Monthly Archives: December 2020
Goldman is trumpeting new secular bull market in commodities and investors should listen
Seeking Alpha/KCI Research Ltd.
“Goldman Sachs is on board, with their head of commodity research, Jeffrey Currie, stating on Dec. 8, 2020, that the world is entering a long-lasting bull market for commodities. Most investors are not positioned for this forthcoming reality, even though the transition is already underway … The good news, if you are reading this, is that we are early in this transition process, and there’s still plenty of time for those who have enjoyed an amazing decade plus long bull market in traditional stocks, bonds, and real estate securities, to reposition their portfolios to benefit from the winners of the next decade.”
USAGOLD note: Commodities, in general, will benefit from the rotation KCI Research envisions – but the king and queen of the commodities are gold and silver and they are likely to be the most direct and easily understood beneficiaries. Goldman’s Jeffery Currie, by the way, has been a staunch advocate of gold and silver ownership over the past few years.
Repost from 12-23-2020
Relief but no cure in new stimulus plan
“[T]he deal is no panacea for the world’s largest economy: it has come too late to avoid a big slowdown in the labour market and a reduction in consumer spending — and may be insufficient to address longer-term damage from the pandemic.”
USAGOLD note: The elephant gives birth to a mouse? This article discusses in detail what precisely is lacking and why the market reaction has been underwhelming. Not to worry Congress will be back at it after the holiday break ……
Repost from 12-22-2020
Reflation story to be supportive for gold next year, targeting $2,300 – Goldman Sachs
“Goldman Sachs argues that gold has much more upside to come next year. The firm says that while gold may trade more rangebound in the next few months, there will be further upside in bullion as it is bought as a hedge against dollar debasement.”
USAGOLD note: An update on Goldman’s bullish stance for 2021 …… If the firm is right on rangebound trading for the next few months, it could prove beneficial for long-term accumulators with an eye to Goldman’s ultimate target – $2300 per ounce.
Repost from 11-16-2020
$10.275 trillion in nine months
Credit Bubble Bulletin/Doug Noland
“In early rules-based versus discretionary central banking debates, it was long ago recognized that discretion came with the risk of one misstep leading invariably to a series of only greater policy mistakes. This is the story of the contemporary Federal Reserve – from Greenspan to Bernanke to Yellen and now Jerome Powell. Policy doctrine has become progressively in the clutches of a runaway financial Bubble. The Fed was out digging a deeper hole this week – an error compounded by Chairman Powell’s press conference dovish overkill. We’re in the throes of a period of precarious Monetary Disorder. This is apparent in Credit data and the monetary aggregates, throughout the financial markets and, increasingly, in housing markets across the country. “
Sources: St. Louis Federal Reserve [FRED], Board of Governors of the Federal Reserve System
Click to enlarge
Repost from 12-22-2020
Gold inches higher as 2020 grinds to a close; gold up 5.7% in December, silver 16%, DJIA 2.7% (!)
(USAGOLD – 12/30/2020) – Gold inched higher in quiet year-end trading, responding for the most part to a weaker dollar. It is up $4 at $1885.50. Silver is up 10¢ at $26.40. As 2020 grinds to a close and media emphasis remains riveted on stocks, gold is up 5.7% in December and silver is up 16%. The Dow Jones Industrial Average, for reference purposes, is up 2.7%(!). Please see our Chart of the Day below.
Through much of 2020, the Federal Reserve has gone studiously about the business of deploying QE4 – a policy many see as having done the lion’s share of work pulling the economy and markets from disaster’s edge. Two of the most pressing issues markets will need to sort out in 2021 is how the latest round of quantitative easing will play out in the economy, and the effect on financial markets, including precious metals. The speculation will undoubtedly add an interesting twist to the annual flood of year-end reviews and new year forecasts.
“[I]nstruments such as inflation swaps have started to rally,” says analyst Mike O’Sullivan in a Forbes article posted yesterday, “and if anything the market risk here is that central bankers regard a long overdue pick up in inflation as ‘a good thing’, do not adjust policy to it and thereby spur an ‘inflation trade’ in commodities, cyclical equities but that sees an accelerating move out of bonds. 2021 might be the first time in over a decade when inflation forecasters may get what they wish for.”
Chart of the Day
Chart courtesy of TradingView.com • • • Click to enlarge
Gold inches higher as 2020 grinds to a close; gold up 5.7% in December, silver 16%, DJIA 2.7% (!)
(USAGOLD – 12/30/2020) – Gold inched higher in quiet year-end trading, responding for the most part to a weaker dollar. It is up $4 at $1885.50. Silver is up 10¢ at $26.40. As 2020 grinds to a close and media emphasis remains riveted on stocks, gold is up 5.7% in December and silver is up 16%. The Dow Jones Industrial Average, for reference purposes, is up 2.7%(!). Please see our Chart of the Day below.
Through much of 2020, the Federal Reserve has gone studiously about the business of deploying QE4 – a policy many see as having done the lion’s share of work pulling the economy and markets from disaster’s edge. Two of the most pressing issues markets will need to sort out in 2021 is how the latest round of quantitative easing will play out in the economy, and the effect on financial markets, including precious metals. The speculation will undoubtedly add an interesting twist to the annual flood of year-end reviews and new year forecasts.
“[I]nstruments such as inflation swaps have started to rally,” says analyst Mike O’Sullivan in a Forbes article posted yesterday, “and if anything the market risk here is that central bankers regard a long overdue pick up in inflation as ‘a good thing’, do not adjust policy to it and thereby spur an ‘inflation trade’ in commodities, cyclical equities but that sees an accelerating move out of bonds. 2021 might be the first time in over a decade when inflation forecasters may get what they wish for.”
Chart of the Day
Chart courtesy of TradingView.com • • • Click to enlarge
IG says gold, silver uptrend kicking back into gear – silver could outperform
“Given the widespread perception that the dollar is a haven asset, a decline in the dollar highlights a move into riskier assets over safer bets. Thus it should not necessarily surprise us that silver outperforms as the traders look for risk. With that in mind, the dollar decline forecast by many for 2021 could bring significant outperformance for the price of silver.”
USAGOLD note: We caution that silver’s volatility works both ways. In short, the downsides relative to gold can be just as pronounced as the upsides as a good many silver investors have discovered over the years. Silver should not be viewed, in our estimation, as a substitute for gold, but a complement – something that gives the investor who understands it, and is willing to shoulder the risks, greater upside potential.
Repost from 12-21-2020
The reincorporation of gold into mainstream finance
Denver Gold Group/Presentation by Shane McGuire
“Gold was questioned as a safe haven asset in 2008, as it initially declined with other commodities (though closing the year higher). The dramatic continuing decline in interest rates and the advent of negative nominal rates across much of the bond space has made gold more competitive. Major financial institutions, like Bridgewater, have focused extensively on how gold works within a diversified portfolio. Gold is no longer viewed simply as an Armageddon asset class, but rather as one that can provide significant diversification benefits.”
USAGOLD note: McGuire is the Portfolio Manager of Emerging Markets and Gold Fund for the Teacher Retirement System of Texas.
Repost from 9-28-2020
Gold against US dollar risk. A value proposition
“However, there is quite some reason to assume that holding gold in the period that lies ahead will also pay off for the investor, as monetary policy around the world is about to debase the purchasing power of official currencies, be it the US dollar, euro, Japanese yen, and others.”
USAGOLD note: Degussa shows how gold has been a good place to be since 1973, and believes, as indicated above, that the future might be just as rewarding given central bank monetary policies.
Repost from 12-21-2020
Silver investment for 2020 expected to come in at 5-year high
Silver Institute/Staff/December 2020
“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.”
USAGOLD note: It has been a very good year for silver investment as we have reported consistently on this page. Demand is up and so is the price. For those who like to peruse the numbers, the Silver Institute offers its supply and demand projections for 2020 at the link above.
Repost from 12-21-2020
Gold advances cautiously in subdued year-end trading; gold and silver no longer a ‘contrarian investment’
(USAGOLD – 12/29/2020) – Gold advanced cautiously in subdued year-end trading as the dollar took a turn to the south and markets, in general, weighed the effects of Washington’s relief package. It is up $7 this morning at $1883. Silver is down 3¢ at $26.28. As mentioned yesterday, while market emphasis has been on the now-signed, sealed, and delivered pandemic relief package, the Federal Reserve has gone about the business of deploying QE4 – a policy many see as having done the lion’s share of work pulling the economy and markets from disaster’s edge.
In this morning’s report, we elaborate on that perception with a couple of charts (see below) that quantify the Fed policy. Two of the most pressing issues markets will need to sort out in 2021 is how the latest round of quantitative easing will play out in the economy and what the effect is likely to be on financial markets, including precious metals. The speculation will undoubtedly add an interesting twist to the annual flood of year-end reviews and new year forecasts.
Crescat Capital’s Kevin Smith believes we are entering a period of across the board currency devaluations that will benefit gold and silver owners. “Analytically minded investors will soon be rotating, if not stampeding, out of expensive deflation-era growth equities and fixed income securities and into cheap hard assets, creating a reversal in the 30-year declining trend of money velocity,” he says in an article posted at the MarketWatch website. “To be frank, buying gold or silver is not a contrarian investment position today,” Smith wrote. “There are enough people in agreement with the idea that all government-backed fiat currencies are doomed to some level of devaluation through inflation due to the level of fiscal and monetary imprudence and unsustainable debt imbalances in the financial system.”
Chart[s] of the Day
Sources: St. Louis Federal Reserve [FRED], Board of Governors of the Federal Reserve System (US)
Chart note 1: These charts show Federal Reserve combined purchases of U.S. Treasuries and mortgage-backed securities – a policy operation widely referred to as quantitative easing (QE). We are now immersed in QE4 – clearly identified on both charts’ far-right as the largest operation to date. These charts do not include Fed purchases of corporate bonds – another important component of QE4. The three prior quantitative easings are most identifiable on the bottom chart in 2008, 2010, and 2012.
Chart note 2: You can monitor these charts and many other data sets of interest to precious metals owners at our Monetary Trends and Indicators page. The charts automatically update on a feed from the St. Louis Federal Reserve.
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Hamilton beats MMT
Project Syndicate/Todd G. Buchholz
“I wish I could believe that government debt doesn’t matter (or that Elvis is still alive). But debt matters a great deal, and we should be thankful that US President-elect Joe Biden’s presumptive treasury secretary, Janet Yellen, is not an MMT acolyte.”
USAGOLD note: Janet Yellen is not MMTer. At the same time, she is not a sound money advocate either. That aside, as Buchholz – formerly, by the way, director of economic policy under George H.W. Bush – warns MMT has been “picking up ever more support.” We would think that its influence within the Democratic Party might reach the hallowed halls of the Treasury Department sooner than some might think.
Repost from 12-21-2020
Bearishly pragmatic
The Morning Porridge/Bill Blain
“Like everyone else, she’s upset – wondering what the point in it all is… no Christmas, no parties and little prospect of family time. Her Grandmother in Scotland can’t see her, and it’s looking likely the easing of get-together restrictions over the feast days won’t happen.”
USAGOLD note: Blain starts with the holiday dilemma we all face in these times (above) and ends with an observation and a reference to his own course of action: “My view is financial assets will remain fundamentally distorted and increasingly vulnerable to correction. I’m sticking with a healthy weight of gold and looking for alternatives.” Ramirez posted a cartoon the other day that captures perfectly the spirit of Christmas 2020 ……
Cartoon courtesy of MichaelPRamirez.com
Repost from 12-18-2020
Gold dallies, silver rallies to start final trading week of the year
(USAGOLD – 12-28-2020) – Gold dallied while silver rallied to start the final trading week of the year. The yellow metal is up $6 at $1888 (+0.3%). Silver, which a good many investors believe will be a direct beneficiary of the Biden administration’s emphasis on a green economy, is up 73¢ at $26.63 (+2.8%). While the emphasis has been on the now-signed, sealed, and delivered pandemic relief package, the Federal Reserve has gone about the business of deploying QE4 – a policy many see as having done the lion’s share of work pulling the economy and markets from disaster’s edge. Analysts and economists, in turn, have begun to speculate on the repercussions of those policies with many concluding that stagflation will be the likely outcome.
“Over the coming years,” says Strategic Investor’s David Forest in an analysis posted at the Daily Reckoning website, “we expect the dollars needed to produce a sufficient income will keep growing. That doesn’t mean we’ll see massive inflation like some analysts are predicting. We could see something more like stagflation. That’s when growth stalls while prices rise. This is the deadliest combination possible. It’s also more of a reason to own gold. Over the past 25 years, gold appreciated more than 380%. That’s what helps protect your wealth when you can’t even earn a decent rate of interest on your savings. At the end of the day, there may be surges along the way, but the dollar is heading lower.”
Chart of the Day
USAGOLD note: In the contemporary global fiat money system, when the economy goes into a major tailspin, both the unemployment and inflation rates tend to move higher in tandem. The word “stagflation” is a combination of the words “stagnation” and “inflation.” President Ronald Reagan famously added unemployment and inflation together in describing the economy of the 1970s and called it the Misery Index. As the Misery Index moved higher throughout the decade so did the price of gold, as shown in the chart shown above.
Notable Quotable
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“In a lot of cultures, the word for money derives from the word for gold. In China, the ideogram for money is the ideogram for gold.”
Peter Oakley
Royal College of Arts (UK)
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Happy Holidays Everyone!
Wishing you the very best of the Season
and a Golden 2021 from all of us at USAGOLD
All that is gold does not glitter, not all those who wander are lost; the old that is strong does not wither, deep roots are not reached by the frost.
J. R. R. Tolkien
Happy Holidays Everyone!
Wishing you the very best of the Season
and a Golden 2021 from all of us at USAGOLD
All that is gold does not glitter, not all those who wander are lost; the old that is strong does not wither, deep roots are not reached by the frost.
J. R. R. Tolkien
Christmas greetings from your Uncle Sam
U.S. Treasury Department/Fiscal Data/12-21-2020
USAGOLD note: As we conclude a less than agreeable year, the U.S. Treasury Department reports the federal debt to the penny at $27,512,907,024,042.97. On December 31, 2019, the debt figure stood at $23,201,380,134,806.73 making this year’s addition to the national debt $4,311,526,889,236.24 as of 12/21/2020 – by far the largest on record. The Ramirez cartoon below makes the important point that the national debt is a legacy we are leaving our children and grandchildren.
Cartoon courtesy of MichaelPRamirez.com
Ricards says lockdowns lead to recessions, economic destruction, ‘a flood of money into gold’
Stansberry Research/Daniella Carbone interviews James Ricards/12-21-2020
USAGOLD note: Ricards says we should be concerned about deflation, not inflation, and that “gold will do very well in that environment because of the political and economic uncertainty.” He goes on to say that “diversification,” though most do not understand what it really means, is the key and that investors should have “10% of investable assets in gold.”
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