Bloomberg/Netty Idayu Ismail and Filipe Pacheco/8-25-2019
“If the trade war momentarily played second fiddle to Jerome Powell’s Jackson Hole address, it has come crashing back to the forefront of concerns as most markets prepare to re-open for business Monday. Renewed tension between the U.S. and China has strategists betting investors will continue to seek the safety of government bonds, gold and the Japanese yen.”
USAGOLD note: We had two important meetings of major players this weekend – the central bankers’ meeting in Jackson Hole and the G-7 meeting in Biarritz – and neither seems to have worked out that well. In fact, little was done that could be construed as anything close to market damage control. To the contrary, an argument could be made that much additional damage has been inflicted and that both the central bankers and political leaders have pretty much left the markets to their own devices. We could get an inkling what Monday holds in store when Asia opens in a few hours. . . . .
“Gold prices in Vietnam jumped 2 percent Saturday after U.S. President Donald Trump slapped another 5 percent tariff on Chinese goods.”
USAGOLD note: Odds are we are going to see more reports like this one out of Viet Nam. The trade war has an indirect consequence for emerging economies of which Viet Nam is just one. These currencies tend to weaken as the dollar strengthens and dollar strength has become collateral damage in the trade war between the U.S. and China. Gold demand, in turn, strengthens in these countries as the populace heads for shelter against currency depreciation and possible financial system risks.
Financial Times/Brendan Greeley/8-22-2019
“’I would say this is the probably the most interesting environment for central bankers since the crisis,’ says Raghuram Rajan, a former governor of the Reserve Bank of India, now at the Chicago Booth School of Business.”
USAGOLD note: Global concerns, a short toolset and a divided FOMC up the ante at this year’s Jackson Hole Federal Reserve conclave. Larry Summers, former Secretary of the Treasury, says policy-makers are confronted with “black hole monetary economics.”
“Secret British government documents have warned of serious disruptions across the country in the event that the U.K. leaves the European Union without a trade deal on Oct. 31, according to a report. The Sunday Times newspaper published what it said was what the British government expects in the case of a sudden, ‘no-deal’ Brexit.”
USAGOLD note: Sounds like Y2K all over again. . . . .
“Laboratory tests show that the ultra-thin gold is 10 times more efficient as a catalytic substrate than gold nanoparticles, which are three-dimensional materials with the majority of their atoms residing in the bulk rather than at the surface. The scientists believe the new material could also form the basis for artificial enzymes that could be applied in rapid, point-of-care medical diagnostic tests and water purification systems. They report the 2D gold in a paper in Advanced Science.“
USAGOLD note: At the risk of sounding woefully behind the times, I have to ask: Can something two dimensional exist in physical reality?
Reuters/Peter Hobson and Yawen Chen/8-22-2019
“Beijing has previously taken steps to curb capital outflows when its currency weakened. These steps included some restrictions on gold imports in 2016, sources have said. No clear data for capital outflows exist but a measure from China’s balance of payments called errors and omissions points to $88 billion leaving in the first three months of this year, the most on record.”
USAGOLD note: China appears to be dancing around two disparate objectives: reducing capital outflows and building gold stockpiles within its borders to underpin its de-dollarization effort.
Bloomberg/Ruth Carson and Adam Haigh
“The debate on how low bond yields can go is hotting up as the relentless rally in global fixed-income markets shows no signs of slowing amid increased concern about an economic downturn. That’s sparked a conundrum for macro funds hunting for yield and returns. Enter gold, which has risen 18% this year — well ahead of fellow havens such as the yen, Swiss franc and Treasuries.”
USAGOLD note: Gold – The once and future king of the safe havens. . . . . .
Repost from 8-15-2019
Image courtesy of VisualCapitalist
“The recent debt deal struck between the White House and Congress virtually guarantees trillion-dollar deficits well into the future as well as continued acceleration of the government’s collective IOU, which is now at $22.3 trillion.”
USAGOLD note: Ponder for a moment the implications of trillion dollar deficits in the context of the trade war and China’s absence as a buyer of U.S. Treasuries. Who wil finance the public debts of the future? And how much buyer interest will there be as yields continue to descend toward zero? “Leading central banks,” says Financial Times, “now own a fifth of their governments’ total debt” – a circumstance that leaves one final question: Can governments survive without quantitative easing?
Repost from 8-15-2019
Financial Times/James Politi/8-21-2019
“Budget agency chief says debt is on ‘unsustainable course’ and rising faster than expected.”
USAGOLD note: And keep in mind that this number occurs in the absence of a recession. . . . .The national debt remains the elephant in the room.
“In volume terms, the country imports 800-900 tonnes of gold annually. To mitigate the negative impact of gold imports on trade deficit and CAD, the government increased the import duty on gold to 12.5 per cent from 10 per cent in this year’s Budget.”
USAGOLD note: Strong gold demand continues in India – all related to the weakening rupee. . .Apparently, the 12.5% duty has had only a marginal effect on reducing imports.
Repost from 8-15-2019
“Based on its latest regulatory filings, Sandler increased its stake in the SPDR Gold Trust by nearly 180% to $38 million by the end of the second quarter, making it the biggest position the fund holds. The ramped-up wager could be a defensive play against more market turbulence ahead.”
USAGOLD note: Sandler joins a long list of top funds taking a strong position in the yellow metal – and most are in it for defensive purposes. There are many ways to generate investment gains, but few to protect those gains through times of economic uncertainty and financial risk.
Financial Times/Sebastian Payne, Guy Chazan, Mehreen Kahn and Arthur Beesley/8-20-2019
“The stand-off fuelled rising expectations that the UK will leave the EU on October 31 without an exit deal, souring relations between the two sides and threatening severe economic disruption.”
USAGOLD note: Demand for gold has been running strong for the past several months on both sides of the English Channel. This could touch off another wave of buying among an increasingly nervous citizenry.
Reuters/Peter Hobson and Yawen Chen/8-14-2019
“China has severely restricted imports of gold since May, bullion industry sources with direct knowledge of the matter told Reuters, in a move that could be aimed at curbing outflows of dollars and bolstering its yuan currency as economic growth slows.”
USAGOLD note: Reuters goes on to say that China has cut incoming shipments by 300 to 500 tonnes. This could lead to higher yuan-based prices within China for the gold already on hand. How that will affect the international dollar-based price of gold will be an interesting situation to monitor. There will be plenty of opinion generated in the gold space on this news. This article is a lengthy treatment of the subject and highly recommended.
Repost from 8-14-2019
World Gold Council/Max Chen/8-16-2019
“Gold ETFs have been a shining through a gloomy market as investors poured billions of dollars into this asset category in face of rising uncertainty. According to the World Gold Council, investors funneled $2.6 billion into gold bullion-backed ETFs in July, raising their collective holdings to 2,600 tons, or the highest level since March 2013, the Wall Street Journal reports.”
USAGOLD note: Most of that flow came from funds and institutions . . . There is considerable capital afloat looking for a safe place to dock which should auger well for the precious metals as we move into the Fall investment season. That 2600 tonnes, by the way, is the fourth largest stockpile on the planet behind the United States, Germany and the International Monetary Fund.
“‘Some clients are afraid of PLA intervention in Hong Kong, or of another closure of the airport, which will make it difficult to move their gold out of the city, as gold is shipped on commercial flights,’ said J. Rotbart & Co.”
USAGOLD note: The safe haven seeks safe haven.
“President Donald Trump raised his demands Monday on the Federal Reserve, calling for the central bank to cut interest rates by a full percentage point and to restart its crisis-era money-printing program.”
USAGOLD note: There is no question where the president stands. The obvious question though is “Where does the Fed stand in all of this?” We may not see it all at once, but we might see it in pieces – including a new round of quantitative easing.
“‘There is international arbitrage going on in the bond market that is helping drive long-term Treasury yields lower,’ Greenspan said in a phone interview. ‘There is no barrier for U.S. Treasury yields going below zero. Zero has no meaning, beside being a certain level.’”
USAGOLD note: Below zero has a great deal of meaning to savers who saved all their lives for retirement and now find themselves essentially deprived of any income for their efforts. I am sure Alan Greenspan knows and understands the problem since he is probably experiencing it just like everyone else. Just as accumulating gold works for hedge funds in a zero yield environment, so it works for ordinary individuals. With gold you get both the prospect for upside potential and a safe haven against the very forces creating below-zero yields in the first place.
Have you visited our Online Order Desk?
We invite you to do some window shopping and sign up for membership
to our Members Only Premium Bulletin Board.
“Exchange-traded funds (ETFs) backed by physical gold have outperformed others tracking equities or fixed-income indices, bolstered by a surge in inflow from investors looking to profit from a recent rally in the safe-haven asset to a six-year high through such passive funds.”
USAGOLD note: Like their American and European counterparts, professional money managers in Asia are hedging their stock and bond portfolios with gold particularly in light of what is happening in Hong Kong. The threat of military intervention hangs in the sultry south China air. . . . . .
Re-post from 8-12-2019
USAGOLD note: Most of you are probably already aware of today’s events on Wall Street, but thought we would post an update nevertheless since we do not carry live pricing on the stock market here. . . . . .Gold and silver, as you can see, are surging. . . . .
Financial Times/James Politi, Alistair Gray and Richard Henderson/8-13-2019
“The Trump administration said it would delay imposing a 10 per cent tariff on a series of consumer goods imported from China — including laptops and cell phones — until December, in a bid to ease fears about the trade war’s impact on markets and the economy.”
USAGOLD note: Volatility. This news sent the gold price briefly back below the $1500 level to $1486 where it found quick, immediate support. It then pushed back over the $1500 level to $1502 where it is trading as this article is posted. The bad news is that gold has rediscovered volatility. The good news is that someone is buying the dips.
“The Treasury Department said federal spending in July was $371 billion, up 23% from the same month in 2018, while receipts were $251 billion, up 12% compared with July 2018. The fiscal-year-to-date deficit was $867 billion, compared with $684 billion in the comparable year-earlier period.”
USAGOLD note: Few will be surprised by these numbers. . .Keep in mind that the federal government is racking up these numbers at a time when the economy is doing well. What happens when it isn’t? What happens if the long-forecasted recession actually becomes a reality and tax revenues plummet?
Bloomberg/Sydney Macki and Aline Oyamada/8-12-2019
“In just hours, Argentina went from weathering-the-storm mode to full-on shipwreck as investors dumped government debt on fears of yet another potential default for the crisis-prone South American nation.”
USAGOLD note: Another debt/currency crisis for Argentina spawned by yet another political crisis. We have to wonder if the South American country could be a canary in the coal mine with respect to other emerging countries feeling the effects of stubborn U.S. dollar strength.
“Speculation has been building among strategists that U.S. may intervene to forcibly weaken the dollar. The risk of U.S. action rose further in the eyes of some analysts this week after the yuan plunged to a decade-low and the Trump administration formally named China a currency manipulator.”
USAGOLD note: I think that the president probably meant what he said on Friday, but that doesn’t mean he wouldn’t change his mind at the drop of a yuan.
Bloomberg/Jasmine Ng and Tian Tong Lee/8-8-2019
“Commodity purchases by China rebounded strongly in July. Imports of soy to coal and crude oil gained, signaling demand in the world’s biggest buyer remains solid even as a trade spat with the U.S. escalates.”
USAGOLD note: Interesting look at the effect of the trade on commodity demand in China. . .Copper imports, for example, rose to record levels. Reports like this raise the question of U.S. leverage present in talks with China.
“There’s a powerful constant amid the to-and-fro of the U.S.-China trade war as currency policy gets dragged into the standoff between the world’s two top economies: Beijing wants more gold in its reserves.”
USAGOLD note: The addition for July is roughly 10 tonnes and below previous announcements. The PBoC has added almost 84 tonnes thus far this year. We would characterize China’s announcement as acknowledgement of a diversification that occurred long ago and add, like many in the gold arena, we believe China’s actual reserves to be much higher than what has been reported.
“However, a 2018 study of Norway has punctured these theories by showing that IQs are dropping not just across societies but within families. In other words, the issue is not that educated Norwegians are increasingly outnumbered by lower-IQ immigrants or the children of less-educated citizens. Even children born to high-IQ parents are slipping down the IQ ladder.”
USAGOLD note: Don’t worry. Be happy.
Re-post from 5-24-2019
“’There’s been a strong incentive to change, not just for Russia but for its trading partners too,’ said Dmitry Dolgin, an economist at ING Bank in Moscow. ‘The European Union is also now facing trade pressure from the U.S.’ pushing them to try to reduce dependence on the dollar,’ he said.”
USAGOLD note: We all knew what Putin was up to with respect to the dollar. How many, though, know that “[t]he common currency has almost overtaken the dollar in trade with the European Union and China and trade in rubles with India surged”? The charts at the link tell the story of a quiet evolution in currency markets that is beginning to pick up momentum.
Re-post from 8-5-2019
“Germany’s yield curve is now at its flattest since the financial crisis — and yields across the world are slumping to fresh lows — in a cacophony of signs that investors are growing increasingly pessimistic about the outlook for the world economy.”
USAGOLD note: Of the two leading safe havens, one appears to be running out of gas creating a flow of capital to the other.
USAGOLD note: I came across this study in researching another subject. It is a March 2019 Pew Research Center poll that quantifies the underlying mood of the country. Polls like this explain why gold and silver remain very much on the minds of many Americans. . .Published with permission.