Monthly Archives: March 2021
Repost from 3-26-2021
“As can be seen from the above bar chart of Switzerland’s gold imports from February this year they have pretty much defaulted to coming from gold mining nations, with the exception of the UK, which has always been a major contributor to Swiss gold imports from its position as the centre of global gold trade, and its supply of LBMA large good delivery gold bars for re-refining in Switzerland into the aforementioned smaller sizes in demand on global markets. Other words the pattern of Swiss gold imports in February was just about getting back to normal. The gold export figures from Switzerland also seemed to be normalising with around 77% destined for Asia, including the Middle East and provided we include Turkey in this designation.”
USAGOLD note: The flow of gold West to East resumes ……
Charts courtesy of GoldChartsRUs.com • • • Click to enlarge
Repost from 3-26-2021
“We fear this naïve mindset is not just David Brook’s, but a rapidly growing school of thought among economists, politicians, and central bankers. We all want unicorn-like solutions to what ails us, but the truth, grounded in history, is there is no such thing as a free lunch. Since David shrugs off any consequences of aggressive monetary and fiscal policy, we bring them to the forefront. Someone must pay for rampant Federal spending.”
USAGOLD note: The bill, Lebowitz explains, will be paid in the form of inflation, social inequality, destabilized markets, stunted real growth, and a declining dollar. Few would stand in the way of the fiscal and monetary effort expended to keep the economy from imploding due to the pandemic. Fewer still are preparing for the consequences of those policies, and that is where the 1920s and 2020s have something in common. The chart below shows the relationship between gold and inflation – inflation, that is, of the Fed’s balance sheet, a process that is far from over.
Sources: St. Louis Federal Reserve [FRED], ICE Benchmark Administration • • • Click to enlarge.
Repost from 10-24-2020
“Demand for gold from jewellers and central banks will remain sharply lower in 2021 than before coronavirus, but investors will keep prices high by stockpiling record amounts of bullion, Refinitiv Metals Research said.”
USAGOLD note: As the saying goes, there is no rush like a gold rush and Refinitive thinks one is brewing for 2021. It sees investor demand for coins and bars swinging from a 6% decline in 2020 to a 13% gain in 2021. And if a blue wave rolls into Washington DC that 13% predicted increase might be seen as modest. Refinitiv is one of the top research firms in the field of precious metals.
Repost from 12-7-2020
“Very long ‘secular cycles’ interact with shorter-term processes. In the United States, 50-year instability spikes occurred around 1870, 1920 and 1970, so another could be due around 2020. We are also entering a dip in the so-called Kondratiev wave, which traces 40- to 60-year economic-growth cycles. This could mean that future recessions will be severe. In addition, the next decade will see a rapid growth in the number of people in their 20s, like the youth bulge that accompanied the turbulence of the 1960s and 1970s. All these cycles look set to peak in the years around 2020.” – Historian Peter Turchin, Nature magazine, February 2010
USAGOLD note: Mauldin hits on themes we have emphasized here at our live daily newsletter in recent weeks including the latest from Peter Turchin (as published in a recent Atlantic Monthly profile) and a mention of Neil Howe’s Fourth Turning (which we featured in the December issue of News & Views). In the recent past, Mauldin has raised the possibility of an “unprecedented financial crisis” within the next five years. He is a deep-thinker worthy your attention.
Repost from 3-24-2021
“It’s the invisible force rocking Wall Street: An inflation revival for the post-lockdown era that could change everything in the world of cross-asset investing. As America’s dalliance with run-it-hot economics sends market-derived price expectations to the highest in more than a decade, Bloomberg solicited the views of top money managers on their make-or-break hedging strategies ahead.”
USAGOLD note: Most of the inflation-proofing strategies outlined by analysts from some of Wall Street’s most prestigious firms include real assets, gold, commodities, et al.
Repost from 3-24-2021
“At the turn of the year, weak growth and poor management of the Covid-19 pandemic led to a consensus that the US dollar would weaken significantly in 2021. Instead, it’s been strengthening — a trend with significant implications for the US and the rest of the world.”
USAGOLD note: Greene covers the would-be scenarios in this piece published while FOREX market psychology is in a state of flux. She does a good job of weighing the directional options for the dollar and what might influence them in the months ahead. She reminds us that Janet Yellen not that long ago “ditched the long-held strong dollar policy.”
(USAGOLD – 3/31/2021) – Gold is taking a breather from the ongoing sell-off that pushed its price below the $1700 mark. It is level at $1687 in today’s early going. Silver is level at $24.11. The bond and dollar markets also traded in a tight range overnight. While gold is about to post its worst quarter in four years, demand for the metal continues to run at a high level among private investors. Premiums remain firm and wholesalers report limited availability on a number of items, particularly gold and silver American Eagles. Wells Fargo’s head of real asset trading John LaForge believes gold’s fortunes could turn abruptly and that its price could still reach $2200 this year. The bank sees “diminishing supply growth” as the gold market’s key feature – a situation that has developed over the past three years. “Such times in the past have sparked some of gold’s strongest price rallies,” says LaForge in a report reviewed at Kitco News, “We believe gold could be on the eve of a new commodity bull super-cycle, which would be only the seventh since the year 1800, Gold prices have climbed over 40% since 2018, and we believe that more gains lie ahead.”
Chart of the Day
Sources: St. Louis Federal Reserve, U.S. Census Bureau, U.S. Bureau of Economic Analysis
Chart note: The trade deficit has been the quiet problem developing under the already roiled surface of the U.S. economy. Last week, the Commerce Department reported that the current account deficit surged 34.8% to $647.2 billion in 2020. That is the largest shortfall since 2008.
“A lot of economic, market and bank supervisory theory is based on the premise that financial actors are largely rational. The crisis convinced me that they are not. It was not rational for very experienced financial leaders to make their companies hostage to short-term financing that was, in the final analysis, secured by the irrational assumption that house prices will always go up. It was not rational for Dick Fuld to reject offers because their terms offended his pride. It was not rational for money market fund investors to flee all money market funds just because one fund made a bad bet. It was not rational for some lenders, at the height of the crisis, to stop accepting even Treasuries as collateral. The crisis convinced me that greed, ego, fear, short-sightedness, group-think and other human foibles have at least as much, if not more, to do with financial behaviour as rational thinking does.”
Former chief of staff to New York Fed president Tim Geithner during the 2008 financial crisis
(Speech to the LBMA, October 2018)
How to choose a gold firm
It may be the most important choice you make as a gold owner
It is surprising how many prospective investors simply dive into gold and silver investing without much in the way of a consumer inquiry. That lack of simple due diligence has ended up costing a good many investors thousands of dollars, and sometimes even hundreds of thousands before the damage is detected.
Here you will find some brief but useful guidelines
to help you choose the right gold and silver company.
Reliably serving physical gold and silver investors since 1973
Repost from 3-25-2021
“Of course, the initial burst of Treasury futures selling – which appears to have originated out of Japan every time – would then have a domino effect on the rest of the world, and as Morgan Stanley notes, “weak price action during the Tokyo session led to additional selling during the London session” although to a lesser extent. As the next chart shows, since the start of the year, 85% of the cumulative decline in TY futures prices occurred in the overnight session, i.e., Japan is almost single-handedly responsible for the dump surge in yields this year!”
USAGOLD note: Morgan Stanley believes that the selling came from Japanese commercial banks who will now see the yield as attractive and buy back in before Japan’s fiscal year-end (March 31). To what extent that balances the prevailing negative psychology in the bond market remains to be seen. However, the Morgan Stanley revelations will serve as a reminder of the enormous power Japan and China can exert in the U.S. Treasuries market as a result of their massive holdings – about $2.37 trillion in the aggregate. It would not be in either country’s best interest to dump their sovereign holdings on the market but that does not preclude other entities within their borders from doing the same for their own reasons. If Morgan Stanley is right about this, we see the influence even a single commercial bank or pension fund can wield in the bond market – and just how precarious the situation has become.
Repost from 3-25-2021
“We added in late 2018 to our bullish view and then the price broke out. If you look at a gold chart to go back several years you’ll see this big basing action where gold labored with all of its highs being about $1350. It couldn’t get through there. Multiple rallies failed and in 2019 it finally punched through. Silver did the same thing in July of last year. Now these are fresh massive base breakouts. We’re talking bases that go back years…You don’t punch through something like that and then say ‘Oh. It’s all over. I’m going back down again.’ This is a huge base for gold, a huge base for silver, and we think the bull trend is likely to extend for a couple more years at least and probably extend in a way that is not normal.”
USAGOLD note: We are always interested in Michael Oliver’s current thinking on the precious metals markets. We agree with this profile of Oliver posted by one of the viewers: “Mr. Oliver is one of the very best analysts out there, most are not worth anything, but a very few like him are quite worth listening to. He also isn’t afraid to take a stand and place his bets on his opinions, unlike just about every newsletter guy out there!” He says the upside moves in gold and silver will be “far more accelerated, far more dramatic” than they were in the 1970s.
Repost from 12-26-2020
“Investors’ views on the big risks to markets in 2021. Against a rosy consensus, dangers lurk in inflation, a virus setback, and the sheer weight of optimism.”
USAGOLD note: Much speculation contained herein contingent on unfolding events, most of it revolving around whether or not we will get inflation in 2021. Scott Minerd’s comments, in our view, go to the heart of the matter. “It [the free market system] has been replaced,” he says, “by cycles of increasingly radical monetary intervention, the socialization of credit risk, and a national policy of moral hazard. This is troubling……” Since we have never been in a situation quite like this one before, there is no operating manual to guide us. For his part, Humpty remains on his wall oblivious to any danger of a great fall.
Repost from 2-14-2021
“For the postwar period, the United States wielded the dollar’s central role in global trade and finance to its advantage, trying to even the playing field for trading relationships and as a sanctioning facility. The end of this powerful, unipolar advantage might be at hand. The pendulum is swinging in the direction of a new, multipolar world.”
USAGOLD note: We referenced this well-reasoned report in Monday’s Daily Market Report and repost it here for those who may have missed it. Campbell foresees major changes ahead for the dollar as the world moves from a unipolar to multipolar system for national currency reserves.
Repost from 2-8-2021
Repost from 3-23-2021
“‘We need to reduce sanctions risks by bolstering our technological independence, by switching to payments in our national currencies and global currencies that serve as an alternative to the dollar,’ Lavrov said, according to a transcript of his interview released on Monday.”
USAGOLD note: It is well-known that both countries have been moving in this direction for some time. So why the overt statement now? Russia most likely sees an opportunity to push its agenda at a time when the United States and China are increasingly at odds.
Where are we in Tytler’s historical cycle?
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasury. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship. The average age of the world’s great civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency from complacency to apathy, from apathy to dependency, from dependency back to bondage.” – Alexander Tytler, 18th century historian and jurist
Dr. MoneyWise says: I always keep in mind Alexander Tytler’s historical cycle. I estimate that we are now somewhere between the “apathy” and “dependency” stages with “dependency” – if the recent bailouts and rescue plans are any indicator – now seen by policymakers as a permanent fixture in the American economy. History is replete with examples of a rapid debasement of the currency accompanying the latter stages of Tytler’s cycle and that is why I own gold.
Reliably serving physical gold and silver investors since 1973
Repost from 3-23-2021
“Dare anyone say we’re at the outset of another commodities super-cycle? Well, at least the outlook in this area is darn good. Already, the S&P GSCI commodities index is up 76% over the past 12 months and 16% thus far in 2021.”
USAGOLD note: The latest from Goldman’s Jeff Currie on the commodities super cycle ……
(USAGOLD – 3/30/2021) – Gold dropped sharply for the second straight day as selling in the bond market accelerated and the dollar pushed higher. It is down $30 at $1684.50. Silver is down 59¢ at $24.18. Weakness across the spectrum of commodities, led by the energy sector, did not help matters. For now, speculators have taken hold of the market and the trend is to the downside. Technicians have identified $1675 as a support zone. It looks like it won’t be long until we will see if it holds.
Chart of the Day
Chart note: Just prior to the stock market collapse in 2000, Hussman Funds’ John Hussman predicted an 83% drop in the NASDAQ 100. It subsequently dropped a precise …… 83% emulating the parabolic effect shown above. He is now convinced “that future generations will use the present moment to define the concept of a reckless speculative extreme, in the same way our generation uses ‘1929’ and ‘2000’”. In short, Hussman echoes Jeremy Grantham’s recent warning of an “epic bubble” and crash to be followed by two decades of “lackluster returns.”
“The possibility of gold reasserting itself as the international medium of exchange continues to increase; but, a lot more bad stuff has to happen before we get to that point. Also, governments around the world have too much at stake to capitulate when it comes to ceasing to issue ‘funny money’. For the time being, let’s focus on things as they are.”
USAGOLD note: I have always put considerations of some sort of great reset on the back burner as pretty much a waste of time. If gold is going to be used in the international monetary system as something other than an alternative reserve asset – which is the way things are headed – it is going to take an agreement on how to value it and how much of it each nation-state is going to own. That discussion – let alone an agreement – is a long way away, so focusing on things as they are seems a much more practical undertaking. Williams offers some solid background thinking on the relationship between currencies and gold – with the dollar as the centerpiece.
“We live in a technological golden age but in a monetary and fiscal dark age. While physicists discover the so-called God particle, governments print and borrow by the trillions. Science and technology may hurtle forward, but money and banking race backward.”
Grant’s Interest Rate Observer