Author Archives: News
“Call it Helicopter Credit. … ‘The Fed has effectively shifted from lender of last resort for banks to a commercial banker of last resort for the broader economy,’ said JPMorgan Chase & Co. chief U.S. economist Michael Feroli.”
USAGOLD note: For most Americans, the Fed’s extraordinary policies seem just what the doctor ordered – some much-needed medicine for a dangerously ill economy. Not much though has been advanced on the longer term consequences of this massive economic bailout. When we consider the Fed as ‘commercial bank of last resort,’ we must keep in mind that the central bank still remains the ‘lender of last resort’ as well.
“The move would be aimed at reducing the risk of disruption if metal cannot reach London, the world’s most important physical gold trading hub, where trades are underpinned by metal held in high-security vaults.”
USAGOLD note: It was only a few days ago that we were told there is plenty of gold in London just in the wrong bar size. This article tells us the physical availability problem goes beyond bar size to one of getting gold in and out of the world’s central physical gold hub because of coronavirus-related problems.
Cartoon courtesy of MichaelPRamirez.com
“Investors are snapping up gold bars and coins, seeking the security offered by the precious metal as the coronavirus pandemic trashes economies and forces central banks to print trillions of dollars in new money. But with major gold refineries across Europe shut because of government-ordered lockdowns, online shops out of stock and many of the passenger planes that move bullion grounded, physical gold is becoming harder to track down.”
Important USGOLD client note: Due to our long-standing relationships with key market-makers and our own inventory planning, we are still working from a strong inventory position and are able to deliver most of the standard gold and silver bullion items – American Eagles, Canadian Maple Leafs and Krugerrands. Even our sources though are strained under the circumstances and our inventory, of course, is finite. We do not know, as a result, how long the supply will hold up. All deliveries are running on schedule with occasional minor delays due to the order and shipping volume, and we think you will find our pricing as advantageous when compared to most sources. The one thing we have no control over is rising premiums which, unfortunately, we have no choice but to pass along. Please contact us to discuss prices and availability. 1-800-869-5115 x 100
“’What we are seeing now is fast and violent,’ unlike the gradual sell-off in the 2007 and 2008 crisis, said Phil Brendel, a senior distressed credit analyst at Bloomberg Intelligence. If the virus isn’t suppressed, even more distress is possible, according to Brendel. ‘The worst is yet to come,’ he said.”
USAGOLD note: You get the sense that something is brewing under the surface that when it bubbles up it is going be another black swan (or even flock of black swans) on top of the black swan that’s already landed on the financial pond. Yesterday, Financial Times reported the Dutch bank ABN Amro taking a $200 million loss the equivalent of 10% of its annual profits from one trader going bust and leaving the bank holding the bag.
“In short, the shock from the COVID-19 spread will blow a fiscal hole through Washington, D.C., that could take years if not decades to patch.”
USAGOLD note: Though the virus might fade, the mega-deficits – we take no pleasure in saying – are probably here to stay. In this article, Cox theorizes that we might see a federal deficit yet this year in excess of $1.5 trillion. That would push the aggregate national debt over $25 trillion. The U.S. government has added $17 trillion to the national debt since the turn of the century.
Repost from 3-24-2020
“Three of the world’s largest gold refineries said on Monday they had suspended production in Switzerland for at least a week after local authorities ordered the closure of non-essential industry to curtail the spread of the coronavirus.”
USAGOLD note 1: We first warned that the coronavirus could translate to a supply problem in the gold market in last month’s newsletter. “At the moment,” we wrote, “the supply lines in the precious metals business are still functioning smoothly. There could come a time, though, when they are not – a possibility, by the way, that has received scant attention in the context of the coronavirus contagion”.
USAGOLD note 2: The lead article in that edition of our monthly newsletter, by the way, titled “Hedging the decline and fall of a currency – The baseline case for gold hasn’t changed much in 1700 years” carries special relevance in light of recent events. It reviews Jack Whyte’s latest novel “The Burning Stone” – a prequel to his series on the Arthurian legend. Whyte skillfully tells the story of Rome’s silver denarius debasement and how one Roman patrician guarded, and in fact enhanced, his wealth through ownership of gold coins.
Repost from 3-24-2020
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“Gold suppliers are in talks to use chartered or cargo flights to transport the precious metal, which usually moves around the world in commercial planes and has been left stranded as global travel grinds to a halt.”
USAGOLD note: Brilliant idea! “Let’s call Brinks and see if they can move some metal for us …”
“ABN AMRO leaves gold investors empty-handed, as the bank closes all weight accounts for gold, silver and platinum. Approximately 2,000 customers who have precious metals in their weight account at the bank have to sell them before April 1. If they fail to do so, ABN AMRO will sell their positions at the current market price. The bank cannot guarantee that they will sell the precious metal at a favorable price.”
USAGOLD note: The ABN Amro situation illustrates with a high degree of clarity why it is important to own metal in hand rather than in some paperized version of gold ownership subject to the whim of the institution managing the account. In this particular case, we cannot help but note that ABN Amro’s closure of paper gold fund comes at a time when bullion is in short supply and owners of the fund are likely to have a stronger than average desire to take delivery of the position. Investors of the fund were forced to sell their positions at a time when it is very difficult to acquire a replacement in the open market. A bird in hand, as the old saying goes, is worth two in the bush.
“The world’s supply chains are facing a root-to-branch shutdown unlike any seen in modern peacetime as efforts to contain the coronavirus outbreak hit everything from copper mines in Peru to ball bearing makers in Germany’s industrial heartland.”
USAGOLD note: In sorting out the reams of conjecture on the economic effects of the coronavirus, the one analysis that makes enduring sense is that no one knows how all of this going to shake out. Peru, by the way, is the world’s second-largest producer of silver and the sixth-largest producer of gold.
Repost from 3-23-2020
“About 1 million to 4 million people may have filed for unemployment benefits last week, the largest number ever in such a short time. The filings figure, which will be released Thursday before U.S. markets open, will be the first indication of how hard the labor force is being hit by the abrupt shutdown of a large part of the U.S. economy by the coronavirus pandemic.”
USAGOLD note: That’s up from 281,000 last week ……
“The strains have rippled through gold trading, with liquidity at some points running thin in a vast market that’s dominated by the world’s biggest banks and watched by millions of mom-and-pop investors.”
USAGOLD note: This article includes a revealing chart showing the futures’ premium level over spot at its highest level since 1980. To address the physical squeeze, Comex told Bloomberg it would launch a new gold futures contract denominated in 400-ounce bars against which investors could take delivery. The question, as we raised yesterday at this page, is whether or not customers holding contracts would be “willing to exchange for the new contract.” That, it appears at first glance, would mean holders rolling their positions forward and not taking delivery on the April contract. The chart below offers a sense of the outstanding long position at the COMEX – not all will want delivery.
Chart courtesy of the World Gold Council
“Gold’s lacklustre performance this week appeared to diminish the metal’s ‘safe haven’ status, as it declined for the second week in a row amid a global stock market sell-off due to coronavirus. But investors are still flocking to the precious metal in the hope of a rebound and protection against an even worse fall in other assets, from stocks to currencies and bonds.”
USAGOLD note: Sanderson reports of a development we are experiencing first-hand at USAGOLD. The fact of the matter is that the very strong physical demand for gold and silver argues for its ‘safe-haven status.’
Repost from 3-22-2020
“Investors seeking safety rushed into Treasury futures on March 12, and hedge funds got hammered. A difficulty in completing trades ensued, and was a contributing factor to the Federal Reserve’s decision to pledge $5 trillion to keep markets running smoothly.”
USAGOLD note: That figure – $5 trillion – portends problems much deeper in the financial system than what surfaces as a temporary overnight repo problem. Over the past few days, a considerable amount of conjecture has surfaced that, as reported above, several hedge funds might be in trouble.
Related, please see: Confirmed – Fed balied out hedge funds facing basis trade disaster/ZeroHedge/3-21-2020 (Multiple LTCM’s?)
Repost from 3-22-2020
“The London Bullion Market Association (LBMA) and several major banks that trade gold have asked U.S. exchange operator CME Group Inc to allow gold bars in London to be used to settle its contracts to ease disruption to trading, sources said.”
USAGOLD note: COMEX contracts are now denominated in 100 troy ounce increments. As it stands, if delivery is required it will be made in the form of a 100-ounce bar. The LBMA and gold bullion banks are requesting that COMEX allow substitute settlement in 400-ounce bars that the banks have on deposit in London. “The rule change would obviate the need to reshape and transport metal,” reports Reuters, “meaning it could remain in vaults in London while ownership is transferred. If this happened spot and futures prices could converge and markets trade normally, sources said.” Though Reuters’ sources appear quite convinced that the LBMA’s solution will address the problem, the real test, in our view, will be whether or not exchange customers with contracts on the COMEX (or COMEX itself) can or will accept the 400-ounce bars in settlement – particularly if they are standing for delivery. If not, what happens?
“One of the few places in Zurich to buy physical gold, Degussa’s Zurich showroom is emblematic of the hoarding mentality prevalent with Swiss shoppers. While retailers were picked clean of staples like toilet paper, flour, milk, and eggs, Degussa was overrun by retail or affluent clients looking to buy an emergency ration of gold.”
USAGOLD note: The financially astute Swiss people have a centuries-old affinity for precious metals so it is not hugely surprising that gold would be on the same shopping list with other of life’s necessities.
Repost from 3-20-2020
“Mattresses full of money, getting paid to take out a mortgage, surging demand for safe-deposit boxes — these are some of the ideas people have about what happens when interest rates turn negative. Just a few months ago, such scenes — at least in the U.S. — seemed unthinkable. But with Treasury yields tumbling and the Federal Reserve abruptly slashing rates to near zero on Sunday, Americans may soon get a taste of them firsthand.”
USAGOLD note: A better idea might be to put a bunch of real money under that mattress full of fiat money. That way you will also store the potential for capital appreciation. Everywhere negative interest rates exist there also exists extraordinary demand for gold coins and bullion.
Repost from 3-19-2020
“Investors are fleeing emerging markets in record numbers and piling into the safe-haven greenback, with two emergency interest-rate cuts this month by the Federal Reserve doing nothing to diminish the dollar’s appeal.”
USAGOLD note: The dollar’s V-shaped recovery comes as a surprise and, according to the article linked above, will weigh heavily on emerging states having to make principal and interest payments on dollar-based debts. It has also been a key influence in gold’s selloff today.
Repost from 3-19-2020
“Sales of the one-ounce American Silver Eagle coins were at 3.1 million so far this month, as of Wednesday, compared with total sales of 650,000 in the month of February, according to data from the Mint.”
USAGOLD note: Though sales have been strong, as MarketWatch’s Myra Saefong reports, we still have inventory and delivering on our regular schedule on the most-commonly traded items. (3-23-2020)
“House Speaker Nancy Pelosi signaled that she’s not on board with the Senate stimulus plan in negotiations to combat economic damage from the coronavirus pandemic. ‘From my standpoint, we’re apart,’ Pelosi told reporters in the Capitol when asked if she expects there to be a deal today.”
USAGOLD note: My fellow Americans, in times like these, we must endeavor at all costs to maintain our collective sense of humor……
Cartoon courtesy of MichaelPRamirez.com
“The entire U.S. yield curve fell below 1% for the first time in history as rising expectations that the Federal Reserve will cut policy rates to zero in the coming months drove investors to reach for longer-dated securities.”
USAGOLD note: In nominal terms, it looks pretty bad for savers. In real terms, when the inflation rate is taken into consideration, it looks even worse. This article concludes that we are going below zero on rates.
Chart courtesy of the St. Louis Federal Reserve [FRED]
Source: Board of Governors of the Federal Reserve System (US)
Repost from 3-12-2020