Author Archives: Daily Market Report

Gold encounters minor resistance at $1800 level; silver at $24
Holmes weighs in on Palantir’s ‘black swan’ gold purchase

(USAGOLD – 8/25/2021) – Gold looks to be encountering minor technical resistance at the $1800 level in early trading, with a stronger dollar providing the impetus. It is down $9 at $1795. Likewise, silver is encountering some resistance at the $24 level. It is down 12¢ at $23.80. As we have reported consistently, though prices have been stuck in a range over the past three months, global demand for the physical metal itself has remained consistently strong. US Global Investor’s Frank Holmes recently addressed the rationale behind investors aggressively buying this summer’s price dip – including Palantir’s 28,000 troy ounce ‘black swan’ gold purchase.

“This is yet another reminder that U.S. taxpayers and investors need their own ‘attractive insurance policy’ against freewheeling government spending and currency debasement,” he wrote in an article posted at the Seeking Alpha website.  “For my money, gold is such an asset, as it has no counterparty risk. The more money that’s printed to cover government spending, the more valuable I believe gold becomes. … Risk is precisely the reason why Palantir Technologies decided to make an investment in gold. The data analytics firm, founded in part by billionaire Peter Thiel, announced last week that it had stockpiled as much as $50 million worth of gold bars in preparation for ‘a future with more black swan events.’ What’s more, Palantir—named for the all-seeing crystal balls in Lord of the Rings—is also allowing customers to pay for its software in gold. Palantir’s decision ‘is only the beginning of what will soon be many major corporations diversifying their U.S. dollar cash into gold,’ the National Inflation Association (NIA) wrote in a note to subscribers.”

Chart of the Day

line chart showing 7.8% producer price index for July 2021

Source: U.S. Bureau of Labor Statistics • • • Click to enlarge

Chart note: “The producer price index for final demand increased at a 7.8% pace for the 12 months ended July, according to the Labor Department,” reports Fox News. “The July print was faster than the 7.3% pace recorded in June and ahead of the 7.3% rate that analysts surveyed by Refinitiv were expecting. The reading was the strongest since recordkeeping began in November 2010.” If the increased wholesale rate of inflation pushes through to consumer prices (retailers can only absorb so much), it will do serious damage to the real rate of return. The Fed is likely to stick with its prognosis that the inflation is transitory, but the persistent argument is gaining more and more adherents.

 

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Gold hits the pause button after yesterday’s strong break to the upside
Some encouraging words for newcomers on the summer doldrums from veteran analyst

(USAGOLD – 8/24/2021) – Gold hit the pause button this morning after yesterday’s strong break to the upside offered a hopeful sign that the metals might be moving out of the summer doldrums season. It is level at $1806. Silver is up another 17¢ at $23.83. Press reports attributed gold’s rise yesterday to a confluence of factors including geopolitical fallout from events in Afghanistan, a sharp global increase in Delta variant cases, and a global surge in the cost of living. On Friday, Gold Newsletter’s Brien Lundin, a veteran gold market analyst, had some encouraging words for newcomers experiencing the summer doldrums for the first time – advice that turned out to be prescient in light of yesterday’s strong advance.

“[W]hile it can be disconcerting to investors,” he wrote in a market note, “especially those new to the sector, it’s not unusual to see gold muddle about as it transitions from the summer doldrums to the often-stronger fall season. What is unusual about things right now, of course, is the most accommodative monetary policy in U.S. and world history. … I guess what I’m saying is that the big picture for the metals is exceedingly bullish, and we just have to sweat out the short-term malaise – similar to how we have in the past, but with the added confidence of having the macro environment so enormously in our favor.”

Chart of the Day

The inflation-adjusted price of silver
(Based on the Bureau of Labor Consumer Price Index, 1970 to present)

line chart showing the inflation adjusted price of silver 1970 to preset

Chart courtesy of Macrotrends.net 

Chart note:  “If we account for inflation,” writes analyst Peter Krauth in a piece posted recently at the FXEmpire website, “and that’s massively understated ‘official inflation,’ then silver prices peaked at $120 in 1980 and around $57 in 2011. Today’s price near $24 is still well below those levels, suggesting a lot of upside remains ahead. In fact, at $24 today versus the inflation-adjusted $120 in 1980, silver is currently about 80% below that peak.” He believes “$100 silver is well within reach.”

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Gold turns to the upside in across-the-board advance in commodity prices
WGC’s Crawley expands on an old reference to make a new point about gold

(USAGOLD – 8/23/2021) – Gold turned to the upside as part of a general, across-the-board advance in commodity prices led by oil. It is up $19.50 at $1802 and has now retraced almost in full the losses from the early August flash crash. Silver is up 57¢ at $23.65. The metals were helped along by concern about the geopolitical fallout from events in Afghanistan, a sharp global increase in Delta variant cases, and a global surge in the cost of living. In an article posted on the Investment Innovation Institute’s website, the World Gold Council’s Jacob Crawley expanded on an old reference to make a new point about inflation and gold.

“In the investment world,” he said, “gold is often thought of as producing zero [returns] in real terms; it just keeps up with inflation. You hear these stories about a Roman toga costing an ounce of gold and then a suit on Jermyn Street in London costing you a thousand pounds. It is this idea that over the long run gold’s purchasing power has been retained. But what we can show since the seventies is actually gold has had a positive real return. … Gold is a proven long-term hedge against inflation but its performance in the short term is less pronounced, particularly against the US CPI (Consumer Price Index). Instead, our analysis shows stronger and more consistent relationships between gold and broader inflation measures such as the US and world money supply (M2).”

Chart of the Day

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

overlay area chart showing gold and the purchasing power of the dollar 1971-April2021

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

Chart note:  As Jacob Crawley points out above, gold does not always react with straightforward immediacy to a decline in the dollar’s purchasing power, but over time, as today’s chart shows, it more than adequately serves that purpose. Those who criticize gold as an inflation hedge usually base their argument on carefully selected time periods, but when you use 1971 as the starting point – the year the fiat money system was launched and the most logical beginning date – gold’s hedging qualities are clear and indisputable.

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Gold continues to trade in a range
Wells Fargo’s La Forge foresees new commodity bull market supercycle

(USAGOLD – 8/20/2021) – Gold continued to trade in a range, closing out a week spent nursing its wounds from the unexpected and still unexplained flash crash of August 9th. It is up $6 in quiet trading at $1786. Silver is level at $23.28. John LaForge, head of real asset strategy at Wells Fargo, believes commodities have already launched a new bull market supercycle with gold’s rise to a record price in 2020 providing the leadership. His newfound bullish view is quite a departure from a long-held bearish outlook that goes all the way back to 2012. The prime impetus for the change of heart is that the long-term fundamentals, he believes, have swung in commodities’ favor.

“Now many years into this process possibly a decade,” he writes in a recently released client advisory, “and commodities become prone to supply shortages, with no quick way to bring production back. As the other old commodity saying goes, ‘low commodity prices cure low commodity prices.’ Commodity bull supercycles are sparked this way, and we are seeing similar broad supply growth issues in 2021.” He goes on to reference charts on corn and gold – “two very different commodities,” he says – and points out that their supply growth rates have gone negative. “Both showed similar conditions,” he points out, “at the start of the last bull supercycle that began around 1999.”

Chart of the Day

Gold, silver, and commodities
(One year, in percent)

overlay line chart showing gold silver commodities index one year August 2021

Chart courtesy of TradingView.com • • • Click to enlarge

Chart note:  Over the past 12 months, gold and silver – both falling within the commodities realm – have underperformed sector indices like the GSCI by a wide margin. At the same time, as Wells Fargo’s John LaForge points out in the analysis linked above, gold led commodities higher in 2020, posting a record high above the $2000 mark. Some see the current washout in precious metals as a prelude to leading the next leg in the commodities bull market supercycle. As LaForge points out “low commodity prices cure low commodity prices.”

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Gold drifts sideways in quiet summertime trading
World Gold Council reports strong rebound in ASEAN gold demand

(USAGOLD – 8/19/2021) – Gold continued to drift sideways in quiet summertime trading as yields tracked lower, the dollar strengthened, and financial markets weighed the prospect of the Fed tapering bond purchases later this year. It is down $1 at $1787.50. Silver is down 17¢ at $23.40. As of yesterday’s close, the yellow metal had made up most of the ground lost in the August 9th flash crash.

The World Gold Council reports increased demand among ASEAN countries as they emerge from pandemic lockdowns. Jewelry purchases are up 118% year on year and bar and coin purchases up 132%, according to a report published at FinewsAsia. “[W]hile ETFs will most likely not repeat the record performance of 2020,” says the Council’s senior markets analyst Louise Street, “the need for effective risk hedges and the continued low-rate environment supports our view that investors will add to their strategic allocations throughout the rest of the year.” Among the ASEAN countries, Viet Nam, Thailand, and Indonesia are in the top ten globally for consumer gold demand.

Chart of the Day

overlay line chart showing consumer inflation expectations at 4.8%

Source: New York Federal Reserve Bank

Chart note: Consumer inflation expectations are running high at +4.8% while the yield on the ten-year is very low at 1.3% translating to a historically high negative real rate of return. Inflation expectations as of July were at an eight-year high.

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Gold quietly tracks sideways in early trading
James Grant weighs in on gold’s subdued performance over the past year

(USAGOLD – 8/18/2021) – Gold is quietly tracking sideways this morning after spending the last several days regaining much of the ground lost in last Monday’s flash crash. It is now trading at $1789 – up $2 on the day. Silver is up 6¢ at $23.80. After achieving all-time highs a year ago this month, gold has been subdued much to the chagrin of those who believe it should be responding with more immediacy to the multi-layered crisis at hand. Interest Rate Observer’s James Grant spent a significant portion of a recent interview with Sprott’s Ed Coyne explaining gold’s subdued performance over the past year. Here’s a snippet:

“Gold has a way of disappointing its most devoted adherents. In 2008-09 it broke people’s hearts and went down. ‘This is a crisis!’ Gold is an ancient medium that appears in the periodic table. I didn’t invent it. Some people think I invented it! It appears in the periodic table, it’s an old thing and it takes its sweet time, right. It has a kind of a geological time set, that’s its clock: geological. Over the sweep of a reasonable investment horizon, it protects against the depredations of the stewards of our currencies. That’s what its purpose is. And that’s what it mainly does. Over the course of fiscal quarters and even some years, it will disappoint, but over the course of a reasonable investment, long-term horizon, it will spare you the punishment that our central bankers so willfully are meting out.

[Y]ou really have to take these things in with a great grain of salt and just say, all right, what I have here in gold, and very cheap gold equities, by the way, what I have here is an investment in monetary disorder, not a protection against it. We have it (monetary disorder) already. Monetary disorder is in fact the monetary system. It is an inherently disorderly system. In gold, you have an investment in that you do well, the more disorderly it becomes and especially well when the world recognizes the essential chaos of our monetary institutions.”

[With thanks to Sprott, the Canadian gold firm, for permission to quote the Grant interview at length.]

Chart of the Day

Gold price
(Annual average 1971-present)

bar chart showing the annual average gold price 1971 to present

Chart note: This chart amply illustrates James Grant’s point made above that “over the course of a reasonable investment, long-term horizon, [gold] will spare you the punishment that our central banks so willfully are meting out.” In 2020, it posted its all-time average high at $1770.37. It has been our experience – and we have been in the gold business for a very long time – that the investor who sees gold as a long-term store of value and a form of savings is often the one who reaps the rewards, even when the quiet times are taken into account.

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Gold gains for the fifth straight day, retraces most of flash crash loss
Rickards warns ‘we may be in the early stages of a financial panic.’

(USAGOLD – 8/17/2021) – Gold inched higher this morning, posting gains for the fifth straight day. It has now retraced most of the loss suffered in last week’s flash crash. It is up $5 at $1793. Silver is up 2¢ at $23.93. Analysts, for the most part, attribute gold’s rebound to rising inflation expectations and concerns about a possible correction in a stock market bumping along all-time highs. In recent months, Daily Reckoning’s James Rickards has been a leading contrarian in the gold camp, repeatedly stating that the most immediate economic concern will be disinflation, not inflation. He now believes that there is something even more important going on than the inflation/disinflation debate. “We may be,” he says, “in the early stages of a financial panic …”

“If a new liquidity crisis is underway (and there are signs that this is the case),” he writes in a recent analysis posted at the Daily Reckoning site, “then we should not be surprised to see it turn into a full-scale panic and possible market collapse late this year. If that happens, stocks will crash, rates will plunge, Treasury bond prices will soar, and the dollar will initially rally based on a flight-to-quality trade. Gold’s reaction in this scenario is also predictable. Today’s calm market is the best time to acquire gold in preparation for what could be a tumultuous fall and winter to come. The equilibrium is about to be broken, and the balance of forces favors gold.” As our Chart of the Day shows, the calm-market buying Rickards references may have already begun. Coin and bar demand for the first half of the year is the highest since 2013.

Chart of the Day

bar chart showing gold coin and bullion demand worldwide for second quarter 2021

Chart courtesy of World Gold Council • • • Click to enlarge

Chart note: “Bar and coin investment,” reports the World Gold Council, “generated strong y-o-y growth in Q2, rising by 56% to 243.8t. This was lower than the strong Q1 result but comparable with the five-year average of 252.8t. The total for H1 reached 594.5t, 45% higher than 2020 and the highest since 2013. In US$ value terms, H1 investment gained 60% to reach an eight-year high of US$34bn.” 

 

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Gold takes a breather after three straight days of gains
Mauldin says portfolios need to both ‘participate and protect’

(USAGOLD – 8/16/2021) – Gold is taking a breather this morning after three straight days of gains that took it back to the $1780 level. It is down $5 at $1775.50. Silver is down 21¢ at $23.60.  For a long while, John Mauldin (Mauldin Economics) has been one of the more thoughtful big picture analysts – someone whose work we read regularly. In a recent reflection, titled “Ubiquity, Complexity and Sand Piles” posted at the GoldSeek website, he begins with a section on a Brookhaven National Laboratories study of sandpiles. Researchers attempted to ascertain at which point, and to what degree, the last grain of sand falling on the pile causes disequilibrium and the collapse of the pile. It found that the impact of the last grain of sand varied. It “might trigger only a few tumblings or it might instead set off a cataclysmic chain reaction involving millions.”

“We cannot accurately predict when the avalanche will happen,” he concludes. “You can miss out on all sorts of opportunities because you see lots of fingers of instability and ignore the base of stability. And then you can lose it all at once because you ignored the fingers of instability. You need your portfolios to both participate and protect. Don’t blindly buy index funds and assume they will recover as they did in the past. This next avalanche is going to change the nature of recoveries as other market forces and new technologies change what makes an investment succeed. I cannot stress that enough. Don’t get caught in a buy-and-hold, traditional 60/40 portfolio. Don’t walk away from it. Run away.”

Chart of the Day

Gold in key currencies
(2019 to present)

gold in key currencies 2019 to present

Chart courtesy of TradingView.com • • • Click to enlarge

Chart note: The collapse of fiat currencies’ purchasing power, writes market commentator Alasdair Macleod in a detailed analysis posted at Gold Eagle, “is unlikely to echo the great European inflations of the 1920s, because to a large degree commerce subsisted on the alternative of gold-backed dollars, instead of local currencies. Today, the collapse of the dollar will mean there is unlikely to be any alternative currency available, because they are all tied to the dollar.” Gold’s strong, synchronous performance in the world’s top currencies since January 2019 makes Macleod’s point. It is up 41% in U.S. dollars, 49.5% in India rupee, 28.1% in British pounds, 33% in Chinese yuan, 35.2% in European euros, and 41.9% in Japanese yen. In the event of a global breakdown in fiat currencies, concludes Macleod, “anyone who does not plan to get hold of some physical gold and silver with a high degree of urgency could end up sinking with nothing but valueless fiat currencies.” (All data as of 8-13-2021)

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Gold pushes marginally higher in early trading
Bloomberg’s McGlone sees gold as ‘powder keg awaiting a spark’

(USAGOLD – 8/13/2021) – Gold pushed marginally higher in early trading as the dollar weakened and bond yields steadied. It is up $8.50 at $1762. Silver is up 24¢ at $23.46. At $1762, gold has recovered roughly half the ground lost in Monday’s still unexplained flash crash. Bloomberg commodity strategist Mike McGlone describes gold “as a powder keg awaiting a spark” and sees a “wobble” in stocks as potentially furnishing it, though it is just one of several possible catalysts mentioned. “The benchmark precious metal,” he says in an in-depth analysis released yesterday, “has the relative-value advantage of a substantial correction within an enduring bull market and support from declining U.S. Treasury bond yields.”

Chart of the Day

bar chart showing seasonal price patterns for gold showing August to be a good month to make a purchase

Chart courtesy of World Gold Council • • • Click to enlarge

Chart note: “Investors,” says the World Gold Council, “often use seasonal patterns to find opportune entry and exit levels. This tends to hold true for gold on average, over time. Historical analysis suggests that after a statistically positive performance during January, gold returns tend to be mixed with no consistent pattern linked to seasonality but driven instead by underlying macroeconomic variables. That tends to change again towards the end of Q3 when various market forces align resulting in a historically strong period for gold.”  History, in short, shows August to be a good month for buying gold.

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Gold holds steady despite 1% monthly gain in producer prices
Barrick Gold CEO says ‘no one believes in fiat currencies anymore’

(USAGOLD – 8/12/2021) – Gold held steady in quiet, early trading after yesterday’s strong turn to the upside. It is down $2 at $1750. Silver is down 23¢ at $23.37. Slow summertime trading continues to dominate the precious metals market, though yesterday’s BLS report of a 5.4% uptick in consumer prices (annualized) provided something of a boost. As a follow-up, producer prices came in a very strong 1% higher this morning for July and considerably higher than expectations at 0.6%. The BLS reports wholesale prices being 7.8% higher over the past twelve months – an increase likely to raise more than a few eyebrows this morning.

In a CNBC interview broadcast on Monday, Barrick Gold CEO Mark Bristow had some interesting insights to pass along on changing sentiment among investors looking for a place to park money in these uncertain times. “This world,” he said, “is battling with how to position investments on the back of the unforeseen and unrealized damage of how the pandemic crisis was managed… and the impact it has on the global economy which really hasn’t materialized yet. So I think without a doubt I take this as a buying opportunity and you should still have a 5% or so part of your investment [portfolio] in gold.” Bristow went on to say (with a bit of hyperbole) that “no one believes in fiat currencies anymore.”

Chart of the Day

Gold, silver and stocks
(1970-1979)

overlay line chart showing gold, silver and stocks 1970-1979

Chart courtesy of TradingView.com • • • Click to enlarge

Chart note: In a recent Project Syndicate essay, widely followed economist Noriel Roubini wrote that Biden administration neo-populist policies could trigger higher inflation, even a stagflationary crisis. As we have posted here previously, gold and silver did very well during the stagflationary 1970s while stocks languished. (Gold rose 1,819.72%, silver 1,698.94%, and stocks 11.49%.)

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Gold firms ahead of this morning’s consumer price report
Alsopp rates the yellow metal ‘a strong buy’ on increasingly positive fundamentals

(USAGOLD – 8/11/2021) – Gold caught something of a bid this morning in advance of today’s Bureau of Labor Statistics consumer price report. It is up $9.50 at $1739.50. Silver is up 13¢ at $23.53. Precious metals have been in a sell-off since last Friday’s payrolls report – data that raised the specter of Fed tapering and higher interest rates. We go along with Peter Boockvar’s straightforward reading as quoted here yesterday. Investors fall into two camps and will act accordingly – those who believe the Fed will stay ahead of the inflation rate and those who don’t. For the latter, he called gold’s flash crash on Monday “a gift.” Judging from the level of activity at USAGOLD over the past few days, we would say that the “don’t” camp is well-represented.

Icon Economics’ Stuart Allsopp drew similar conclusions from the sell-off in an analysis posted at the Seeking Alpha website. “If you’re bullish on gold,” he writes, “and not fully invested last night’s price action should be considered a blessing. The metal fell almost $100 from Friday’s close, hitting as low as $1,677, before rebounding. The move was undoubtedly technical in nature, occurring amid no new fundamental developments. The triggering of stop losses following the break of uptrend support from the 2019 lows likely played a role in the crash, and with these weak longs now purged, gold is a strong buy given the increasingly positive fundamentals.”

Note: It will likely take a good part of the morning for the markets to sort out the consumer price report (due at 6:30 am MT), so we decided to post today’s DMR early. We may post an update at Today’s Top Gold News & Opinion page later in the day if market activity warrants it.

Chart of the Day

grpahic link to YouTube video How reserve currencies over 120 years

Visualization courtesy of James Eagle • • • Click to view 

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Gold attempts to regain its footing in the early going
Boockvar calls the sell-off a ‘gift’ for investors who think Fed will ‘crab walk’ tightening

(USAGOLD – 8/10/2021) – Gold is attempting to regain its footing this morning after yesterday’s anomalous flash crash and partial recovery. It is up $3 at $1733. Silver is down 2¢ at $23.50. A number of gold market analysts yesterday pointed to computer-based selling that generated a cascading effect – not a sudden wave of bearish sentiment among private investors – as the culprit in yesterday’s selloff.

In a market alert yesterday, Gold Newsletter’s Brien Lundin quoted market analyst Peter Boockvar as saying: The trade with gold and silver is pretty straight forward here. If you believe the Fed will get ahead of the curve or at least in line with it with regards to inflation, then sell. If you think the Fed will crab walk their tightening, then this selloff is a gift. I believe in the latter. Just a reminder, when Greenspan was lifting rates off 1% on towards 5.25% in the mid 2000’s, the price of gold doubled. When Yellen started raising rates in December 2015 after 7 years at zero, gold bottomed. I know we are not debating rate hikes now, but rather the timing and pace of tapering but you get the point.”

Note: The Bureau of Labor Statistics reports on consumer prices tomorrow and producer prices on Thursday.

Chart of the Day

Stockbroker-dealer margin accounts

bar chart showing level of margin accounts at stock brokerages

Sources: St. Louis Federal Reserve, Board of Governors of the Federal Reserve System

Chart note: This chart shows the dangerous and astronomical growth in margin debt on account at stock brokerages and dealers. This is one blow-out number that cannot be directly blamed on pandemic distortions. Rapid growth in stock market margin debt is generally associated with overbought conditions and subsequent severe corrections. In percentage terms, the year-over-year growth rate for the first quarter of 2021 (almost 70%) is the largest since 2000.

 

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Gold spends a raucous night in overseas markets
Quick recovery follows flash crash at Asian open

(USAGOLD – 8/9/2021) – Gold spent a raucous night in overseas markets dropping $80 before recovering most of those losses prior to the open in the United States. It is now down $15 on the day at $1749. Silver is down 37¢ at $24.03. Bloomberg reported the drop as a flash crash triggered by a wave of stop-loss selling at the open of trading in Asia. In a Reuters report Friday, Blue Line’s Phillip Streible summarized what is behind gold’s wild ride over the past two trading sessions. “The job numbers are hitting gold because they blew away expectations, so the market is anticipating that the Fed’s taper date could be brought forward with an announcement in September and the actual tapering in early January most likely.” As for what we might anticipate in the future, he added that “[w]e’ve already seen peak GDP, peak corporate earnings and economic data is going to be mixed at best going forward, so gold is still pretty good value.”

Chart of the Day

Gold-Dow Jones Industrial Average
(50-year performance, in percent)

overlay area chart showing the 50 year performance of gold and the DJIA through 8-9-21

Chart courtesy of TradingView.com • • • Click to enlarge

Chart note: As we approach the fiftieth anniversary of the fiat money system’s introduction on August 15, 1971, we thought it would be interesting to post a snapshot of aggregate gold and stock market returns over the period. Many will be surprised to learn that gold has outperformed stocks since 1971 – up 4451% to stocks 3954%. (All data of 8/9/2021) Too, we should keep in mind that many see the stock market as topping and gold still correcting from last year’s record highs.

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Gold drops sharply below the $1800 mark on better than expected payrolls report
Revisiting a bit of wisdom and perspective from Electrum Group’s Thomas Kaplan

(USAGOLD – 8/6/2021) – Gold dropped sharply below the $1800 mark as a better than expected non-farm payrolls report boosted the dollar, tanked the bond market, and touched off a selling wave in the paper gold markets. It is down $26 at $1779.50. Silver is down 49¢ at $24.73. Given this morning’s steep selloff, we thought revisiting a few words of wisdom from Electrum Group’s Thomas Kaplan might offer some perspective. “Let’s put it this way,” he said in an interview at Stansberry Research about a year ago, “gold still remains on Wall Street and in the west probably the most under-owned, least crowded trade in the global financial markets. … The era in which gold was the asset which people loved to hate and hated to love is starting to come to an end. We’re still in the very early innings. It’s still a smart money trade as opposed to a big passive money trade but that’s about to happen.”

“The difference is this,” he continued. “The market is now ready for the next leg of the gold bull market. The first leg was the one that took us up 12 consecutive years in a row (Please see the chart below, i.e., 2001-2012) regardless of whether there were inflation fears, deflation fears, whether there was a glut of oil or a shortage of oil, political stability or political instability, dollar weakness, dollar strength. It didn’t matter. Every year for 12 years gold went up. The next move is going to be a third wave, a long wave that lasts for a decade or fifteen years, maybe more … I think that you really are looking at a complete paradigm shift that will make gold the generational trade.”

Chart of the Day

Gold Annual Returns

(2000 – 2020)

bar chart showing gold's annual percentage increase 2000-2020

Sources: St. Louis Federal Reserve, ICE Benchmark Administration Limited (IBA) • • • Click to enlarge

Chart note: Year to date, gold is down about 7%, but we still have more than four months to go. The seasonal charts tell us that precious metals have a history of rallying during the final one-third of the year.

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Gold marginally higher after Clarida comments
Two bank trading desks point to $1834 as key resistance to further upside

(USAGOLD – 8/5/2021) – Gold was marginally higher this morning in the wake of Fed vice chair Clarida’s semi-hawkish comments yesterday. It is up $2.50 at $1816. Silver is up 11¢ at $25.55. A couple of bank trading desks weighed in this morning on gold’s future prospects in reports posted at FX Street. Credit Suisse sees gold as trapped in a range unless it can close above the $1820 mark. A further push over the $1834 level, it says, will “open the door” for a move back to the $1917 resistance level. Commerzbank “maintains a bullish bias” on gold but also sees $1834 as an important barrier to further upside.

Clarida’s comments yesterday gave the dollar a boost and sabotaged gold’s attempt to gain some upside momentum. As we have reported here consistently over the past several months, though prices have stayed stubbornly in a range, physical demand for the metals globally continues to run strong. As shown below, the World Gold Council reports a 56% percent gain in bar and coin demand over the past year through the second quarter.

Chart of the Day

bar chart showing growth in bar and coin demand from World Gold Council

Chart courtesy of the World Gold Council • • • Click to enlarge

Chart note: Though ETF demand was down for the second quarter of 2021, bar and coin investment demand was up 56%, reflecting strong interest in gold among private investors globally.

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Gold vaults higher ahead of Friday’s jobs report
WGC survey reveals strong interest in gold among professional money managers

(USAGOLD – 8/4/2021) – Gold vaulted higher this morning ahead of Friday’s jobs report as the dollar weakened and yields held steady. There might be an element of technical buying in play given gold’s stubborn rangebound trading above the $1800 level over the past several weeks. One trader quoted in this morning’s Reuters Asia report pointed to “the converging 100- and 200-day moving averages” as suggesting “a breakout is coming.” Gold is up $14 at $1826. Silver is up 32¢ at $25.87.

A recent World Gold Council survey found that 40% of professional money managers who already have exposure to gold plan to increase their holdings over the next three years, and 40% of those surveyed who do not own gold plan to make a commitment sometime over the same period. “Despite mounting fears of inflation,” says WGC, “our data suggest that the expansion of institutional gold allocations should not be attributed to any single factor. In fact, when institutional investors are asked to name the primary role that gold plays in their portfolios, diversification tops inflation-hedging by a comfortable margin. Many investors also look to gold for long-term risk-adjusted return enhancement.” Of those fund managers planning to add gold for the first time, the average target allocation was 4% of the assets under management.

Chart of the Day

Total assets of pension funds worldwide
(trillions of dollars)

bar chart showing pension fund assets globally now over $50 trillion

Chart courtesy of Statista.com

Chart  note: “Gold is an increasingly important asset for European pension funds,” reports Oliver Hall in a recent report posted at the Proactive website, “with new research showing many funds intend to increase their holdings of the yellow metal in the coming months.” There was a time not that long ago when investing in gold would have been unheard of among pension fund managers. Now, 73% say “it offers increasingly attractive diversification benefits.” Pension funds globally, we will add, have considerable assets to hedge – over $50 trillion (2019), according to Statista.

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Gold clings stubbornly to ground gained over the $1800 level
WSJ reports the Fed buying 76.4% of the federal debt issued since the pandemic began

(USAGOLD – 8/3/2021) – Gold clung stubbornly to ground gained in July above the $1800 level in today’s early going, though it is marginally weaker at $1813 – down $1.50 on the day. Silver is up 16¢ at $25.60. The yield on the 10-year Treasury continued to push lower, reinforcing what many see as surprising strength in the bond market. That strength, however, is largely the result of Federal Reserve support. The Wall Street Journal reported yesterday that the Fed had purchased 76.4% of the massive federal debt issued since the pandemic began.

Quadriga Igneo’s Diego Parrilla is among the group of analysts who think that central banks do not have the level of control over the economy as some people think. In fact, he sees them as captive to a linear policy of supporting the current financial bubble, or it will collapse. That support is clearly evident in our Charts of the Day on central bank balance sheets posted immediately below.

“The tapering process will be glacial in terms of speed,” he says in an article posted at Bloomberg. “I think the drivers for gold strength, not only remain but actually have been strengthened.…Central bank money printing isn’t really solving problems, it’s delaying the problem. Gold will benefit purely from being a physical asset that you cannot print.” Parrilla, formerly an analyst with Goldman Sachs, believes gold will reach $3000 to $5000 over the next three to five years. Adding credibility to his prediction, Parilla correctly called gold’s record rise in 2020 to over $2000 back in 2016 when the metal was trading in the $1200 to $1300 range.

Charts of the Day

Federal Reserve Balance Sheet

bar chart showing Federal Reserve balance sheet

European Central Bank Balance Sheet

bar chart showing European Central bank balance sheet

Bank of Japan Balance Sheet

bar chart showing the Bank Of Japan balance sheet

Peoples Bank of China Balance Sheet

bar chart showing Peoples Bank of China balance sheet

Charts courtesy of TradingEconomics.com • • • Click to enlarge

Chart note: For the record, the charts on quantitative easing in various economies from over the past decade through Thursday, July 29, 2021. The most notable feature for Europe, Japan, and the United States is the ongoing pandemic-related surge. China is lagging on a relative basis, which might be one reason why the Chinese yuan has been in an upswing over the past several months.

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No DMR today

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Posted in Today's top gold news and opinion |

No DMR today 8/2/2021


Gold takes a breather after yesterday’s solid gains
Hecht says silver could be setting up for a repeat of 2020’s explosive rally

(USAGOLD – 7/30/2021) – Gold looks to be taking a breather after yesterday’s solid gains. It is down $2 at $1827.50. Silver is down 4¢ at $25.55. The yellow metal is up 4% on the month and 1.75% on the week. Silver is down 1.3% for the month of July, but up 1.3% on the week. Silver’s snapback performance yesterday after its unexpected steep decline Wednesday is a reminder of the metal’s volatility. Commodity analyst Andrew Hecht, whose experience in the silver market stretches back to the 1970s as a trader with Salomon Brothers, is well aware of the metal’s long history of radical ups and downs.

“Silver volatility,” he writes in a recent Seeking Alpha article, “can be explosive. Meanwhile, the price action can also be coma-like, lulling market participants into a false sense of security for long periods. Silver’s history is full of false technical breakouts and breakdowns…Silver is a unique metal as it is part industrial, part investment asset. It experiences long periods of coma-like price action, but when it moves, as the price did not 2020, few commodities compare to the precious metal when it comes to percentage moves.” Hecht reminds readers of silver’s performance in 2020 when “bearish price action gave way to an explosive rally.” (Silver went from the $12 level in March to $29 by early August.) He goes on to say that “[t]he recent price dynamics could be setting up for a repeat performance given the rising level of inflation across all markets.”

Chart of the Day

Silver Volatility Index

line chart showing silver volatility 2011-2021

Sources: St. Louis Federal Reserve [FRED], Chicago Board Options Exchange

Chart note: Please see today’s Daily Market Report for long-time silver trader Andrew Hecht’s comments on the metal’s volatility.

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Precious metals show signs of emerging from their summertime impasse
Napier says he is ‘very bullish on gold’ as we enter a new era of financial repression

(USAGOLD – 7/29/2021) –  Precious metals showed signs of emerging from their summertime impasse this morning. Gold is up $18.50 at $1827. Silver moved aggressively higher gaining 60¢ at $25.62. The upswing began overnight in Asia and gained pace during European trading hours as Investors factored in the Fed’s decision to stay the course on monetary policy and leave tapering at the discussion level. The dollar slid and bond yields firmed. Russell Napier, the financial strategist who presciently warned of inflation’s return about a year ago, believes that we are entering an era of “financial repression” when policymakers will keep interest rates below the inflation rate to relieve the massive global debt burden.

“I’m very bullish on gold,” he says in an interview published at TheMarketNZZ. “The problem for gold in the last year was that interest rates have gone up, because people still believe there will be a link between inflation and interest rates. If people believe there will be inflation at 4%, they will say interest rates will ultimately be at 5 or 6%, hence they don’t want to own gold. It’s only when they begin to realize that that link is broken, that the gold price will lift off.”

Chart of the Day

Gold vs Dow Jones Industrial Average
(1970-1979, in percent)

overlay chart showing the performance of gold and stocks during the 1970s in percent
Chart courtesy of MacroTrends.net • • • Click to enlarge

Chart note: “How did [the late 1960s] end?” asks ZeroHedge’s Tyler Durden in a recent post, “Unhappily, as the value bull of 1968 (comparable to the first half of 2021) was followed by the volatile bear of 1969… which then was followed by the 1970s – the decade when the US almost succumbed to hyperinflation and only 20% interest rates courtesy of Paul Volcker prevented the premature collapse of the American empire.” If the 1970s were the inflationary main event, the late 1960s were the warm-up act – an indication of, and laying the groundwork for, things to come. We sometimes overlook the fact that stocks peaked right about then. Nearly twenty years of sideways to down action followed. As we pointed out in the past, stocks started and ended the 1970s at 1000 while inflation, as Durden points out, raged and gold rose almost 1800%.

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