJIA – Year to Date
Chart courtesy of TradingView.com • • • Click to enlarge.
Gold, silver and the DJIA – One Year
Chart courtesy of TradingView.com • • • Click to enlarge.
Chart note: As of last Friday (10/23/2020), gold is up 27.56% over the past 12 months. Silver – now outperforming gold on a 12-month basis – is up 40.39% and the Dow Jones Industrial Average is up 5.60%. Year to date, gold is up 24.48%. Silver is up 36.69% and the DJIA is down 1.85%.
“Turkey’s central bank has dented hopes for a return to economic orthodoxy, ignoring calls from many investors to raise its main interest rate and sending the lira to a new record low. The currency fell more than 2 per cent immediately following the decision …”
USAGOLD note: It is no mystery why the citizens of Turkey import so much gold. It is also no mystery why they are reluctant to give it up in one of the many schemes the government and central bank have offered in order to recycle those savings into the economy. The time to buy gold is well before a debasement is in full swing. Gold is up almost 350% in Turkish lira over the past 12 months. Please see the chart below.
Chart courtesy of TradingView.com • • • Click to enlarge
“The US federal budget deficit spiked to a record $3.1 trillion in the fiscal year that ended in September, according to data released Friday by the Treasury Department. The monthly budget statement caps a year rife with economic catastrophe and unprecedented relief measures. The coronavirus pandemic first slammed businesses, corporations, and households in February and continues to wreak havoc on US economic growth as case counts swing higher.”
USAGOLD note: Tax revenues cover half U.S. government spending. The other half is covered by debt. The chart below reflects the dramatic gap between expenditures and revenue. In times past, the Fed would at least make an attempt to discourage excessive government debt, but now it has taken the lead in encouraging even more spending.
Repost from 10-16-2020
“In light of the deep recession caused by the coronavirus pandemic, the world’s most powerful central banks have responded in two ways: with a combination of quantitative easing – essentially money printing – and lowering interest rates (to sometimes even negative rates). The combination of these two monetary actions could possibly lead to inflation. As a result, many people seek gold as a more reliable store of value than normally stable paper currencies.”
USAGOLD note: Solid overview for first-time investors. This article lays out the reasons why gold is a valuable alternative to currency-based savings.
Repost from 8-27-2020
“Money is close to a free commodity,” Blankfein said. “And when something is free, you tend not to husband it, you tend to overuse it like it’s a free good.”
USAGOLD note: Blankenfein goes on to say that “people” are lending money to the U.S. Treasury “as if there would never be inflation again.” Do those “people” by any chance occupy offices at the Marriner Eccles Building? The former CEO for Goldman Sachs, we remind ourselves, was once a gold trader who most likely understands all too well the dangers of the printing press and with it the ancillary creation of both moral hazard and market bubbles.
Repost from 10-16-2020
Gold continues to seesaw around the $1900 mark; Citibank analysts see silver at $40 over the next 12-months
(USAGOLD – 10/22/2020) – Gold continues to seesaw around the $1900 mark in the run-up to the U.S. election with safe-haven demand acting as a positive influence and ongoing gridlock over the stimulus package acting as a deterrent. Overarching all, pandemic infections have begun to climb again in both the United States and Europe. The metal has been stuck in a $50 range on either side of $1900 for the past 30 days. This morning it is trading at $1914 – up $8 on the day. Silver is up 7¢ at $24.87.
Citibank is out with a fresh report on the precious metals market saying investor interest will “remain high during 2021 as pressure on governments to devalue currencies, concerns about vaccine efficacy and take-up rates and questions over equity and bond valuations and rising global debt remain in most scenarios.” The investment bank’s view on silver is notably “very bullish,” according to a review of the analysis posted at the Forbes web site. It sees silver’s price rising to $40 over the next 12-monhts with “$50/oz a very realistic target and $100/oz possible,” according to the report.
Chart of the Day
Chart courtesy of MacroTrends.net • • • Click to enlarge
Chart note: We have had quite a few new visitors over the past several weeks who are looking into gold for the first time, and this chart more than any other, we feel, is central to understanding why gold continues to make sense as a long-term portfolio holding. When the United States abandoned the gold standard in 1971 and freed currencies to float against the dollar, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold-backed the dollar and the era from 1971 to present when it did not. Gold has had its ups and downs since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.
Financial Times/Stephen King/10-21-2020
“Giving elected representatives the keys to the printing press is the equivalent of giving a gambling addict the keys to the casino.”
USAGOLD note: HSBC’s Senior Economic Advisor addresses the consequences of running the money printing at full tilt. “Governments without access to tax revenues,” he says, “can instead debase the coinage.” How likely is it that the United States will be faced with such a choice? A chart we ran here a few days ago offers a clue as to where we might be headed.
“Investment appetite for gold will continue to rise, particularly in the period that follows the U.S. election. In fact, we reiterate that the long gold trade is likely agnostic to the election outcome — and gold bugs need not look too far on the horizon to expect a large-scale fiscal deal that could de-bottleneck the ongoing real rate suppression,” – TD Securities, Canadian investment bank
USAGOLD note: As gold remains in a pre-election muddle, some are predicting a strong post-election rally. TD Securities vocalizes what a good many are thinking when it says: “A blue wave would lead to global reflation, which would be the most positive outcome for gold.” At the same time, a Trump victory coupled with gains in the Congress could produce an equally large dose of Republican-style stimulus. Bottom line? Own gold. Sit back. Watch the show.
Repost from 10-16-2020