Monthly Archives: December 2021

happy new year 2022

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Gold knocked off perch above $1800 in thin pre-holiday trading
Despite rangebound year, gold is poised to finish 2021 with the highest average price on record

(USAGOLD – 12/29/2029) – Gold was knocked off its perch above the $1800 mark in thin pre-holiday trading. It is down $11 at $1796.50. Silver is down 18¢ at $22.86. As we approach year-end, it looks like gold will finish the year down 7.5%, and silver, down about 16%. As we have reported consistently all year, though prices have been rangebound, demand for the precious metals incongruously has run at record levels as investors shore up their portfolios against an uncertain future. Market analyst Adam Hamilton is optimistic about the new year. He sees gold as being on the cusp of a major breakout based on what he calls “technicals wound up in a gigantic bullish pattern.”

“But the major trend shifts that earn smart contrarian traders fortunes are never apparent with a myopic short-term focus,” he says in a piece posted at the Seeking Alpha website. “Much-broader perspective is necessary to see when probabilities favor key transitions from uplegs to corrections and vice versa. Layered on top of gold’s core fundamental analysis from my last couple essays is a gigantic bullish technical pattern. It is winding ever-tighter, portending a major breakout. Gold felt awesome in 2020 because it blasted 25.1% higher, and bearish in 2021 because it has dropped 5.7% year-to-date. But prevailing gold levels are actually better this year than last year, as gold averaged $1,798 so far in 2021 compared to $1,773 in 2020! (Please see our Chart of the Day) Gold has largely spent this year consolidating high, digesting its huge gains from last year. That consolidation has formed a huge bullish pennant formation.”

Chart of the Day

bar chart showing the average annual price of gold from 1971 to present

Sources: St. Louis Federal Reserve [FRED], ICE Benchmark Administration

USAGOLD note: As Adam Hamilton points out above, it is interesting to note that even though gold looks like it will finish the year on the downside, it is still poised to post its highest average annual price ever at just below $1800 per ounce.

 

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Posted in Daily Market Report, dailyquotes |

US inflation is at a near-40-year high. So why are markets so calm?

MoneyWeek/John Stepek/12-13-2021

photo of gold bars and $100 bills“To an extent, you’d be right. Lots of global central banks actually have stopped printing money and have started raising rates – just not the important ones.”

USAGOLD note: Stepek says the markets are underestimating “the odds of a much more inflationary income here.” He ends by advising to buy cheap stuff, hold gold, make sure there’s cash on hand for capitalizing on opportunities.

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Posted in Today's top gold news and opinion |

Money Week’s Stepek on what to expect from markets until year end

Money Week/John Stepek/12-6-2021

cartoon showing an infrastructure project to tunnel through a mountain of debtCartoon courtesy of MichaelPRamirez.com

“And what’s happening now – and in fact has been happening for most of this year – is that the threat both of higher inflation and of higher interest rates is hurting the valuations of the very longest-duration assets. That is, the longest maturity bonds and the most speculative stocks.”

graphic image of a book and reading glasses A Good Weekend ReadUSAGOLD note: Stepek gives gold a mention toward the end of this article saying that if government borrowing costs spike, “central banks will be called upon to print more money. “Look for inflation hedges,” he says. “Gold is wobbly now but if inflation and financial repression are the end game here then it will pan out.” Meanwhile, the mountain of national debt driven by government spending and subject to potentially higher interest rate charges continues to grow, as shown in the Ramirez cartoon above.

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Posted in Today's top gold news and opinion |

Notable Quotable

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“But this bubble will burst in due time, no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios. Make no mistake – for the majority of investors today, this could very well be the most important event of your investing lives. Speaking as an old student and historian of markets, it is intellectually exciting and terrifying at the same time. It is a privilege to ride through a market like this one more time.”

Jeremy Grantham
GMO

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Posted in Notable Quotable | Tagged , |

No DMR today (12-9-2021). We will update later at the Top Gold News & Opinion page if anything of interest develops.


Gold traders exercise caution ahead of next week’s Fed meeting
‘Goodbye to Groundhog Day $1800?’

(USAGOLD – 12/8/2021) – Gold drifted marginally lower in quiet trading as traders exercised caution ahead of next week’s Fed meeting. It is down $1 at $1784.50. Silver is down 12¢ at $22.42. Sprott’s Paul Wong believes gold’s nearly two-year correction is about to end after a “bumpy” November.

“We believe the end of gold bullion’s consolidation is near (goodbye to Groundhog Day $1,800  at last?),” he writes in an analysis posted Monday. “Since gold’s August 2020 peak, the metal has been consolidating the breakout from the multi-year base pattern…. Though the past year has seen many price swoons and exhausting trading, gold was never in danger, technically, of breaking its secular bullish pattern. As we wind down 2021, we see several elevated markers of macro risk that the market will not likely be able to ignore for much longer – risks that we believe to be in the regime-changing category.”

Chart of the Day

Gold price and the yield on 10-year inflation-indexed securityoverlay chart showing the price of gold and the net yield on the 10 year inflation indexed security
Sources: St. Louis Federal Reserve [FRED], Federal Reserve Board of Governors, ICE Benchmark Administration
Click to enlarge

Chart note: As you can see in this chart, declining real rates have had a direct effect on the price of gold, particularly noticeable in the period after the 2007-2008 credit collapse and the pandemic-induced economic crisis that began in early 2020. The inflation-indexed real rate of return on the 10-Year TIPS is fluctuating around the minus 1% level. With inflation on the rise, the negative real rate of return will accelerate unless the Fed and/or bond market pricing push yields higher at an equivalent rate.

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Posted in Daily Market Report |

China’s role in U.S. inflation won’t be transitory

BloombergOpinion/John Authers/12-1-2021

photgraph of rolled dollar and yuan on a newspaper background“U.S. consumers got used to inexpensive Chinese-made goods. They’re no longer cheap, but the buying hasn’t slowed. A few words from the Fed won’t bring the prices down.”

USAGOLD note: Prices are rising everywhere, and raw materials – including oil – are the culprit (along with central bank-sponsored monetary inflation). Cheap Chinese goods disguised the underlying inflation in the past. Now, as Authers explains, it is surfacing.

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Posted in Today's top gold news and opinion |