Monthly Archives: June 2022

Bank of England’s Mann says inflation ’embedded’ in British economy

FTAdviser/David Thorpe/6-24-2022

“The very high UK inflation rate is now “embedded and persistent” in the domestic economy, according to Catherine Mann, a member of the Bank of England’s Monetary Policy Committee.”

USAGOLD note: The progression goes something like this – nonexistent to transitory, transitory to persistent, persistent to embedded – and it can happen quickly, as shown in the chart below. Now, Mann tells us, inflation is “embedded and persistent” in the British economy. A good many economists would say the same about the United States. Once the inflation message sinks in with investors, inflation could have an even more substantial effect in financial markets than it already has. We will add it is running very near double-digit levels in the UK.

United Kingdom Inflation Rateline chart showing the inflation rate in United Kingdowm as of May 2022
Chart courtesy of TradingEconomics.com

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Posted in Today's top gold news and opinion |

Germany warns of Lehman-like contagion from Russian gas cuts

YahooFinance-Bloomberg/Arne Delfs and Vanessa Dazem/6-23-2022

map showing gas pipelilnes going into Europe from Russia
“Europe’s largest economy faces the unprecedented prospect of businesses and consumers running out of power. For months, Russian President Vladimir Putin has gradually reduced supplies in apparent retaliation over sanctions imposed over the invasion of Ukraine. The standoff escalated last week after steep cuts to the main gas link to Germany, putting reserves for the winter at risk.”

USAGOLD note: Though the natural gas problem for Germany is covered in the United States, few have weighed its implications for the European Union as a whole and the rest of the global economy. This article explores the details. It might turn out to be a very unpleasant winter for Europe, as a settlement in Ukraine seems more distant now than ever. Germany’s Economic Minister Robert Halbeck raises an early red flag saying “The whole market is in danger of collapsing at some point.”

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Posted in Today's top gold news and opinion |

More on the Seth Klarman Harvard interview

Yahoo/Theron Mohamed/6-22-2022

“Seth Klarman trumpeted gold as a haven asset, dismissed cryptocurrencies as dangerous and pointless, and predicted the Federal Reserve would back down from its inflation fight.…  The billionaire investor and Baupost Group chief — widely seen as Warren Buffett’s spiritual successor — also championed the US dollar, and warned rising interest rates could spell trouble for funds that have taken too many risks in recent years.”

USAGOLD note: We posted a link to Klarman’s Harvard Business School comments earlier in the week, but this one offers more in the way of direct quotes, including some interesting comments on gold ownership.

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

Jim Rogers warns of the ‘worst bear market’ in his lifetime – these are the ‘least dangerous’ assets to own today

YahooFinance/Jing Pan/6-21-2022

photo of a stack of silver coins and bars“With the S&P 500 down 21% year-to-date, the situation for stocks is pretty grim — but according to legendary investor Jim Rogers, it’s just the start. ‘This has to be the worst bear market in my lifetime, which means it will go down a lot and it will last a long time,’ the 79-year-old told ET Now earlier this month.”

USAGOLD note: Silver is his top recommendation as least dangerous, though he adds that “there’s no such thing as safe.” We agree –  not in this life, and particularly not in this investment environment. He also rates gold as “less dangerous.”

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

Gold edges higher in the aftermath of the Sintra central bank conclave
‘It remains unconventional despite its extremely long and illustrious track record.’

(USAGOLD –6/30/2022) – Gold edged higher in the aftermath of the central bank conclave in Sintra, Portugal, as markets generally dug in for more tightening and the threat of a recession. It is up $3 at $1823. Silver is down 10¢ at $20.71. ByteTree’s Charlie Erith addresses a question topmost on many gold investors’ minds. Why is gold so widely ignored in professional money circles? He comes away with a very down-to-earth answer: They do not make significant fees by promoting it like they do with stocks and bonds. In fact, he says, the incentive is to ridicule it.

“[Warren Buffett] points out that it doesn’t pay dividends or generate a return on capital,” he writes in an analysis posted on the firm’s website. “Fine. But it also doesn’t have profit warnings, rights issues, lawsuits, new competition, patent cliffs, asset write-downs, leverage, liquidity mismatches, management scandals, or fraud. It is just a blob of uncopiable metal that sits there, quietly ticking higher over long stretches of time as governments debase currencies.… Central banks and doomsters are the outliers who understand this. For the rest of the world’s investors, ownership of gold as part of a long-term savings strategy remains unconventional, despite its extremely long and illustrious track record. This has particularly been the case during eras of high inflation and political unrest, such as we face now.”

Bar chart showing annual gain or loss in the price of gold 2000 to present
Click to enlarge

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NEWS & VIEWS
Forecasts, Commentary & Analysis on the Economy and Precious Metals
Celebrating our 49th year in the gold business

JULY 2022

“The bottom line is this inflation and all its consequences are probably unstoppable.”
Bill Blain, Morning Porridge
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A general tendency towards more inflation
‘Ultimately, the power to create money is the power to destroy.’

photograph of Paul Volcker reading newspaper before Congressional testimony

WASHINGTON, DC – AUGUST 5, 1980: Federal Reserve Chairman Paul Volcker reads the financial page as he waits for a hearing. (Photo by James K. W. Atherton/The Washington Post via Getty Images)

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California is sending ‘inflation relief’ checks up to $1,050 — here’s who qualifies

CNBC/Weston Blasi/6-29-2022

graphic image of helicopter money drop“If you’re a California taxpayer being hurt by inflation, you may be getting some financial relief. The state is sending 23 million residents ‘inflation relief checks of up to $1,050this fall to help ease the financial burden that the highest inflation in 40 years has placed on Americans.”

USAGOLD note: Inflation relief in the form of more inflation. We have heard similar rumblings from the White House, an indication of the complete denial in high places of what causes price inflation in the first place. Other states, CNBC tells us, are looking at similar programs. Helicopter money no matter the source is still helicopter money.

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Morgan Stanley investment head sees hidden inflation threat in dollars and commodities

Forbes/Jason Bisnoff/6-28-2022

photo of U.S. one dollar bills rolling off the printing press“We may get to a point sometime over the next three to six months, where the dollar starts to weaken on a relative basis as the US economy slows, and as other economies and central banks start to tighten. It may be that we get into a scenario where even though the Fed may have some success squashing demand [for goods and services], we may not squash inflation.” – Lisa Shalett, Morgan Stanley, Chief Investment Officer

USAGOLD note: What Shalett is saying in so many words is that supply will be squashed as well as demand. Commodity prices theoretically rise under such circumstances even as demand cools pushing up the inflation rate – not the outcome the Fed is looking for.

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Posted in Today's top gold news and opinion |

Bond market rebound is bad news for the economy

Bloomberg/Gary Shilling/6-29-2022

graphic image of the inflation spiral higher wages, higher inflation, higher wages, etc“The good news is that yields in US Treasury securities may be near their peak. The bad news is that makes the recession I’ve been forecasting since February more likely.”

USAGOLD note: We would like to believe that interest rates are now at their peak, but with inflation still revving its engines, that outcome is still up in the air, in our view. We know that peak interest rates are the current Wall Street default forecast. We also recall, though, that as the 1970s inflation spiral spun out of control, those in charge were forever forecasting its demise – a decade of official denial while prices and rates marched steadily higher.

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Posted in Today's top gold news and opinion |

Reducing inflation will come at a great cost: Stagflation

Linked-In/Ray Dalio/6-21-2022

graphic image of a bull and bear with the words 'stagflation ahead'“More specifically, I now hear it commonly said that inflation is the big problem so the Fed needs to tighten to fight inflation, which will make things good again once it gets inflation under control. I believe this is both naïve and inconsistent with how the economic machine works. That’s because that view only focuses on inflation as the problem and it sees Fed tightening as a low-cost action that will make things better when inflation goes away, but it’s not like that. “

USAGOLD note: The unhappy tradeoff is containing inflation with economic weakness. The Fed, says Dalio, will opt instead to “chart a middle course that will take the form of stagflation.” Dalio, we mention for the sake of our new visitors, is a staunch advocate of gold ownership.

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Meet Zoltan, the sellside Jules Verne

Financial Times/Robin Wigglesworth/6-23-2022

photo of stacks of bullion gold coins

“His view is that the result will be a third Bretton Woods era, mostly defined by three main pillars: The Chinese renminbi is going to play a far larger, international role; gold is going to play a far bigger role in foreign currency reserves; and countries are going to stockpile reserves in essential natural resources in addition to financial ones.”

USAGOLD note: Zoltan Pozsar commands considerable interest whenever he publishes and his Bretton Woods III treatise released this past March is still being parsed and discussed among pundits, investors, and fellow analysts. Wigglesworth explores Pozsar’s origins, influences, and current thinking in the article linked above. “People are learning that you can have all the money in the world,” he tells Wigglesworth, “but if you can’t buy shit with it, it’s a problem. So you might as well stock up on stuff.” That, in a nutshell, explains why central banks, funds, institutions and high-net-worth individuals globally are buying yellow metal.

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Posted in Today's top gold news and opinion |

The perfrect storm in oil caught markets off guard

OilPrice.com/Irina Slav/6-18-2022

etching showing a rider fleeing the storm

“These seem to be all the necessary ingredients for a perfect oil storm, spiced up with the latest massive oil field outage in Libya. Things are, indeed, worse than pretty much everyone expected, and, what is perhaps more worrying, they will remain so for a while yet because there is no quick fix on the table.”

USAGOLD note: Irina Slav offers an essential overview on the current state of the oil market. In her view, the perfect storm now enveloping supply is not likely to let up anytime soon.

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Jay Powell seeks to allay recession fears but warns of inflation surprises

Financial Tinmes/ Colby Smith/6-21-2022

photo of jerome powell deliver testimony before Congress“Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data and the evolving outlook, and we will strive to avoid adding uncertainty in what is already an extraordinarily challenging and uncertain time.” – Jerome Powell, Senate testimony, 6/21/2022

USAGOLD note: Markets have sensed that the Fed may be just as clueless as everyone else on the future direction of inflation, recession, et al. The outlook from Mr. Powell, as captured in the two sentences immediately above, may have cemented that suspicion. By raising the specter of stagflation (recession + inflation), he may have just fanned the fires.

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Gold goes positive ahead of Powell, Lagarde, Bailey panel discussion
Dominic Frisby says gold is ‘the one part of my portfolio that isn’t keeping me awake at night’

(USAGOLD – 6/29/2022) – Gold moved to the positive side of the price ledger this morning ahead of today’s panel discussion in Portugal featuring Jerome Powell, Christine Lagarde, and Andrew Bailey – all beleaguered heads of their respective central banks. It is up $12 at $1834. Silver is up 17¢ at $21.10. Such joint appearances are rare, so it will be a matter of interest in financial markets how they respond to the near double-digit global inflation rate. Dominic Frisby, the UK-based market commentator with a flamboyant style, has always given gold mixed but generally favorable reviews. “I own gold and I’m glad I do,” he writes in his latest posted at MoneyWeek. “I may be rude about it, but I love it. And it’s the one part of my portfolio that isn’t keeping me awake at night. In fact, it’s so boring, it’s helping me to sleep.”

He goes on to say that the June through August summertime lull (See charts below) is “usually, the best time of year to buy…. I stress ‘usually’, not always. A summer low in gold is frequent enough to be noticeable but not consistent enough to be reliable. A bit like your errant teenager’s mood swings.…[T]oday we are meandering around the $1,820 mark, which is also where the 52-week moving average lies. That’s actually quite a telling little fact. For all the declines we’ve seen elsewhere in stocks, bonds and crypto, and the ensuing erosion of wealth, gold sits at its one-year average. In other words, it’s done what it’s supposed to: preserved its value, and preserved your capital. And that’s with the US dollar so strong.”

overlay line chart showing seasonal trading patterns for gold

overlay line chart showing seasonal trading patterns for silver

Charts courtesy of the Moore Research Center (541-639-5340) • • • Click to enlarge

Chart[s] note: “Seasonal patterns,” explains Moore Research Center, “are displayed against a numerical index from 0 to 100 (the right-hand vertical scale). The graph reaching 0 represents the seasonal low (the time of the year when prices are most consistently low); the graph at 100 represents the seasonal high (when prices are most consistently high). The graph at 20 represents when prices have tended to be in the lower 20% of the year’s eventual price range.”

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

Notable Quotable

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“There are certainly forms of instability that have been introduced by algorithmic trading that will increase as we put more and more faith in these algorithms. The February 2018 flash crash was instructive. The culprit was a slightly esoteric exchange-traded product that has a rebalancing mechanism inside of it. And that rebalancing mechanism ended up destroying the product on one specific day when the market moved a little bit more than the product was designed to handle. The product was required to trade a lot of instruments in response to that move. But then those trades exaggerated a small move and it became a big move, which required more rebalancing—and everything spiraled out of control.”

Anonymous algo-trader
LOGIC

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Posted in Notable Quotable, Today's top gold news and opinion | Tagged |

Mobius: Bear market could get much worse

The Sounding Line – CNBC/Taps Coogan/6-21-2022

graphic image collapsing house of cards“I have confidence that (the Fed) is going to follow their rule book and you know what that is. If inflation is 8.5% to 9% then interest rates are going to go up to 8.5% to 9%… They’ve made this mess with the printing of money the way they did and now it’s going to be very difficult for them to get out of it and we are going to be going through a lot of crises in the following months…”

USAGOLD note: It would be difficult to quantify the systemic risks 8.5% to 9% interest rates would generate, but they would be substantial in our view.…… The latest from Mobius who recommends investors allocate 10% to gold – “emergency money” as he calls it.

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‘We now see the Fed moving toward an attempted controlled unwind position’

ZeroHedge-Bear Trap Report/Larry McDonald/6-20-2022

photo of a very large brown bear“Never forget – NOT allowing price discovery for a long period of time – then forcing the process onto markets with a ‘bayonet in the back’ – at an ever-accelerating rate – is a virgin-central bank experiment. It comes at a high price. Never happened before. Inflation is forcing central bankers to allow price discovery. There was always price discovery before Lehman – but for much of the last 12 years markets have been in a Fed zombie trance. We mean a real – free market – ‘cost of capital.'”

USAGOLD note: Withdrawal symptoms are likely to show up soon…… McDonald says the bear is stalking the Fed and will eventually undermine its determination to raise rates – a prospect, we will add, likely to play well in the gold market.

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The ECB has a huge dilemma: Price stability or bail out nations

MishTalk/Mish Shedlock/6-19-2022

cartoon image of man flipping a gold coin“There is no new tool and there won’t be a new tool. The ECB can use an existing QE tool to buy unlimited amount of sovereign bonds or not. It’s a choice, not a new tool.”

USAGOLD note: There has been talk of a new tool that the ECB will deploy to deal with the sovereign debt problems of the southern tier states, most notably Italy and Greece. Shedlock says there is no new tool. It’s a smokescreen. To bail or not to bail, that is the question, but it very well might translate as “to be or not to be.”

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Silver overdue for a spike higher

Seeking Alpha/Paul Franke/6-20-2022

image of silver bars with rising chart trend line in background

“To start the conversation, silver is traditionally a top long-term hedge against inflation and currency debasement, exactly the environment we find ourselves in 2022. Hence, silver’s drift lower since August 2020 is something of a headscratcher.”

USAGOLD note: Franke, formerly editor of the Maverick Investor newsletter and consistently ranked at the top of stock pickers throughout his 30-year career, now sees silver as on the launch pad. Silver, it has been our experience, can inexplicably dither for long periods and then just as inexplicably gain traction for no apparent reason. You wake up one morning, and it is suddenly off to the races…… “From a statistical review, the odds favor a price gain of better than 20% once every two years, and a 40% advance once every three years, all other variables being equal.:… One could argue a solid quote advance is due to begin soon,” he says.

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

Gold drifts sideways despite a weaker dollar and generally firmer commodities
Research firm Zacks says buying ‘while prices are not too high seems wise’

(USAGOLD – 6/28/2022) – Gold drifted sideways in quiet summertime trading despite a weaker dollar and a general firming trend in the commodities complex. It is level at $1825. Silver is up 6¢ at $21.29. Gold’s short-term fate continues to be tied inversely to that of the US dollar index – largely manifested through software-based trading systems. That preoccupation with the dollar index has translated to keeping a lid on prices over the past few weeks, though some might argue that gold’s holding its own against the dollar’s onslaught has been a good thing.

“In addition to the interest rate hikes and value in tech phenomena described above, there is the strong dollar and softer demand from the largest consumer China (because it now has economic issues of its own),” says Zacks, the research firm, in an analysis posted at the NASDAQ website. “These are downward pressures on the yellow metal. But there are also some supporting factors. The G-7 nations have decided to stop buying Russian gold, which could raise prices. A more significant factor that isn’t great news for the economy is the increasing possibility of a big recession, not only in the U.S but globally. The likelihood of this happening is increasing every day, which means that putting at least some of your money into gold and related assets while prices are not too high seems wise.”

Gold and the US Dollar Index
(%, year to date)
overlay line chart showing gold and the US dollar index year to date in percent
Chart courtesy of TradingView.com

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