Author Archives: Opinion
“Nothing in the policy statement or the press conference led me to doubt our view that this will be the last hike of the cycle,” said Ellen Zentner, chief US economist at Morgan Stanley. “The consumer is slowing, jobs are slowing, inflation is slowing and all those big pieces of the economy have been coming in line with our expectations.”
USAGOLD note: The tussle between an adamant Fed and a dubious Wall Street continues ………
“The Fed promised us a nonevent and it delivered — give or take a few comments. The Federal Open Market Committee did indeed raise the benchmark fed funds rate by 25 basis points to the highest level in 22 years at 5.5%. But as that outcome had been rated a 99% probability when Wednesday dawned, it came as no surprise.”
USAGOLD note: We are not yet out of the inflation woods……Gasoline prices, says Authers, could trigger a surprise summer wake-up call.
“Over the centuries between these two events, currency demonstrating a symbolic link between honey and money is surprisingly common. In a recent study in Australian Coin Review, I trace the bee through numismatic history – and suggest a scientific reason why our brains might naturally draw a connection between the melliferous insects and the abstract idea of value.”
USAGOLD note: All about the connections between bees, honey, and money……
“August is usually the quietest month of the year for the stock market. But Fitch shattered any sense of summer calm last night when it slashed the US government’s credit score, in what could end up being a massive blow to President Joe Biden’s economic track record.”
USAGOLD note: Biden’s track record wasn’t exactly glowing before the Fitch announcement. A good many analysts have warned of late that the government’s fiscal stance – and that includes both the Biden administration and Congress – has become a danger to the economy and financial markets. The yield on the 10-year Treasury jumped from 4.01% to 4.105% after the Fitch announcement.
“Gold has big daily drop following Fed and ECB announcements. The pullback lasted 2 days before a big blast higher. In the wake of fluff announcements by the Fed and ECB in which no reporters asked any difficult questions, gold took a mini-dump then surged twice as much two days later.”
USAGOLD note: Mish posts a thumbnail analysis of the current gold market and concludes: “If you have faith in central banks, sell your gold. Otherwise, I suggest hanging onto it.” Worth a visit……
“Following the COVID era, we have entered a period of fiscal dominance among major developed economies. Hence, the escalating debt burden is already near historical levels and compounding at an alarming pace. To sustain the current government spending deluge, we believe it is inevitable that the Fed and other monetary authorities reassume their fundamental role as the primary financiers of government debt.”
USAGOLD note: Crescat predicts “capital will divert away from US Treasuries and flow into gold.”
Chart courtesy of VisualCapitalist.com
“Incredibly, by 2016 commodity prices had sold off to such an extent that they were the most radically undervalued in 120 years. The only times that came close were in 1929, 1969, and 1999. Following every prior period of radical undervaluation, commodity and natural-resource related investments dramatically outperformed, both in absolute and relative terms.”
USAGOLD note: In this in-depth study, Goehring & Rozencwajg say the coming rally and eventual overvaluation in commodities will likely be led by gold.
A long-time market bear who called the 2000 and 2008 crashes warns the S&P 500 could plummet 64%, bursting a historic bubble
“John Hussman is doubling down on his dire outlook for US stocks, even after the market defied recession predictions to notch some impressive gains this year.”
USAGOLD note: Hussman is not impressed by the stock market rally thus far this year. “Yes, this is a bubble in my view,” he says. “Yes, I believe it will end in tears.”
“There is a particular “setup” that we’ve historically found to be associated with abrupt “air pockets” and ‘free falls’ in the S&P 500. It combines hostile conditions in all three features most central to our investment discipline: rich valuations, unfavorable market internals, and extreme overextension. The last time we observed this combination to a similar degree was in November 2021, shortly before the S&P 500 lost a quarter of its value. The S&P 500 remains lower than it was then. Despite enthusiasm about the market rebound since October, I remain convinced that this initial market loss will prove to be a small opening act in the collapse of the most extreme yield-seeking speculative bubble in U.S. history.”
USAGOLD note: Hussman tells in detail how the stock market is breaking down and why it should be taken seriously.
“The fact that Fed-induced curve inversions have presaged recessions 100% of the time in the past is never respected. Always a case of hope triumphing over experience. Thing is — very rarely do recessions occur in the same month as the onset of the inverted yield curve. There are lags, and that typically can be a year or longer. Think back to 2007. But like the story of the boy who cried wolf, the wolf did show up in the end.”
USAGOLD note: A heads up from Rosenberg……
Recessions follow inverted yield curves with a lag
(Grey bars = recessions)
Source. US Federal Reserve [FRED]
“The metal is benefiting from loose monetary policy, low real yields, record inflows into exchange-traded funds and increased asset allocation, the bank’s analysts including Aakash Doshi and Ed Morse said in a report. Gold is expected to climb to an all-time high in the next six-to-nine months, and there’s a 30% probability it’ll top $2,000 an ounce in the next three-to-five months.”
USAGOLD note: The report points out that prices for the metal have already posted new highs in every other G-10 and major emerging market currency this year. Silver, it says, will benefit from “demand for a store of wealth.
“The experience of beauty, whether derived from nature, art, music or even mathematics, correlates with activity in the emotional brain, the medial orbitofrontal cortex. Beauty has long been associated by philosophers with truth and purity – also qualities commonly associated with gold. Our instinct for gold and the emotions it inspires from beauty to desire are basic.”
USAGOLD note: Frisby examines mankind’s age-old attachment to gold.
Oil markets will face ‘serious problems’ as demand from China and India ramps up, IEF secretary general says
“Oil demand bounced back to pre-Covid levels quickly, “but supply is having a tougher time in catching up,” said Joseph McMonigle, secretary general of the International Energy Forum, adding that the only factor moderating prices right now is the fear of a looming recession.”
USAGOLD note: Rising oil prices could have a profound effect on the inflation rate as it settles in, assuming McMonigle is right.
“When a global slowdown has been lacking, the dollar has declined at a per annum rate of -1% whereas gold has gained 10% per annum…” – Tim Hayes, Ned Davis Research, chief global investment strategist
USAGOLD note: Ned Davis Research recently downgraded the U.S. dollar from neutral to bearish and upgraded gold from neutral to bullish. It points to an important technical indicator as further evidence of the changing dollar-gold scenario. In January, gold achieved “a golden cross, when its 50-day moving average rose above the index’s 200-day moving average, while the U.S. dollar saw a death cross.” Since the January crossover, gold is up 7.75%, and the US dollar index is down 2.2%.
Chart courtesy of GoldChartsRUs • • • Click to enlarge
“To the contrary, inflation is likely to be a more persistent threat than it has been in decades, owing to the long list of powerful forces that have driven prices higher, and the limits of central-bank efforts to control it.”
USAGOLD note: Anyone who lived through the decade of the 1970s can tell you that claims that inflation had been tamed were often wildly overblown.
Inflation rate 1970s
Chart courtesy of TradingEconomics.com
“Every independent central bank in the world holds at least some amount of bullion. Gold’s status as a currency is therefore borne out by the fact that bullion is counted as part of a central bank’s foreign exchange reserves. It is the only commodity-currency to have survived as money into the electronic age. This implies gold’s unique monetary status.”
USAGOLD note: Steele provides historical background on gold’s role as a central bank reserve asset and offers seven monetary functions that encourage it. All seven have to do with gold’s status as the ultimate store of value and final means of payment.
“The dollar is one of the few assets that’s gone down, rather than up this year – and analysts are warning that there could be bleaker times ahead for the greenback now that the Federal Reserve looks set to wind down its interest-rate hiking campaign.”
USAGOLD note: The most important data, as pointed out in this article, provide reasons for lowering rates which would continue to fuel the dollar’s slide against other currencies.
“Federal Reserve rate hikes have had minimal disinflationary impact in this cycle, opening the door to a re-acceleration in inflation. At first glance, Fed Chair Jerome Powell has little in common with the Wizard of Oz. But in one respect he may: pulling levers that do nothing.”
USAGOLD note: Yet another under-the-radar analysis predicting more inflation down the road – second coming……
“Did you know that 2022 was the WORST year for US Treasuries in American history? The benchmark 10-year Treasury fell nearly 18%, and the 30-year Treasury collapsed over 39%. Many other bonds did even worse.”
USAGOLD note: Giambruno warns that “It may be tempting to think the worst is over for bonds – it’s not. As you’ll see, the pain for bondholders is just starting.” The result he says will be a mass movement over time to reliable stores of value.
“With the labor market strong and the consumer ebullient, price increases are likely to continue to be effortless. S&P Global’s preliminary survey for July noted its output price index has been a reliable leading indicator of CPI — anticipating the easing of US CPI to 3% in June. But its recent fluctuation suggests further declines in CPI below 3% may prove tricky as firms seek to pass through higher costs and interest payments to customers.”
USAGOLD note: The current situation has the feel of the run-up to the inflation surge in 2020. Then purchasing managers were warning of price increases before the general public became aware of the burgeoning problem.