Monthly Archives: September 2021

Investors believe it’s time to get very conservative in the stock market

CNBC/Yun Li

Repost from 9-24-2021

graphic image collapsing house of cards“Wall Street investors believe it’s time to take some risk off the table as concerns continue to pile up this month, according to the new CNBC Delivering Alphainvestor survey.”

USAGOLD note: We are prompted to remind our readers of Leon Cooperman’s warning that “when the market finally goes down, it will move so fast your head will spin.” According to the CNBC survey, 76% believe that now is the time to be very conservative about the stock market.

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This turning point for markets merits a hard look

Bloomberg/John Authers

Repost from 8-11-2021

“[I]t’s worth taking a detour into the past, because it looks to me as though we are at the 10th anniversary of a major turning point. There could be some important lessons.”

USAGOLD note: According to Bloomberg’s John Authers, 2011 served as a major turning point for market sentiment – a time when markets began acting as if inflation was unlikely to be a problem in the future. This editorial reflects on whether or not we are entering a new turning point ten years later – “a brief resurgence of fear that inflation really could happen, and that there is indeed a limit to what central banks can do with low bond yields.” Authers does not draw any hard conclusions, but he does raise an interesting question or two.

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Chanos says retail investors may be left holding the bag

CNBC/Yun LI

Repost from 8-11-2021

graphic image of people joining hands to cross ravine what happens when the last man steps off?

USAGOLD note: Isn’t that usually the case? When the retail trade is all in, generally speaking, that’s about the time the party’s over. As Chanos points out, the promoters and insiders cash out and the small private investor buys. He sees the danger as particularly high at this juncture, makes reference to a “trading frenzy” and “wild animal spirits.”

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Does bitcoin act like digital gold? Embarrassingly, it moves in close correlation with risky stocks

South China Morning Post

Repost from 9-24-2021

graphic image of a melting bitcoin“When Wall Street makes the case for cryptocurrencies, it’s all about the benefits of diversification. But when markets go down, bitcoin has an embarrassing habit of getting swept up in the sell-off.”

USAGOLD note: The cryptocurrencies also tag along for the ride when stocks bolt higher. Most students of the financial markets will attest to cryptocurrencies behaving like risk assets, i.e., they act more like speculative stocks than stores of value. They certainly do not follow gold …… As this article points out, when investors derisk their portfolios they “start dumping cryptocurrencies.”

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Short and Sweet

‘Everyone knows they need a safe haven’

photo of stack of gold and silver coins

“Last March and April (2020),” writes the Systemic Risk Council’s Paul Tucker in a piece published recently at Financial Times, “the fabric of our financial system was stretched almost beyond endurance. Only intervention from the north Atlantic central banks seems to have averted some kind of disaster triggered by markets grasping the pandemic was serious.”

The most important lesson from that brush with disaster is that the financial authorities did not even bother to disclose to the public (and the investment community) just how dangerous the situation had become until months after the fact. It was labeled, you might recall, a “liquidity problem” that the Fed was addressing – no need to worry. Such circumstances argue strongly for having a hedge in place at all times just in case the wheels actually do come off.

MoneyWeek’s Merryn Somerset Webb posted a reminder of gold’s baseline portfolio role during times of market uncertainty in a separate Financial Times’ opinion piece in early January. “Think of the reasons to hold gold,” she wrote. “If inflation is coming (and it probably is) you want to hold a real asset that can hedge against it — one that can’t be inflated away by relentless money creation and currency debasement.…[E]veryone knows they need a safe haven, but everyone also knows the traditional ones (government bonds) no longer offer that safe haven. That turns us to gold, the one asset that has a 3,000-year record of protecting purchasing power. No wonder the gold price is up around 40 percent since 2018. I hold a lot of gold for all these reasons.”


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Foreign investors help prop up Treasury market as Fed considers retreat

Financial Times/Kate Duguid and Joe Rennison

Repost from 9-23-2021

photo of Fed chair Powell at podium answering questions“Foreign investors cannot get enough US government debt, which analysts say could help soften the blow when the Federal Reserve starts to cut back its own bond-buying programme this year.”

USAGOLD note: Though the Financial Times characterizes the foreign purchases as “a high level of demand,” they do not appear to be enough to offset in any meaningful way the large contribution made by the Fed each month. The Wall Street Journal recently reported that the Fed purchased nearly 75% of the federal debt issued since the pandemic began. Though the financial press might make considerable noise about tapering, the Fed will need to consider what happens to rates if its support is removed – even if done gradually.

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Posted in Today's top gold news and opinion |

Gold holds steady in today’s early going
Latent institutional interest in the metal could resurface any time, according to survey

(USAGOLD – 9/30/2021) – Gold held steady in today’s early going – up $3 at $1731. Silver is up 12¢ at $21.73. If you are looking for a reason why gold has had difficulty getting out of its own way of late, weak institutional demand as reflected in the reduction in gold ETF stockpiles is an excellent place to start. (Please see our Chart of the Day.) A recent Coalition Greenwich survey, though, reveals a solid latent interest among institutions that could resurface at any time.

“One of the primary goals of our study [on institutional involvement in the gold market],” says London-based market consultant, “was to see how investors are reacting to the unprecedented market environment created by the easing of the COVID-19 crisis, and to understand how emerging concerns like inflation and the need for tail-risk protection were affecting their views of gold. Our topline finding on that front is that institutional allocations to gold are expected to increase over the next three years. Currently, about 1 in 5 institutions have specific allocations to gold in their portfolios. Allocations are most common among institutions in EMEA** (29%) and among the world’s biggest institutions, or those with more than $10 billion in assets (27%). The average gold allocation for investors who own or include gold in their policy portfolio was 4%. Almost 40% of current gold investors expect to increase their allocations in the next three years, and about 40% of institutional investors who do not have gold exposure but have a target or have considered it, plan to make an investment in that time frame.”


*Please see: Rethink, Rebalance, Reset – Institutional Portfolio Strategies for the Post-Pandemic Period / Coaltion Greenwich / Andrew McCollum

**Europe, Middle East, and Africa

Chart of the Day

overlay line chart showing gold ETF holdings and gold price 2001 to present

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 nearly two years reflects declining interest on the part of institutional investors. Some analysts believe institution and fund participation in the gold market could turn quickly should inflation prove to be persistent or if some other economic and/or financial market uncertainty surfaces. If you are looking for a reason why gold is not performing up to snuff at this juncture, the reduction in ETF stockpiles and institutional interest is a good starting point.

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

Notable Quotable

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“Gold is scarce. It’s independent. It’s not anybody’s obligation. It’s not anybody’s liability. It’s not drawn on anybody. It doesn’t require anybody’s imprimatur to say whether it’s good, bad, or indifferent, or to refuse to pay. It is what it is, and it’s in your hand.”

Simon Mikhailovich
Tocqueville Funds

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The odds of a 20% correction in stocks are rising as the market transitions to the next stage of its cycle, Morgan Stanley warns

MarketsInsider/Isabelle Lee

Repost from 9-22-2021

graphic image-icon of bear stepping through round portal“Analysts – led by Michael Wilson – called this scenario ‘Ice,’ which would happen if earnings revisions and higher-frequency macro datapoints slow down.”

USAGOLD note:  The bears are beginning to emerge from the woods …… Morgan Stanley is one of a number of Wall Street bears predicting a sharp stock market correction.

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Posted in Gold and Silver Price Predictions from Prominent Players, Today's top gold news and opinion |

Unprecedented inflation? That what CEOs see

BloombergOpinion/Brooke Sutherland

Repost from 9-22-2021

“Of course, the current level of inflation isn’t unprecedented — it is notable, though.”

USAGOLD note: Use of the word “unprecedented” might be a stretch, but the CEOs of major companies quoted in this article seem to be very much surprised by the surge in operating costs.

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Posted in Today's top gold news and opinion |

Consumer inflation expectations hit eight-year high

Bloomberg/Alexandre Tanzi

Repost from 8-11-2021

“U.S. consumers’ expectations for inflation over the medium term rose to an eight-year high in July, according to a Federal Reserve Bank of New York survey.”

USAGOLD note: Consumer inflation expectations are running high (+4.8%) while the yield on the ten-year is very low (1.3%). That does not translate to a very lucrative future real rate of return.

overlay line chart showing consumer inflation expectations at 4.8%

Source: New York Federal Reserve Bank

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Did gold just give us a taste of what’s coming for stocks?

ZeroHedge/Grahm Summers

Repost from 8-11-2021

photograph of a yellow caution flag in the breeze“This would mean stocks losing considerable support from the Fed. Again, the Fed has spent over $4 trillion supporting the markets since the March 2020. But by the look of things, that will be ending soon.”

USAGOLD note: And let’s not overlook the direct implications to the bond market. The Fed has purchased almost 75% of the debt issued by the U.S. federal government since the pandemic began. Gold, as Summers suggests, might be a canary in the coal mine in this respect.

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Why Evergrande has suddenly exploded into a potential global financial market crisis

MarketWatch/Vivien Lou Chen

Repost from 9-22-2021

photograph of China Evergrande sign with Chinese characters

“It is the non-COVID, non-inflation risk that has been lurking in the global backdrop for months: A looming default by Chinese property developer Evergrande Group. On Monday, this somewhat obscure, overseas risk suddenly shook up financial markets from Asia to Europe and the U.S.…”

USAGOLD note: We should know soon if Monday’s retreat in stocks was a warning shot across the bow on Evergrande or a groundless knee-jerk reaction. Much depends on the Chinese government’s reaction to the meltdown, i.e., whether or not it will allow Evergrande to truly become China’s Lehman Brothers moment.


Image attribution: Chorzinghuam 2, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons [cropped]

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Short and Sweet
Why the U.S. needs to encourage Americans to hold gold

graphic image of gold eagle and the stars and stripes

We have always believed that citizen ownership of physical gold is in the national best interest, not just the best interest of its accumulators. In the event of a worldwide economic breakdown or a realignment of the global monetary system, it would be good for the country to have a storehouse of gold held by the populace. China encourages citizen gold ownership for precisely that reason.

“With a growing number of countries encouraging their central banks and citizens to acquire gold,” writes The Federalists Sean Fieler, “it is increasingly reasonable to assume that gold will be part of the world’s monetary future, not just its past. The U.S. Treasury should embrace policies that will attract more of the world’s gold to America and better position our citizens and our nation for whatever the monetary future may hold.”


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Sidestep the debt ceiling logjam by minting a $1 trillion platinum coin

Market Insider/Andy Kiersz and Joseph Zeballos-Roig

Repost from 9-22-2021

image of platinum Pt periodic table, platinum backdrop“But the conundrum could have a coin-size solution. A loophole in the law that prescribes the types of coins that can legally be minted in the US theoretically allows the Treasury Department to mint a $1 trillion platinum coin, deposit it at the Federal Reserve, and then continue paying its bills as normal.”

USAGOLD note: So all we have to do is mint about 30 of these miracle coins and we have the national debt paid. Mint another 30 and the government suddenly accrues untold wealth. One wonders why the Treasury Department didn’t summon the miraculous long ago.…… All said, as It turns out, the Treasury Department, in fact, did reject the idea back in 2013 saying that instead of the quick fix, Congress should get its act together, raise the debt ceiling, and avoid a federal government bond market default.

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Gold gets back on the plus side of the ledger
The dollar’s lost purchasing power translates to higher gold prices over the long run

(USAGOLD – 9/29/2021) – Gold got back on the plus side of the ledger this morning in response to a softened tone yesterday from Fed Chairman Powell during Senate testimony. It is up $9 at $1744.50. Silver is down 15¢ at $22.39. Yields softened this morning, and the dollar improved marginally. Kelsey Williams (Kelsey’s Gold Facts) believes in gold’s fundamental – some might say ultimate – value. He sees gold not just as real money but as the “original” money. Thus, gold is the measure of value for everything else – including the US dollar.

“The US dollar,” he explains, “has lost somewhere between 98-99% of its purchasing power over the past one hundred years. When the gold price hit $2060 oz. last August, it was a one hundred-fold increase over the past century and represented a ninety-nine percent loss in US dollar purchasing power. In inflation-adjusted terms, $2060 oz. in August 2020 is nearly identical to $1895 oz. in August 2011. Both peaks equate similarly to a ninety-nine percent loss in US dollar purchasing power. The increase in the US dollar price of gold from one peak to the next (Aug 2011-Aug 2020) represents the actual purchasing power that was lost in those intervening nine years. Approximately midway between the two price peaks, the gold price bottomed at $1040 oz. in January 2016. This was a fifty-fold increase and reflected a ninety-eight percent loss in US dollar purchasing power.”

Chart of the Day

Purchasing power of the US dollar
(1913-present)

Line chart showing the purchasing power of the dollar 1913 present
Source: St. Louis Federal Reserve [FRED], US Bureau of Labor Statistics • • • Click to enlarge

Chart note: Since 1913, the US dollar has lost almost 96% of its purchasing power. Since 1971 and the introduction of the fiat money system, it has lost 85% of its purchasing power. Since 2008, during a period of relative price stability, it still lost over 22% of its purchasing power. 

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

Notable Quotable

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“We’re in very uncharted waters. Nobody has gotten by with the kind of money printing now for a very extended period without some kind of trouble. We’re very near the edge of playing with fire.”

Charlie Munger
Berkshire Hathaway

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Beware MS70, MS69, PF70 ‘Perfect’ + ‘Certified’ Gold and Silver American Eagles and American Buffalos

1 ounce US Eagle and Buffalo bullion gold coins, obverse and reverse.

In 2006, the US Mint produced its first-ever .9999 fine gold coin in the form of the popular American Buffalo. The goal was to offer investors an American-made alternative to popular pure gold products like Canadian Maple Leafs, Austrian Philharmonics and gold bars. While numerous dealers (USAGOLD was one) simply offered Buffalos as an alternative bullion coin at a competitive rate, the novelty of the coins coupled with feverish demand helped spawn a whole new spinoff in the gold business – the independently graded contemporary bullion coin.

On the surface, there is nothing wrong with having one’s contemporary bullion coins graded and housed permanently in hard plastic containers. It is when these items are then promoted as exceptionally rare and desirable and priced at very high, and often unsustainable, premiums over their gold content that it becomes a problem. In reality, as you will read below, the graded item, in most cases, is not substantially different (except for the container) from the typical bullion coin purchased daily by thousands of investors around the world.

Our feeling was that after Buffalo hype wore off, this promotion, like many others that came before it, would fade away with waning interest. Yet here we stand many years later, rather than fading away, it has expanded and proliferated to include American Gold Eagles, American Silver Eagles, and U.S. Mint Commemoratives. One need only search MS70 or PF70 “Perfect” American Eagles to see just how many companies offer these fictional “numismatics.” (MS is an abbreviation for mint state and PF for proof)

At USAGOLD, we could not be more emphatic in our warning against paying significant premiums above the metal content for these products. This includes common contemporary items sold as “first-strike”, “early issue”, “first release”, Mint State 69, Mint State 70, Proof 69 and Proof 70, as graded by the independent grading services including the Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation (NGC). Below we have published the mint’s official statement regarding “First Strike”/”First Release” designations and production quality controls.


U.S. Mint Statement on “First-Strike” and “First-Release Designations

Coin dealers and grading services may use these terms in varying ways. Some base their use on the dates appearing on United States Mint product packaging or packing slips, or on the dates of product releases or ceremonial coin strike events.

Consumers should carefully review the following information along with each dealer’s or grading service’s definition of “first strike” or “first release” when considering purchasing coins with these designations.

The United States Mint has not designated any coins or products as “first strikes” or “first releases,” nor do we track the order in which we mint coins during their production. The United States Mint strives to produce coins of consistently high quality throughout the course of production.

Our strict quality controls assure that coins of this caliber are produced from each die set throughout its useful life. Our manufacturing facilities use a die set as long as the quality of resulting coins meets United States Mint standards and then replace the dies, continually changing sets throughout the production process. This means that coins may be minted from new die sets at any point and at multiple times while production of a coin is ongoing, not just the first day or at the beginning of production.

United States Mint products are not individually numbered and we do not keep track of the order or date of minting of individual coins. Any dates on shipping boxes are strictly for quality control and accounting purposes at the United States Mint. The date on the box represents the date that the box was packed, verified and sealed, and the date of packaging does not necessarily correlate with the date of manufacture. The date on shipping labels and packing slips for coins that are sent directly to United States Mint customers from our fulfillment center is the date the item was packed and shipped by the fulfillment center. The other numbers on the shipping label and packing slip are used for tracking the order and for quality control.

U.S. Mint Consumer Alert

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The statement of ‘consistently high quality throughout the course of production’ is critical. At one of the top grading services, for example, 99.6% of the one-ounce gold American Eagle business strikes submitted for review graded either Mint State 69 or Mint State 70 — the two highest grades at the services. Fully 46% of submissions received a Mint State 70 grade, the ultimate rating. As for the silver American Eagle one-ounce coins, 99.5% of submissions (or nearly 5.7 million coins) made the top grades of Mint State 69 and Mint State 70, and a similar percentage of proof silver Eagles made the top grades of Proof 69 and Proof 70.

With the mint continually producing new coins at the same high quality that they always have, year after year, there is literally an ENDLESS supply of product. To be clear, you do not have to avoid buying these coins altogether. You just have to avoid paying an egregious dealer premium to do so. In fact, if you were so inclined as to desire ownership of graded bullion coins for future numismatic potential, we’d recommend simply purchasing bullion coins from us at our competitive premiums, and submit them to be graded (certified) on your own.


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Investor frustrations about gold

Myrmikan Capital/Daniel Oliver

Repost from 9-22-2021

photo of President Biden at the podium prress conference“[I]nvestors are understandably frustrated that gold is not already much, much higher. There seem but two likely possibilities: gold is simply digesting its recent run from $1,500/oz only eighteen months ago and will soon launch higher, or gold is telegraphing a looming dollar liquidity crisis.… The third possibility is that Myrmikan’s thesis is simply incorrect: the government can run rising deficits without limit, the stock market can accelerate higher forever, wealth concentration can continue with no societal or political effects, the U.S. empire can decline with no material consequences for Americans or our markets.”

USAGOLD note: Myrmikan reflects on why gold can’t seem to get out of its own way. How could it remain stuck in a range while the Biden administration’s anything-goes, free-wheeling economic policies progress without any check whatsoever? Ultimately, it says, it will become unstuck and trade for “multi-thousands per ounce” as investors launch what Ludwig von Mises called “the flight into real values.”

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Posted in Gold and Silver Price Predictions from Prominent Players, Today's top gold news and opinion |

Powell is fighting for the minds of the people

Bloomberg Opinion/Bill Dudley

Repost from 9-22-2021

“If households and businesses trust officials’ judgment, they’ll expect consumer-price inflation to stay near the central bank’s 2% target in the long run. As a result, they’ll be less likely to demand and offer wage increases, which will help ensure that any surge in inflation proves temporary.”

USAGOLD note: How does the Fed go about abrogating the inflation process? In some respects, that ship has already sailed. The Fed prints money. Prices go up. Businesses respond by passing along those increases to consumers. Consumers respond by demanding higher pay. If either fails to act, they become inflation’s victim – and neither is foolish enough to accept that outcome. Ultimately, if the Fed wants to stop the inflationary process there is only one way to do it: Go back to square one. Stop the flood of money like Volcker did in the 1980s.

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