GnS Economics/Tuomas Malinen/10-15-2019
“No one dares to look at the facts—or if they do, they dismiss them. Denial is a powerful force. The fact is that monetary policy is running on empty, at least in the Eurozone, and governments can provide only limited fiscal stimulus. We’ve reached the end. There’s nothing left to do than prepare for the crisis and wait. And, to be very afraid.”
USAGOLD note: A simultaneously dire and persuasive forecast from economist Tuomas Malinen, chief economist at GnS Economics and Adjunct Professor of Economics at the University of Helsinki.
Reuters/Marc Jones and Dhara Ranasinghe/10-15-2019
“I’m not expecting any of this to go away in the years ahead.” – James Bullard, President, St. Louis Federal Reserve Bank
USAGOLD note: A candid assessment of the trade situation from an important voting member of the FOMC. . . . . . Seen as an interest-rate dove,Bullard argued for a half-point cut at the last meeting of the committee.
Market Sanity/Video interview
USAGOLD note: Harry Dent does not mince words in this interview. He calls what’s headed our way “the crash of a lifetime” – similar to the 1930s. 2020 is the year the bubble peaks, he says.
Repost from 10-10-2019
Credit Bubble Bulletin/Doug Noland
“And what about the possible impact of a positive G20 and momentum toward a U.S./China trade deal? Stocks, no surprise, are readily excitable. For global safe haven bonds, however, it’s of little consequence. How can this be? Because even a trade deal would at this point have minimal impact on what has become deep and rapidly worsening structural impairment. Trade deal or not, Chinese exports to the U.S. will decline, right along with capital investment. Even with a deal, the Chinese financial system faces the consequences of years of rapid expansion as economic prospects deteriorate. Sure, 6% growth as far as the eye can see. That implies a further surge in consumer debt and even more dangerous mortgage finance and apartment Bubbles. Unparalleled overcapacity and maladjustment.”
USAGOLD note: For Noland, it’s all about China’s internal economy rhyming with the U.S.-based sub-prime debacle of 2007-2008. . . “China’s crisis clock,” he says, “began ticking no later than with last month’s takeover of Baoshang Bank.”
Repost from 6-30-2019
Make the Libra as good as gold
“Your consultants, like most economists today, will be vociferously opposed to the yellow metal, burdened as they are by ignorance and countless myths and superstitions. This widely shared skepticism will actually be an advantage, as it will keep away well-capitalized imitators.”
USAGOLD note: Advice delivered with tongue firmly in cheek . . .
Repost from 6-29-2019
“The United States is just one bad recession away from being right back at zero interest rates or even lower, Larry Summers warned on CNBC on Monday.”
USAGOLD note: File for future reference. . . .from an ex-Secretary of the Treasury and still a major player on the international economic scene.
“Major gold companies are running out of reserves and every year it costs more to mine. That is causing an “existential crisis” for the gold mining industry, as executives at gold producers like Barrick, Newmont Goldcorp, Randgold, AngloGold Ashanti, Newcrest and Kinross, puzzle over how to replace their depleted reserves, where new gold will come from, and how they will deal with the rising costs of extraction.”
USAGOLD note: In-ground reserves are down 26% from their peak in 2012 due to “a dearth of new big deposits” being discovered. . . .
“More than two decades since the Asia debt crisis gripped the region, global consulting firm McKinsey & Co. is warning that signs of a rerun are ‘ominous.’ Increased indebtedness, stresses in repaying borrowing, lender vulnerabilities and shadow banking practices are some of the concerns cited by McKinsey in an August report.”
USAGOLD note: Physical gold demand in Asia under these circumstances is stronger than ever.
Repost from 8-20-2019
Business Insider/Bradley Saacks
“Similar to his billionaire hedge fund counterpart Ray Dalio, Baupost Group CEO Seth Klarman is concerned about an incoming financial crisis as well as political and social tension in the US.”
USAGOLD note: Quite a bit of discussion on what Seth Klarman has to say about the current state of economic affairs.
Repost from 1/25/2019
“There isn’t a lack of catalysts to drive the market crazy, including upcoming trade talks, third-quarter earnings reports and President Donald Trump’s impeachment saga. Over the past 30 years, more than 190 S&P 500 companies have seen a daily move of more than 1% in October, the most companies in any given month, according to Macro Risk Advisors.”
USAGOLD note: October is the month when markets have been known to go bump in the night. For details, we recommend a visit to the link above.
Repost from 10-1-2019
“’Normally the business cycle is the key driver of asset prices. … But not at the moment,’ [Deutsche Bank’s Torsten] Slok wrote in a Tuesday note to clients. ‘How can the S&P 500 be so high and credit spreads so tight when rates markets are so worried about the growth outlook and therefore the corporate earnings outlook?’”
USAGOLD note: The answer to the question is that we are in a stock market bubble blown out of proportion by the availability of nearly unlimited credit.
Repost from 10-9-2019
World Gold Council
“Today, gold is more relevant than ever for institutional investors. While central banks in developed markets are moving to normalise monetary policies – leading to higher interest rates – we believe that investors may still feel the effects of quantitative easing and the prolonged period of low interest rates for years to come. These policies may have fundamentally altered what it means to manage portfolio risk and could extend the time needed to meet investment objectives. In response, institutional investors have embraced alternatives to traditional assets such as stocks and bonds. The share of non-traditional assets among global pension funds has increased from 15% in 2007 to 25% in 2017. And in the US this figure is close to 30%.”
USAGOLD note: Gold is considered to be a “non-traditional asset” in this context, yet in reality, it may be the most traditional asset of them all. It is wealth in its purest form – a stand-alone asset detached from any counterparty risk. Simultaneous to this piece’s publication, Azerbaijan’s sovereign wealth fund announced it is looking to add 50 tonnes of gold to its holdings in 2019 and that it is “steering clear of larger bets on bonds and especially equities.”
Repost from 2/8/2019
“This is the time where you need to reflect upon your strategy. It’s actually easy to manage assets when the economy is booming. It’s much more difficult to manage into a turning point.” – Campbell Harvey, Duke University
USAGOLD note: Yes. Well said. One of the more enduring strategies is to have a hedge in place before that turning point is headlined at all the financial websites.
Repost from 10-9-2019
“I see gold as a solution to many of the issues I’ve laid out, whether it’s recessionary spillover from Germany, high debt levels or helicopter money. I’m not alone in thinking this. In a September report, the World Gold Council (WGC) calls the yellow metal ‘the most effective commodity investment,’ adding that ‘allocations of 2 percent to 10 percent in a typical pension portfolio have provided better risk-adjusted returns than those with broad-based commodity allocations.’”
USAGOLD note: Holmes goes on to make an important point. The very small slice of global capital now devoted to gold among major players leaves room for significant expansion in the future.
Repost from 10-9-2019
The Alchemist/Aelred Connelly interviews the LBMA’s Jeremy East/Q42019
“China remains the largest single consumer of physical gold globally, with estimated annual demand of approximately 2,000 metric tons. . . China is also the largest gold producer in the world, producing approximately 450 metric tons per year.”
USAGOLD note: The shortfall between the 2000 metric tonnes in demand and 450 metric tonnes is Chinese production is made up from global supply. We have often wondered: What are the actual sources for that roughly 1500 tonnes China demands annually?
Should I buy a gold ETF?
Are you looking for a price bet or the real thing?
For safe-haven, asset-preservation purposes, the best alternative is not futures, options, mining stocks or even ETFs, but delivery of the metal itself in the form of gold coins or bullion. Some think that owning an ETF is akin to owning real gold, but it is not. It is essentially a price bet simply because only owners of 10,000 ounces or more (with most trusts) can take delivery of the metal represented by the shares. Then there is the problem of counterparty risk. “Unlike physical gold bullion – which is a tangible asset,” says Mauldin Economics’ Olivier Garret, “ETFs are a financial product that have counterparty risk. Counterparty risk is present when there’s a possibility the other party in an agreement will default or fail to live up to their obligations. . .[O]ne of gold’s primary benefits is being the only financial asset that is not simultaneously somebody else’s liability. Therefore, these ETFs are a poor substitute.” In short, by owning an ETF instead of the real thing, investors expose themselves to one of the primary risks they hope to avoid through gold ownership.
The USAGOLD storage option – strong competition for the ETF
One of the advantages of a gold or silver ETF is that the trustee stores the metal for you and makes it easy to buy and sell. We can open a fully-allocated storage account for you that offers the same advantages. In fact, the annual cost of storage and insurance is actually lower than most ETF fees. You can buy and sell with a phone call. Most importantly, because specific coins and/or bullion are stored in your account, you can still take delivery in part or full whenever you so wish – something, as mentioned above, that the ETFs offer only to their largest institutional clients.
ORDER DESK: 1-800-869-5115 firstname.lastname@example.org
ORDER GOLD & SILVER ONLINE 24-7
“As yet the equity market seems totally unaffected, with volatile and risky stocks still making the running. Although the brontosaurus has been bitten on the tail, the message has not yet reached its tiny brain, but is proceeding up the long backbone, one vertebra at a time.” – Jeremy Grantham, June 2007
USAGOLD note: After quoting Jeremy Grantham, Authers goes on to explain what has bitten the brontosaurus’ tail” and finds that the export business globally are in “true collapse.”
Repost from 10-3-2019
“DoubleLine Capital’s Jeffrey Sherman believes the August rush into Treasurys may have been overdone and said that those worried over a potential economic slowdown in the U.S. may be better served buying gold.”
USAGOLD note: Sherman puts a degree of separation between financial markets’ two favorite safe havens over the past several months. . . . . .
Image courtesy of Visual Capitalist
Repost from 9-11-2019
“New highs are times to take profits on a scale-up basis, and significant corrections offer the opportunity to step up to the plate and repurchase the precious metals. Unfortunately, the human emotions of fear and greed often drive traders and investors to buy when markets are peaking and sell on days like September 5 and 6. Trailing stops can be useful tools and capital savers during wild bull markets.”
USAGOLD note: For Investors in the physical metals, i.e., those who have their positions fully paid for and stored safely away, short-term price movements are not usually a matter of concern. For leveraged investors in the futures and options markets, it is a different story. The short-term is always in such cases a direct and abiding concern. If one fundamentally believes in the metal’s safe haven attributes, a drop in the price can be seen as an opportunity to acquire portfolio insurance at a more favorable price.
Repost from 9-11-2019
Lombardi Letter/Moe Zulfiqar
“You see, after the 1970s, central banks bought into the idea that the U.S. dollar was the savior of the global financial system. They rushed to buy the greenback like there was no tomorrow. After the financial crisis of 2008–2009, it became very clear to central banks that the U.S. dollar isn’t as secure as they were told it would be.”
USAGOLD note: An interesting take on the the motivations behind central bank gold purchases. “The perfect recipe,” he says, “for higher gold prices.”
Image: Gold vault at the Federal Reserve of New York
Repost from 10-8-2019
Bloomberg/Rich Miller and Christopher Condon/10-11-2019
“In foreshadowing the Fed’s decision earlier this week, Chairman Jerome Powell repeatedly insisted that any planned securities purchases would not be a resumption of quantitative easing — the crisis-era stimulus programs that the central bank used to lower long-term borrowing costs and boost the economy.”
USAGOLD note: While Wall Street and most of the rest of the financial world were immersed deeply in the trade talks late last week, the Fed launched a $60 billion per month repo liquidity program. QE or not QE, that is the question. . . . . .Whatever we label it, it adds up to the same thing. The central creating adding regular doses of much-needed liquidity out of thin air. Below Doug Noland provides his view on what might be going on. . . .
Credit Bubble Bulletin/Doug Noland/10-12-2019
“[Financial Times’ Gillian] Tett’s article pinpoints the ‘belly of the beast.’ The GSEs, securitizations, sophisticated mortgage derivatives, and ‘repo’ finance created the nucleus of the risk intermediation and leverage fueling precarious mortgage finance Bubble excess. I am convinced the mushrooming of government bonds, the proliferation of global ‘repo’ markets and off-shore securities lending operations, along with unmatched global derivatives excess and leveraged speculation, are at the epicenter of the runaway ‘global government finance Bubble.’”
USAGOLD note: Noland at his best. . . .Derivatives are back.
Bonner & Parners/Bill Bonner/9-27-2019
“First, let’s square up the numbers. Pooley and Tupy say the typical working stiff has to put in 30% more hours to get the typical F-150. Our figures show more like 100%. We agree on the prices for the F-150. We agree on the average wage in 1970. But what typical wage earner takes home $32.50 an hour today? Pooley must be adding non-dollar ‘benefits’ to wages, just as he is to products.”
USAGOLD note: This is not just a foray into why the average Joe is worse off today than he was in 1970. It is also a study in how economic statistics can be warped to suit the political agenda of the analyst. Bonner, as he oftens does, brings clarity to the numbers.
“Even though the bulls have the upper hand in light of optimistic headlines, Cramer says there’s still plenty of time for the next report to send stocks lower.”
USAGOLD note: Volatility rules the day. . . .in all markets – gold included.
“The bullion bounce surge, which has taken off this month, will continue to be propelled by mounting investor worries, according to Swiss bank UBS. ‘Gold is set to gain as recession, trade and geopolitical risks rise, and yields fall,’ the report states. An ounce of the metal, which recently fetched $1,520 could rally more than 10% to $1,680 in 2020, the usually-conservative bank says.”
USAGOLD note: Another institution – this time UBS – weighs in with a strong bullish forecast for gold.
Repost from 8-15-2019
“The past year has been somewhat surreal in the gold market, as we have the rare occurrence of the dollar rising in somewhat slow fashion while gold bullion has appreciated about $300 per ounce to trade near $1,500. Historically, a rising dollar and rising gold bullion haven’t gone together, but the distortions that have come with global quantitative easing policies are to blame for the breakdown in this inverse relationship.” (See below)
USAGOLD note: We have been tracking this trend here at USAGOLD for quite some time. More and more analysts, like Saxo Bank, see the trend continuing. (See post further below.) To be frank about it, we do not see, at this juncture, much standing in the way in a continuation of the current trends. The article at the link is a very good review if you are new to the “surreal” gold-dollar relationship.
Repost from 10-7-2019
USAGOLD note: “The long-term prospect for gold,” says Mobius, “is up, up and up. And the reason why I say that is money supply is up, up, and up. You know with the efforts by the central banks to lower interest rates they’re going to be printing like crazy.” He thinks a typical portfolio should have about 10% in physical gold.
Repost from 8-20-2019
Saxo Bank/Steen Jakobsen
“We maintain a bullish outlook for gold, based on the assumption that the dollar will weaken and global bond yields stay low. Following a period of consolidation, gold could move higher to reach $1550/oz by year end before moving higher into 2020.”
USAGOLD note: This lengthy report lays out a positive case for gold based on a continuation of current trends, including a strong dollar. In short, Saxo sees gold and the dollar rising in tandem as they have since about mid-year.
Repost from 10-6-2019
“A significant bull wedge is in play, and the target zone is well above the $19.75 area highs!”
USAGOLD note: The latest from Stewart Thomson. . .The “silver metal rat” reference has to do with 2020 being the Chinese zodiac’s year of the Metal Rat – a year “marked by radical positions and choices,” according to KarmaWeather.
“’Gold is a good alternative currency because it’s safe, and because it costs nothing to own it compared to paying negative rates on deposits,’ Roche said. As a result, gold prices will likely touch $1,600 before the end of this year, before moving higher to $2,000 next year, he said.”
USAGOLD note: This CNBC article ends with an insightful piece of analysis from David Roche. Worth the visit. Roche is the latest to join the “$2000 per ounce club.”
Repost from 10-3-2019