Author Archives: Opinion
“Bullion banks are between a rock and a hard place. For years they’ve been playing the hedge funds as an angler hooks and plays a fish. That game has ceased and there is no easy way for them to get level. For the moment they are trying to put a lid on the price, but the cost has been rising open interest, and therefore rising mark-to-market positions. The August active contract runs off the board at the end of this month and bullion banks are likely to be forced into large delivery volumes again. Furthermore, the exchange for delivery arbitrage facility between Comex and the LBMA is broken, allowing Comex premiums to London spot to go unchallenged.”
USGOLD note: Conclusion similar to what we posted yesterday with the Bloomberg article on increased delivery commitments in silver and platinum as well ……… Macleod fills in the blanks providing important details.
“Gold prices are near an 8-year high but investors should keep adding exposure to the precious metal, that’s the advice of Clear Harbor Asset Management CEO Aaron Kennon.”
USAGOLD note: We once estimated that the price of gold reached over 100 billion marks per ounce during the 1920s nightmare German inflation having started in 1918 at 119 marks per ounce. Caveat venditor – Let the seller beware! It’s all a matter of currency value. As pictured, currency denominations went from 20 marks to 20 million marks on roughly the same piece of paper – same intrinsic value – in a few short years. A 20 mark gold coin, on the other hand, bought roughly the same amount of groceries in 1923 that it did in 1918.
“Yet that view attaches too much importance to the change in U.S. foreign policy since 2016, and not enough to the change in Chinese foreign policy that came four years earlier, when Xi Jinping became general secretary of the Chinese Communist Party. Future historians will discern that the decline and fall of Chimerica began in the wake of the global financial crisis, as a new Chinese leader drew the conclusion that there was no longer any need to hide the light of China’s ambition under the bushel that Deng Xiaoping had famously recommended.”
USAGOLD note: Insights from historian Niall Ferguson on what happened to U.S.-China relations and what we might expect in the future. A lengthy, important read on the developing new Cold War with China that Ferguson sees as “inevitable and desirable.”
Repost from 7-5-2020
“Although silver has picked up significantly since its March low it has greatly underperformed gold over the past two years. But this is normal during the earliest stages of a major sector bull market, when gold is favored over silver. On its 20-year chart we can see that silver remains stuck within a giant base pattern that started to form as far back as 2013. This chart makes clear that once gold breaks out to new highs against the dollar, then silver should break out of this base to enter a dynamic advancing phase.”
USAGOLD note: Maund says silver can go either way – and that its plight is dependent on exogenous factors like the direction of the stock market, gold, and Fed policy.
Repost from 7-5-2020
“But these deficit-financed interventions must be fully monetized. If they are financed through standard government debt, interest rates would rise sharply, and the recovery would be smothered in its cradle. Given the circumstances, interventions long proposed by leftists of the Modern Monetary Theory school, including helicopter drops, have become mainstream.”
USAGOLD note: Doctor Doom outdoes himself in this one. He warns at one point that even if the coronavirus is contained his year, it could potentially return next flu season and cause markets to crash again. The engame? …… a “persistent depression and a runaway financial-market meltdown,” he says.
Repost from 3-24-2020
“I’m fully aware that the provocation is that of, seemingly, an act of God or at least a viral mutation or something so we ought not to begrudge the Fed its humane impulses. But how do you not mobilize every single possible tool in your kit or bomb in your arsenal next time there’s a downturn in anything? I think this introduces the possibility of everything that gold bugs have been praying for. Are we going to talk about gold? I can’t wait.”
USAGOLD note: Grantian wisdom at its best ……With his sense of humor (as you can tell from the above) well in place.
Repost from 3-28-2020
“’As real yields continue to move lower, it makes gold more attractive,” said [MKM Partners’ JC] O’Hara. “We plotted gold along with real yields and that’s the spread between the U.S. 10-year yield less the 10-year breakeven rate. … Yields have been negative and declining for the majority of 2020, and we see no end to that trend for the foreseeable future.’ That tailwind could lift gold as high as $1,900, says O’Hara, implying nearly 7% upside.”
USAGOLD note: The Fed has said it will keep rates near zero to “at least 2022” [CNBC – 6/10/20]. If that be the case, gold has a long way to go with the wind in its sails.
Repost from 7-5-2020
“I have found throughout my long investment career that an investor needs to make very few investment decisions in their lifetime. The key is to identify a long-term trend as it begins to emerge, invest in that trend, ride it until it ends and another trend replaces it. As an example, U.S. stocks in the 50s and 60s, commodities in the 70s, Japanese stocks in the 80s, tech stocks in the 90s, commodities in 2000s, and tech and paper assets in the 2010s. The next trend that is emerging will favor things or hard assets. This is what the gold markets are telegraphing now. This trend will be inflationary driven by resource shortages and a tsunami of money printing.”
USAGOLD note: A very well thought out piece from Jim Pulava – well worth the visit at the link above. Everything cycles and he believes we are moving into a part of the investment cycle that will favor “things” over “paper”.
Repost from 7-5-2020
“A resurgent coronavirus pandemic in the United States and the prospect of improving growth abroad are souring some investors on the dollar, threatening a years-long rally in the currency. … A decline in the dollar earlier this week set off a technical formation known as a ‘Death Cross,’ which occurs when the 50-day moving average crosses below the 200-day moving average, according to analysts at BofA Global Research.”
USAGOLD note: A heads-up is in order as death crosses are something that garner considerable attention in trading circles. “The death cross indicator,” says Investopedia (with reference to the stock market), “has proven to be a reliable predictor of some of the most severe bear markets of the past century: 1929, 1938, 1974, and 2008. Investors who got out of the stock market at the start of these bear markets avoided large losses that were as high as 90% in the 1930s.” Could be good for gold and silver.
“After months of living with the coronavirus pandemic, American citizens are well aware of the toll it has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there’s another threat to the economy, too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed.”
USAGOLD note: With that, Partnoy, a law professor at UC Berkeley who once structured securities at Morgan Stanley, launches into a lengthy dissertation on how a financial sector collapse could happen centering around a breakdown in the CLO market (collateralized loan obligations).
“China’s official gold reserve holdings of 1,948 tonnes — although suspected to be much higher than that — are all held inside the country. In fact, no one outside of China is quite sure where all that gold is, but the two most likely places are, one, the gold is held in vaults within the People’s Bank of China in Beijing or, two, somewhere else under the control of the People’s Liberation Army. Or, possibly both.”
USAGOLD note: Keep your friends close and your gold closer ……
The stock market is poised for a 40% drop, warns economist who says the current climate feels a lot like 1929
“I think we’ve got a second leg down and that’s very much reminiscent of what happened in the 1930s where people appreciate the depth of this recession and the disruption and how long it’s going to take to recover. … Stocks are [behaving] very much like that rebound in 1929 where there is absolute conviction that the virus will be under control and that massive monetary and fiscal stimuli will reinvigorate the economy.” – A. Gary Schilling, economist – A. Gary Shilling & Co
USAGOLD note: Schilling joins a group of prominent economists and market analysts who see similarities between the 1930s and the present. Schillings warning about a 40% drop prompts a quick review of the market action following the 1929 crash. The top (380) to bottom (43) decline occurred over a three year period from late1929 through most of 1932 and amounted to a more than 85% loss of index value. The Dow Jones Industrial Average did not return to its 1929 peak until late 1954 – 25 years after the Great Crash.
Chart courtesy of MacroTrends.net
“Now that clients are starting to say to me, ‘Well this thing has more room to run,’ I’m starting to get a little bit uncomfortable,” [JPMorgan’s global market strategist David] Lebovitz said. “Because at the end of the day, you have sentiment flying at the center of this and human behavior is the one thing nobody’s good at predicting, regardless of how much data you have. He added: ‘We’ve never had a downturn like this, and we’ve never had a policy response like this. So trying to say, ‘This is what happened last time,’ and apply it to the future feels a little bit challenging.’”
USAGOLD note: The markets are navigating uncharted waters at best dangerous and unpredictable. Some see it; some do not.
“A less innocent — but all too plausible — alternative reading is that investors now believe central banks will exercise complete control over asset prices for the foreseeable future. In other words, the categorical imperative of policymakers doing ‘whatever it takes’ to counter the current crisis could ensure a lasting decoupling of equity prices from ailing economies.
USAGOLD note: Plender thoughtfully lays out the possible scenarios if and when the Fed moves to yield control Including those he describes as “morally hazardous.” The short answer to FT’s headline question? Helicopter money and its economic cousin, MMT, come to mind.
Repost from 7-1-2020
“… [P]olicymakers now see their primary task as staving off downturns and boosting growth and inflation. Central bankers have come out and said governments need to do more to stimulate growth with fiscal policy. The way to invest for unexpected bursts of fiscal stimulus might be assets that have largely been out of favor in recent years, such as value stocks of financial and non-U.S. companies, and perhaps commodities.”
USAGOLD note: First, we disagree with the notion that the baby boomer investing era is coming to an end. To the contrary, we see it as being in its formative years. Generally speaking, investors do not suddenly stop being investors arbitrarily at 70 years of age. Second, the headline to this article, in all fairness, belies the content. What it is really about is the changing investment landscape from one dominated by disinflation to one potentially featuring inflation (perhaps even runaway inflation) – a paradigm change that, should it occur, will need to be taken into account in the investment portfolio.
Repost from 6-19-2020
“Speaking at a Schroders breakfast briefing yesterday (January 22), Janet Mui, global economist at Cazenove Capital, said she thought investing in gold was the best way for advisers and fund managers to hedge the risks in their portfolios. She said: ‘Gold has the feature of portfolio hedging and diversification. Gold should be in your portfolio.’”
USAGOLD note: More and more, it is becoming a mainstay in the financial business that the wise investor and/or financial advisor embrace gold as a means to capital preservation in a rapidly changing and increasingly dangerous investment climate. In Cazenove’s case, it is emphasizing gold as a hedge against geopolitical turbulence.
Related, please see:
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Repost from 1-24-2020
“‘If you don’t have a tail hedge, I suggest not being in the market [as] we’re facing a huge amount of uncertainty.’ That’s “Black Swan: The Impact of the Highly Improbable” author Nassim Nicholas Taleb offering his view on the risks swirling in the market and a growing lack of clarity about the future in the era of a deadly pandemic that has created a public health and economic crisis.”
USAGOLD note: Taleb goes on to say “we are printing money like there’s no tomorrow.”
Repost from 7-2-2020
Repost from 6-29-2020
Fred Hickey/Twitter feed
“I’d be mighty uncomfortable right now with gold inching ever closer to a major breakout if I was one of those many wise guys who’d sold out their long gold futures positions, sold GDX, & bought DUST in anticipation of a seasonal sell-off that hasn’t occurred. A perfect environment for gold – now breaking out & on its way to new highs, leaving lots of influential gold traders (long-term bulls) on the sidelines & now having to chase gold higher. Only 1 of half-dozen traders (with lots of followers) has thrown in the (bear) towel (last nite) First the smart money guys bought gold (Tudor-Jones, Druckenmiller, Gundlach, Dalio, Zell etc. Now mainstream money’s coming in (see recent Reuters story about 9 major wealth advising firms recommending as much as 10% gold allocations). Public will follow. 30 tons into GLD last 2 days.”
USAGOLD note: There was a time when gold was considered a marginal choice on Wall Street. Over the past several years, it has become increasingly mainstream with a good many fund managers and investment advisors consistently touting it as a necessary inclusion in the well-balanced investment portfolio. Below is a link to the Reuters article Hickey cites above:
Repost from 7-2-2020
“‘We are hearing it more and more as we get more data. People are getting nervous again. Business leaders are getting worried. Consumers are getting worried. And there is a real sense this might go on longer than we have planned for,’ Bostic said in webcast remarks to the Tennessee Business Roundtable.”
USAGOLD note: Some reported this comment from Atlanta Fed President Raphael Bostic Bostic as being the inducement for gold jumping higher yesterday. Generally speaking, comments and observations from regional Fed presidents do not move markets. This comment will raise a few eyebrows, however, in that Bostic is relaying what “business leaders” are telling him.
Cartoon courtesy of MichaelPRamirez.com
“The central bank’s program to buy corporate debt just delays the inevitable collapse and makes it worse, the Bond King contends. … Gundlach, the CEO of DoubleLine Capital, argued that ‘the price of corporate bonds isn’t really real. There’s no price discovery mechanism that’s being pegged. There’s no message; there’s just a target price that the Fed has been doing, and that led to a pop-up in corporate bonds.'”
USAGOLD note: Gundlach’s complaint has become a common one among knowledgeable money men. Ray Dalio recently told Bloomberg that after the 2008 financial crisis, the Fed applied its largesse to a small coterie of banks and financial institutions that it deemed systemically important. “Now,” he says, “the whole economy has become systemically important.” …… To what end no one knows.