Author Archives: Opinion

Why the future money is gold and silver

Seeking Alpha/Alasdair Macleod/4-16-2021

photo image of stacks of gold and silver coins

“It is almost certain that like the majority of gold and silver bulls hodlers expect to sell bitcoin for profit measured in their governments’ currencies, creating for themselves relative wealth in dollars, euros, yen — whatever their governments impose on their citizens as money. But it is an investor’s, or speculator’s approach, which is accompanied by feverish examination of charts, confirmation bias from ‘experts’ and only a half-understood concept of what is driving the price. So sudden and wonderful has been the unbanked wealth creation in leading cryptocurrencies,that investors commonly proclaim that gold and silver are yesterday’s story and that we oldies should move with the times.

These investors claim that five thousand years of empirical evidence is about to be overturned. But they are investors. All bulls and no bears. Other than banking fabulous profits in fiat at a future date, this has nothing to do with money per see. The point about sound money is you acquire it by spending fiat, so that when fiat goes you will have it to spend. It is not an investment decision, but more like an insurance policy taken out for which a risk assessment has to be made.”

USAGOLD note: A realistic, thoughtful discourse on the differences between precious metals and bitcoin, the piece linked above may be seen someday as the final word on the subject. Macleod covers all the bases…… Though we doubt that gold and silver will ever be used again as transactional money in this digital age, we do believe, as does Macleod, that it will serve investors well as an insurance policy against the debasement of national currencies.

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Why more inflation is right around the corner

National Review/Steve H. Hanke/4-14-2021

chalboard showing inflation pattern as chart with symbols for various currencies“Over a 6–18-month period after a monetary injection occurs, economic activity will pick up. Ultimately, the prices of goods and services will increase. That usually takes between 12 and 24 months after the original monetary injection. Given this sequence, it’s as clear as the nose on your face that we’re going to see more — perhaps much more — inflation entering the system in the coming months.”

USAGOLD note: Hanke, an economics professor at Johns Hopkins University, is well-known for his analysis of the effects of currency debasement on economies. He says the recent CPI increase of 2.6% annualized (.6% month over month) is “simply a harbinger” of things to come.

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Keep 10-15% of assets in physical gold, avoid Bitcoin: Mark Mobius

The Economic Times/Staff/4-16-2021

graphic image of group of green flags“However, gold at this level sounds like a good investment. In fact, I have added some gold to my own portfolio because I think it has reached a sort of turning point where we are going to see a recovery in gold prices. But even if you are not following gold on a day-to-day basis, from a long-term point of view, you are better off with 10% or 15% of assets in physical gold.”

USAGOLD note: The highly respected Mr. Mobius weighs in on the gold-bitcoin debate…… He turned bullish on gold a couple of years ago recommending it as a holding during numerous media interviews. Needless to say, those following his advice thus far have been greatly rewarded.

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The gold investment thesis revisited

SprottInsights/John Hathaway

Repost from 4-12-2021

image of black swan head“Missing, in our opinion, are the yet unseen consequences from extreme financial asset valuations supported by the rapid expansion of new public and private sector debt. Economic nirvana, founded on path-dependent monetary and fiscal policy, is impossible. The punchbowl cannot be taken away without wrecking the economy and the markets. Public servants are unwilling and incapable of doing so. Intoxicants will most likely disappear for unforeseen reasons. Gold will sense adverse outcomes long before they have been articulated.”

USAGOLD note:  Hathaway concludes that “either inflation or deflation seems possible at this moment.” And then there is the outlier – the possibility of something completely unforeseen. Perhaps the level of physical demand now working its way through the gold and silver markets is an indicator that investors already are preparing for “outcomes long before they have been articulated” – some black swan event yet to be identified.

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Precious metals are and always have been the ultimate insurance

Gold Eagle/Claudio Grass interview of Pro Aurum’s Robert Hartmann

Repost from 4-13-2021

“Precious metals are and always have been the ultimate insurance. They provide protection both against state failures and against mistakes in the monetary policy of the central banks. Every investor who looks into the history books sees that both have happened over and over again in the past centuries. From that perspective, investing in physical gold and silver is a common-sense precaution and a necessary part of any wealth preservation plan. Investors and ordinary savers ignore this at their peril and the failure to include precious metals in one’s portfolio is pure negligence.”

USAGOLD note: There are essentially two broad schools of thought alive and well in the gold market. The first holds that crisis is around the corner and, as a result, precious metals should be owned to profit from the event. The second holds that crisis is a permanent fixture in the market dynamic and that the portfolio should always include precious metals as the ultimate safe haven. The first buyer sees gold as an investment product, i.e., buy it now and sell it later when the time is right. The second sees gold, like Hartmann, as an insurance product to be held for the long run. Some combine the two, allocating one part of their precious metals portfolio for trading purposes and another as a permanent, or semi-permanent, store of value. It is important for the novice gold owner to determine where he or she stands on this distinction because it dictates, in turn, which products to include in the portfolio and to what degree – strategies with which we have helped a good many investors over the years. We invite you to call our Order Desk for further information.

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‘History will not be kind.’

Credit Bubble Bulletin/Doug Noland

Repost from 1-26-2021

antique print of wolf at door from Little Red riding Hood“Yellen: ‘The smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs.’ I hate being this pessimistic. But in no way do the long-term benefits of massive deficit spending today outweigh the cost. Current market and economic structures ensure resources are poorly utilized. The securities markets are today a powerful mechanism for resource misallocation and wealth-destruction. And I see Trillions of deficit spending generating limited sustainable economic benefit. Meanwhile, ‘acting big’ will further fuel ‘Terminal Phase’ excess, with terrible long-term consequences…

My biggest fear is materializing. When this historic Bubble bursts, a major crisis will unfold with our nation’s finances in complete shambles. The Fed’s ‘money printing’ operation has gone parabolic as it desperately attempts to sustain an unsustainable Bubble. Treasury debt growth has gone parabolic as Washington tries to sustain an unsustainable economic structure. The system is on a trajectory that ensures a crisis of confidence – and I don’t see this as some long-term concern. This is an issue of short-term sustainability.”

USAGOLD note:  Yellen says “the world has changed.” Noland says “History will not be kind.” By that, we are not certain if he means history will be a harsh judge, or that it will deliver an inevitable comeuppance. Either way, the wolf, it would seem, is at the door.

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Don’t tell the Fed, but the smart money expects inflation

Money & Markets/Michael Carr

Repost from 4-12-2021

Photo stacks of silver bullion coins“Last week I wrote about how smart money is buying gold. This is based on data from the futures market, where large traders are required to report their positions every week. But it’s not just gold. Smart money is buying other commodities.”

USAGOLD note: Silver likely ranks high on that list of “other commodities” judging from our volumes at USAGOLD. Institutional investors are moving on commodities and that has to do with several top firms, including Goldman Sachs, touting the sector as in the beginning stages of a secular bull market.

 

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How the Fed took control of the economy

Axios/Dion Rabouin

Repost from 4-9-2021

graphic illustration of a money printing machine
“To brace the U.S. economy and stave off another Great Depression, the Federal Reserve has taken control of it through unprecedented intervention — manipulating market prices, controlling rates and propping up companies on a previously unimaginable scale. The U.S. is a market-run, capitalist economy. But the market is ostensibly now governed by an unelected and largely independent group of technocrats that directs it by creating ridiculous sums of money to buy assets.”

USAGOLD note: A strong, some would say even bold, take on the Fed policy from Axios’ Dion Rabouin. Several analysts pointing to the same set of circumstances have cautioned, “this cannot end well.”

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Inflation will rise. Don’t panic.

AXIOS/Felix Salmon/4-16-2021

Antique image of Alfred E Neumann asking 'Me Worry?"“It’s been 40 years since America last saw a damaging level of inflation. Yet despite that — or perhaps because of it — inflation fears are widespread, and could even become self-fulfilling.”

USAGOLD note: For those who have prepared for inflation through a judicious purchase of physical gold and silver, panic is not on the agenda, nor is the question of whether or not the Fed has it right on inflation, i.e., it isn’t worried about inflation.

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Einhorn Letter Q1 2021

Greenlight Capital/David Einhorn/1-15-2021

“[T]he Fed has indicated that it believes any abnormally high inflation will be transitory. We wonder, how will the Fed know? Do price increases come with a label that says “transitory”? Our sense is that no matter how hot inflation gets in the coming months, the Fed will continue with zero interest rates and large scale asset purchases. After all, the U.S. Treasury has a lot of debt to sell and it isn’t clear who, other than the Fed can absorb the supply.”

USAGOLD note: The current situation in a nutshell…… Einhorn is a long-time advocate of gold ownership. This is the same constroversial client letter that received considerable financial media attention for being critical of government regulators saying; “…[F]or the most part there is no cop on the beat. It’s as if there are no financial fraud prosecutors; companies and managements that are emboldened enough to engage in malfeasance have little to fear.”
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Goldman says copper is the new oil, raises price forecast to $11,000 per metric ton

CNBC/Pippa Stevens/4-14-2021

“Copper prices are expected to rise, as the transition to green energy accelerates and the supply of the metal tightens, says Goldman Sachs.”

USAGOLD note: When you consider that Goldman’s commodities’ index is up almost 22% since the beginning of the year, it gives cause to think that gold might be lagging and due for a rally. It is down almost 7% on the year. Goldman sees copper as a star performer forecasting it to rise from $8,900 per tonne currently to $11,000 per tonne over the next 12 months. Silver, by the way, has also been referred to as the “new oil” in recent days for its abundant use in green energy technologies.

The Goldman Sachs Commodity Index and Gold
(Per cent gain or loss year to date, 2021)

overlay line chart showing the GSCI and gold year to date

Chart courtesy of TradingView.com • • • Click to enlarge

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China’s digital currency is a threat to dollar dominence

Financial Times/Michael Hasentab/4-13-2021

graphic representation of digital gold yuan

“Markets have been gripped by cryptocurrency fever. The price of bitcoin has attained new highs while debate has raged over the emergence of cryptocurrency technology. But these may be a sideshow for a big developing trend — the rapid digitalisation of the renminbi.”

USAGOLD note 1:  What other central banks, China is getting ready to launch – and Hasentab, the chief investment officer at Templeton Global Macro sees both enormous benefits for the global monetary system and a possible undermining of the dollar’s dominance as the world’s top reserve asset. If what he says turns out to be the case, it would likely increase the appeal of owning gold as a hedge against dollar depreciation.

USAGOLD note 2: Though Hasentab does not mention gold, we would add that there is also the outside chance China might somehow deploy gold in its digital scheme to give its version of cryptocurrency greater credibility. It is, after all, the number one producer of gold and rumors persist that it owns significantly more gold than it is reporting. (The image above includes an artist’s rendering of a digital gold yuan token)

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Easiest money in history

Elliott Wave International/Murray Gunn

Repost from 4-13-2021

Chart showing the cycle of market emotions from optimism to euphoria to despondency to optimism againClick to enlarge

“This era of central bank-induced gushing liquidity, combined with a manic social mood, has created statistics that, when looked back on in the cold light of day, will be viewed as clearly insane. At this juncture, it is seen as entirely normal, indeed clever, to give your money to someone who will not tell you what they are going to do with it. The SPAC (Special Purpose Acquisition Company) mania is a prime candidate for the financial bubble history books.”

USAGOLD note: Well said…

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The Feds are implementing the greatest monetary experiment in U.S. history

Rogue Economics/Bill Bonner

Repost from 4-12-2021

graphic image of computer code abstract

“A thousand years ago, when money meant coins, China invented paper currency. Now the Chinese government is minting cash digitally, in a re-imagination of money that could shake a pillar of American power.” – Wall Street Journal, as quoted at link above

USAGOLD note: Bonner explores the consequences of the spend and print economics and its consequences – along with China’s introduction of a new form of “computer code” money that could become an international alternative to the dollar.

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Dylan Grice – ‘Central banks are going to overcook the economy’

TheMarketNZZ/Mark Dittli

Repost from 3-6-2021

cartoon of a hedge fund manager on the phone telling a client to buy gold

‘We have found there are plenty of managers running highly specialized, niche strategies which generate extremely attractive returns without being correlated to wider financial markets, or being subject to any of the risks we’ve just been talking about. Investors in traditional assets – public equity, private equity, venture, government bonds, corporate credit – are sitting on a time bomb. They have to keep their fingers crossed and hope that bomb doesn’t go off on their watch. If and when government bond yields rise, the traditional assets which have done so well will be smoked.’

USAGOLD note: Grice, a former investment strategist at Societe Generale, is one of those analysts to whom the global market cognoscenti pay a great deal of attention. This interview with that mind is a must-read. There are three approaches to the difficulties Grice communicates. One is to find a money manager, like Grice, who has a deeper understanding of what lies ahead and hope he pulls the right levers. Another is to develop that same deeper sense of what lies ahead, structure one’s investments accordingly and hope that you have pulled the right levers.  The last, and the most sensible in our view, is to diversify one’s portfolio completely and include gold and silver in the mix as the ultimate, unassailable store of value. It leaves much less to chance.

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The Fourth Turning: The end of things and a beginning

The Hill/Bernie Quigley

Repost from 10-3-2020

graphic image showing sun moon cycle - icon

“Now might be a good time to review The Fourth Turning: What the Cycles of History Tell Us About America’s Next Rendezvous with Destiny by historians William Strauss and Neil Howe. The authors’ thesis is that all historical periods are ‘post-war periods’ and every 80 years or so a human cycle of four generations concludes itself in catastrophe and rebirth.”

USAGOLD note:  I came across this review of The Fourth Turning posted at The Hill while researching another topic and thought it worth posting a link. It lists five possible crisis triggers in the book, one being that “the Centers for Disease Control and Prevention announce the spread of a new communicable virus.” The prescience of the authors – in both the big picture and the details – is uncanny. It’s an old article but worth revisiting in light of what has gone on in the American economy since it was published in late 1996. We are in the grip of the Fourth Turning now and will continue to be, according to Neil Howe, until 2028, when a new era will dawn.

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Platinum price to rise as green hydrogen emerges as a new demand segment

MiningWeekly/Simon Liedtke/4-14-2021

“The rarity of platinum, combined with a decline in supply and overwhelming demand, is a formula for a build-up of a ‘perfect storm’, says independent precious metals consultant Dr. David Davis, who says that this will lead to significant upward pressure on the price of platinum, to which investors have already begun to react.”

USAGOLD note:  Some are buying platinum for the green aspect of its profile. There is another component to platinum’s story that is equally intriguing. For a very long time – and up until 2011 – platinum cost more per ounce than gold and at times significantly more than gold (See chart below). Now gold sells for considerably more per ounce than platinum. If you have an interest in adding platinum to your holdings, please contact the Trading Desk for product availability and pricing. (1-800-869-5115, Ext 100)

Gold and platinum prices
(1998 to present)

overlay chart showing the prices of gold and platinum 1998 to present

Chart courtesy of TradingView.com • • • Click to enlarge

 

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Annual threat assessment of the U.S. intelligence community

Office of the Director of National Intelligence/4-9-2021

seal for the office of the director of national intelligence usa“The COVID-19 pandemic has disrupted life worldwide, with far-reaching effects that extend well beyond global health to the economic, political, and security spheres. We expect COVID-19 to remain a threat to populations worldwide until vaccines and therapeutics are widely distributed. The economic and political implications of the pandemic will ripple through the world for years.…The economic fallout from the pandemic is likely to create or worsen instability in at least a few—and perhaps many—countries, as people grow more desperate in the face of interlocking pressures that include sustained economic downturns, job losses, and disrupted supply chains. Some hard-hit developing countries are experiencing financial and humanitarian crises, increasing the risk of surges in migration, collapsed governments, or internal conflict.”

USAGOLD note: An ominous assessment of the economic and political future, this study also reviews the threats from China, Russia, Iran, and North Korea. In the whirl surrounding economics and the financial markets, we sometimes push aside the geopolitical situation. As we have reported here occasionally, though, rivalries have sharpened over the past year and could become even more contentious as the net economic effect of the pandemic takes its toll.

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Singer warns of trouble, eager to say ‘told you so’

Bloomberg/Katia Porzecanski and Nishant Kumar

Repost from 3-1-2021

graphic image of billionaire investors stacking bars of gold in a large vaultImage courtesy of VisiualCapitalist.com

“Offering a curmudgeonly riposte to today’s raucous financial markets, the 76-year-old billionaire said in a letter to clients of his $42 billion Elliott Management Corp. that a ‘flamboyant line-up’ of excesses will come back to haunt investors. To Singer, who has long warned of an ugly end to the Federal Reserve’s easy-money policies, it’s all just a bit too much.”

USAGOLD note:  Singer has long been a proponent of gold ownership. This article reports that Elliott (Singer’s investment fund) made money thanks to “a combination of portfolio-protection trades related to interest rates and gold, together with our core activities.” Given the billionaire’s mindset, we highly doubt he has given up on gold in this latest downtrend.

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Is hyperinflation on the horizon?

GnS Economics/Tuomas Malinen

Repost from 3-1-2021

“Worryingly, many of the conditions that led to the extreme inflation episodes in Weimar Germany and in 1990s Russia have started to emerge. First, central bankers have been running ‘quasi-monetization’, or asset-purchase (QE) programs for over a decade with a stupendous increase during the past pandemic year (see Figure 1). Secondly, supply-chain disruptions have also started to emerge, which will start to crimp production capacities at some point. These are the two ‘pre-conditions’ for an inflationary crisis to materialize.”

USAGOLD note:  Rarely in history have central banks made a public announcement of creating inflation simply because it is a kind of Frankenstein creation that takes on a life of its own and can become a monster. Yet that is precisely what central banks are doing at the present. Malinen describes the internal machinery of inflation – the hidden engine under the hood that drives the process. He says if the beast gets away it could create “total chaos in the financial markets…with the world descending into chaos.”

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