Author Archives: USAGOLD
The USAGOLD Website
A guiding light for current and would-be clientele since 1997
When the USAGOLD website was established in 1997, there was no Google, no Facebook, no I-Tunes, no Amazon. Instead there was just a handful of scattered websites trying to figure what this new technology was all about and how it could be used to some advantage. We were among that group. Our idea of innovation in those early days was two spinning globes on either side of the USAGOLD logo. We marveled at it; considered it state of the art.
But being among the first on the internet to have spinning globes was not our only achievement. We were also among the first to sponsor a Daily Market Report (1996), a Discussion Group (1997), Live Prices and Charts (2007) and a Mobile Website (2011) – to mention just a few of our ground-breaking internet ventures. We await the next wave of innovation so that we can offer even more value to our regular visitors.
Through our 23-year presence on the world wide web, the philosophy underlying our website has always been a simple one – to act as a guiding light for our current and prospective clientele by providing a state of the art information portal coupled with a reliable and competitive brokerage service. We had and still have no aspirations beyond that, and that pinpoint focus has paid dividends beyond anything we would have imagined in 1996.
From a humble beginning, we have grown to almost 800,000 visitors per month currently and there have been times when that count has been significantly higher. USAGOLD today remains one of the most highly referenced and visited web portals in the gold business. We once had a client tell us of visiting the Gold Souk in Dubai and being surprised that so many merchant stalls had USAGOLD on their computer screens.
If you would like to gain a better understanding of what USAGOLD has to offer to you as a current or prospective client, the menu at the top of the page is a good place to start.
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Only real intrinsic money survives the test of time
Here is a timeless observation from the now-deceased Richard Russell (Dow Theory Letter):
“Paper money is now being created wholesale throughout the world. Stated simply, all paper currency is now valued against each other. But more important, ultimately ALL paper is ultimately valued against the only true, intrinsic money – gold. In world history, no irredeemable paper currency has ever survived. Since all the world’s currency is now irredeemable (in gold), this means that in the end, the only form of money that will survive is real intrinsic money – gold. It’s not a question of whether gold will survive, it’s a question of when the world’s current paper money will deteriorate and finally die. I can tell you that irredeemable paper will not survive – but obviously I can’t tell you when it will die. The timing is the only uncertainty.”
The chart below from the World Gold Council speaks to Russell’s point. It shows the performance of various currencies – past and present – against gold over the long term. When the end comes, as the chart illustrates, it can come abruptly and without warning. For those who stick to the proposition that gold is not really an inflation hedge, or that it is not really a safe-haven against currency debasement, the chart offers instruction. For those who already own gold as a safe-haven, it provides justification. For those who do not own gold, it serves as an incentive. As the old saying goes: All is well until it isn’t.
Chart courtesy of the World Gold Council
Landscape mode is recommended for mobile phone viewing.
Market Data by TradingView
Delayed data except FOREX
Gold in six easy lessons
1. Don’t buy it because you need to make money; buy it to protect the money you already have.
2. Don’t look at price as a barrier; look at it as an incentive.
3. Don’t buy the paper pretenders; buy the real thing in the form of coins and bullion.
4. Don’t fall prey to glitzy TV ads; do your due diligence instead.
5. Don’t allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.
6. Don’t forget the golden rule: Those who own the gold make the rules!
Short and Sweet
Of wheelbarrows and runaway inflation
As Crescat Capital’s Kevin Smith and Tavi Costa point out in a recent client alert, the U.S. government issued $4.4 trillion of debt in 2020, and $2.4 trillion, or 54%, was purchased by the Federal Reserve. They believe that $300 billion per month in quantitative easing will be needed to cover the upcoming tab as opposed to the current $120 billion per month. “Global central bank money printing is one of the primary drivers of the gold price,” they say. “Our current valuation target for gold based on the level of central bank assets and the inelastic supply of above-ground gold is $3,200/oz. Note, this is a rising target.”
“Really smart investors,” says Morning Porridge’s Bill Blain, the London-based commentator, “are increasingly hedging their wealth created from financial assets (stocks and shares) by putting much of their allocations into Alternatives: outright real assets or cash flow driven assets, assets that are likely to retain value while still paying attractive returns. (The cost is lower liquidity). The idea is that if crisis ever comes, then owning the wheelbarrow might be better than owning the mountains of worthless cash it’s carrying (to cite the classic example of inflationary danger from Weimar Germany…)” If runaway inflation truly does materialize, a wheelbarrow full of gold and silver might be an even better option ……
Reliably serving physical gold and silver investors since 1973
Quality service & portfolio guidance since 1973
USAGOLD ranks among the most reputable gold companies in the United States. Founded in the 1970s and still family-owned, it is one of the oldest and most respected names in the gold industry. The firm’s unblemished, zero-complaints record and solid reviews with the Better Business Bureau testify to the exceptional customer service and professional excellence which sets it apart from the competition.
USAGOLD specializes in gold and silver coins and bullion delivered to our client’s safekeeping. For over 47 years, we have resolutely advocated owning precious metals for asset preservation purposes rather than speculation. Admittedly, this philosophy does not resonate with all prospective gold and silver owners, but if it does with you, we think you will find our firm a kindred spirit.
Short and Sweet
China renews its appetite for gold
Its state-owned holdings could be as high as 14,500 metric tonnes.
“With China’s economy rebounding strongly since the second half of last year,” reads a recent article in the South China Morning Post, “its appetite for gold jewellery, bars, and coins has also recovered, and since January domestic prices have been higher than global benchmark rates, making it profitable to import bullion. The People’s Bank of China (PBOC), the nation’s central bank, controls how much gold enters China through a system of quotas given to commercial banks.” The SCMP goes on to say that China would import about 150 metric tonnes of gold in April and May, worth about $8.5 billion.
When it comes to gold, China is a price taker, not a price maker, as so many thought would be the case when it opened gold trading in Shanghai in 2019. For the time being, it is content to allow its commercial banks and citizenry to accumulate at current prices. “China has much more gold than it says it does,” writes investment analyst Dominic Frisby in a recent Money Week article, “In fact, China has more gold than the US. Its enormous gold hoards are all part of its grand global reserve currency status designs.” Based on calculations by gold market experts detailed at the link, Frisby estimates China’s real reserves could be as high as 14,500 tonnes compared with U.S. reserves of 8,133 tonnes.
Blinded by the Money Illusion
“Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.” – Janet Yellen, Former Federal Reserve chairwoman
With those words, Janet Yellen, now the Secretary of the Treasury and facing an even worse crisis than the one referenced above, put investors around the world on notice, though probably not in the way she intended. In the past, such smug assurances from public officials have been enough to send contrarian villagers heading for the safety of the nearby woods. The informed student of financial history knows that panics, manias, crashes, and collapses are as common to investment markets as hurricanes to Caribbean beaches. To think that suddenly we have banished their recurrence for ‘our lifetimes’ smacks of the kind of misguided hubris that contributed directly to the 2008 meltdown and subsequent untold financial hardship. Just about the time most everyone comes to the conclusion nothing could go wrong, everything goes wrong …… and in a hurry, as we have discovered over the course of the past year.
Short and Sweet
Yap stone money inflation
Monetarily speaking, everything progressed smoothly on the island of Yap where large stones weighing hundreds of pounds were transported around to serve as money. That is until something unforeseen happened to the value of the money. For centuries, the stones served in exchange because there wasn’t much of this type of rock on Yap itself.
The depreciation of the stone money began when an enterprising Western businessman realized he could produce stone money cheaply and in copious quantities on a neighboring island and transport it to Yap, where it could be used to procure goods in demand elsewhere. In other words, this oceanic cousin of John Law printed Yap stone money to buy his wares at what might be called a “favorable” discount. By this process, the yap stone money was debased until it became worthless. Little did the citizens of Yap know that they were deprived of their wealth, and their money destroyed, by the process of monetary inflation.
Coins & bullion since 1973
Blowing up the “Everything Bubble”
“What the average person fails to understand,” writes Lance Roberts in an analysis posted at the Real Investment Advice website, “is that the next ‘financial crisis’ will not just be a stock market crash, a housing bust, or a collapse in bond prices. It could be the simultaneous implosion of all three. Whatever causes that change in sentiment is unknown to me or anyone else. I am not saying with certainty it will happen, as I hope sanity prevails and actions are taken to mitigate the consequences. Unfortunately, history suggests such is unlikely to be the case.”
And, we might add, it is not likely the damage will be restricted to the United States. All the largest and most advanced economies are engaged in rate suppression and quantitative easing schemes. In fact, an implosion in one location could cause corresponding meltdowns in multiple locations. Easy money and heavy leverage have greatly influenced price levels in all markets heightening rollover risks. And then there’s the derivative problem with notional exposure estimated at more than $1 quadrillion, according to Investopedia (4/28/2020)
Reliably serving physical gold and silver investors since 1973
Do not take your eye off the prize
Gold’s value is relative. It doesn’t really matter how many digits it takes to express the price. Its true value lies in what those digits represent in terms of purchasing power. During the post-World War I hyperinflation in Germany, for example, a 20-mark gold coin in 1918 purchased the equivalent of twenty marks worth of goods and services in the marketplace. By 1924 that same 20-mark gold coin (weighing roughly one-quarter troy ounces) provided the purchasing power of nearly 25 billion paper marks.
By pointing out this example of gold’s constancy, we do not intend to imply that the United States is headed the way of the Weimar Republic. What we do mean to say, though, is that those who track the nominal value of gold by itself without taking into account the current and future value of the currency in which it is measured take their eye off the prize.
What are the intentions of the central bank and federal government, we should ask ourselves, and what will be the likely effect on the currency?
This analysis is from the April 2021 edition of News & Views – our monthly newsletter.
Short and Sweet
What if the 1980s rendition of the inflation rate were used to determine real yields on Treasury paper?
Chart courtesy of ShadowStats.com
There has been so much analysis published on the link between the bond market yields and the price of gold that it seems almost superfluous to include a section on it in our monthly newsletter. Then again, a good many of our readers would think us remiss if we failed to address it. Too often, analysts talk about yields and yields alone as the primary influence on gold prices when in reality, the culprit or benefactor (depending upon the market’s direction) is the real rate of return on government paper.
So rather than going over familiar ground, we thought it might be a bit more interesting to explore what the real rate of return might be on the 10-year Treasury if Shadow Stats’ rendition of the inflation rate were taken into account. ShadowStats tracks alternative data series to official statistics. Above is its rendition of the inflation rate if calculated using the methodology in place during the 1980s. As you can see, the inflation rate would be running near 10% using that measure of consumer prices.
If you were to plug that data into the current chart for the 10-year inflation-indexed security – now at .5% – the current real yield would be roughly a negative 10%. If that were the market perception, the governing psychology in money markets would be much different than it is now. The chairman of the Federal Reserve, in turn, would not be talking about driving the inflation rate over 2% to kick-start the economy, but 10% instead – once again, a much different psychological framework than the one under which the markets are operating at present.
Further note: The day after we released the April edition of News & Views we received a note from Nick Laird, proprietor of the Gold Charts R Us website, asking if we had seen the following chart posted at his website. It shows the real rate of return using SGS data with the gold price superimposed and answers the headline question posed above. No further comment is necessary.
Chart courtesy of GoldChartsRUs
If you think you could benefit from a concise review of the latest news, analysis, and opinion on the gold market from a variety of expert sources, then News & Views is the newsletter for you. Prospective clients are welcome. By subscribing, you will automatically receive future editions and occasional in-depth Special Reports by e-mail.
Short and Sweet
How much gold is enough?
Investors often ask about the percentage commitment one should make to precious metals in a well-balanced investment portfolio. Analyst Michael Fitzsimmons offered an interesting take on that subject in a recent Seeking Alpha editorial, “Assuming a well-diversified portfolio (which does include cash for emergencies),” he says, “my belief is that middle-class investors (net worth under $1 million), should own at least 5-10% in gold. I also believe that as an American investor’s net worth climbs, the higher that percentage should be because, in my opinion, he or she simply has more to lose by a falling US$. For instance, an investor with a net worth of $2-5 million might have a 15-20% exposure to gold; $10 million, perhaps a 30-40% exposure.” USAGOLD recommends, as it has for many years, a diversification of between 10% and 30% depending on your view of the risks at large in the economy and financial markets.
Coins & bullion since 1973
Better Business Bureau Five Star Review
“I made my first purchase of gold about 5 years ago and it was with USAGOLD. They answered all my questions and allowed me to buy a larger amount than they usually allow for a first time buyer. They trusted me and it worked out fine for both parties. Their BBB rating was a big factor in me trusting them. Other firms looked pretty sketchy and I didn’t want to spend that much money on a shaky firm. Since then I have purchased coins quite a few times from USAGOLD and have never been disappointed with the quality of the coins. The whole staff is very professional and courteous and are not pushy at all. They treat you as a friend, not a number. They remember me as soon as I tell them my name. That is a nice feeling. I will continue to buy from them and I highly recommend them.” –– Jim W.
Scorecard: 19 verified five-star reviews. Zero complaints.
A+ rating. Accredited since 1991.
USAGOLD Recommendation: The precious metals industry is unique in the financial industry in that it is not subject to oversight or regulation by third-party government entities like the SEC or CFTC. As such, marketplace forums and feedback sites often serve as a replacement for investors attempting due diligence. While several options can be found, by far the most impartial and least susceptible to vested influence is the Better Business Bureau. When looking at a company’s BBB profile, don’t focus solely on the rating. To be honest, pretty much everybody has an ‘A’ or ‘A+’ rating. What is far more important to assess is the number and nature of complaints, number and caliber of positive and negative reviews, longevity with the BBB, as well as the number of ‘stars’ given a company through the actual customer review system.
Reliably serving physical gold and silver investors since 1973
When paper money dies, precious metals prevail.
The lessons learned from the nightmare German hyperinflation of 1923
“They’ll print money until they run out of trees.”
Jim Rogers, investor and financial commentator
Not many investors are seriously concerned about hyperinflation in the United States at this juncture. At USAGOLD, we, too, see it as an outlier – something that could happen but not a probability. But that’s the thing about hyperinflations. Rarely does the handwriting appear unmistakably on the wall. Not many were worried about hyperinflation in Germany in 1923 when it struck out of the clear blue. When disaster did strike, however, it came with a vengeance. Prices shot up in 1921. Then just as quickly – within the space of a year – they ran out of control. By 1923, an individual’s life savings could not purchase a cup of coffee. We ran into the following charts researching another matter at the GoldChartsRUs website. The one unsettling aspect they all have in common is their verticality – an indication of how quickly and conclusively the inflationary catastrophe swept through the German economy.
The first and second charts reflect the severe debasement of the German mark at the time. The third and fourth show how gold and silver performed as a hedge. In effect, what could have been purchased with an ounce of gold or silver before the debacle, could have been purchased at any time as it worsened and finally when it ended a few years later. Few, as stated above, predict an inflationary disaster on the level of the Weimar Republic. Still, it is good to know that by preparing for the lesser version of inflation, one prepares for the nastier versions as well.
Charts courtesy of GoldChartsRUs • • • Click to enlarge
Image (top): Paper German marks converted to notepad, 1920s Weimar Republic. Attribution/ Bundesarchiv, Bild 102-00193 / CC-BY-SA 3.0, CC BY-SA 3.0 DE <https://creativecommons.org/licenses/by-sa/3.0/de/deed.en>, via Wikimedia Commons
Joe Biden and the new era of big government
Bridgewater’s Dalio says stay clear of bonds, buy ‘stuff’
For many, the above headline accompanying a recent Financial Times “Big Read” will be welcome news. For others, it will serve as a warning. FT says the Biden administration’s economic program “echoes” Franklin Delano Roosevelt’s New Deal and Lyndon Johnson’s Great Society. “The passage of the [stimulus] bill in a deeply divided Congress…,” explains FT, “has a much broader significance. It cements a leftward shift in US politics and economics that has gained traction during the coronavirus crisis, affording government a far bigger role in solving problems in society than it has enjoyed in recent decades.” Part and parcel of that shift is a severe leftward tilt in Washington’s economic policy that poses a direct threat to the dollar’s longer-term value and stability in the bond market courtesy of a deluge of debt and printed money dropped from Air Force One – a situation aptly captured in the Ramirez cartoon below.
Bloomberg reports that major financial institutions from Goldman to JPMorgan are worried about inflation, citing it as an “invisible force rocking Wall Street.” In a recently posted LinkedIn piece, Bridgewater Associates’ Ray Dalio stated flatly that “the economics of investing in bonds (and most financial assets) has become stupid … [B]ecause you are trying to store buying power, you have to take into consideration inflation. In the US, you have to wait over 500 years, and you will never get your buying power back in Europe or Japan. In fact, if you buy bonds in these countries now, you will be guaranteed to have a lot less buying power in the future. Rather than get paid less than inflation, why not instead buy stuff – any stuff – that will equal inflation or better? We see a lot of investments that we expect to do significantly better than inflation.” Of course, the ultimate “stuff” – the ultimate stores of value – are gold and silver. Most of the inflation-proofing strategies outlined by analysts in the Bloomberg report include real assets, gold, commodities, et al.
Cartoon courtesy of MichaelPRamirez.com
The following is the lead article in the May edition of News & Views
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Super-rich doomsday preppers ahead of the times
And the not-so-super-rich are now following in their footsteps
“Survivalism,” wrote Evan Osnos in a 2017 article for The New Yorker, “the practice of preparing for a crackup of civilization, tends to evoke a certain picture: the woodsman in the tinfoil hat, the hysteric with the hoard of beans, the religious doomsayer. But in recent years, survivalism has expanded to more affluent quarters, taking root in Silicon Valley and New York City, among technology executives, hedge-fund managers, and others in their economic cohort.”
We have always taken exception to the mainstream media’s portrayal of the ordinary gold owner as “the woodsman in the tinfoil hat”. . . etc. Many among the media are utterly amazed to learn that people like Steve Huffman (Reddit, CEO), Peter Thiel (PayPal founder), and the long roster of other luminaries mentioned in this New Yorker article are identified as “preppers” in one capacity or another. They would probably be even more amazed to learn that many of this same group are likely to be gold and silver owners. We say “likely” because precious metals owners by and large are a group reluctant to advertise their ownership.
As it is, they take a place alongside a wide range of Americans who own precious metals – physicians and dentists, nurses and teachers, plumbers, carpenters, and building contractors, business owners, attorneys, engineers, and university professors (to name a few.) We know because that is the description of our clientele here at USAGOLD. Gold ownership, in short, is pretty much a Main Street endeavor. In a Bankrate survey taken last June, one in seven investors (14%) chose gold or other precious metals as the best place to park money they wouldn’t need for more than ten years – making it the fourth most popular category. Similarly, a 2020 Gallup poll found that 17% of American investors rated gold the best investment “regardless of gender, age, income or party ID. . .” One might assume that if Bankrate or Gallup took a similar poll today, even more investors would give the precious metals a thumbs up given what has occurred over the past year.
Those well-to-do preppers, as it turns out, were uncannily ahead of the times. A little over three years after the New Yorker article was published, large numbers of the not-so-super-rich followed in their footsteps – setting up “bugout” retreats in the countryside and small-town America (though for reasons unforeseen in the article) while a good many fled the big cities permanently for safer environs. That mindset – the general flight to safety – has echoed loudly in the precious metals markets. The World Gold Council reports global retail gold investment demand running at record levels in 2020. As for silver, just last week, the Silver Institute, a research organization not given to hyperbole, forecasted an eye-catching 26% increase in physical silver investment for 2021 based on current trends.
Bankrate Survey of Investors
Chart courtesy of BankRate.com • • • Click to enlarge
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