Monthly Archives: November 2021

Black holes could be inadvertently making gold, astrophysicists say

Science Alert/Michelle Starr/11-16-2021

Artist rendering of a black hole“The creation of metals such as gold, silver, thorium, and uranium require energetic conditions, such as a supernova explosion, or a collision between neutron stars. However, a new paper shows that these elements could form in the swirling chaos that rings an active newborn black hole as it swallows down dust and gas from the space around it.

USAGOLD note: The anti-gold contingent within financial media will no doubt seize upon this finding as just one more reason to short gold. [smile]

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How durable is the Potemkin economy?

Real Investment Advice/Michael Lebowitz/11-17-2021

photo of Powell and Yellen shaking hands“The original Potemkin Village dates to the late 1700s. At that time, Russian Governor Grigory Aleksandrovich Potemkin constructed facades to hide the poor condition of his town from Empress Catherine II. Since then, Potemkin Village represents a false construct, physical or narrative, created to hide the actual situation. As the pandemic ravaged the economy, the Federal Reserve, White House, and Congress went to work and built a Potemkin economy around the ailing economy.”

USAGOLD note: Lebowitz fears that “sustained inflation will weaken the foundation of the facade and blow our Potemkin economic recovery over.” We are puffing it up, he says, with “fiscal and monetary gimmickry.”

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Fed should hike interest rates immediately to cut stagflation risks, economist Stephen Roach suggests

CNBC Trading Nation/Stephanie Landsman/11-16-2021

artist rendering of the Titanic and icebergs

“Roach has been warning stagflation was one supply chain accident away. Now, he contends the U.S. is in the throes of a broken supply chain while consumer demand is at a fever pitch.”

USAGOLD note: Roach believes that the “supply-demand imbalance is going to be persistent. Enduring.” The Titanic continues to steam through quiet but increasingly dangerous waters.

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The nation’s largest pension plan approves leverage to meet its targets

MIshTalk/Mish Shedlock/11–16-2021

graphic image of the charge of the lemmings“Despite huge stock market gains over the last decade, U.S. pensions are hundreds of billions of dollars short of what they expect to need to pay public worker retirement benefits.”

USAGOLD note: CALPERS takes a bite of the derivatives apple …… Will it be its last? The Wall Street Journal reports that CALPERS, the nation’s largest pension fund, would now “use borrowed money and alternative assets to meet its investment-return target.”  The low yield environment drags another player into the embrace of high-risk leverage and trading.

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Gold attempts to close November on a positive note
Gold ETF drawdowns reflect ‘diminished appetite’ among funds and institutions

(USAGOLD – 11/30/2021) – Gold is making an attempt to close the month on a positive note. It is up $7 at $1793.50. Silver is down 4¢ at $22.91. Global bond markets also firmed and stock bourses weakened as investors weighed the economic and financial impact of the Omicron variant. One of the factors weighing on the gold price over the past year has been the lack of interest among funds and institutions, as reflected in reduced gold ETF stockpiles. Some analysts, though, believe the apathy could suddenly turn to renewed interest if inflation were to prove more of a problem than advertised or if some other event were to raise the level of financial uncertainty.

“Gold-backed ETFs experienced net outflows of 25.5 tonnes (-$1.4bn, -0.7% assets under management) in October,” reports the World Gold Council in its most recent ETF Monthly Commentary. “Outflows of near equal magnitude from Europe and North America were marginally offset by inflows in Asia. Global gold ETF holdings fell to 3,567 tonnes (US$203bn) during the month – notching year-to-date low levels – as investor appetite for gold diminished in the ETF space following price declines in August and September. However, this was countered by both a pickup in COMEX managed money net long positions in gold futures and evidence of continued strength in vaulted physical gold, suggesting some investors may be shifting gold ETF positions into physical exposure while prices recover.”

Chart of the Day

overlay line chart showing gold ETF stockpiles and the price of gold 2000 to present

Chart courtesy of GoldChartsRUs.com

Chart note: There is a tight correlation between the ebb and flow of gold ETF stockpiles and the price of gold. Over the past two years, stockpiles have come down and so has the price, but, as mentioned above, that could change quickly and forcefully if inflation remains a problem or some other event raises the level of investor uncertainty.

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The central bank quandary: Inflation vs recovery

Blain’s Morning Porridge/Bill Blain/11-23-2021

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

“The problem is by messing around with interest rates, you unbalance the whole financial asset structure. Bonds yield too little, and Equities are overpriced. As I said above, that will continue till interest rates start to normalise, forcing the relative value of equity lower. Which means, have fun in the equity markets today… but we don’t know for how long. There is an alternative. Avoid financial assets. Think about real assets… Gold, Property, etc… Buy assets linked to the real world.”

USAGOLD note: Blain comes to this conclusion after a long excursion into the why’s and wherefore’s on stocks and bonds – all by way of answer to a reader asking about how the bond market works and what she should be doing with her savings.

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Legendary investor Jeremy Grantham issues investor warning

MarketsInsider/Theron Mohamed/11-14-2021

grpahic image of Dr MoneyWise pointing to a chart of the 1929 stock market crash with comment

“The legendary investor and chief strategist of Grantham, Mayo & van Otterloo also sounded the inflation alarm, blasted the Federal Reserve for pumping up asset prices, and reiterated his warning that the worst market crash in US history is coming.”

USAGOLD note: Grantham criticized the mentality that stock prices never decline and “all you have to do is buy.” Investors, he says, are more “blindly optimistic” than they were before the Crash of 1929 or the tech and housing bubbles.

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Silver Insitute’s interim silver market review

TheSilverInstitute/Staff/11-17-2021

Photo stacks of silver bullion coins“Physical investment in 2021 is on course to increase by 32%, or 64 Moz, year-on-year to a six-year high of 263 Moz. The strength will be driven by the US and India. Building on solid gains last year, US coin and bar demand is expected to surpass 100 Moz for the first time since 2015. Growth began with the social media buying frenzy before spreading to more traditional silver investors. Indian demand reflects improved sentiment towards the silver price and a recovering economy. Overall, physical investment in India is forecast to surge almost three-fold this year, having collapsed in 2020.”

USAGOLD note: Yesterday the Silver Institute released its interim overview of the global silver market – a quick and important read for our clientele who own silver or are contemplating it. The report includes a comprehensive supply-demand table and bullet commentary on each of the categories.

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Investors lulled into ‘dreamland’ by central banks, warns Bill Gross

Financial Times/Robin Wigglesworth/11-15-2021

Advertisement for the 1960s television serial The Twilight Zone“‘It’s dangerous,’ Gross warned of accommodative central bank policy. “It’s all dreamland that’s been supported by interest rates that aren’t where they should be.'”

USAGOLD  note: Gross joins the ranks of prominent investment managers and commentators warning of twilight zone markets saturated with financial euphoria. He points out that the Fed is captive to the markets and cannot do much about it.

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Let’s dance: Buy the credentials – Forget reality, baitballs and financial ergot!

Blain’s Morning Porridge/Bill Blain/11-15-2021

cartoon showing a chorus line corodinatedkick

“Oh dear. When market pricing is determined primarily by the fashion sense of flash-mobs it’s probably time to hang up my hat and go with them… but, of course… I won’t. My spidey-senses are all-a-tingle. I sense a madness in the air, a contagion on the loose. Is it just a disease? Something wicked this way comes… and we all know what it is….”

USAGOLD note: Thoughts on the current financial irrationality …… “Crank up the volume,” he advises, “keep dancing and keep buying! Yay!”

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Gold stabilizes in a range below $1800 to start a busy week for financial markets
Incrementum’s Stoferle puts gold’s 2021 rangebound pricing into perspective

(USAGOLD – 11/26/2021) – Gold looks to be stabilizing in a range below the $1800 mark this morning as news filters through financial markets to start the week that the latest variant might not be as problematic as first thought. It is level at $1793. Silver is up 3¢ at $23.23. With several Fed luminaries delivering speeches, Chairman Powell testifying before Congress, Treasury Secretary Yellen weighing in with a speech tomorrow, and a steady stream of data releases culminating with Friday’s payroll report, Wall Street may get more than its fair share of stimulation this week. Incrementum’s Ronald Stoferle added some much-needed perspective over the weekend on gold’s stubborn, rangebound behavior thus far in 2021.

“Confidence comes from repeatedly fulfilled expectations,” he says in a speech titled The Tipping Point and the New Normality, “That’s why gold is many things, but certainly not dead. A 25% price rise in 2020 and its role as a hedge in the Covid Crash speaks for itself. And now gold is down 3.5%. But what is this 3.5% against the 25%, is this really so bad? No, and many other events speak in favour of gold. One of these is the gold purchases by central banks around the world. As Palantir’s interest shows, this is not limited to central banks. Comex gold delivery is also higher than it has been for a long time. And what do we see in technical analysis? The mother of all ‘cup and handle’ formations. A breakout from this formation could mean a price of $2800.”

Chart of the Day

Personal Consumption Expenditure Index
(% change year over year, 2016 to present)
line chart showing the personal consumption expenditure index less food and energy October 2021
Sources: St. Louis Federal Reserve [FRED], U.S. Bureau of Economic Analysis

USAGOLD note: The PCE price index posted its largest gain since 1990 last week at 4.4%, excluding food and energy. With food and energy, the index posted a 5% gain – another solid indication that inflation is anything but transitory.

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wishing all a Happy Thanksgiviing 2021 pumpkins in a row

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Gold to see a recovery to last week’s high at $1877 as $1750 holds – Commerzbank

FXStreet/Staff/11-24-2021

OPINION

“Gold has sold off aggressively following a key day reversal. The sell-off is viewed as corrective and the market should remain well supported on dips back to the $1,750 region. Assuming that the $1,750 area holds the downside, we should see a recovery to last week’s high at $1,877. Above here lies $1,917/22, the May 2021 peak and 61.8% retracement and the 2011 high. This will act as the break-up point to the $1,965 November 2020 peak and the 78.6% retracement at $1,989. This is the last defence for the August 2020 peak at $2,072.”

USAGOLD note: Commerzbank technicians undeterred……Make a gutsy call.

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This is Jerome Powell’s shot at a Volcker moment – in reverse

Bloomberg Businessweek/Joe Wiesenthal/11-18-2021

photograph of a row of doves

“But what would pulling a Volcker actually look like in 2021? Perhaps it would be the exact opposite of what people imagine. Because despite elevated inflation, the Fed is nowhere close to maximum employment, which it’s mandated to promote alongside stable prices.”

USAGOLD note: In our view, the Biden administration would not have chosen to nominate Powell had he failed to deliver some assurances on this score when interviewed for the job. We should keep in mind, too, that the Board of Governors, once Biden is through with his appointments, will tilt decidedly to the dovish side of the monetary ledger.

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On inflation and wealth

Linked-in/Ray Dalio/11-11-2021

graphic showing cash as trash“Yesterday’s inflation report showed inflation raging so you are now seeing inflation erode your wealth. That is no surprise. At this time 1) the government is printing a lot more money, 2) people are getting a lot more money, and 3) that is producing a lot more buying that is producing a lot more inflation. Some people make the mistake of thinking that they are getting richer because they are seeing their assets go up in price without seeing how their buying power is being eroded. The ones most hurt are those who have their money in cash.”

USAGOLD note: The latest from Ray Dalio …… He has not deviated much from the “cash is trash” theme that garnered considerable attention last year. Now with inflation digging in, he is adamant as ever. One of the investments Dalio recommends in lieu of cash is gold, and he has been advocating it for many years.

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El Erian: This is one of the worst inflation calls by the Fed ever

MarketsInsider/Isabelle Lee/11-12-2021

graphic image of bank with red warning flag waving above“I desperately want to be wrong on this call because if inflation ends up to be hotter for longer, it has very unfortunate economic, financial, institutional, social, and political implications.”

USAGOLD note: A clear warning and unusually blunt criticism from the normally staid Cambridge economist ……

 

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Peter Boockvar: Where do we go from here? It’s time for a reality check.

MarketSanity/Interview of Peter Boockvar-Bleakley Financial Group/11-19-2021

photo image of stacks of gold and silver coins“Peter Boockvar believes the Fed is cornered on inflation. Gold upside of $2,500 and Silver at $50 are certainly reasonable in this cycle. It doesn’t matter whether it is Chair Jerome Powell or Lael Brainard.”

USAGOLD note: Thought we would add a positive precious metals outlook to your Thanksgiving weekend!

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Gold, the S&P 500 and stagflation

Zero Hedge/Tyler Durden/11-14-2021

graphic image of a golden bull preparing to charge“[I]s gold about to have a new chance to shine? According to a recent burst of pro-gold articles, golden sentiment may be about to shift. As Bloomberg writes today, ‘gold may outperform the S&P 500 Index about 20% as the threat of stagflation becomes real.'”

USAGOLD note: One of the analysts sourced in this post projects $2300 as a possibility on further sharp declines in real yields.

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Massive 21 pound Klondike gold nuggest goes up for sale

artist rendering of prospectors crossing Chilkoot Pass heart of the Klondike

 

Daily Mail/David Averre/11-15-2021

“He made the incredible find 100 years after the 1896 Klondike Gold Rush – hence the name ‘Alaska Centennial’ – while pushing dirt with his bulldozer along the shores of the Swift Creek Mine. Clay, realising he had hit the jackpot, buried the nugget under an Alaskan tree to buy time while he decided what to do with it.”

USAGOLD note: The sales price is $1 million …… Photo included at the link.

 

 

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