Monthly Archives: July 2021

What’s hot: Inflation might not be transitory, gold weakness may well be

Investing.com/Wisdom Tree

Repost from 7-26-2021

photo of gold bullion bar on a $100 bill

“So, has the Fed now adopted a hawkish stance? Should markets be spooked? At WisdomTree, we don’t think so. What the central bank has done amounts to forward guidance, a mechanism for managing market expectations. This was extremely important for the Fed to do to maintain its focus on stabilising prices and maximizing employment without risking becoming the cause for major market volatility. Monetary accommodation from the central bank remains at crisis levels – something that is no longer required for an economy that is starting to find its footing.”

USAGOLD note:  Gold rallies often come suddenly, sometimes seemingly without cause, and quite often when sentiment has ebbed to its lowest. As we often say, the best time to buy precious metals is when everything is quiet, i.e., time like now. “Gold’s price decline following the central bank’s latest meeting,” says Wisdom Tree, “may seem like an overreaction in hindsight.”

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U.S. investors expect inflation to pick up, prompting these portfolio changes, a UBS survey finds

MarketWatch/Christine Idzelis

Repost from 7-26-2021

gold coins against background of bar and line charts stacks“UBS found 57% of U.S. investors believe inflation will accelerate over the next 12 months — a higher percentage than any other region. The Swiss bank probed 2,999 investors with at least $1 million of investible assets, conducting its survey globally from June 23 to July 12, according to its statement Wednesday.”

USAGOLD note: UBS cited precious metals as one of the alternatives likely to benefit from investor inflation concerns.

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What’s scarier than the inflation scare? Markets.

Bloomberg/John Authers

Repost from 6-11-2021

graphic image of a wizard in silouette“Everyone had an inflation scare marked in their diaries for about now. Few can have reckoned on the scare dissipating in markets just as the inflation numbers came through on cue and higher than expected. Headline inflation has reached 5% for only the second time in 30 years. It had only been higher during the oil spike of 2008.”

USAGOLD note: Authers says that the market reaction to inflation is alarming given the real rate of return has collapsed to a negative 3.7% – the worst since the 1970s.  Are the declining yields the work of investors or the Fed? If it is the Fed, the sovereign debt is being monetized – a prescription for even more inflation down the road.……”Pay no attention to that man behind the curtain.”

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The greatest failure of American macroeconomic policy

Rogue Economics/Bill Bonner

Repost from 6-14-2021

photo of John Connally Treasury Secretary under Richard Nixon“We ended yesterday’s Diary with a question: Who will tame inflation this time? You already know the answer, don’t you, Dear Reader? No one. It’s too late for that. Too many businesses… households… and the government itself depend on “printing press money.” Too many economists, investors, politicians, and policymakers have forgotten how inflation works. They think it stimulates the economy. And today, the costs of tapering off the Federal Reserve’s crackpot policies are far too high.”

USAGOLD note:  Bonner says we aren’t going to see any Reagans or Volckers, but we will see Connallys “aplenty.” That is just another way of saying we have a long way to go on the inflation track without much in the way of a deterrent. As Secretary of the Treasury under Richard Nixon, John B. Connally presided over the devaluation of the dollar, severing the link between the dollar and gold thus launching the fiat money system, and price controls as a means to fighting inflation. He famously told European finance ministers in 1971 that the dollar is “our currency, but your problem.”

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No DMR today 8/2/2021


Gold takes a breather after yesterday’s solid gains
Hecht says silver could be setting up for a repeat of 2020’s explosive rally

(USAGOLD – 7/30/2021) – Gold looks to be taking a breather after yesterday’s solid gains. It is down $2 at $1827.50. Silver is down 4¢ at $25.55. The yellow metal is up 4% on the month and 1.75% on the week. Silver is down 1.3% for the month of July, but up 1.3% on the week. Silver’s snapback performance yesterday after its unexpected steep decline Wednesday is a reminder of the metal’s volatility. Commodity analyst Andrew Hecht, whose experience in the silver market stretches back to the 1970s as a trader with Salomon Brothers, is well aware of the metal’s long history of radical ups and downs.

“Silver volatility,” he writes in a recent Seeking Alpha article, “can be explosive. Meanwhile, the price action can also be coma-like, lulling market participants into a false sense of security for long periods. Silver’s history is full of false technical breakouts and breakdowns…Silver is a unique metal as it is part industrial, part investment asset. It experiences long periods of coma-like price action, but when it moves, as the price did not 2020, few commodities compare to the precious metal when it comes to percentage moves.” Hecht reminds readers of silver’s performance in 2020 when “bearish price action gave way to an explosive rally.” (Silver went from the $12 level in March to $29 by early August.) He goes on to say that “[t]he recent price dynamics could be setting up for a repeat performance given the rising level of inflation across all markets.”

Chart of the Day

Silver Volatility Index

line chart showing silver volatility 2011-2021

Sources: St. Louis Federal Reserve [FRED], Chicago Board Options Exchange

Chart note: Please see today’s Daily Market Report for long-time silver trader Andrew Hecht’s comments on the metal’s volatility.

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Shrinkflation, inflation’s sneaky cousin, is on the rise

MisesInstitute/Klajd Bregu/7-28-2021

“The term shrinkflation, is credited to British economist Pippa Malmgren, and refers to the shrinking weight of the products while the price for the package remains the same. This is in effect another form of inflation, since the per unit price of goods increases when products shrink. However, shrinkflation is trickier, since most consumers do not notice it (see here for a few examples of shrinkflation). Shrinkflation is an ongoing process, but we are seeing more of it in the past year, and especially the first half of 2021, as businesses scramble to catch up with increasing costs of production.”

USAGOLD note: Not all the forms of inflation are obvious. Bregu says business is only doing what it must in shrinking content and puts the blame for inflation on the government and the central bank for simply printing too much money. It all reduces to the currency losing its purchasing power, no matter how that reduction is expressed in the marketplace.

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Powell vs. Greenspan on inflation approach

Zero Hedge/Joseph Carson/7-27-2021

graphic image of the White House with piles of greenbacks in front of it
“A ‘hands-off’ policy is a short-term friend to finance until it isn’t, whereas a ‘hands-on’ is a long-term friend as it attempts to limit the scale of the inflation cycle. Greenspan’s “hands-on” policy worked, and early results indicate Powell’s “hands-off” isn’t. How long will it take before investors realize Powell will eventually need to follow Greenspan’s plan?”

USAGOLD note: Such thinking will figure largely within the Biden administration as it contemplates who will chair the Fed come February of next year. The White House will be heavily in favor of the “hands off” approach and will worry about Powell, a Republican, changing course if/when he is reappointed. Lael Brainard, often touted as the most likely alternative, favors the progressive agenda embraced by the Biden White House.

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Legendary investor Jeremy Grantham says both stocks and crypto are in bubbles worse than in 2000

Markets Insider/Isabelle Lee

Repost from 7-23-2021

“Grantham said he received a lot of hate from market bulls following the publication of his investor letter in January, which called bubbles in a number of financial sectors. His opinion has only grown stronger since, however.”

USAGOLD note: Grantham goes on to say that bubbles are “easy to see” but forecasting when the bust will come is “trickier.” Another tricky aspect of a bubble scenario is figuring out the best place to park capital in the event of a bust. In an inflationary environment, cash and bonds do not make a lot of sense. There is one candidate, though, that has not reached bubble proportions, a sitting bull, if you will, i.e., the precious metals.

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There are signs of stubbornly high inflation on the horizon, former Bank of England chief says

MarketWatch/Greg Robb

Repost from 6-10-2021

cartoon showing a boat riding the rising tide“Move over Larry Summers. Former Bank of England Governor Mark Carney indicated Monday he is in the camp of economists worried about an outbreak of higher inflation.”

USAGOLD note: With the warnings coming almost daily from analysts, like Carney, with lofty credentials, it’s a wonder the price of gold and silver are where they are – and not significantly higher.

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The Fed’s forecasts

Linkedin/David Kelly

Repost from 6-8-2021

antique image of humpty dumpty clinging precariously to wall“There is an old saying that investors shouldn’t fight the Fed. It is equally true that the Fed shouldn’t fight economic reality.

USAGOLD note: David Kelly, chief global strategist at J.P. Morgan, says the Fed needs to rein it in – that its “super-easy money policy is just asking for trouble.” If it doesn’t, it risks a boom-bust scenario when the Fed is forced to tighten “triggering an asset price crash and a recession.”

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YouTube/James Eagle

Repost from 7-23-2021

grpahic link to YouTube video How reserve currencies over 120 years

Click to view 

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Goldman Sachs: Gold to rebound sharply towards $2000

FXStreet/Dhwani Mehta

Repost from 7-23-2021

graphic image of a golden bull preparing to charge“Analysts at Goldman Sachs expect commodities to “rebound sharply” following their recent sell-offs while targeting gold to reach $2000 over the coming months… Do not expect widespread lockdowns.”

USAGOLD note: Goldman sees gold rising in a general commodities rally.

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Posted in Gold-silver price predictions, Today's top gold news and opinion |

Precious metals show signs of emerging from their summertime impasse
Napier says he is ‘very bullish on gold’ as we enter a new era of financial repression

(USAGOLD – 7/29/2021) –  Precious metals showed signs of emerging from their summertime impasse this morning. Gold is up $18.50 at $1827. Silver moved aggressively higher gaining 60¢ at $25.62. The upswing began overnight in Asia and gained pace during European trading hours as Investors factored in the Fed’s decision to stay the course on monetary policy and leave tapering at the discussion level. The dollar slid and bond yields firmed. Russell Napier, the financial strategist who presciently warned of inflation’s return about a year ago, believes that we are entering an era of “financial repression” when policymakers will keep interest rates below the inflation rate to relieve the massive global debt burden.

“I’m very bullish on gold,” he says in an interview published at TheMarketNZZ. “The problem for gold in the last year was that interest rates have gone up, because people still believe there will be a link between inflation and interest rates. If people believe there will be inflation at 4%, they will say interest rates will ultimately be at 5 or 6%, hence they don’t want to own gold. It’s only when they begin to realize that that link is broken, that the gold price will lift off.”

Chart of the Day

Gold vs Dow Jones Industrial Average
(1970-1979, in percent)

overlay chart showing the performance of gold and stocks during the 1970s in percent
Chart courtesy of MacroTrends.net • • • Click to enlarge

Chart note: “How did [the late 1960s] end?” asks ZeroHedge’s Tyler Durden in a recent post, “Unhappily, as the value bull of 1968 (comparable to the first half of 2021) was followed by the volatile bear of 1969… which then was followed by the 1970s – the decade when the US almost succumbed to hyperinflation and only 20% interest rates courtesy of Paul Volcker prevented the premature collapse of the American empire.” If the 1970s were the inflationary main event, the late 1960s were the warm-up act – an indication of, and laying the groundwork for, things to come. We sometimes overlook the fact that stocks peaked right about then. Nearly twenty years of sideways to down action followed. As we pointed out in the past, stocks started and ended the 1970s at 1000 while inflation, as Durden points out, raged and gold rose almost 1800%.

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McConnell sends warning shot across Democrats’ bow on debt ceiling

PunchbowlNews/John Bresnahan, Anna Palmer and Jake Sherman

Repost from 7-23-2021

Uncle Sam poster with quote bubble saying 'I need vast sums of money!'“Senate Minority Leader Mitch McConnell is taking a very hard line on the debt ceiling. His message — if Senate Democrats want to raise the debt ceiling, they’re going to have to do it themselves because no Republicans will vote for it in the current ‘environment’ on Capitol Hill.”

USAGOLD note: Though somehow, someway Congress always gets the debt ceiling passed, this time around things could get dicey given the extraordinary level of government spending over the past 18 months. The Republicans appear to be intent on sending a message to the Biden administration. “I can’t imagine a single Republican in this environment that we’re in now,” says McConnell in a strongly worded statement, “– this free-for-all for taxes and spending — to vote to raise the debt limit.” Back in 2011, when the debt ceiling became a major point of contention in Congress, Standard & Poor’s downgraded the U.S. credit rating from AAA to AA+. A similar event could generate an earthquake in the already shaky bond market.

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Pension funds intend to increase gold holdings in coming year – survey

Proactive/Oliver Haill

Repost from 7-22-2021

“Gold is an increasingly important asset for European pension funds, with new research showing many funds intend to increase their holdings of the yellow metal in the coming months.”

USAGOLD note: There was a time, not that long ago, when investing in gold would have been unheard of among pension fund managers. Now, 73% say “it offers increasingly attractive diversification benefits.” Pension funds globally, we will add, have considerable assets to hedge – over $50 trillion (2019), according to Statista.

Total assets of pension funds worldwide
(trillions of dollars)

bar chart showing pension fund assets globally now over $50 trillion

Chart courtesy of Statista.com

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They don’t hate gold because it’s gold. They hate it because it’s not government money.

Mises Institute/Ludwig von Mises

Repost from 6-8-2021

Ed Stein cartoon graphic of gold bar flying a dollar kite“The struggle against gold, which is one of the main concerns of all contemporary governments, must not be looked upon as an isolated phenomenon. It is but one item in the gigantic process of destruction that is the mark of our time. People fight the gold standard because they want to substitute national autarky for free trade, war for peace, totalitarian government omnipotence for liberty.”

USAGOLD note: This article is excerpted from von Mises’ Human Action published in 1949. It is a refutation of John Maynard Keynes’ reference to the gold standard in 1944 as a “barbarous relic” and one of the most concise, realistic and principled available even now over seventy years later.  It is unlikely we will ever go back to the gold standard. Such is the stuff of dreams, but if we have learned anything at all during the last fifty years of the fiat money system, it is that gold has proven to be an adequate and reliable hedge against its excesses.

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Yellen says its OK if Biden $4 trillion stimulus triggers inflation and higher rates

MarketWatch/Mike Murphy

Repost from 6-7-2021

photo image of elephant - imposing full frontal“‘We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade,’ she said. ‘We want them to go back to’ a normal environment, ‘and if this helps a little bit to alleviate things then that’s not a bad thing — that’s a good thing.’”

USAGOLD note: The Biden administration and the Fed want a new “new normal” that is an upgrade from the old new normal which was actually secular stagnation. At no time, though, did she mention allowing the real rate of return to go positive or that the Fed would quit printing money being applied to the federal government’s financing needs. With the statement, Yellen identifies the elephant in the room – the Japanification of the United States.

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Short and Sweet

Is the dollar the Humpty Dumpty of the global monetary system?

Graphic image of Humpty Dumpty perched happily on a wall, antique

The dollar at the moment is something of a Humpty Dumpty in the global monetary system – sitting on his wall oblivious and seemingly immune to all that goes on around him.  Whether or not there will someday be a Great Fall remains to be seen, but increasingly forces are lining up against it. Over the past few years, we have seen protracted movement among various central banks out of the dollar and into gold and other currencies. Though the dollar remains something of a Humpty Dumpty oblivious to all that goes on around him, a good many analysts believe it is poised for a major decline.

It is with that in mind that we took an interest in a Bloomberg report posted recently that “[g]old stored at the Bank of England has been selling for unusually high premiums recently, signaling that central banks may be back in the market buying.” The report goes on to say that the reason for the burgeoning gold demand from central banks is “to diversify their portfolios away from the U.S. dollar to safeguard their finances amid concerns over the Fed’s ultra-loose monetary policy, massive U.S. government spending and inflationary pressures.”

We see that as a rational response to current economic circumstances and a way of taking advantage of the dollar’s current strength to load up on gold. For example, Brazil, the world’s ninth-largest economy, recently reported a hefty 42-tonne purchase of gold to shore up its central bank reserves. Poland has announced its intent to add another 100-tonnes to its coffers in the months ahead. And those are only two in an expanding list of central banks in the market to buy gold. We hasten to add that it is not just the United States that is in the business of debasing its currency, but most, if not all, of the states issuing internationally traded currencies.

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Gold steady ahead of Fed meeting results and press conference
Greenlight’s Einhorn sees gold gaining as Fed stays behind the inflation curve

(USAGOLD – 7/28/2021) – Gold is steady ahead of today’s Fed meeting results and Chairman Powell’s press conference. With both bond yields and the dollar gaining ground, Wall Street, it seems, anticipates a slightly hawkish result. The yellow metal is level at $1800. Silver is attempting to regain its footing after yesterday’s steep decline. It is up 7¢ at $24.82. Though most of Wall Street, as reflected in recent financial market pricing, buys into the Fed’s assessment that inflation is a temporary problem, Greenlight Capital’s David Einhorn sees things much differently.

Chairman Powell,” he says in his quarterly client letter released Monday, “is committed to remaining very accommodative for a long time and then only gradually tightening. We believe he will find whatever excuse he needs to do so, no matter what the data shows. The result, we believe, is that inflation won’t be aggressively addressed. So, the risk is to the upside. In our macro book, we hold inflation swaps and gold. The former will benefit from reported inflation being higher than the market expects. The latter should benefit as the market realizes the Fed is behind the curve and has no plans to catch up.”

Chart of the Day

overlay line chart showing the close relationship between growth in ETF gold stockpiles and the price of gold

Chart courtesy of GoldChartsRUs.com • • • Click to enlarge

Chart note: Since the 2000s, there has been a strong relationship between growing gold ETF stockpiles and the price of gold.  The reduction in holdings over the past 18 months reflects declining interest on the part of institutional investors. Some analysts believe institutional and fund participation in the gold market could turn quickly should inflation prove to be persistent or id some other economic and/or financial market uncertainty surfaces.

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Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Coming to a grocery store near you: The 2021 price shock

Bloomberg/Megan Durisin and Deirdre Hipwell

Repost from 4-25-2021

graphic image of lines in the sand pointing higher“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.

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