Monthly Archives: April 2021
The following is the lead article in the May edition of News & Views
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Super-rich doomsday preppers ahead of the times
And the not-so-super-rich are now following in their footsteps
“Survivalism,” wrote Evan Osnos in a 2017 article for The New Yorker, “the practice of preparing for a crackup of civilization, tends to evoke a certain picture: the woodsman in the tinfoil hat, the hysteric with the hoard of beans, the religious doomsayer. But in recent years, survivalism has expanded to more affluent quarters, taking root in Silicon Valley and New York City, among technology executives, hedge-fund managers, and others in their economic cohort.”
We have always taken exception to the mainstream media’s portrayal of the ordinary gold owner as “the woodsman in the tinfoil hat”. . . etc. Many among the media are utterly amazed to learn that people like Steve Huffman (Reddit, CEO), Peter Thiel (PayPal founder), and the long roster of other luminaries mentioned in this New Yorker article are identified as “preppers” in one capacity or another. They would probably be even more amazed to learn that many of this same group are likely to be gold and silver owners. We say “likely” because precious metals owners by and large are a group reluctant to advertise their ownership.
As it is, they take a place alongside a wide range of Americans who own precious metals – physicians and dentists, nurses and teachers, plumbers, carpenters, and building contractors, business owners, attorneys, engineers, and university professors (to name a few.) We know because that is the description of our clientele here at USAGOLD. Gold ownership, in short, is pretty much a Main Street endeavor. In a Bankrate survey taken last June, one in seven investors (14%) chose gold or other precious metals as the best place to park money they wouldn’t need for more than ten years – making it the fourth most popular category. Similarly, a 2020 Gallup poll found that 17% of American investors rated gold the best investment “regardless of gender, age, income or party ID. . .” One might assume that if Bankrate or Gallup took a similar poll today, even more investors would give the precious metals a thumbs up given what has occurred over the past year.
Those well-to-do preppers, as it turns out, were uncannily ahead of the times. A little over three years after the New Yorker article was published, large numbers of the not-so-super-rich followed in their footsteps – setting up “bugout” retreats in the countryside and small-town America (though for reasons unforeseen in the article) while a good many fled the big cities permanently for safer environs. That mindset – the general flight to safety – has echoed loudly in the precious metals markets. The World Gold Council reports global retail gold investment demand running at record levels in 2020. As for silver, just last week, the Silver Institute, a research organization not given to hyperbole, forecasted an eye-catching 26% increase in physical silver investment for 2021 based on current trends.
Bankrate Survey of Investors
Chart courtesy of BankRate.com • • • Click to enlarge
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Repost from 4-25-2021
“The Federal Reserve is expected to begin trimming its $120 billion in monthly asset purchases before the end of the year as the U.S. economy recovers strongly from Covid-19, according to economists surveyed by Bloomberg.”
USAGOLD note: Does this not depend on Treasury needs and whether or not there is a market for its securities domestically and internationally? Too, we should all remember what happened in the bond market the last time the Fed attempted to taper in 2013.
Repost from 4-25-2021
“This week, the Bloomberg Agriculture Spot Index — which tracks key farm products — surged the most in almost nine years, driven by a rally in crop futures. With global food prices already at the highest since mid-2014, this latest jump is being closely watched because staple crops are a ubiquitous influence on grocery shelves — from bread and pizza dough to meat and even soda.”
USAGOLD note: If true, it could be the first rumblings of inflation hitting Main Street …… The Fed’s 2% line in the sand could go vertical quickly and without warning.
Repost from 4-24-2021
“Americans are growing more concerned about rising costs and are consistently boosting their inflation expectations, new data show. A new survey from CivicScience shows 87% of those surveyed in a representative sample of U.S. adults say they are at least “somewhat concerned” about the increasing cost of household expenses (all numbers are rounded to the nearest percentage point).”
USAGOLD note: That 87% is split between 46% “very concerned” about inflation and 41% “somewhat concerned”. We haven’t gotten to the point yet where consumers en masses are buying now in order to keep from having to pay more later, but that could happen overnight, especially with all the pent-up savings rattling around the monetary system.
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 4-24-2021
“This [the impact of the pandemic] resulted in the largest silver market surplus since at least 2010, the earliest year for which Metals Focus tracks data. One notable exception was physical investment. A growing appetite for safe haven assets and, initially, the strength of the gold price all boosted investors’ appetite for silver bars and coins last year, culminating in an 8% rise overall. Investment in other arenas also experienced a vintage year in 2020, with record inflows into silver ETPs and, at times, also exceptionally strong OTC buying. Negative real interest rates and yields for the US dollar, as well as 30 most other major currencies, were arguably the single most important factor 60 driving investors towards precious metals last year.”
USAGOLD note: Annually, the report linked above provides a comprehensive look at the supply and demand picture for silver. It predicts 26% growth in investment demand for 2021 as investors continue to take metal out of the market against 8% gains respectively in mine production and recycling.
Precious metals drift lower to close less than inspiring week
By way of perspective, gold is still up 5.25% on the month and silver 8.5%
(USAGOLD – 4/30/2021) – Gold drifted lower in early trading as it looks to close out a less than inspiring week. It is down $2.50 at $1771. Silver is down 13¢ at $26.04. With the metals rangebound, we return to a Crescat Capital overview from about a month ago that still resonates and offers some perspective. When it was first published, gold was trading at about $1685 and silver at just under $24. We should keep in mind that over the past month, despite their ups and downs, gold is still up a little over 5.25% and silver about 8.5%. From March of 2020, mentioned below as the start of a new bull market in precious metals, gold is up almost 11.5% and silver, 56%(!). (Both performances are shown in our Chart[s] of the Day below.)
“Gold sentiment became extremely negative recently,” says Crescat Capital in that late March market research letter, “pulling gold prices down with it, a contrarian buy signal early in a new long-term inflation cycle. The precious metals bull market only began a year ago according to silver and junior miners. If it were after a 10-year run up already, a shift to negative sentiment would be a different story. Bull markets climb a wall of worry. We see it as a great opportunity to buy the pullback … The setup today for precious metals is outstanding given supply constraints, rising inflation expectations, asset bubbles in traditional financial assets, record debt to GDP, double barreled fiscal and monetary stimulus, negative and declining real interest rates. The new bull market only started in March of 2020 after a ten-year bear.”
Chart[s] of the Day
Gold and silver price performance
(percent gains March 30, 2020 to April 30, 2021)
Gold and silver price performance
(One month, percent gains)
Charts courtesy of TradingView.com • • • Click to enlarge
Chart note: We should keep in mind that gold is still up a little over 5.25% and silver about 8.5% over the past month despite the choppy, rangebound trading of the past two weeks. From March 2020, identified by Crescat Capital above as the start of a new bull market, gold is up almost 11.5% and silver, 56%(!).
“The good news: this bull market will run for months and months. The bad news: stock gains will be lean. The lion has already taken his bites. This is the studied conclusion of crack financial journalist Mark Hulbert. He has ransacked market history and interrogated the data.”
USAGOLD note: Over the past few months, record new highs in the stock market have been the stuff of headlines on almost a daily basis. The fact of the matter is that daily moves higher have been minimal. Over the past 12 months, on the other hand, the Dow Jones Industrial Average is up, but is up 18% – a respectable gain but not one commensurate with the awe-inspiring headlines. Gold, by contrast, is up 13% without the benefit of maximum press coverage. Silver, which has received little to no attention from the mainstream media, is up 46%. For those who have had a stray thought or two along the same lines, Maher’s article based on Hulbert’s views will sharpen that perception. The bull is at best resting and at worst could be in for a very long Rip Van Winkle-like sleep.
“I grew up in a purely urban family. We had no relatives in the country. I’m born in 1944. When I was a baby, my mother could only buy food because she still had some gold coins. Without gold, I would have starved. She always told me that. Therefore, this generation already has a certain gold affinity. In extreme times of crisis, this is one of the few things left to be accepted. Gold was the only thing left to the people of the city at that time. Before the silver cutlery was also traded at the farmer.”
Former European Central Bank governor
Repost from 4-25-2021
“It is not hard to spot signs of the froth and speculation in current markets. Every week seems to throw up cases that challenge any precept of rational investing.”
USAGOLD note: The point of this article is that “beat the market” strategies, or, even worse, “all-in” strategies can end up being big losers when an economic or market crisis occurs. Less than half of risk management strategies, Mackenzie points out, ended up performing well during the pandemic with some taking losses of more than 25%. At the risk of being accused of mercilessly beating the same drum, wouldn’t it make sense to adequately diversify one’s portfolio before the event? The ultimate risk management strategy against a variety of negative financial scenarios is to simply transfer 10% to 20% of one’s assets to gold and silver.
Repost from 4-24-2021
“Switzerland in March recorded its biggest monthly gold exports in ten months as shipments to India leaped to their highest since 2013, underlining a revival in Asian bullion demand, Swiss customs data showed on Thursday. Switzerland is the world’s biggest gold refining centre and transit hub. Its numbers provide an insight into market trends.”
USAGOLD note 1: We’ve noted the revival of the West to East gold pipeline in recent weeks. A weak rupiah, India’s currency, is adding to investor demand.
USAGOLD note 2 (4-29-2021): Things are likely to change again with the pandemic unfortunately running nearly out of control in India.
Repost from 3-18-2021
“Inflation is the number one risk for the market, according to a monthly survey of global asset managers commissioned by Bank of America, displacing COVID-19 for the first time since February 2020. Both inflation (37% of respondents) and the risk of a market taper tantrum (35%) beat out the pandemic as the top risk for investors.”
USAGOLD note: It is likely a very long time ago that inflation topped the list of concerns among top money managers, even though massive quantitative easing did not ignite it in the aftermath of the Great Financial Crisis (2007-2008). Maybe it really is different this time. The so-called taper tantrum, though, is the market fearing its own shadow. The Fed has not suggested anything near selling off its balance sheet assets as was the case during the taper tantrum in 2013. What the market really fears is that the Fed will not raise its monthly quantitative easing quota to meet the massive bond issuance upcoming from the federal government.
Repost from 3-12-2021
USAGOLD note : In this fundamentally sound analysis, Judy Shelton, the shunned Trump nominee for the Federal Reserve Board, demonstrates convincingly why Congressional Republicans never should have rejected her for a position on the central bank’s Board of Governors. She puts her finger on one of the key reasons why the economy remains stubbornly on hold despite the Fed’s massive money creation over the past year. “[T]he implications for productive economic growth,” writes Shelton, “should give pause to Fed officials, who might ask themselves why banks have chosen to retain reserve balances in their Federal Reserve depository accounts at sky-high levels, $3.15 trillion at present, despite the Fed’s elimination of all reserve requirements in March 2020.”
Repost from 4-24-2021
“The percentage of investors with $1 million or more in brokerage accounts they self-manage that sold out of market positions and went to cash in the second quarter more than doubled, from 7% to 16%, according to a new survey of wealthy investors from Morgan Stanley’s E-Trade Financial shared with CNBC. Overall bullishness declined as well, with millionaire investors who say they are now bearish increasing by 6 percentage points, from 36% to 42%.”
USAGOLD note: We cited this report in Friday’s DMR and repost it here for those who may have missed it. Those who go to cash will be looking around for a place to park their money awaiting what they see as inevitable. “Nothing beats a little cash in a bear market, of course,” Interest Rate Observer’s James Grant once said, “and the oldest form of cash is gold.”
‘No one questions its value. . .’
“No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counter-party. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.” – Alan Greenspan, former chairman of the Federal Reserve
Image courtesy of the British Museum Collection/Lydia, croesid, ca 550 BC
Repost from 4-22-2021
Visualization courtesy of VisualCapitalist.com • • • Click to enlarge
“Gold has long been an important hedge in times of uncertainty, and unlike foreign currencies, equities, or debt securities, its value is not dependent on any company or nation’s solvency. This has made gold an essential part of many national central bank reserves, especially as the monetary supply of many nations continues to expand and central banks are exploring digital currencies which could be reserve or gold backed. With gold still making up a large part of many nations’ reserves, how have central banks been managing the precious metal?”
Gold down marginally in Fed meeting aftermath
World Gold Council’s reports ‘exceptional strength’ in US retail gold demand during first quarter
(USAGOLD – 4/29/2021) – Gold is down marginally this morning as yields continued to plod higher and the dollar weakened. In other words, market conditions after the Fed meeting looked pretty much like they did before. Gold is down $2.50 at $1781 in the early going. Silver is up 20¢ at $26.48. It might take a day or two for the markets to sort out the net effect of the Fed’s clearly stated intentions to keep interest rates down and the bond market well-supported for the foreseeable future. The World Gold Council is out with its quarterly assessment of the gold market and here is what it had to say on U.S. investment demand:
“We have reported on the recent exceptional strength of US retail investment interest with demand fuelled by persistent near-zero interest rates, fears of inflation – particularly given massive government stimulus – continued uncertainty as to the long-term impact of the pandemic, and restricted opportunities to splurge on travel and other discretionary expenditure. Reports suggest a blinkered mindset among US investors during the quarter, with investment activity almost solely focused on buying and very little on selling-back or profit-taking. Conversations with market contacts revealed relatively long delivery lead times for gold investment products, indicative of tight market conditions in part due to the strength of demand. Activity somewhat decelerated in March and latest figures for April show a continued slowdown, but this is likely to be due largely to slowing production of bullion coins as the Mint shifts production towards newly-designed coins, due to be released mid-year.”
Chart of the Day
Chart courtesy of the World Gold Council • • • Click to enlarge
Chart note: The U.S. Mint recorded the best quarterly sales for gold American Eagles since 2009 and that came amidst reports that it was unable to keep up with strong investor demand.
“There is tremendous potential for gold to grow further, particularly among institutional investors. There are many that are not invested in gold, and the World Gold Council is doing a lot to promote its benefits.” – John Reade, chief market strategist, World Gold Council
USAGOLD note: Reade also pointed out that gold will find a market among those looking to hedge risk and that it is not losing market share to cryptocurrencies as is so often claimed.
“I’ve been saying for years that central banks can never step away from this. They can threaten to. And they can bluff, and they can do some probing bets like they did last year, and the market may fall for that, or call that bluff in the short term. But yes I think we’re in a position now where central banks can never back away, which sort of begs the question how can this ever end. Can asset markets get inflated forever?”