John Rubino/Dollar Collapse
“Two points about Mobius’ suggestion that most portfolios should be 10% allocated to gold: First, the idea of replacing dollar cash with a historically better-performing store of wealth seems like a no-brainer in a world of soaring fiat currency debt and plunging interest rates. Second and vastly more interesting, the current allocation to gold in the financial world is about 1% of total investable capital, so moving from here to 10% would produce spectacular price gains for gold.”
Image courtesy of Visual Capitalist/Jeff Desjardins
Repost from 7-11-2019
“There is lots of institutional demand waiting on the sidelines. Gold is reappearing on everyone’s radar, and investors are becoming more interested. Gold is in a bull market in most currencies, and overall is doing exceptionally well. The world gold price is close to all-time highs. He thinks that gold will now move into a bull market in dollar terms and $1500 should be a relatively easy target. Election years are generally favorable for gold.”
USAGOLD note: Stoeferle has been one of our favorite gold market analysts for a good many years. With co-author Mark Valek, he publishes each year one of the most thorough reviews of the gold market available. This interview updates his position in light of recent events.
Repost from 7-5-2019
“Morgan Stanley economists expect the Federal Reserve to make a half percentage point rate cut to head off downside risks and the impact of a weakening global economy and trade tensions. ‘Risks to the outlook remain skewed to the downside. A non-linear impact to growth could materialize if financial conditions tighten, bringing corporate credit risks to the fore,’ the economists wrote in a note Wednesday.”
USAGOLD note: We made reference to this article in this morning’s DMR. With the chairman coming down decidedly on the side of lower rates, and perhaps other forms of accommodation, the remaining question is to what degree. Morgan Stanley says a half a point. Jim Cramer had an interesting reaction to Powell’s testimony today. “Powell,” he says, “seems to be very in sync with the White House all of a sudden.”
Financial Times/David McWilliams
“As we mark the 10th anniversary of the bull market, it is worth considering whether the efforts of the US Federal Reserve, under Mr Bernanke’s leadership, to avoid 1930s-style debt deflation ended up spawning a new generation of socialists, such as the freshman Congresswoman Ms Ocasio-Cortez, in the home of global capitalism.”
USAGOLD note: At the end of this very interesting editorial, McWilliams asks a compelling question: “What if a policy designed to protect the balance sheets of the wealthy has unleashed forces that may lead to the mass appropriation of those assets in the years ahead?” Long before a 70% tax rate is promulgated, though, we could face the prospect of asset appropriation in forms more subtle than asset appropriation – deflation, runaway inflation or any one of the maladies that fall in between. . . . .
Repost from 3-3-2019
Credit Bubble Bulletin/Doug Noland
“I’ve witnessed a lot of ‘crazy’ in my three decades of closely following various Bubble markets (i.e. Japan’s Nikkei ending 1989 at 38,916 (closed Friday at 21,746); manic early-nineties buying of Mexican tesobonos; late-1993 collapsing U.S. yields and Bubble excess that portended the 1994 rout; speculative Bubbles in SE Asian securities and Russian bonds; LTCM with $2 TN notional derivatives exposures; Internet and tech stocks in 1999; and $1 TN of new subprime CDOs in 2006; etc.). Yet nothing compares to the ongoing global yield collapse. . .According to Bloomberg, the amount of negative-yielding debt globally jumped Thursday to a record $13.4 TN. Rising almost $2.2 TN over the past month, ‘negative-yielding debt now comprises 25%’ of the total investment-grade universe.”
USAGOLD note: Doug Noland maps the complicated terrain that comprises credit markets at this point in time and concludes that the Fed “should think twice before it feeds this beast.” Both the White House and Wall Street though say – “Consequences be damned – feed the beast. Go to zero. Go beyond.” The Fed must decide whether or not to push button.
Repost from 7-8-2019 [Note 7-10-2019 – Looks like it has decided to feed the best/push the button. . .]
Bonner & Partners/Bill Bonner
“Had America stuck with real, gold-backed money… and/or had the Fed not supported Wall Street with ultra-low interest rates and $4 trillion of new money… the situation would be much different. There would be no trade deficit with China. There would be no $250 trillion in debt. An F-150 would probably cost less than it did in 1971, not more. The working class would have nothing to grumble about… And Donald Trump would not be president. The Fed would not be ‘normalizing,’ because it never would have un-normalized. The rich would not be so rich. The Dow would not be over 25,000. The government would not have $22 trillion of debt itself. And we wouldn’t be up at 6 a.m. writing this Diary.”
USAGOLD note: Another stellar piece of writing/thinking from Bill Bonner. . . .His third bold prediction, I should add, might surprise you. It did me.
Repost from 3-4-2019
Juan Carlos Artigas/SPDR Blog/7-2-2019
“As central banks have upped their ante to gold, investors searching for ways to optimize portfolio outcomes might ask if they could potentially benefit by taking a page from the central bank playbook—using gold to diversify their own portfolios.”
USAGOLD note: It is a vindication of sorts to know that central banks accumulate gold for the very same objectives pursued by individual investors. Though ‘peace of mind’ is nowhere to be found on the chart below, it is the one objective that comprises the sum total of the roles listed.
Chart courtesy of the World Gold Council-GoldHub
“When Federal Reserve Chairman Jerome Powell testifies before Congress on Wednesday and Thursday, he is expected to talk about slowing economic activity and increased risks, showing that the Fed is ready to cut interest rates as needed. But Powell is also likely to keep the markets — and the White House — guessing about how soon and how deep the Fed intends to trim rates, when it meets at the end of July.”
USAGOLD note: The headline says it all. . . .
“Gold is a highly liquid yet scarce asset, and it is no one’s liability. It is bought as a luxury good as much as an investment. As such, gold can play four fundamental roles in a portfolio:
–a source of long-term returns
–a diversifier that can mitigate losses in times of market stress
–a liquid asset with no credit risk that has outperformed fiat currencies
–a means to enhance overall portfolio performance.”
USAGOLD note: Why gold makes sense for private investors as a long-term, all-weather portfolio addition. . . . . . .
Repost from 4-3-2019
“I love gold.” – Mark Mobius
“Veteran investor Mark Mobius says that gold’s set to push higher, potentially topping $1,500 an ounce, as interest rates head lower, central banks extend purchases, and uncertainty surrounding geopolitics and cryptocurrencies fans demand.”
USAGOLD note: Our standard recommendation is a 10% to 30% diversification depending on your particular circumstances, needs and world view (among other considerations). For some, 10% is not enough. For others, 30% is too much. Only you can determine the right number for you.
Repost from 7-4-2019
“Richard Clarida, a well-respected economist and market expert, joined the Fed Board as vice chair in the fall of 2018, tipping the balance of the FOMC in a more dovish direction. Before then, Fed Chair Jerome Powell’s own dovish tendencies had been kept in check by a slightly less dovish staff and the third member of the Fed’s leadership troika, New York Fed President John Williams, who expected inflation to rise gradually above target as the labor market tightened.”
USAGOLD note: Noriel Roubini offers an interesting take on recent developments at the Fed. . . .
Repost from 3-18-2019
Sardines, Old Maid and Musical Chairs
“There is the old story about the market craze in sardine trading when the sardines disappeared from their traditional waters in Monterey, California. The commodity traders bid them up and the price of a can of sardines soared. One day a buyer decided to treat himself to an expensive meal and actually opened a can and started eating. He immediately became ill and told the seller the sardines were no good. The seller said, ‘You don’t understand. These are not eating sardines, they are trading sardines.’
There is great allure to treating stocks as pieces of paper that you trade. Viewing stocks this way requires neither rigorous analysis nor knowledge of the underlying businesses. Moreover, trading in and of itself can be exciting and, as long as the market is rising, lucrative. But essentially it is speculating, not investing. You may find a buyer at a higher price—a greater fool—or you may not, in which case you yourself are the greater fool.” – Excerpt from “Margin of Safety” by Seth Klarman
USAGOLD note: This Seth Klarman anecdote reminds us of the quote from Maynard Keynes on the Old Maid and Musical Chairs:
“For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs — a pastime in which he is victor who says Snap neither too soon nor too late, who passed the Old Maid to his neighbour before the game is over, who secures a chair for himself when the music stops. These games can be played with zest and enjoyment, though all the players know that it is the Old Maid which is circulating, or that when the music stops some of the players will find themselves unseated.” – John Maynard Keynes
Full Article: Value Walk/The Acquirer’s Multiple/3-2-2018
Bloomberg/Craig Stirling and Zoe Schneeweiss
“‘She’s really a political figure, much more so than an economist,’ Alicia Levine, chief strategist at BNY Mellon Investment, said on Bloomberg Television. ‘She’s very political, she’s very wise, and I would assume she has the best economists that can help her with this. It is a little puzzling because she’s not known as one of the leading economic minds out there.’”
USAGOLD note: Our guess though is that the difference will be in style not substance. . .
Repost from 7-3-2019
“At current prices, the minerals contained in asteroid 16 Psyche are said to be worth $700 quintillion — enough to give everyone on the planet $93 billion. We’re all going to be richer than Jeff Bezos! OK, now for the bad news: This isn’t going to happen.”
USAGOLD note: Smith goes on to elaborate on why he believes that an asteroid made of gold is not going to make us all rich. “Wealth,” he says, “doesn’t come from big hunks of metal. It comes from the ability to create things that satisfy human desires.” We’ll go along with that. . . .At the same time, though, “big hunks of metal” in the form of coins and bullion can go a long way in protecting the wealth one has already acquired.
“Gold prices can continue to climb even after they hit a multi-year high last week, a global investment strategist said Monday. In fact, prices are set to ‘reach $2,000 by the end of the year,’ predicted David Roche, president and global strategist at London-based Independent Strategy.”
USAGOLD note: Something major would need to happen for gold to reach $2000 by the end of the year. Roche thinks he knows what that something might be. Financial markets, he says, “are are now poised to crumble like a sand pile.”
The National Interest/Neil McInnes
“In fact, Hayek said, central planning led, via cumulative attempts to mend its inevitable failures, to ‘a servile state’ (he recalled Hilaire Belloc’s 1913 book of that name). It led to serfdom, to a condition ‘scarcely distinguishable from slavery.’ Moreover, any attempt at getting a little bit pregnant in this domain, by toying with moderate planning and a ‘middle way’ between capitalism and socialism, would set the democracies on a slippery slope that would end, more slowly but just as surely, in that same serfdom. The free market was not only more efficient economically but indispensable for political and cultural freedom. Its enemies were intellectuals, meddling politicians–and unbridled democracy, which is to say, oppression and spoilation by demagogues invoking the unrestricted will of the majority.”
USAGOLD note: Given the developments in American politics over the past several months, including the left’s sudden embrace of Modern Monetary Theory, it might be worthwhile to revisit the thinking of Frederich von Hayek and, in particular, his book, The Road to Serfdom. Von Hayek was awarded the Nobel Prize for Economics in 1974. The article linked is a review of that book and highlights many of von Hayek’s principles. He memorably dedicated the book to “The socialists of all parties”.
Repost from 4-23-2019, article publication date = 3-1-1998
“President Trump has never been a fan of the strong dollar. And after beating around the bush for months by demanding a 50 bp rate cut and more QE from the Fed, it seems the president is now explicitly calling on the US to artificially weaken the greenback by any means necessary.”
USAGOLD note: Durden ends this short piece with a “for everybody who bought the dip in gold the other day. . . .well done.” We are likely to see a lot more dip buying in the days and weeks ahead.
“Insanely bullish for gold.” – Kevin Smith, CFA
Repost from 7-3-2019
“It’s all systems go for gold investors. The bullion market is stirring from a multiyear slumber and looks set to enter a sustained rally, experts say. Double-digit increases within the next 18 months may be only the start of the price surge. ‘[W]e believe there is a very good chance that this marks the beginning of a new gold bull market,’ says gold market veteran Joe Foster, portfolio manager for the VanEck International Investors Gold Fund. Foster says the run is ‘likely to last several years.'”
USAGOLD note: A review of the developing strong bullish sentiment among market professionals. . . . . .
Repost from 7-2-2019
“Economist Nouriel Roubini, who earned the appellation ‘Dr. Doom’ a decade ago for his predictions of a global financial crisis sparked by the bursting of the U.S. real estate bubble, is once again warning of a dire economic outlook, this time sparked by the U.S.-China trade policy conflict. ‘It’s a bit of a scary time for the global economy,’ the NYU professor and head of Roubini Macro Associates told Bloomberg Television Tuesday. ‘There is a risk of a global recession and financial crisis by next year.’”
USAGOLD note: Roubini sees the trade war getting worse not better. Given the sudden run to gold, it seems investors are in full agreement with his assessment.
Image courtesy of Visual Capitalist/Jeff Desjardins
Repost from 7-3-2019
Financial Times/Martin Wolf
“Start then with inflationary fire. Much of what is going on right now recalls the early 1970s: an amoral US president (then Richard Nixon) determined to achieve re-election, pressured the Federal Reserve chairman (then Arthur Burns) to deliver an economic boom. He also launched a trade war, via devaluation and protection. A decade of global disorder ensued. This sounds rather familiar, does it not? In the late 1960s, few expected the inflation of the 1970s.”
USAGOLD note: True, “in the late 1960s, few expected the inflation of the 1970s.” But the few who did profited enormously by purchasing gold at $35 per ounce just before the United States devalued the dollar and holding it through the following highly inflationary decade. It rose nearly 25 times. What the current president is attempting to do today de facto is what Nixon had the luxury of doing de jure by simply raising the official dollar price of gold. The current president given his proclivity for easy money must envy the way it was in 1971. That aside, the subheadline to this article is the one that caught my attention: Some fear the fire of inflation; others the ice of deflation. Either way, as we have said many times here, gold historically has been an effective hedge against either – fire or ice.
“The global economy is likely heading toward a “significant market downturn,” according to billionaire Paul Singer. ‘The global financial system is very much toward the risky end of the spectrum,’ Singer said during a panel Thursday at the Aspen Ideas Festival. ‘Global debt is at an all-time high. Derivatives are at an all-time high.’ The co-founder and chief executive officer of Elliott Management Corp. estimated that there will be a market correction of 30% to 40% when the downturn hits. He said he couldn’t predict the timing.”
USAGOLD note: With all the talk about the many dangers lurking in the financial markets, we forget the presence of derivatives’ risk – the one risk that could amplify all else. Singer, for one, does not overlook it.
Repost from 6-30-2019
Seeking Alpha/Andrew Hecht
“I find that for me, being a history buff makes it almost impossible not to be a believer in the metal that has been a fixture and sign of value and wealth since ancient times. I am a gold bug and have been since I first started in the commodities business in the early 1980s. There is no other asset that gives a person the same feeling than gold. Holding a kilo bar of the yellow metal is a feeling that no other investment can elicit.”
USAGOLD note: One of the first memories I have of my years in the gold business is holding twenty Austrian Coronna gold pieces in my hand and thinking – “This is only $2,000?” That was in 1973. Of course, now that same twenty coins is worth almost fourteen times that and it still seems too few dollars for so much gold.
Repost from 6-30-2019
“Geopolitical and trade frictions aside, there is a rationale for why foreigners may want to pare back on U.S. debt. That’s because the fiscal deficit is projected to explode higher in the coming years. A perfect way to fund a gold investment might be selling down your bond exposure.”
USAGOLD note: Why bonds might not be the “safe” alternative in this rapidly changing investment environment.
Repost from 6-30-2019
The Sounding Line/Interview of Nassim Taleb
“The problem is centralization causes deficits. You can pretty much take that as a rule. Centralization lowers skin in the game… Whereas when you have decentralized communities, like in Switzerland, people are much more fiscally responsible because those who make decisions live in the community… We have a problem of agency between us and those supposed to represent our interests. They do not represent our interests, so they run deficits… So we need to have some kind of laws banning the government from deficits.”
USAGOLD note: An interesting take on the modus operandi behind the national debt tying into his theories on having skin in the game. He is right, of course, about centralization being at the core of the deficit problem. We do not suspect that his remedy will be introduced in Congress anytime soon.
Repost from 5-20-2019
“There’s a standard explanation when gold prices spike, as with their 10% appreciation over the past month: Uncertainty is driving haven demand. People are worried about war in Iran, or a trans-Pacific trade war, or Brexit. In times of crisis, people instinctively cling to bullion. There’s certainly something to that. But an overlooked factor is what’s been happening in the other haven trade, government bonds.”
USAGOLD note: In a negative yielding world, gold becomes very attractive not only as a safe-haven store of value, but as an asset that can also appreciate in value as it has since the end of May (+10%).
Repost from 6-28-2019
“No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counter-party. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.” – Alan Greenspan, former chairman of the Federal Reserve
Image courtesy of the British Museum Collection/Lydia, croesid, ca 550 BC
Repost from 10/15/2018
YahooFinance/Interview of Will Rhynd
“Although we have not had a Fed rate cut exactly yet, we have expectations that rates are going to go lower particularly real interest rates (the nominal interest rate minus inflation) and so that typically means gold’s price is on the rise and I think this move is here to stay.” – Will Rhind, Graniteshares
USAGOLD note: Rhind goes to say “right now it’s all about interest rates” not fear of an economic breakdown.
Repost from 6-27-2019
“That brings us to our call of the day from Citigroup analysts who say this ‘bullish gold fever is justified,’ and say the metal could reach between $1,500 to $1,600 an ounce in the next 12 months, and $1,500 by end-2019 in the most optimistic of their new predictions for the metal.”
USAGOLD note: A good many bank analysts will be adjusting their market forecasts based on events of the past week. Citigroup is among them. It has been bullish on the metal for some time now, but this forecast of $1500 to $1600 gold still comes as a surprise.
Repost from 6-21-2019
“Bass says ‘I don’t imagine anything getting done,’ and tells investors to buy gold, real estate. Investors are laser-focused on this weekend’s G-20 meeting in Japan, but famed hedge-fund manager Kyle Bass predicted that nothing of importance will be achieved there, and that investors should prepare for President Donald Trump to slap tariffs on every last dollar of Chinese imports.”
USAGOLD note: Kyle Bass gets a lot of attention in the media because he is often right about economic and political events and good places to put money to capitalize on the outcome. Bass has long been an advocate of gold ownership for defensive purposes.
Gold’s Century – While stocks dominated headlines, gold quietly performed
Repost from 6-26-2019
Globe and Mail/Scott Barlow-Market Strategist
“I have been a gold agnostic – occasionally concerned about the effects of monetary expansion but not convinced that hoards of a largely useless metal are the correct way to gauge excesses. . .That said, it is not surprising that global investors faced with obvious financial aberrations, and strong indications of more unconventional monetary policy ahead, are increasingly opting for the traditional wealth-preserving vehicle of gold.”
USAGOLD note: We are trying to reconcile a paragraph that begins with a reference to “hoards of a largely useless metal” and ends with “the traditional wealth-preserving vehicle of gold.” Where the smart money goes, we observe, the crowd eventually follows.
Repost from 6-26-2019