Monthly Archives: January 2023
No one wins with a world split into two rival political-economic blocs
South China Morning Post/Anthony Rowley/1-22-2023
“Russia and China could choose to declare financial war on the major Western powers in Bloc 1 by selling US dollar assets and investing the proceeds not only in gold but in other precious metals and industrial commodities, forcing the dollar and other key currencies down further.”
USAGOLD note: Rowley considers a new alignment of nations as the world splits into two camps – one led by the United States, the other by China. “Beijing is in a relatively strong position to consolidate and strengthen its position while the US and its allies struggle with long-standing economic problems,” he says. We are not sure how much of that assessment is grounded in reality. The economic problems on both sides are profound.
Yellen dismisses minting $1 trillion coin to avoid federal default
MarketWatch/Andrew Duehren/1-22-2023
“Treasury Secretary Janet Yellen said the Federal Reserve likely wouldn’t accept a $1 trillion platinum coin if the Biden administration tried to mint one to avoid breaching the debt limit, dismissing an idea that has been floated to circumvent Congress on the issue.”
USAGOLD note: Why do some choose to believe that outrageous solutions do not come with equally outrageous consequences? The best solution is to abolish the debt ceiling. It serves no practical purpose.
Short & Sweet
Gold’s secular bull market: 2003-2022
‘Each price correction and consolidation period has been a buying opportunity’
“The last government to doubt gold’s value got burned,” says veteran commodity analyst Andrew Hect in a report posted at Seeking Alpha. “At the turn of this century, the United Kingdom decided to part with one-half of its gold reserves. Ironically, London is the hub of the international gold market, so the UK sent a signal that gold had seen better days. In a series of auctions, the UK sold around 300 metric tons at prices mainly below the $300 per ounce level. Since 2003, gold never traded below $300 per ounce. Since 2010, the price has not ventured below $1,000, and since 2020, the price has remained above $1450 per ounce. … In 1999, gold reached a bottom at $252.50 per ounce. Since then, each price correction and consolidation period has been a buying opportunity in gold. The over two-decade-long bullish trend continues to take gold to higher highs.”
Gold price
(Weekly prices, 2000-2022)
Chart courtesy of TradingView.com
Thinking this latest consolidation is another buying opportunity for gold?
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Gold buys owe much to central bank buying
Bloomberg/Liam Denning/1-20-2023
“The collapse of Sam Bankman-Fried’s FTX platform, along with his arrest, offered a tragicomic rebuke to those touting the blockchain as a serious challenger to gold (and the dollar and just about everything else). In contrast to crypto’s digital vapor, gold will inarguably hurt you if dropped on your foot.”
USAGOLD note: Bloomberg commodity columnist Liam Denning weighs in on what’s going on in the gold market…… Central bank buying is certainly a factor, but what are the reasons for that buying?
Gold trades to the downside ahead of tomorrow’s rate decision
WGC reports strongest gold demand in over a decade led by central banks
(USAGOLD – 1/31/2023) – Gold is trading to the downside this morning ahead of tomorrow’s Fed decision and press conference. It is down $9 at $1917. Silver is down 27¢ at $23.42. Wall Street expects the Fed to strike a more dovish tone, but there is a minority worried about a hawkish surprise. The World Gold Council reports the strongest demand for gold in over a decade. “Colossal central bank purchases,” it says in its full-year demand trends report for 2022, “aided by vigorous retail investor buying and slower ETF outflows, lifted annual demand to an 11-year high.” Investment demand for gold coins and bars grew by 10% to 1,107 tonnes. Central bank buying was at a 55-year high of 1,136 tonnes.
Chart courtesy of the World Gold Council • • • Click to enlarge
Notable Quotable
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“It’s an extraordinary moment; we have our first pandemic in 100 years. We have our first invasion in Europe in 75 years. And we have our first inflation around the world in 40 years. When you look at the combination, the intersection of the pandemic, of the war, of the inflation, it signals paradigm shift, the end of 15 years of financial repression and the next era to come.” – Ted Pick, Morgan Stanley, co-President at CNBC
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A fatal conceit
Alhambra Investments/Joseph Y. Calhoun/1-22-2023
“Investors spend an inordinate amount of time trying to figure out something that is beyond figuring. Their views of the economy and markets are shaped by current economic data and expectations regarding the future actions of a small group of economists who have no better chance of predicting the future than a coin flip. And their collective track record at such tea leaf reading hints that the coin might be the better choice.”
USAGOLD note: What you just read, if you accept it as accurate and we do, is the best argument for diversification – and that diversification, if history is a teacher, should include gold and silver…… Some practical advice at the link.
Inflation complacency
Credit Bubble Bulletin/Doug Noland/1-20-2023
“Despite all the talk, previous and ongoing, this Federal Reserve is soft on inflation. Not as eager as Wall Street to declare mission accomplished, Fed officials are nonetheless signaling that their work is near completion”…It was important that central bankers pushed back against the view that QE liquidity backstops would be restarted as necessary to quash incipient market instability. Powell was hawkish during his November 1st post-meeting press conference. But Fed hawkish resolve soon dissipated. Now, messaging has become so frayed that markets don’t take hawkish resolve seriously. The paramount message that the Fed would push back against looser market conditions is MIA.”
USAGOLD note: We agree with Noland’s assessment. After all is said and done, the Fed at its core is dovish.
What’s behind fall in US yields? Fed hope, growth fear
Bloomberg/Martin Ademmer and Bjorn Van Roye/1-24-2023
“For the US central bank, the burden of controlling elevated inflation falls increasingly on hopes for favorable supply shocks.”
USAGOLD note: And that could go either way. A one-paragraph, no-nonsense summary of the Fed’s latest policy conundrum……
Chart courtesy of TradingEconomics.com
Short & Sweet
The true nature of inflation
Cartoon courtesy of Michael P. Ramirez.com
“The nature of inflation is widely misunderstood and misinterpreted,” writes analyst Dave Kranzler in an Investing.com overview, “‘Inflation’ and ‘currency devaluation’ are tautological—they are two phrases that mean the same thing. … Dollar devaluation has been occurring since the early 1970’s. The value of the dollar relative to gold (real money) has declined 98%. In 1971, $40,000 would buy a 4,000 square foot home in a good suburb. Now it takes $700,000 on average to buy that same home. Price inflation is the evidence of currency devaluation. The CPI is not a real measure of price inflation. The CPI is methodically massaged – starting with the Arthur Burns Federal Reserve (it was his idea) to hide the real degree of currency devaluation from all of the money that has been printed since 1971.”
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Worried about what currency devaluation is doing to the value of your savings?
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Sentiment speaks: $2428 target for gold
Seeking Alpha/Avi Gilbert/1-17-2023
“As of now, the structure in gold seems to be quite bullish. And, while I would still like to see another pullback before we continue to trek much higher in 2023, I wanted to take a moment to outline my longer-term expectations for this impending rally that I expect. Back in 2011, I utilized a 100+ year structure in gold to identify the topping target for gold. And, I used the same structure to identify a bottoming target for the correction I expected, even before that correction began. So, now I am going to provide you my next target on the upside – and that is $2,428.”
USAGOLD note: Elliot Wave analyst Gilbert reprises a long history of successful gold calls to give extra credibility to his bullish $2428 target ……
Gold trades sideways ahead of this week’s Fed decision and press conference
Schroders says gold does well during recessions returning 28% on average
(USAGOLD – 1/30/2023) – Gold is trading sideways this morning as the markets remain cautious ahead of Wednesday’s Fed rate decision and press conference. It is down $2.50 at $1928. Silver is up 9¢ at $23.76. If a recession is in the cards, then what might we expect from gold? Schroders, the London-based investment firm, has some answers. Gold, it says in a report released last week, “tends to do well in absolute and relative terms during US recessions.” It has returned 28% on average and outperformed stocks by 37%.
“One observation we would make is that when the policy responses to US have been particularly loose/accommodative, the gold price performance has been most explosive,” says the firm. “This was the case in 1973 (when Arthur Burns was Federal Reserve governor) and was also the case in 2008 and 2020. We think policy responses to future US recessions will also be highly accommodative and involve a return to combined fiscal/monetary support.”
Gold and recessions
(Shaded bars = recessions)
Chart courtesy of TradingView.com • • • Click to enlarge
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“When you think of the color gold, images of grandeur and extravagance are likely to come to mind. For millennia, the metal has adorned crowns and hilts of swords. It has been used to enhance paintings and ornaments to increase their value. In some cultures, gold is a predominant feature of festivals and celebrations. In Eastern cultures, the metal is an integral part of auspicious occasions like marriages and festivals by way of gifts and sacred rituals. Gold also features heavily on the attires of brides and grooms throughout South Asia. Humans’ fascination with gold is as old as time itself. The scarce material has a certain appeal to it. Empires have flourished by possessing gold, wars have been fought to control regions harboring rich deposits of the metal and treasure hunters and explorers have spent a lifetime in search of it.”
Puja Bhattacharjee
Independent Journalist
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Favorite web pages
Daily gold and silver price history
1968 to present
Our Daily Gold and Silver Price History pages are among the heaviest traffic pages at the USAGOLD website. The archived data is licensed from the ICE Benchmark Administration and the London Bullion Market Association and Netdania Creations and run from 1968 to present. FOREX prices for the day are posted as a live feed and then frozen at the end of each trading day. These pages are frequented by data gatherers of all descriptions from professors and their students to market professionals and investors – all interested in gold’s price performance both over the long run and within specific time constraints for their own research purposes.
Daily Gold and Silver Price History is another of the quiet pages at USAGOLD that garners significant global interest particularly when the market is moving or breaking news warrants more than average interest. We also invite you to return here regularly – to this Live Daily Newsletter page – for up-to-the-minute gold market news, opinion, and analysis as it happens.
We invite your visit. We encourage your bookmark.
USAGOLD’s
Daily gold and silver price history pages
A Gold Classics Library Selection
Extraordinary Popular Delusions And The Madness Of Crowds
Stock speculators, Paris, 1720, Mississippi Land Bubble
Charles Mackay in his Extraordinary Popular Delusions and Madness of Crowds, written in 1841, unwittingly provides us one of the better studies of modern market behavior. I doubt Mackay would have guessed that his book would be read, digested and taken as revelation by readers in the 21st century. At the same time, he probably would have not been surprised that the pull of the same dark gravity that caused people to throw their fortunes at tulip bulbs in Holland, or land they never had a hope of seeing in the New World, would be omnipresent in the age of computers, instantaneous communication, and the nearly infinite availability of market analysis. The highly successful speculator and gold investor Bernard Baruch (1870-1965) put his blessing on this book as one of the secrets to his success on Wall Street.
Said Baruch:
“Have you ever seen in some wood, on a sunny quiet day, a cloud of flying midges — thousands of them — hovering, apparently motionless, in a sunbeam? …Yes? …Well, did you ever see the whole flight — each mite apparently preserving its distance from all others — suddenly move, say three feet, to one side or the other? Well, what made them do that? A breeze? I said a quiet day. But try to recall — did you ever see them move directly back again in the same unison? Well, what made them do that? Great human mass movements are slower of inception but much more effective.”
So we bring you Charles Mackay and his Extraordinary Popular Delusions with our own sense of mission. If the rising generations now receiving their education, or even their more jaded elders, find application in their own investment philosophy, then the purpose of this Gold Classic Library entry has been served. Complicated and timelessly revealing, here you will find examples of herd behavior, delusion, mania, craftiness, and financial loss and gain. Solomon taught us that there are no new things under the sun. Mackay teaches us how we might recognize the signs and that the crowd gone mad is a matter to be reckoned with in almost every era.
Brazil and Argentina to start preparations for a common currency
Financial Times/Michael Stott and Lucinda Elliot/1-22-2023
“The initial focus will be on how a new currency, which Brazil suggests calling the ‘sur’ (south), could boost regional trade and reduce reliance on the US dollar, officials told the Financial Times. It would at first run in parallel with the Brazilian real and Argentine peso.”
USAGOLD note: The dollar rebellion gains new adherents – the two largest economies in South America, and that makes for an interesting headline. That said, Argentina might find it difficult to give up its money printing ways – something that will no doubt be required in a monetary union along the lines of the European Union. In short, discussions about a currency union at some point will necessarily get down to the nitty-gritty of government spending, deficits, money printing – and most importantly, monetary sovereignty. Austerity has never been one of Argentina’s strong suits, and that fact of life, in our view, is likely to keep this new currency union in the discussion stage for a long time to come.
The stock market is about to be flipped upside down as inflation rebounds
MarketsInsider/Matthew Fox/1/21/2023
“BofA said another factor that will push up inflation is a renewed spike in commodity prices as the reopening of China’s economy will spark a wave of demand for oil. That, combined with supply issues stemming from the ongoing conflict between Russia and Ukraine, will put renewed pressure on oil prices, which dropped nearly 40% from their 2022 peak.”
USAGOLD note: This is not the kind of future the Fed has in mind……Of all the big banks, Bank of America is the most bearish by far. The bank is bullish on gold.
Investors contradict Fed officials on US interest rate reversal
Financial Times/Kate Duguid and Colby Smith/1-21-2023
“The divergence reflects beliefs about future inflation, which has cooled in recent months but remains high by historical standards. ‘There is a very clear disconnect and it is a disconnect about inflation, said Priya Misra, head of rates strategy at TD Securities.
USAGOLD note: The tug of war between Wall Street and the Fed proceeds…… The “disconnect” described could be in force for some time to come.
Short and Sweet
Blinded by the Money Illusion
“Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.” – Janet Yellen, Former Federal Reserve chairwoman
With those words, Janet Yellen, now the Secretary of the Treasury and facing an even worse crisis than the one referenced above, put investors around the world on notice, though probably not in the way she intended. In the past, such smug assurances from public officials have been enough to send contrarian villagers heading for the safety of the nearby woods. The informed student of financial history knows that panics, manias, crashes, and collapses are as common to investment markets as hurricanes to Caribbean beaches. To think that suddenly we have banished their recurrence for ‘our lifetimes’ smacks of the kind of misguided hubris that contributed directly to the 2008 meltdown and subsequent untold financial hardship. Just about the time most everyone comes to the conclusion nothing could go wrong, everything goes wrong …… and in a hurry, as we have discovered over the course of the past two years.
Reliably serving physical gold and silver investors since 1973
Summers warns of 1970s crisis if central banks relent on rates
Bloomberg/Phillip Aldrick/1-20-2023
“Going soft on inflation will plunge economies back into the recessionary depths of the 1970s and have “adverse effect on working people everywhere,” former US Treasury Secretary Larry Summers warned.”
USAGOLD note: We have made consistent reference to the 1970s Fed strategy that kept interest rates below the inflation rate – a policy that fostered stagflation and a strong gold market. The Fed, in our view, is not going soft, it is already soft on inflation and has been since it first surfaced as a problem several months ago.