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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Posted in Today's top gold news and opinion |

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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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 |

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-silver price predictions, 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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God and money: ‘A perfect and just measure shalt though have’

The New York Sun/Judy Shelton/7-31-2021

“The 50th anniversary of the collapse, on August 15, 1971, of the Bretton Woods monetary system is a momentous moment in the history of money. It should provide an occasion for thoughtful discussion focused on the road to reform, our priceless constitutional foundation, and the restoration of honest money.”

USAGOLD note: Though we completely support Ms. Shelton’s viewpoint, as expressed so eloquently and logically at the link above, we have to say that the chances of the United States restoring the gold standard anytime soon are next to nil. In lieu of a gold standard, though, there is a more practical and straightforward route investors can choose. They can put themselves on the gold standard by buying and taking delivery of gold coins. That strategy, as shown in the chart below, has worked nicely thus far in the fifty years of the fiat money system, and there is little reason to believe it won’t during the next fifty. Anyone who has held a handful of gold coins knows the value and comfort of making that decision in their own (and family’s) behalf.

Gold and the purchasing power of the U.S. dollar
(1971 to present)

overlay area chart showing the value of the dollar and gold since 1971

Sources: St. Louis Federal Reservie, Bureau of Labor Statistics, ICE Benchmark Administration

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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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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 |

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-silver price predictions, 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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Could a collapse of cryptocurrencies force a reform of the global monetary system

The New York Sun/Steve Hanke

Repost from 8-10-2021

graphic image of a melting bitcoin“Once gold was removed from the mix, though, the Bretton Woods system broke down and was abandoned in 1973. Since then, the world has been flying blind. Indeed, we have — in the words of Jacques de Larosière, the former managing director of the International Monetary Fund — a global monetary non-system.”

USAGOLD note: Some interesting history from Johns Hopkins economics professor Steve Hanke, an expert on currency systems. He does not elaborate on the possibility of a cryptocurrency collapse – only mentions it as a possibility at the end of the editorial while calling for a New Bretton Woods-style monetary conference.Though we are not ready defenders of the crytocurrencies, how their collapse might catalyze a new monetary system escapes us. Of much greater significance, in our view, is the steady migration from the U.S. dollar among global central banks to other currencies and gold, much as what happened to the British pound following World War II and the inception of the Bretton Woods system.

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Buffett slows buybacks, sell stocks with market at highs

Bloomberg/Katherine Chiglinsky

Repost from 8-10-2021

Ed Stein cartoon showing a chart of stock and gold diverging with an investor thinking 'decisions-decisions'

“He repurchased just $6 billion of Berkshire stock, the lowest amount of buybacks since the middle of 2020, and was a net seller of other stocks for the third quarter in a row, according to the conglomerate’s second-quarter earnings released Saturday. Buffett’s been faced with a high-class problem in recent years: Too much cash, and too few opportunities.”

USAGOLD note: Buffett’s dilemma will not be news to veteran investors who have worked, watched, and played the stock market over the years. Cash might be trash, but it’s better than being caught in a crash. Gold might be an even better option for the opportunistic value investor – particularly those harboring doubts about the purchasing power of the currency. It has spent the last year vacillating in a tight, roughly $200 range while stocks inflated to uncomfortable levels for knowledgeable investors like Warren Buffett.

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Inflation fears rise sharply as confidence in Bank of England drops

Financial Times/Chris Giles

Repost from 9-22-2021

“The findings come at a sensitive time with financial markets also expressing increasing doubt over the bank’s ability and willingness to control rising inflation and just ahead of next week’s meeting of the Monetary Policy Committee.”

USAGOLD note: A number of analysts have remarked the interest in gold is a function of the confidence investors have in the central bank. This is the first headline we have seen tying together inflation fears and declining confidence in a major central bank.

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No recovery until 2045

Daily Reckoning/James Rickards

Repost from 9-22-2021

antique print of wolf at door from Little Red riding Hood“One study from the Federal Reserve Bank of San Francisco in collaboration with outside academics showed that of the 19 highest fatality pandemics since the Black Death in the mid-1300s, the average time needed to return to normal levels of interest rates, growth and employment is more than 30 years.”

USAGOLD note: Rickards is sticking with his assessment that disinflation and possibly deflation is the wolf at the door – not inflation. As most of our readers know, he is an advocate of gold ownership under such circumstances.

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