Author Archives: Jake Farlow

The Case for the Gold Standard:
Steve Forbes Suggests We Take A Closer Look at U.S. Monetary Policy Options

(USAGOLD – 4/26/2024) Gold prices are higher in early US trading. Gold showed very little reaction to another U.S. inflation report that came in a bit warmer than market expectations. Gold is trading at $2343.10, up $10.64. Silver is trading at $27.55, up 12 cents. Steve Forbes argues that the United States should consider returning to the gold standard monetary system, where the value of the dollar is backed by and can be redeemed for gold. He claims that going off the gold standard in 1971 allowed the government to print excessive amounts of money, leading to inflation and devaluation of the dollar. Forbes suggests that being on the gold standard would constrain the money supply, prevent inflation, and make the dollar a more stable and trusted currency globally. It portrays the gold standard as providing fiscal discipline and protecting against irresponsible government spending and debt accumulation. However, he does not address the potential downsides, challenges, and pain of reinstating a gold standard system.

Gold’s Resilience Tested:
Technical Indicators Suggest Uptrend May Hold Despite Recent Losses

(USAGOLD – 4/25/2024) Gold prices are slightly positive in early US trading. The gold market has struggled to gain upward momentum despite a lackluster start to the year for the U.S. economy. Gold is trading at $2320.25, up $4.08. Silver is trading at $27.27, up 11 cents. Gold experienced its worst daily decline in nearly two years on April 22, 2024, with a drop of -2.7%, and continued to fall in the following session, accumulating a loss of -5.8% from its all-time high on April 12 to an intraday low of US$2,291. Despite this significant drop, several factors suggest the medium-term uptrend that began in mid-February 2024 may still be intact. The Gold/Copper ratio, which measures gold’s performance relative to copper and indicates economic growth trends, remains supported within a rising trend channel, suggesting continued demand for gold as a hedge against stagflation risk. Additionally, Gold’s price is still above its 50-day moving average, which aligns with a key medium-term support zone. The daily RSI momentum indicator also remains above a critical support level, indicating the uptrend’s resilience. If Gold breaks above US$2,420, it could target US$2,540, while a fall below US$2,210 could lead to a test of the long-term pivotal support zone at US$2,075/2,035, which coincides with the 200-day moving average.

From Rate Cuts to Default Risks:
Navigating the Troubled Waters of U.S. Bonds

(USAGOLD – 4/24/2024) Gold prices are flat in early US trading. Gold is trading at $2322.54, up 52 cents. Silver is trading at $27.25, down 6 cents. The article “Inflation Reacceleration, Bond Deterioration” discusses the troubling dynamics in the U.S. bond market and the broader economic implications of rising interest rates and persistent inflation. It highlights the Federal Reserve’s (Fed) interventions, which included discussions of rate cuts despite inflation not reaching the target of 2.0%. These interventions led to a temporary decrease in yields, particularly for Treasuries, which was intended to manage the growing federal debt interest. However, the article criticizes these measures as short-term fixes to a deeper problem, noting that the interest on the debt is projected to surge dramatically, potentially reaching $1.6 trillion annually in the near future. The piece also points out the decreasing foreign investment in U.S. Treasuries, particularly from China and Russia, and suggests that the U.S. may face a default scenario, either directly or through inflationary devaluation of the currency. With a grim outlook on the U.S. financial situation, indicating a shift by some investors towards gold as a safer asset.

Precious Metals Take a Hit:
Gold Sees Largest Daily Loss Since 2022

(USAGOLD – 4/23/2024) Gold prices are sharply lower again and hitting three week lows early this morning in US trading. Precious metals futures markets are experiencing pressure from profit-taking and weak long liquidation. Gold is trading at $2314.38, down $12.92. Silver is trading at $27.03, down 17 cents. Gold prices experienced a significant drop, marking their largest daily decline in two years with a 2.5% fall to approximately $2,350 per troy ounce. Despite this setback, gold remains a strong performer in 2024, still up about 14% for the year, significantly outpacing the S&P 500’s 5% return. The decline in gold prices, which are now nearly 4% below their recent peak of over $2,400, coincides with a broader selloff in precious metals, including a 5% drop in silver prices. Factors contributing to the selloff include profit-taking by investors after a historic rally and a shift towards slightly riskier assets amid a decrease in geopolitical tensions in the Middle East. This shift reflects a reduced demand for gold, traditionally viewed as a safe haven during times of turmoil and inflation.

Utah’s Incremental Approach to Sound Money:
A Step-by-Step Strategy

(USAGOLD – 4/22/2024) Gold prices are sharply lower this morning in US trading. The perceived reduction in Middle East tensions has negatively impacted the demand for safe-haven metals. Gold is trading at $2336.16, down $55.77. Silver is trading at $27.34, down $1.35. The article “Utah’s Step-By-Step Strategy in Support of Sound Money” by Mike Maharrey, discusses Utah’s incremental approach to promoting gold and silver as legal tender and fostering a sound money system. Since 2011, Utah has passed a series of laws, starting with the Utah Legal Tender Act, which recognized gold and silver coins as legal tender and exempted them from certain taxes. The state has seen the development of a robust gold and silver market, the establishment of the United Precious Metal Association (UPMA) offering bank-like services using precious metals, and the creation of the Goldback, a local voluntary medium of exchange. In 2024, Utah further supported sound money by authorizing the state to hold precious metal reserves and excluding central bank digital currencies from the state’s definition of legal tender. Maharrey emphasizes the effectiveness of a step-by-step strategy, as advised by the Founders, in achieving monetary reform and establishing a sound money system.

Economy On Life Support:
Uptick In Bankruptcies, Car Repossessions, and Credit-Card Delinquencies

(USAGOLD – 4/19/2024) Gold prices are slightly higher this morning but down from last night’s spike as Israel attacked Iran. Military and geopolitical analysts are saying Israel’s military action overnight was limited and meant to show Iran that Israel has the capability to do a major, devastating strike on Iran if it wants to do so. Gold is trading at $2381.74, up $2.70. Silver is trading at $28.45, up 20 cents. David Brady, a seasoned markets analyst and money manager, has issued a stark warning about the potential for a significant downturn in the S&P 500. On the “Thoughtful Money” podcast, he predicted that the index could drop by 30% from its current level of over 5,000 points to 3,500 points, marking an 18-month low. Brady attributes this forecast to the overvaluation of stocks and a higher risk of downside than potential upside. Despite anticipating a temporary rebound influenced by Federal Reserve interventions before the presidential election, Brady expects a subsequent severe crash, potentially reaching the lowest levels in 14 years. He cites multiple economic pressures, including rising inflation and increasing financial instabilities, as factors contributing to this grim outlook.”Still, it’s worth underscoring that the US economy and stocks have largely defied naysayers. Stocks hit record highs earlier this year, while inflation has cooled significantly, unemployment remains near historic lows, and growth has been robust.”

Gold Defies Expectations with Rally:
Silver Struggles to Keep Pace

(USAGOLD – 4/18/2024) Gold prices are higher this morning. Safe-haven purchases of both precious metals persist as the market remains cautious towards the end of the week due to geopolitical worries. Gold is trading at $2377.82, up $16.20. Silver is trading at $28.44, up 22 cents. Gold prices have been hitting record highs, defying the usual relationship with interest rate expectations. Typically, gold rallies with the anticipation of rate cuts and falls with expectations of rate hikes. However, despite a reduction in the expected number of rate cuts for 2024, gold has continued to rally. This unusual behavior may be due to large investors taking long positions in gold, possibly in anticipation of unforecasted large rate cuts or increased geopolitical instability. Silver, on the other hand, has not seen a similar rally and remains far from its all-time high. This discrepancy might suggest that the gold rally could be overextended or that silver might soon catch up. The gold-to-silver ratio indicates that silver is currently much cheaper relative to gold than in the past, suggesting potential for silver to gain. However, silver’s extensive industrial use and the impact of slow growth in China and tighter central bank policies may be restraining its price.

Gold Investment in China:
TA March 2024 Overview of Premiums, Demand, and Central Bank Activity

(USAGOLD – 4/17/2024) Gold prices are higher this morning. Federal Reserve Chairman Jerome Powell in remarks on Tuesday suggested interest rates may have to remain higher for longer, to get inflation back down to a level where the Fed feels more comfortable. Gold is trading at $2392.96, up $10.06. Silver is trading at $28.69, up 58 cents. In March 2024, Ray Jia of the World Gold Council reports China’s gold market witnessed several significant developments. The Shanghai Gold Benchmark PM (SHAUPM) in RMB experienced a 10% increase, and the LBMA Gold AM Price in USD rose by 8%, with gold prices reaching record highs due to factors like strong global investment demand and geopolitical risks. Despite a slight dip in wholesale demand, the first quarter saw the highest Q1 wholesale gold demand since 2019, totaling 522t. The People’s Bank of China (PBoC) continued its gold purchasing streak for the 17th consecutive month, adding 5t to its reserves, which now stand at 2,262t. Additionally, Chinese gold ETFs saw significant inflows, pushing total assets under management to a new high of RMB35bn (US$5bn). There was a retreat in China’s gold price premium in March, reflecting weakened local demand amidst rising gold prices, although the first quarter overall recorded the highest Q1 premium ever due to strong physical demand in the initial months.

Decade of Stagnation:
Top Fund Manager Predicts ‘Dead Ball’ Era for Stocks Amid Inflation Fears

(USAGOLD – 4/16/2024) Gold prices slightly lower this morning after seeing some routine profit-taking pressure. The overall market continues to be somewhat uneasy due to increased geopolitical tensions. Gold is trading at $2374.39, down $8.75. Silver is trading at $28.28, down 59 cents. A top fund manager, Bill Smead, has warned that the stock market may be entering a “dead ball” era, potentially lasting a decade or more, with minimal returns and possible significant losses akin to those experienced during the dot-com bust and the 2008 financial crisis. Smead attributes this bleak outlook to the possibility of prolonged high inflation and interest rates, drawing parallels to the economic conditions of the 1970s. Despite the S&P 500’s 6.6% rally in 2024, Smead cautions against investing in overvalued sectors like AI and mega-cap stocks, which he believes are in a speculative bubble. Instead, he suggests that opportunities may lie in sectors that typically benefit from inflation, such as oil and gas, real estate, and gold. While Smead’s view is bearish, the consensus on Wall Street remains optimistic, with many investors bullish on stocks for the next six months.

The Cantillon Effect in Action:
Federal Reserve Policies and the Widening Wealth Gap

(USAGOLD – 4/15/2024) Gold prices are higher this morning after geopolitical tensions surged in the Middle East over the weekend. Gold is trading at $2350.29, up $5.92. Silver is trading at $28.61, up 73 cents. The recent article “The Rich get Richer. Thanks to the Fed.” from Peter St. Onge, discusses the significant increase in wealth among America’s richest due to Federal Reserve policies, particularly during the pandemic. The wealth of the top 1% in the U.S. reached an all-time high of $45 trillion, a 50% increase from 2020, largely fueled by the Fed’s massive money printing efforts amounting to $6 trillion in two years. This influx of new money primarily benefited financial markets and the wealthy, as the Fed’s method of increasing the money supply involves buying financial assets and subsidizing lending, a process known as Quantitative Easing. The article explains the Cantillon Effect, where new money benefits the rich first, with inflationary effects trickling down to impact the rest of the population, particularly harming those on fixed incomes like social security and pensioners. He concludes by stating that the Fed’s actions inherently drive inequality, serving the interests of the wealthy at the expense of the broader population.