Author Archives: Opinion

Daniel Lacalle

Repost from 2-18-2021

“If you want to protect your savings, gold, and silver are important assets to own, especially the physical asset, not just financial instruments. Equities only help while monetary policy continues to create asset inflation, but that can stop abruptly when money supply growth coincides with nominal GDP growth, as the multiple expansion effect dies. Sovereign bonds are not a solution as both the price and the yield make them the most expensive asset.”

USAGOLD note: Lacalle says that “once in place, the so-called expansionary policy cannot be stopped… The worst excuse of all is that ‘there is no inflation.'” …… A good read on where the economy and financial markets might be headed.

Image courtesy of Visual Capitalist

Financial Times/Rana Foroohar

Repost from 2-17-2021

“Bitcoin isn’t so much a bubble as ‘the last functioning fire alarm’ warning us of some very big geopolitical changes ahead. I agree. Central bankers have over the past 10 years (or the last few decades, depending on where you put the marker) quashed price discovery in markets with low interest rates and quantitative easing.”

USAGOLD note: We do not post the link to this article to boost bitcoin but because it frames so well what Foroohar calls “a new world order” wherein the dollar diminishes in stature. She sees bitcoin as the “canary in the coal mine” with some in the investor community believing the United States “will eventually come in some ways to resemble Weimar Germany.” Foroohar says none of this makes her want to own bitcoin.

Financial Times/Michael Mackenzie

Repost from 2-17-2021

“The trend will sap demand for fossil fuels but also will drive a strong cycle for copper, nickel, silver and platinum — important materials for batteries and for the expansion of electrical power grids and charging stations.”

USAGOLD note: FT’s Mackenzie joins a growing list of analysts and commentators contemplating the emergence of a secular bull market in commodities that could last for the next decade. Per the snippet above – more than hopes of Reddit-led short squeeze – USAGOLD clientele have increasingly added silver and platinum to their holdings for two more lasting and fundamental reasons. First, their relatively low prices compared when with other assets – and not just gold, but stocks and bonds as well. Second, a perception that demand will increase for both items in the years to come as a result of the Biden push for a greener economy. The chart below shows the uptrend many see as part of a first leg in the rally.

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

Mish Talk/Mish Shedlock

Repost from 2-14-2021

“This will end in a currency crisis of some sort perhaps in conjunction with the shooting war Hugo envisions. I am not suggesting the end is near. How long the shrinking middle class will put up with this is a mystery. But when the currency crisis does arrive, expect this global cry: No one could possibly have seen it coming.”

USAGOLD note:  Two brief but incisive posts on the current state of global economic affairs from Hugo Salinas Price and Mish Shedlock …………

CNBCTradingNation/Stephanie Landsman

Repost from 1-4-2020

“What’s holding the boot together is basically zero interest rates. As long as rates remain where they are, unless we have a real dramatic pullback in economic activity, this bubble that we’re in is probably not going to burst any time soon. We have to understand though we are investing in a bubble.” – David Rosenberg, Rosenberg Research [Emphasis added.]

USAGOLD note:  The problem with bubbles is no one can know when it is going to burst, but when it does the damage can come swiftly and with a vengeance. The best way to deal with it, as we have said repeatedly, is not necessarily to vacate the market – or try to pick a top – but to build hedges.

Daily Reckoning/Bill Maher

Repost from 2-16-2021

“Deflation stacks additional weight upon the shoulders… further encumbers the back… and buckles the knees. Recall, debt’s real value increases under deflation. Inflation, meantime, eases a man’s load. Debt’s chains weigh lighter upon him. He can get on… and move ahead. Hence the Federal Reserve’s mania for inflation. It quickens the pace of commerce. It eases debt’s burden, public and private.”

USAGOLD note:  With that as his premise, Maher lays out what he sees as the likely outcome – the two choices available to the Federal Reserve. “The show,” he concludes, “will continue until it cannot.”

Technical Traders/Chris Vermuellen/2-17-2021

Repost from 2-17-2021

“My research team and I believe the recent downside trend in Gold has reached a support level, near $1765, that will act as a launching pad for a potentially big upside price trend. This support level aligns with previous price highs (May 2020 through June 2020) after the Covid-19 price collapse, which we believe is an indication of a strong support level.  As you can see from the Gold Futures Weekly chart below, if Gold price levels hold above $1765 then we feel the next upside rally in metals could prompt a move targeting $2160, then $2400.”

USAGOLD note:  A ray of light in an otherwise bleak setting from Mr. Vermuellen …… but first, he points out, $1765 must hold.

USAGOLD note (2-22-2021-AM): Half-hearted no more………Gold and silver staging strong rallies at mid-morning (MT). Gold bouncing off lows indicated by Vermuellen above warranting a repost. With nothing fundamental surfacing as yet, this morning’s upside appears to be the result of a technical rally and short-covering touched off by strong pricing in the commodities sector – oil up +3%, copper up +1.5%. LME Index up 2.96%……

MarketWatch/Steve Goldstein

“We believe that the tide on yields and inflation is turning, which will pose a major risk to multiasset portfolios.” – Marko Kolanovic, JP Morgan

USAGOLD note:  Marko Kolanovic echoes Steve Hanke’s call from a few days ago that we have now entered the initial stages of a commodity supercycle driven by “ultraloose monetary and fiscal policies.”

Repost from 2-16-2021

NewsMaxFinance

USAGOLD note:  If not 2021, then when……if ever? NewsMax relays a Wall Street Journal report on Daly’s comments. We would add that the chairman of the Federal Reserve appears to be on the same page – along with most other policymakers at the Fed. Round and round we go. Where it stops, nobody knows. The chart below illustrates the massive acquisitions made by the Fed in this “bond-buying spree” the vast majority of which has been federal government debt.

Sources:  St. Louis Federal Reserve [FRED], Board of Governors Federal Reserve System
Click to enlarge

Repost from 2-16-2021

The hazards of asset allocation in a late-stage major bubble

GMO/Jeremy Grantham

“But this bubble will burst in due time, no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios. Make no mistake – for the majority of investors today, this could very well be the most important event of your investing lives. Speaking as an old student and historian of markets, it is intellectually exciting and terrifying at the same time. It is a privilege to ride through a market like this one more time.”

USAGOLD note:  Grantham doesn’t pull any punches in this assessment.  “I believe this event,” he warns, “will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.” Grantham has a strong record of predicting the deflation of market bubbles.

Repost from 1-7-2020

BloombergOpinion/John Authers

“The financial history of the past 50 years is in many ways the story of a series of attempts to find a different anchor to replace gold as the mechanism of control. Each new regime has been greeted with a change in the trend of the price of stocks in gold terms.”

USAGOLD note:  Authers guides us on a walk down memory lane wherein five different Federal Reserve policy regimes were introduced to replace the gold standard. Each eventually created volatility in financial markets that brought about their demise and the introduction of a new standard. Now, says Authers, the Fed has deployed the “QE standard, or a refusal to let bond yields rise,” which is workable until inflation kicks in. Then it will seek still another replacement. In each case, those regimes’ apex coincided with an overvaluation of stocks to gold, as shown in the chart below.

S&P 500 to Gold Ratio
(1927 to present, log scale)

Chart courtesy of macrotrends.net • • • Click to enlarge

Repost from 2-14-2021

Credit Bubble Bulletin/Doug Noland/2-12-2021

“Central banking traditionally operated as a judicious and conservative institution, with an overarching mandate focused on promoting monetary and financial stability. Historically, recognition that missteps can impart such profound societal hardship necessitated an incremental and risk-averse approach. Stability and doing no harm took precedence. At least that’s the manner in which central banking has been approached for generations. The world is now in the throes of history’s greatest experiment in central bank doctrine and operations. It’s easy to forget that the Federal Reserve is only about 13 years into experimental QE activism. Indeed, central bankers have minimal history for a well-founded assessment of how QE operates, its various impacts and consequences, both intended and unintended. The lack of clarity beckons for circumspection.”

USAGOLD note:  With that as an introduction, Doug Noland offers a lengthy review of quantitative easing – its many layers and potential consequences – calling it “ruinous inflationism.” He concludes that QE will continue until the bubble finally bursts and inflicts “terrible hardship throughout the economy.”

Financial Times/Chris Giles/2-15-2021

“Joe Biden’s strategy for the US economy is the most radical departure from prevailing policies since Ronald Reagan’s free-market reforms 40 years ago. With plans for public borrowing and spending on a scale not seen since the second world war, the administration is undertaking a huge fiscal experiment. The whole world is watching.”

USAGOLD note:  What Reagan-Volcker were to runaway inflation (verging on hyperinflation), Biden-Yellen-Powell are to runaway disinflation (verging on deflation). Investors sense the changes Financial Times makes the centerpiece of this “Big Read” and are buying the precious metals to bridge this new, paradigm shift. It’s ‘go big or go home’ and the dollar could become the most direct casualty. (Note the portrait of Franklin Delano Roosevelt in a position of prominence over the fireplace.)

Financial Times/The Editorial Board

“If the Twenties do ‘roar’, as many economists are suggesting, then it could be as much for higher inflation as economic growth. The Federal Reserve must be mindful of these risks.”

USAGOLD note:  The previous Roaring Twenties were driven by inflation, the Fed stepped in to quell the trend and touched off a deflationary episode history labels the Great Depression. This editorial assumes that the Fed can put a stop to inflationary tendencies quickly and assertively. When push comes to shove, that might not be possible this time around as we have pointed out previously. Any attempt to taper could be met quickly and decisively by a rout in the stock and bond markets and cries of madness from the White House and Capitol Hill.  A house of cards no matter how elaborate is still a house of cards.

Repost from 2-11-2021

BullionStar/Ronan Manly

“And where have we seen investment demand being strong right now? In the physical market of course, all the way from retail to wholesale to mints to refineries. So now is not a time when there will be ‘refiners off-loading their metal’ into vaults because of weak investment demand. In fact the opposite is to be expected.  In short, strong investment demand leads to depleted unreported custodian vaulted stocks. And Exchange Traded Products have at all times to compete with the rest of the market for the pool of available silver in the London vaults of the storage providers.”

USAGOLDl note:  In short, Manly believes inventories of silver in London are at very low levels.  As a result, a persistently high level of demand could ultimately strain an already tight supply situation. As shown in the chart below, long before the Reddit Rebellion’s raid on the silver market became national headlines, ETF stockpiles experienced rapid growth. Over the past two years, silver ETF inventories have grown by almost 65%, and that is by weight, not dollar value.

Chart courtesy of GoldChartsRUs • • • Click to enlarge

Repost from 2-10-2021

The Wall Street Journal/Aaron Back

USAGOLD note: In this article with an intriguing headline, Back begins by stating that the dollar yield premium over other currencies has “largely disappeared,” quotes TS Lombard economist Steven Blitz as saying the new Fed stance effectively ends the strong dollar policy, and concludes by saying “none of this needs to be bad news for investors.” The final paragraph will come as a surprise to most readers. Aaron Back is the Journal’s Heard on the Street columnist.

Image:  Ed Stein rendition of Gresham’s Law – Bad money drives out good.

Repost from 1-6-2021

MarketWatch/Barbara Kollmeyer

“Acknowledging Tesla, Roubini said bitcoins are still ‘barely used by legitimate companies.’ He also harked back to the last bitcoin bubble of 2017-18, when the cryptocurrency went from $1,000 to $20,000 then back to $3,000. And don’t even refer to cryptocurrencies as ‘currencies,’ as almost nothing is priced in them, he said.”

USAGOLD note: Roubini says the cryptocraze is worse than the tulipmania and says even the Flintstones “had a more sophisticated monetary system based on a benchmark” – shells. As for gold, Roubini says it differs from bitcoin in that it has utility for industrial purposes, as a store of value and hedge against inflation, currency debasement, and tail risks. I believe those are the nicest things Roubini has ever said about gold. The MarketWatch article is a synopsis of the original published in Financial Times.

Repost from 2-14-2021

Morning Porridge/Bill Blain/2-11-2021

“Yes… Buttcoin is terribly clever. Yes… it might replace fiat currencies if fiat currencies collapse – but so could cowrie shells. I think if you end up stuck in a desert and arrive at the proverbial oasis, the proprietor will sell the last bottle of water to the traveler with the gold bar rather than the one brandishing a crypto-wallet.”

USAGOLD note:  That is about as candidly and bluntly as it can be said …… Blain once again cuts to the core in this lengthy piece on the current speculative excesses.

Gold-Eagle/John Ing

“As such, gold is a good thing to have. Like America’s polarised political system, investors either love gold or hate gold despite gaining 25 percent in 2020. It comes down to trust. The case for owning stocks is based on low interest rates and zero inflation. We believe the inevitable pickup in inflation will fuel interest in gold, a classic inflation hedge. Gold for thousands of years has provided monetary stability as a tool of wealth preservation and for most of its years, a worldwide reserve for money, as a hedge against currency debasement.”

USAGOLD note: Ing puts together a lengthy but well-reasoned look at the current financial markets mix along with plenty of historical context and comes away with the conclusion that ‘the dollar is not forever’ … Countries and investors, he says, are looking for alternatives.

Image courtesy of Visual Capitalist

Repost from 2-11-2021

Financial Times/Robin Wigglesworth

“Three centuries ago, the Sephardi merchant Joseph de la Vega wrote the first-ever book on a mysterious, disruptive new invention that was taking off in Amsterdam at the time. His evocative description of the stock market still resonates.”

USAGOLD note:  Robin Wigglesworth takes a shot at explaining what’s going on with retail stock market investors and says we may be at “an inflection point for financial markets.” This article is worth the visit just for the quote from de la Vega in Confusion of Confusions written in 1688.

Repost from 2-11-2021