Author Archives: News
Repost from 7-23-2021
“Senate Minority Leader Mitch McConnell is taking a very hard line on the debt ceiling. His message — if Senate Democrats want to raise the debt ceiling, they’re going to have to do it themselves because no Republicans will vote for it in the current ‘environment’ on Capitol Hill.”
USAGOLD note: Though somehow, someway Congress always gets the debt ceiling passed, this time around things could get dicey given the extraordinary level of government spending over the past 18 months. The Republicans appear to be intent on sending a message to the Biden administration. “I can’t imagine a single Republican in this environment that we’re in now,” says McConnell in a strongly worded statement, “– this free-for-all for taxes and spending — to vote to raise the debt limit.” Back in 2011, when the debt ceiling became a major point of contention in Congress, Standard & Poor’s downgraded the U.S. credit rating from AAA to AA+. A similar event could generate an earthquake in the already shaky bond market.
Repost from 6-7-2021
“‘We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade,’ she said. ‘We want them to go back to’ a normal environment, ‘and if this helps a little bit to alleviate things then that’s not a bad thing — that’s a good thing.’”
USAGOLD note: The Biden administration and the Fed want a new “new normal” that is an upgrade from the old new normal which was actually secular stagnation. At no time, though, did she mention allowing the real rate of return to go positive or that the Fed would quit printing money being applied to the federal government’s financing needs. With the statement, Yellen identifies the elephant in the room – the Japanification of the United States.
Repost from 7-22-2021
“The president argued the nearly $1 trillion bipartisan infrastructure bill and Democrats’ more than $3 trillion human infrastructure plan will drive down prices and bring more Americans back to work.”
USAGOLD note: As we have said so often in the past, few on Wall Street will quarrel with the print and spend policies of the Biden administration given the situation in which we find ourselves. At the same time, those in the know are moving to protect themselves from its consequences, both intended and unintended.
USAGOLD note: Reuters reports a hefty 42% increase in China gold imports through Hong Kong in June. MKS’ Bernard Sin reports “good buying interest” from bargain hunters taking advantage of lower prices. The East buys gold on weakness. The West buys it on strength.
Repost from 4-25-2021
“This week, the Bloomberg Agriculture Spot Index — which tracks key farm products — surged the most in almost nine years, driven by a rally in crop futures. With global food prices already at the highest since mid-2014, this latest jump is being closely watched because staple crops are a ubiquitous influence on grocery shelves — from bread and pizza dough to meat and even soda.”
USAGOLD note: If true, it could be the first rumblings of inflation hitting Main Street …… The Fed’s 2% line in the sand could go vertical quickly and without warning.
Repost from 7-21-2021
“After years without substantially changing the amount of gold in its international asset reserves, the Brazilian Central Bank headed by Roberto Campos Neto bought 41.8 tons of the metal in June.”
USAGOLD note: The trend of aggressive central bank gold buying continues……It would be interesting to know if the metal was purchased in the open market or by private arrangement.
“Stagflation is absolutely the biggest risk for every investor.…Imagine how scary it would be for the market if we had stocks and bonds selling off together … a major problem because central banks can’t really come to the rescue and cut interest rates .” – Nancy Davis, Quadratic Capital Management
USAGOLD note: Alan Greenspan was among the first to warn that the economy could be headed for a round of stagflation like the 1970s and that was back in late 2018, early 2019. Stagflation is the combination of high inflation and high unemployment, i.e., what Ronald Reagan called the Misery Index. At its height in 1980, the Misery Index reached 22%. As of the most recent government reports, it stands at 11.29%, according to YCharts, and is climbing again. Gold and silver were top performers during the stagflationary 1970s.
Repost from 7-20-2021
“US government debt has broken with tradition and pushed higher despite inflation surge.”
USAGOLD note: This article explores the reasons for that historical anomaly. On Monday, the yield on the 10-year Treasury dropped to 1.198. On July 1st, it was 1.52% – a dizzying descent. One cannot rule out the presence of the Fed as the bond buyer of last resort and, thereby, aggressively encouraging the trend.
10-Year Treasury Yield
Chart courtesy of TradingEconomics.com • • • Click to enlarge
“UBS found 57% of U.S. investors believe inflation will accelerate over the next 12 months — a higher percentage than any other region. The Swiss bank probed 2,999 investors with at least $1 million of investible assets, conducting its survey globally from June 23 to July 12, according to its statement Wednesday.”
USAGOLD note: UBS cited precious metals as one of the alternatives likely to benefit from investor inflation concerns.
Repost from 6-9-2021
“Schlick started minting coins with his newly mined silver, similar in size and weight to the Guldengroschen (shortened to Guldener), which were just gaining popularity at the time – each 1⁄8th of a Cologne Mark of silver. Schlick called his coins, which weighed roughly an ounce and were an inch and a half (4cm) across ‘Joachimsthalers’. German speakers to the north and west shortened this to ‘thaler’, while Czech and Slavic speakers to the south and east called them ‘tolars.'”
USAGOLD note: Now you know how the dollar got its name – historically associated with an ounce of silver. Nineteenth and Twentieth century American silver dollars contain .77345 ounces of pure silver.
Attribution: Classical Numismatic Group, Inc. http://www.cngcoins.com, CC BY-SA 3.0 <http://creativecommons.org/licenses/by-sa/3.0/>, via Wikimedia Commons
“Maguire’s costs rose so much so fast that he has had to rewrite his menu prices twice since March. Whether additional increases will follow depends upon a complex interaction of food supplies, labor availability and a shape-shifting virus. ‘It’d be foolish for me to believe we’ve seen the worst of it,’ he said.”
USAGOLD note: Those of us old enough to recall the 1970s will recall the price tickets layered on top of each other on canned and bottled goods on the grocery shelves as prices rose. Inflation was occurring faster than the goods were moving out the door. Passing along the increases to consumers as quickly as possible was the only option available.
“Young Koreans are frantically buying and selling gold in an uncertain time of their lives, and more than half of the individual transactions were made by people in their 20s and 30s.”
USAGOLD note: The younger generation embraces gold – and it is not the first generation of savers to find solace in the investment of kings and the king of investments. ……”Somewhat supersitiously,” reads the article, “gold is also considered a hedge against inflation.” Superstitiously??
“The Economic Affairs Committee publishes its report ‘Quantitative easing: a dangerous addiction?’, which urges the Bank of England to explain in more detail why it believes rising inflation will be a short-term phenomenon, and why continuing with its quantitative easing programme until the end of 2021 is the right course of action.”
USAGOLD note: We see very little from American politicians on the dangers of quantitative easing – in particular its addictive qualities. Can you imagine a member of the U.S. Senate going public with a statement that the Federal Reserve has become addicted to quantitative easing? Even going further by stating the policy needs “significant scrutiny and accountability”?
Repost from 7-16-2021
“Jay Powell, chair of the Federal Reserve, has so far succeeded in steering the US central bank and financial markets towards his view that the surge of inflation gripping America will be fleeting. But confidence in that judgment was called into question on Tuesday after a larger-than-expected increase in the June consumer price index raised new alarm bells about the extent of inflation in the world’s largest economy.”
USAGOLD note: The Fed chairman made it quite clear in testimony before Congress on Wednesday that the recent inflation numbers are not enough to move the needle. No matter what, the Fed is still between a rock and a hardspot. If it raises rates or tapers, it is likely to damage markets – perhaps even severely. If it doesn’t raise rates or taper, inflation is likely to become less and less transitory and could, perhaps, even suddenly morph to the runaway variety.
Repost from 6-1-2021
“Gold stored at the Bank of England has been selling for unusually high premiums recently, signaling that central banks may be bank in the market buying.”
USAGOLD note 1: We cited this report in Friday’s DMR and post it here for those who may have missed it and to add a few comments. As we mentioned in Friday’s report, the sudden influx of this unusually strong demand is somewhat mysterious. Bloomberg cites mobilization of one million ounces or more than 30 tonnes – not a small number when you consider Poland’s purchase of 9 tonnes in 2019 was reported as one of the largest ever by an EU member central bank. In fact, Poland might be the mystery source given its public pronouncement this past March that it was in the market for another 100 tonnes of the metal. At the same time, we will not rule out a possible connection – direct or indirect – to the upcoming implementation of Basel 3 accords. (Please see the USAGOLD Special Report: Will Basel 3 boost gold and silver prices?)
USAGOLD note 2: The Bloomberg report says that the reason for the burgeoning gold demand from central banks is “to diversify their portfolios away from the U.S. dollar to safeguard their finances amid concerns over the Fed’s ultra-loose monetary policy, massive U.S. government spending and inflationary pressures.” We see that as a rational response to current economic circumstances. It is not just the United States that is in the business of debasing its currency, but most, if not all, of the states issuing internationally traded currencies. The Bloomberg article avoids the question “Who would be a seller of physical metal in these precarious times?” If the source of the demand does indeed turn out to be a single central bank, the market will consider it manageable. If, on the other hand, it somehow has to do with Basel 3, it could be just the tip of the iceberg.
Repost from 6-4-2021
“A mountain of dollars on deposit in China has grown so large that banks are struggling to loan the currency and traders say it poses a risk to official efforts to control a fast-rising yuan.”
USAGOLD note: The huge dollar overhang could translate to mass conversions back to the redback, according to this in-depth Reuters report, and a steep rally against the greenback. Gold could be a major beneficiary under such circumstances.
Repost from 4-19-2021
USAGOLD note: We felt compelled to pass along the link above this morning – moral hazard defined. (Smile)
Repost from 7-14-2021
“With the pandemic pushing millions into poverty or bankruptcy, many Indians are now turning to their last resort: selling their gold jewelry to make ends meet. In rural India, the biggest bullion buyer, a brutal new wave of the virus has had a catastrophic impact on the economy and incomes. With fewer banks around, people in rural areas rely on gold in times of need as it can be easily liquidated.”
USAGOLD note: In India, gold is savings. People tap their savings if need be. That draw down, however, does not correlate with a sudden loss of faith in gold’s value. If anything, it will enhance it. Down the road, those forced to sell gold are likely to buy it back as circumstances improve.
Yellen says financial literacy can help create a ‘more equitable economy’ — and Americans appear to be listening
Repost from 5-27-2021
“But research does show that education — especially early education — about how to navigate personal finances can have a lasting, positive impact on people’s lives. It can be part of our strategy for building a more equitable economy,” – Janet Yellen, Treasury Secretary
USAGOLD note: Agreed. And an understanding of gold’s role in the investment portfolio should be part of that education. We are not holding our breath though on The ABCs of Gold Investing making the Treasury Department’s recommended reading list. (Still available at Amazon.com)
Repost from 7-13-2021
USAGOLD note: This extensive article uncovers an unusual phenomenon for the precious metals markets – an extension of the Reddit revolution to the silver market where a large group of retail investors believe they can collectively exert a heavy influence on the metal’s price. The Wall Street Silver community encourages buying and taking delivery of bars and coins, and believes “in a year or two we will have millions of people in the movement.” At the same time, Reuters presents the opinion of those who believe Wall Street Silver will have a difficult time achieving its objectives in the high-volume, global silver market.