Author Archives: Opinion
“Europe might be called the ‘old continent’ and be struggling in various fields such as economic growth, innovation, and demography. Nevertheless, or rather because of this, interest in gold, a crisis proven asset, has increased in recent years, not only among private and institutional investors, but also among central banks. Far from being a ‘barbarous relic’, gold is making a strong comeback on the old continent, which seems to be only in its early stages.”
USAGOLD note: I found Stoferle’s concluding remarks, as posted above, intriguing and in a way comforting. For those of us with our roots in Europe, it may be a reminder of our own heritage. I can remember as a child my grandfather and father referring to Europe, not as the ‘old continent’, but as the ‘old country’ – to distinguish it, one would think, from the ‘new world.’
“Yet, one place where the dollar is not accepted is in the tiny Czech town of Jáchymov – which is ironic, because it was here, tucked deep into the wooded folds of Bohemia’s Krušné hory mountains, where the dollar originated 500 years ago in January 1520. But as I pulled a George Washington one-dollar bill from my wallet in Jáchymov’s 16th-Century Royal Mint House museum, the very spot where the dollar’s earliest ancestors were coined, docent Jan Francovič smiled and stopped me.”
USAGOLD note: A fascinating, in-depth history for those seeking a bit of weekend diversion . . . .
Image: 1537 Thaler (silver), Charles V, Holy Roman Emperor (Reign 1519-1556)
“’Journalism is about covering important stories,’ said one scalawag. ‘With a pillow.’ A staggering bailout of the banking system presently proceeds apace. The mainstream financial press has seized a bed pillow, placed it over this important story… and pressed down murderously. Today we pry away the pillow… and vent in desperately needed oxygen.”
USAGOLD note: Maher, managing editor at the Daily Reckoning, makes the case that there is a great deal more to the repo market liquidity injections than the Fed is letting on. . . . .
Repost from 1-13-2020
“Despite repeated calls for a weaker dollar from analysts throughout last year, the greenback ended 2019 without losing any ground against most currencies. It is now expected to go on a winning streak for at least six months.”
USAGOLD note: Though we offer the above link in the interest of a fair balance between opposing viewpoints, we hasten to point out that there is just as much analysis out there saying the exact opposite – that the U.S. dollar is headed for a rocky year in 2020. Immediately below, we post an opinion piece published in Financial Times over the weekend that investors are beginning to view the dollar a risk investment (like tech stocks) rather than a safe haven.
Repost from 1-11-2020
“I believe that this was just the beginning. In the end, it will be very tempting for the US to get rid of its debts by devaluing its own currency. Many creditors are abroad, especially central banks. If the non-American central banks notice the loss of the value of their assets, they will buy much more gold. Then the historically unusual and economically fatal situation where central banks hold the bonds of mainly one country will finally come to an end. This is one of the reasons I have an optimistic view of gold’s performance in the months and years to come. Also, given the global economic and political landscape, that is troubling to say the least, gold’s appeal is bound to rise and not just among institutional investors.”
USAGOLD note: An interesting, in-depth interview of one of the individuals behind Germany’s gold repatriation program.
Repost from 5-15-2019
” . . . [I]n the West, there are runs on gold when the price is rising, while in the East lines are forming when the price is falling. Realizing gold trades as a currency, and the cultural differences on both sides of the planet is essential for understanding the gold market.”
USAGOLD note: More deep gold market analysis from Jan Niewenhuijs . . . . Understanding the ebb and flow of gold between East and West, he says, “improves our understanding the gold market.” These trends tend to play out over long periods of time, though they can apply over shortened horizons as well. The questions become who benefits from an understanding of the differences between the two cultures and how would a savvy investor in the West capitalize best through this understanding. We can provide a small clue: It all begins with a belief in and understanding of the market cycle.
Repost from 1-8-2020 [In-depth weekend read. . .]
“So far those worries have mostly manifested themselves in small technology glitches that have annoyed its clients — most recently at the end of 2019, when its website seized up with customers trying to reshuffle their portfolios. Yet the bigger concern is that its deepening control over the stock market could at some point become unhealthy.”
USAGOLD note: Though the dominance of Vanguard in passive stock market funds is notable, it also represents a danger highlighted by the extract posted above – the elephant in the room that no one wants to talk about. What happens if a large proportion of the funds owners decide they want out at the same time? We have mentioned on several occasions on this page that investors might be mistaken when they assume they can get out of the stock market via some quick online navigation. What if that is not the case? At the same time, the gold market could seize up from a huge influx of buyers – all possible in the imperfect web-based market system we have created. The best strategy is to diversify before any of this potentially becomes reality.
Repost from 1-13-2020
“The image of the Fed printing paper money, and dumping it from helicopters to consumers waiting below who scoop it up and start spending is a popular, but not very informative way to describe helicopter money. In reality, helicopter money is the coordination of fiscal policy and monetary policy in a way designed to provide stimulus to a weak economy and to fight deflation.”
USAGOLD note: Some say helicopter money is on its way. By Rickards description – the beginnings of which are posted above – it may already be here.
Chart courtesy of the World Gold Council
Chart note: The chart above shows gold’s ranking among top investment choices in 2019. As for the future, “gold,” says the World Gold Council, “has historically performed well in the 12 to 24 month period following policy shifts from tightening to ‘on-hold’ or ‘easing’ – the environment in which we currently find ourselves. And, historically, when real rates have been negative, gold’s average monthly returns have been twice as high as the long-term average.” The full report (linked above) focuses on key gold demand drivers for 2020 – financial uncertainty and lower interest rates, weakening in global economic growth and gold price volatility.
(Kitco reported yesterday that Germany was largely responsible for strong gold coin demand experienced by the Perth Mint in 2019 based on investor concerns of a weakening economy.)
“More than 700 years of history show that the times as they are now, at least in regard to interest rates, aren’t quite so different as we’re led to believe, according to research that goes back to the Black Death plague of the 14th century.”
USAGOLD note: Is it not one thing to have negative rates in times of the gold standard and something else again when it occurs in a fiat money system? . . . . . Such complications aside, the author says “real rates could soon enter permanently negative territory.” As a good many have suggested, gold could do well in a period of low to negative real rates of return as investors question the wisdom of saving in a currency that does not draw a yield.
“In 2008, Rogers notes that we had problems because of too much debt, however, ‘since then the debt has skyrocketed everywhere and it’s going higher and higher. We are going to have a horrible time when this all comes to an end.’ Adding that: …eventually, the market is going to say: ‘We don’t want this, we don’t want to play this game anymore, and we don’t want your garbage paper anymore.'”
USAGOLD note: The bow-tied financial impresario does not mince words as he raises the caution flag on the burgeoning global debt . . .
“For the past few years, I’ve been suggesting that the world’s ultra-wealthy investors have been buying enormous quantities of physical gold at a rate that overwhelms the commercial trader shorting on the COMEX.”
USAGOLD note: Stewart Thomson tells a bullish tale that begins with Goldman’s Jeff Currie and ends at $3000. . . . . .
“The WSJ calls this a deal. Given US tariffs remain and there is no action by China on the intellectual property aspects, I call it a ceasefire.” – MishTalk/Mike Shedlock
“The European Union’s new trade chief will be in Washington for the next three days trying to head off a transatlantic commercial war on several fronts. The prospects for success look slim.” – Bloomberg
“Now this is not the end. It is not even the beginning of the end. but it is, perhaps, the end of the beginning.”
– Winston Churchill, November 11, 1942 –
“Gold rallied nearly 4% in December, mainly in the second half of the month, and recently moved to an intraday high of US$1,613/oz as the US-Iran confrontation unfolded. We believe there are a few likely reasons for the move. . .”
USAGOLD note: In this article, Perlaky runs through six factors driving gold to higher ground over the past few weeks in the paper gold market – four of which are not commonly tracked in financial media including the positive effects of derivatives’ positioning, why light trading volumes have made a difference, and professional investor portfolio positioning prior to the end of the year. He also offers a few brief thoughts on three drivers that have gotten a lot of attention in financial media – technical charting signals (please see chart below), the Fed’s repo policies and geopolitical risks. All in all, an informative look at what drove the recent run-up in gold prices.
Chart courtesy of the World Gold Council
Repost from 1-14-2020
“To be sure, the 1% are not alone in extrapolating the recent past into the future, a cognitive error known as recency bias. It’s human nature to turn bearish after the stock market has performed terribly. By the same token, it’s entirely normal for us to turn bullish after the market has performed spectacularly.”
USAGOLD note: The global elite must hedge their own worst instincts just like the rest of us . . . and many have –
“Well, I worked on Wall Street and in the hedge fund industry for decades. I also lived among the players in New York and Greenwich, Connecticut, at the same time. I’ve met the top hedge fund gurus in private settings. And here’s the thing: I’ve never met one of them who does not have a large hoard of physical gold stored safely in a nonbank vault. Not one.” – James Ricards, Here’s where gold will be in 2026
Repost from 1-12-2020
“What is amazing about this run-up in gold that we have seen is that it has taken place with the U.S. dollar actually quite firm.”
USAGOLD note: David Rosenberg is chief economist at Gluskin Sheff and Associates and a highly-respected Wall Street analyst. We were a bit surprised at his $3000 forecast for gold. He explains how it is possible to a skeptical host.
Repost from 9-16-2019
“The politically attractive, if not the only possible, solution to the debt problem will be to inflate the real debt obligations away, making them easier to pay off in a depreciated currency – but if the governments choose this path, we would see high inflation, which would make gold to shine.”
USAGOLD note: Mr. Powell, would you reach over and flip the switch on that printing press over there?
Repost from 10-26-2020
“Greg Jensen, co-chief investment officer of Bridgewater Associates, the world’s biggest hedge fund, says gold could surge to a record high above $2,000 an ounce as central banks embrace higher inflation and political uncertainties increase.”
USAGOLD note: As most of you already know, Bridgewater Associates is headed up by Ray Dalio whose attachment to gold is well known. This is the first time, though, that the fund has gone public with a number. Jensen advises that investors make gold “a cornerstone” of their portfolios.
“Indeed, the enthusiasm of the systematic strategies exceeds that of the humans to a greater extent than at any point in the last decade. As the importance of systematic investing has only risen throughout this period, that suggests that we should take the current overweighting seriously.”
USAGOLD note: We are in uncharted waters when it comes to the overall influence of machine trading on stock market values . . . and by extension the human counterparts who own the same stocks as the machines. Can we rely on silicon-based buyers materializing to counter the silicon-based sellers?
“The battle continued in 2019, and rarely has the disparity been this sharp. And what do we mean? Well, on one hand, you have real physical gold. This is gold that you store yourself or at a trusted vaulting company. This is gold that you can actually hold in your hands. This is the gold that is demanded at record levels by central banks around the globe. On the other hand, we have pretend gold. This is the domain of the bullion banks. They offer futures contracts, unallocated accounts, and ETFs…all as an alternative to the real thing and as a way of increasing the total supply of ‘gold’ in what amounts to a modern day alchemy.”
USAGOLD note: For real physical gold, check out our Safe Storage Program or simply take delivery like the majority of our clients. Hemke goes on to detail the differences between real and virtual gold at the link.
Image courtesy of Visual Capitalist