Monthly Archives: November 2020
Cartoon courtesy of MichaelPRamirez.com
“In reality, there’s plenty to worry about. As welcome as positive vaccine news is right now, the conclusion of the pandemic will not, unfortunately, usher in a return to normalcy. The massive amount of debt noted above will overhang the system for years, as will deep scars throughout the real economy.”
USAGOLD note: We see extraordinarily large numbers – like global debt soaring to a record $277 trillion – and often they simply do not compute. Doug Noland manages to put some meaning behind that global debt number and a few others in this piece with the quote above serving as an appropriate bottom-line assessment. Here’s another eye-catcher with a similar warning, this time from the Institute of International Finance: “There is significant uncertainty about how the global economy can deleverage in the future without significant adverse implications for economic activity.”
Repost from 11-23-2020
“However, even such a scenario wouldn’t necessarily mean that central banks would end their excessively expansionary monetary policies because the entire economic system as far as consumption and investment is concerned has become dependent on artificially suppressed interest rates and the continued printing of money. Under these conditions, it appears to be highly likely that the purchasing power of basically all official currencies – be it the US dollar, the euro, the British pound or the Swiss franc – will come under pressure. It is against this backdrop that the relative attractiveness of holding gold from an investor’s viewpoint increases.”
USAGOLD note: That pressure, reading between the lines, is likely to manifest itself as higher gold prices in all the currencies mentioned. That has been the trend for some time now, as shown in the chart below on the price of gold in the four largest volume currencies since 2016 – the dollar, euro, yuan and yen.
Gold in four major currencies
U.S. dollar, Chinese yuan, European euro, Japanese Yen
(2016 to present)
Chart courtesy of TradingView.com • • • Click to enlarge
Repost from 11-20-2020
“Rather than man-up… and cut back on spending, both parties are committed to covering these unpayable debts by printing money – a policy that always leads to bankruptcy, poverty, depression, and inflation, as well as social and political chaos. But mum’s the word. Shhh… Cover your eyes. Plug your ears. And seal your lips. The candidates, the Federal Reserve, the press – all keep silent because they know the voters don’t want to hear about it. And their own fortunes, reputations, and careers depend on keeping the jig up.”
USAGOLD note: In fact, the current Fed chairman has become a vocal cheerleader for Washington’s borrow and spend agenda (please see above) – the ideological opposite, as it turns out, of Paul Volcker who took the reins of the Fed as the arch-enemy fiscal stimulus and inflation. The investment milieu has changed radically and with it, all the preconceived, ingrained notions as to how one should manage his or her investment portfolio are out the window.
Repost from 10-12-2020
Daily gold and silver price history
1968 to present
Our Daily Gold and Silver Price History pages are among the heaviest traffic pages at the USAGOLD website. The archived data is licensed from the ICE Benchmark Administration and the London Bullion Market Association and Netdania Creations and run from 1968 to present. FOREX prices for the day are posted as a live feed and then frozen at the end of each trading day. These pages are frequented by data gatherers of all descriptions from professors and their students to market professionals and investors – all interested in gold’s price performance both over the long run and within specific time constraints for their own research purposes.
Daily Gold and Silver Price History is another of the quiet pages at USAGOLD that garners significant global interest particularly when the market is moving or breaking news warrants more than average interest. We also invite you to return here regularly – to this Live Daily Newsletter page – for up-to-the-minute gold market news, opinion, and analysis as it happens.
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Daily gold and silver price history pages
“Physical investment is expected to surge by 27 percent to 236.8 Moz in 2020, which would be a 5-year high. The largest retail market for bars and coins, the US, will lead the way with a projected 62 percent gain. This reflects the impact of increased price volatility and healthy price expectations. … The most significant development in the silver investment market this year has been the strength of silver-backed exchange-traded product (ETP) demand. Year-to-date gains (through November 13) have reached 326 Moz. As a result, global holdings have for the first time comfortably surpassed 1 billion ounces, achieving a new record high of 1.062 billion ounces.”
USAGOLD note: As reported previously, silver demand at USAGOLD has been strong all year. We have consistently provided our clientele with silver bullion coins and bars at competitive prices despite the pandemic while keeping premiums low when compared to other retail outlets. In fact, our premiums on silver bullion coins at the present are lower than most of the competition.
Repost from 11-19-2020
Gold continues rapid descent to start the week, ‘poised to become the new core must-have asset,’ says Crescat Capital
(USAGOLD – 11/30/2020) – Gold continued its rapid descent as we begin the week. It is down another $18 at $1772. Silver is down 54¢ at $22.20. Some technical analysts see aggressive support materializing in the $1700 to $1725 range, but even that remains to be seen. That said, we suspect that a good many safe-haven physical investors with an eye to the longer term will see the current prices as something of a mystery given the economic circumstances as well as a bargain and opportunity. Typically, we would add, that is the thinking that accompanies the beginnings of a turnaround. Crescat Capital offers some insight along these lines in its November research letter.
“Among all the demand drivers for gold,” says the firm, “we view the lack of competing cheap assets being a major one. For the first time in history, junk bonds and stocks are record overvalued in tandem. Both sides of the so-called risk parity strategy, stocks and bonds, are at extreme valuations. In a world of near zero to negative yields and frothy valuations across almost every risky asset, it will become imperative for investors to seek out undervalued assets that are true beneficiaries of the current macro environment. In our view, precious metals are poised to become the new core must-have asset for capital allocators. Gold and silver are risk-off alternatives to bonds in the portfolios of prudently minded investors in today’s market.”
Chart of the Day
Chart courtesy of TradingView.com • • • Click to enlarge.
Chart note: Despite gold and silver’s recent sharp corrections, gold has still managed to post a 16.91% gain year to date. Silver has been the star performer among the precious metals so far this year – up 25.99%. Stocks have been the laggard among this trio that we follow regularly here at the Daily Market Report – up just 3.61% thus far on the year.
2021 marks a dubious milestone:
The fiat money system’s golden anniversary
“If you look out the window, you’ll see printing presses everywhere. You know what happened to all the other countries in history that have gotten themselves deep into debt… it hasn’t been pretty.” – Jim Rogers, recent Peak Prosperity Interview
The Everyman edition of Edward Gibbon’s History of the Decline and Fall of the Roman Empire comprises some six volumes and nearly 4000 pages. Rome was not built in a day and, as Gibbon’s work reveals, it was not lost in a day. What we are challenged to recognize with respect to U.S. monetary policy today is not an event, but a process. The decline of the dollar since the United States went off the gold standard in 1971 has not come in a handful of sudden, cataclysmic events like formal devaluations, but gradually and consistently, over a period of five decades. That process is likely to continue.
Gold has had long periods where it gained in value during those five decades, periods when it lost value, and periods when the price was stagnant. The over-riding trend, though, has been to the upside. In fact, the long-term linkage between the rising U.S. national debt and a rising gold price is one of the most enduring features of the contemporary fiat money economy president Richard Nixon launched in 1971, as shown in the chart in the first section. A system he launched by the way with the famous statement: “We are all Keynesians now.”
In 2021, we will come to a dubious milestone – the fiat money system’s golden anniversary. Pandemic aside, the continuing inability of the U.S. federal government to come to grips with its fiscal problems during those fifty years largely explains the enduring, some would say stubborn, presence of gold in millions of investment portfolios around the world – including now those of central banks, financial institutions and hedge, pension and sovereign wealth funds. Until such time as fiscal rectitude takes hold in the halls of Congress – an unlikely proposition any time soon – present gold owners are likely to hold tight and new owners are likely to continue joining their ranks. In the end, contemporary gold owners, by and large, do not own gold to become wealthy, but to protect the wealth they already have.
Image courtesy of Wikimedia Commons. The decline in the Roman Antoninianus’ pure silver content from 240-280 AD paralleled the beginning stages of the empire’s decline. The coin was introduced in 215 AD with a 50% silver content and was gradually debased in steps to a copper coin plated with silver by 270 AD.
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“Although foreign investors — primarily central banks — were among the biggest sellers, ditching almost $300bn of Treasury bonds and bills in March, the market’s ‘dysfunction’ was ‘exacerbated’ by the unwinding of a popular hedge fund trade that takes advantage of the difference between the prices of Treasury bonds and futures, which led to another $90bn of US government debt being dumped, according to the FSB.”
“At least 20 Chinese companies have suspended planned bond sales worth Rmb15.5bn ($2.4bn) over the past week, as the high-profile defaults of three state-owned enterprises and questions about the solvency of a fourth unnerved investors in the world’s second-largest bond market.”
USAGOLD note 1: Considering Jerome Powell took the vow of transparency when he became the chief operating officer at America’s central bank, it is a bit disconcerting to find out eight months later that what was put off as an overnight repo market liquidity problem was more akin, according to this report, to another near financial meltdown.
USAGOLD note 2: As for the report on China, we have posted a number of articles on the risks posed globally by zombie companies over the past several months. In China, it seems, the problem is rapidly coming to a head. Companies are withdrawing bond offers and investors are dumping their holdings of some troubled companies.
USAGOLD note 3: As we might have anticipated, those at the center of this minor earthquake (at present) are calling for government bailouts. ……… All of this serves as a reminder that we live in financially perilous times and that “anything can happen,” as Softbank’s Masayoshi Son recently reminded us. Preparation is both prudent and essential.
Repost from 11-18-2020
“[Stanford University professor David] Dodson, who once ran for the U.S. Senate in Wyoming and has served as CEO and chairman at multiple companies including an auto parts retailer and trucking company, told CNBC that the fourth quarter is make-or-break for many Main Street owners and retailers and the lack of progress on stimulus could lead to another wave of bankruptcies that end up doing significant damage to the national economy.”
USAGOLD note: As we have noted before, this is the silent crisis evolving on Main Street America. Many of our clientele are owners of small businesses or professional practitioners, and our thoughts and concern go out to them. Trouble for some, as Dodson points out, can become troublesome for many.
Repost from 10-9-2020
Gold edges higher in pre-Thanksgiving trading, a quick thought on Janet Yellen as Treasury Secretary
(USAGOLD – 11/25/2020) – Gold edged higher in quiet pre-Thanksgiving trading following the sharp sell-off of the past two days. It is up $4 at $1814. Silver is up 13¢ at $23.48. The velocity of rebounds following options expiration rarely matches the downdraft. Gold, it seems, almost always takes the elevator down and the stairs back up. As we move into the long Thanksgiving weekend – a time when investors are likely to take stock of where we’ve been and where we are going – there is considerably more to weigh in the balance than in previous years. We will offer a quick thought from Canacord Genuity’s Tony Dwyer as a capstone to the events of the past few weeks and perhaps an opening salvo for what’s to come: “Janet Yellen has exceptional experience, knows how to print money, and should be instrumental in being able to negotiate a near-term fiscal package.” Though that comment is recorded in a Barron’s article on why the stock market broke 30,000, such thinking could echo loudly at some point in the precious metals markets as well.
Wishing you and yours a safe and happy Thanksgiving ………
Chart of the Day
Sources: St. Louis Federal Reserve [FRED], ICE Benchmark Administration, Daniel J. Lewis
Click to enlarge
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.”)
“‘I’m a fan of good process,’ Schwarzman said. “In my comments three days after the election, I was trying to be a voice of reason and express why it’s in the national interest to have all Americans believe the election is being resolved correctly. But the outcome is very certain today, and the country should move on.'”
USAGOLD note: We do not believe Schwarzman will get a lot of argument on this …… It is time to move on. Plan for the future. Has been for some time now. New administration, we might add, but same economic mess.
Table courtesy of VisualCapitalist.com • • • Click to enlarge
USAGOLD note: This table was compiled before gold’s sell-off the past few days, but the yellow was ahead by such a wide margin that the point made does not lose its impact.
“Yet the precious metal is poised to break out in 2021 as inflation concerns take center stage, they added. Goldman holds a $2,300-per-ounce price target for gold, implying a 22% rally from current levels over the next 12 months. Such a bounce would also place bullion at an all-time high.”
USAGOLD note: We referenced this article – the latest from Goldman Sachs commodities analysts Jeffrey Currie and Mikhail Sprogis – in yesterday’s DMR and post the link here for those who may have missed it. Goldman Sachs has been bullish on gold for the past couple of years and remain so going into 2021.
Repost from 11-28-2020
“The token also isn’t ‘very good as a store-hold of wealth because it’s volatility is great and has little correlation with the prices of what I need to buy,’ he said. Owning bitcoin does nothing to protect buying power, Dalio added.”
USAGOLD note: Dalio says that he might be missing something when it comes to bitcoin. We would encourage him to trust his instincts.
Repost from 11-19-2020
Photo courtesy of TheFirstNews and DESA Unicum • • • Click to enlarge
“Measuring nearly 7 centimeters in diameter and weighing a hefty 174.9 grams (5.44 troy ounces), the 50 duct gold coin from 1621 is a masterpiece of baroque engraving and a pearl of Polish coinage. … The gold piece is one of only six similar coins. One of them, a 100-ducat, was sold in the United States in 2018 for a staggering USD 2 million.”
USAGOLD note: By way of comparison, the Brasher doubloons, the so-called holy grail of American numismatics, was recently offered for $15 million in private sale. It will be interesting to see what this unusually large and very rare 1621 Polish 100 ducat gold coin will fetch in the auction sale to be conducted by DESA Unicum in Warsaw at the end of November.
Repost from 11-19-2020
“Perhaps the confusion stemmed from Powell swinging back and forth on inflation himself. On the one hand, he emphasized that the central bank would no longer be dictated by a formula that balances employment and price growth, which, as my Bloomberg Opinion colleague Tim Duy eloquently put it, ‘throws the Taylor Rule* into the dumpster.’ That gives policymakers more discretion than before, which could make it more difficult for them to press pause on a hot economy. And yet Powell made clear that any inflation overshoots would only be ‘moderate,’ suggesting there’s some tangible level not too far above 2% that would make the Fed nervous.”
USAGOLD note: What the Fed chairman described yesterday reeks of a “Fed at the end of its rope,” as Chappatta puts it. So where does all of this put us? The bond market, as this article points out, didn’t know how to react to Powell’s speech yesterday. Neither did gold. At first it shot up. Then it dropped about $50. By the end of the day, it was down $20 and looking to claw its way back up. The other markets seemed equally confused over the whole matter.
*The Taylor Rule,” according to Investopedia, “suggests that the Federal Reserve should raise rates when inflation is above target or when gross domestic product (GDP) growth is too high and above potential. It also suggests that the Fed should lower rates when inflation is below the target level or when GDP growth is too slow and below potential.”
Repost from 8-27-2020
“Whatever assistance can be provided to people who have lost their jobs is important,” Kashkari said. “Whatever assistance can be provided to small businesses that have been affected by the pandemic is important. And supporting state and local governments, whose revenues have been hammered by the COVID crisis, that also is important, because they employ a lot of people.”
USAGOLD note: Kashkari, generally considered one of the Fed’s most consistent doves, also says there is no moral hazard in providing such relief. Few on Wall Street will argue against the monetary and fiscal stimulus package, but at the same time few would argue with the notion that investors should shield their assets from its ill-effects.
Repost from 10-8-2020
“It’s worth understanding that the largest drag on this portfolio mix is the equity component, which is more negative than at any prior point in history. I’m not terribly surprised that Grantham is presently advising a zero allocation to U.S. stocks here. As I noted in last month’s comment, our own measures of market internals indicate that speculators do have the bit in their teeth, but with such extremely overextended technicals and lopsided bullish sentiment that our outlook is essentially neutral, and I continue to view safety nets and tail-risk hedges as essential.”
USAGOLD note: The latest from John Hussman … For the average investor, the best “safety net” and “tail risk hedge,” in our view, is still physical gold and/or silver in the form of coins and bullion. Hussman sees the S&P 500 Index losing two-thirds of its value in the current market cycle.
Repost from 11-18-2020
Gold plunges on options expiration, safe haven flight and concern about a stimulus package before the end of the year
(USAGOLD – 11/24/2020) – Gold plunged again this morning in a continuation of yesterday’s selloff. In the absence of any other clear indicator or news of consequence, the primary culprit appears to be today’s options expiration on the December COMEX gold and silver contracts. Options expiration dates – and December is a high volume contract – are often accompanied by stiff price corrections. Gold is priced this morning at $1813 – down $28 from yesterday’s close. Silver is down another 43¢ at $23.26. In addition to options expiration, traders are selling the metals based on a general flight from safe havens to risk assets and continuing speculation that a stimulus package might not materialize before the end of the year. For gold, some technical analysts are pointing to $1800 as a support zone that if breached could lead to further selling.
While we wait for the dust to settle on the commodities exchange, here is some food for thought from Bloomberg economists Tom Orlik and Bjorn van Roye.
“Who won the Cold War? Maybe China. … In hindsight, the conclusion of the Cold War – hailed as the end of history – was really just the closing of one chapter and the start of another. The world is in the midst of a messy transition as the balance of economic and political power shifts from West to East, from free markets to the state and from democracies to authoritarianism and populism. For businesses, investors and policy makers, history isn’t over. It’s just getting started.” – An Economist’s Guide to the World in 2050 (November 11, 2020)
Charts of the Day
Euro Area Central Bank Balance Sheet
Japan Central Bank Balance Sheet
United States Central Bank Balance Sheet
China Central Bank Balance Sheet
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.