Gold drifts in narrow range ahead of Fed meeting outcome

(USAGOLD – 6/19/2019) – Gold drifted in a narrow range overnight and into the open of U.S. trading as financial markets await the outcome of the FOMC meeting due later this afternoon.  Gold is priced at $1344 – down $2 on the day.  Silver is trading at $15 – down 2¢ on the day.  Yesterday, gold seesawed on trade and forex developments, but encouragingly managed to end the day on an up note. The general trend has favored the upside of late, but the results of the Fed meeting are likely to either boost or undermine that bias.  We will cut today’s report short this morning, but invite you to return to our live daily newsletter page later in the day for an update if anything of interest comes of the Fed meeting.

Quote of the Day
“Reality is far more vicious than Russian roulette. First, it delivers the fatal bullet rather infrequently, like a revolver that would have hundreds, even thousands of chambers instead of six. After a few dozen tries, one forgets about the existence of a bullet, under a numbing false sense of security. Second, unlike a well-defined precise game like Russian roulette, where the risks are visible to anyone capable of multiplying and dividing by six, one does not observe the barrel of reality. One is capable of unwittingly playing Russian roulette – and calling it by some alternative ‘low risk’ game.” ― Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

Chart of the Day

Chart note: Since the turn of the new century, gold consistently provided a real rate of return on investment when measured against inflation. In fact, it provided a real rate of return in twelve of the nineteen years represented on the chart. The period was one of subdued inflation. Gold’s performance, as a result, took many analysts and professional money managers by surprise and altered the perception among money managers that the precious metal is solely an inflation hedge.

 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold pushes sharply higher in advance of important Fed meeting

(USAGOLD – 6/18/2019) – Gold pushed higher this morning in a move that began during Asian trading hours and gained impetus at the London morning fix. It is trading at $1353 – up $13 on the day.  Silver is up 16¢ on the day at $14.99. The metals surged in advance of what has quickly become a very important FOMC meeting scheduled later in the day. Gold’s push to higher ground is in itself an unusual turn of events.  It usually struggles ahead of Fed meetings.

A Bank of America Merrill Lynch study released this morning shows top money managers the most bearish they have been since the 2008 crisis. Interestingly the study mentions “monetary policy impotence” as one of the group’s primary concerns along with the trade war and the possibility of a recession. The survey group has $528 billion under management, according to a Bloomberg article. The report reflects the high degree of pressure Wall Street is putting on the Fed to move on interest rates.  A number of top fund managers have publicly advocated gold ownership in recent months.

Wall Street is not alone in pressuring the FOMC. This morning in directing a barb at Mario Draghi and the European Central Bank President Trump also took indirect aim at the U.S. central bank. “Mario Draghi just announced more stimulus could come,” he said, “which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.” The president’s comments signal that the trade war could become a currency war as well with the Fed caught in the middle of it.

Quote of the Day
“If I had to pick my favorite for the next 12 to 24 months, it would be gold. If it goes to $1400, it goes to $1700 rather quickly. When you break something like that [the 75 year expansion of globalization and trade], a lot of times the consequences won’t be seen at first. It might be seen one year, two years, three years later. . .  So that would make one think that it’s possible that we might go into a recession or make one think that it would make rates go back toward the zero bound level and of course in a situation like that gold is going to scream.” – Paul Tudor Jones, Bloomberg interview 6/12/2019

Chart of the Day

Chart note:  Gold has been on a solid run since mid-August of last year.  It is up nearly 14% over the 10-month period.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold reverses overnight downtrend, now up marginally on the day

(USAGOLD – 6/17/2019) – Gold has reversed an overnight downtrend that took it just below the $1335 mark.  It is now trading at $1342 up $1 from Friday’s close and $7 from the overnight bottom. Silver is up 2¢ at $14.91. Since vaulting to the $1355 level on Friday, gold has retraced some of its gains (from the $1280 interim bottom at the end of May) but looks now like it might be regaining its footing.

Financial markets, in general, are in abeyance this morning and weighing potential outcomes from this week’s FOMC meeting.  The Fed will be addressing serious market concerns about a possible recession and the ill-effects of the U.S.-China trade war at its meeting tomorrow and Wednesday.  Though most analysts feel a rate decrease will not come until July, there is a lingering cloud of unpredictability hanging over this meeting. A surprise of some kind is not out of the question.

Quote of the Day
“One thing that amazes me about the current cohort of global central bankers is the lack of insight into the fact that their extreme loose monetary policy and financial repression may actually be making deflation in the real economy worse – despite clearly succeeding in creating rampant inflation in financial assets. To be sure some of the major players in the central banking orbit, such as ex-Fed Governor Kevin Warsh, have broken out of the QE group-think that grips the minds of central bankers. Warsh has openly stated that financial repression has exacerbated, rather than cured, our economic ills.” – Albert Edwards, SocGen

Chart of the Day

Chart note:  This chart shows the connection between inverted rates and recessions.  Some say that the rate inversions predict recessions, other say inversions create recessions.  Either way, central banks tend to stimulate economies when recessions surface or even prior to their surfacing.  The next Federal Reserve Open Market Committee meeting occurs Tuesday and Wednesday and we should know more about its rate stance by Wednesday afternoon.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold rises sharply on Mideast tensions

(USAGOLD – 6/14/2019) – Gold rose sharply in overseas markets last night after Secretary of State Mike Pompeo blamed Iran for the tanker attacks in the Gulf of Oman. That strength carried over to the COMEX open in New York where it is now trading at $1350 – up $5.50 after being up $9 yesterday. Though the tanker attacks are the clear catalyst for the upside, safe-haven demand and the price were already in a steady upward trajectory on recession, trade and interest rate concerns.  Silver is up 3¢ at $14.98. Technical analysts have long identified the $1350-$1360 price level as strong overhead resistance for gold.

Stay tuned.  We will update this afternoon if anything of interest develops.

Quote of the Day
“If we don’t quite know what the future holds, there is little point in getting carried away by very fancy mathematical calculations of optimal portfolios. Don’t rely on past data to be a good guide. Try to think through what mix of assets gives you the best chance of surviving some big event. That must mean including assets that are negatively correlated or uncorrelated in your portfolio. And I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.” – Mervyn King, former Governor, the Bank of England

Chart of the Day

Chart note:  This chart shows how both the dollar and gold reacted to the start of the credit crisis from late 2007 to late 2008.  The initial reaction for gold was a strong move to the upside.  For the dollar, it was the opposite – a strong move to the downside. Then in early 2008 as the dollar strengthened, gold declined. But for both that slice of price history was more a beginning than an end. In the ensuing three years (not shown), as the depth of the crisis became apparent and central banks launched stimulus policies, gold kicked into overdrive rising from the $720 level to nearly $1900 per ounce.  The US Dollar Index declined by about 18% over the same period.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold reaction to Gulf of Oman tanker attack muted

(USAGOLD – 6/12/2019) – Gold’s reaction to the tanker attack in the Gulf of Oman has been muted thus far. It is up $2 on the day at $1336 after being up as much as $5 in overnight trading. Oil, on the other hand, rose over 3% on the news. A similar rise in gold would have had it up $40 on the day.  Silver is up 4¢ at $14.81.  As it is, the chief determinants in capital flows remain the potential for a recession, a possible escalation of the trade war between the U.S. and China and falling interest rates in response. Over the past two weeks, gold has been a prime beneficiary of those flows led by professional money managers seeking a safe haven.  Its price is up almost 4.5% since the end of May as a result.

Highly-regarded billionaire investor Paul Tudor Jones is among that group of professional money managers with a favorable outlook for gold. “If I had to pick my favorite for the next 12 to 24 months,” he told Bloomberg in an important interview, “it would be gold. If it goes to $1400, it goes to $1700 rather quickly.” Tudor Jones goes on to say that the U.S. is reversing 75 years of expanding globalization and trade. “When you break something like that, a lot of times the consequences won’t be seen at first. It might be seen one year, two years, three years later. . .  So that would make one think that it’s possible that we might go into a recession or make one think that it would make rates go back toward the zero bound level and of course in a situation like that gold is going to scream.”

Quote of the Day
“Debasement was limited at first to one’s own territory. It was then found that one could do better by taking bad coins across the border of neighboring municipalities and exchanging them for good with ignorant common people, bringing back the good coins and debasing them again. More and more mints were established. Debasement accelerated in hyper-fashion until a halt was called after the subsidiary coins became practically worthless, and children played with them in the street, much as recounted in Leo Tolstoy’s short story, Ivan the Fool.” – Charles P. Kindleberger, Manias, Panics and Crashes

Chart courtesy of TradingEconomics.com

Chart note: If you follow the on-going trade war between the United States and China with even passing interest, you have no doubt come across references to China selling U.S. Treasuries as its ultimate hole card. This chart shows something that few, including many financial journalists, acknowledge: China has been unloading exchange reserves since 2014 when they peaked at nearly $4 trillion. Most of those reductions, which have taken China’s reserves to a little over $3 trillion (a 25% reduction) occurred from 2014 to 2017 and came as part of its policy to smooth the yuan exchange rate against the dollar and prevent wholesale capital flight. It is unclear at this juncture to what extent China would be willing to drain reserves in defense of the yuan at this point in time. Trading Economics, as the chart shows, projects further reserve reductions in the future.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold rallies higher on prospect of cross-border central bank stimulus

(USAGOLD – 6/12/2019) –  Gold rallied higher overnight and in early U.S. trading – up $6 at $1334.  Silver is up 3¢ at $14.80. Earlier in the week Counting Pips’ Zac Storella, an expert on CFTC Commitment of Traders data, said that gold is “now at the most bullish level in over a year – showing that sentiment for gold is coming back into favor.”  Today’s return to the upside after two days tracking lower buttresses that perception. Underlying the changing sentiment is concern about the possibility of a global recession and continued deepening of the U.S.-China trade war – two factors, in turn, adding to the prospect of cross-border central bank stimulus.

“It is fair to say that the global slowdown is a very real threat to the entire economy across all borders,” writes CME Group’s Scott Bauer. “China trend growth is declining as it moves into being an economy more like the United States and the Eurozone than an emerging market. The lack of European and U.S. economic momentum and policy paralysis invites comparison to Japan. This comparison will persist and reduce the attractiveness of growth-sensitive assets like equities and increases the allure of gold as a store of value.”  We should not overlook the fact that recent rallies in the gold price have begun during Asian trading hours – an unusual turn of events that illustrates Bauer’s point.

Quote of the Day
“Rather than let the market adjust itself, government typically starts the process all over again with a new and larger ‘stimulus package.’ The more often this happens, the more ingrained become the distortions in the way people consume and invest, and the nastier the eventual depression. This is why I predict the Greater Depression will be … well … greater. This is going to be one for the record books. Much different, much longer lasting, and much worse than the unpleasantness of 1929-1946.” – Doug Casey, International Man

Chart of the Day

Chart note: We faithfully reproduced this chart developed by UK’s Colin Seymour in 2001. Posted originally at the USAGOLD website, Seymour’s chart on the 1929 stock market crash and the annotations that went with it caused quite a stir on the internet at the turn of the century and the early stages of gold’s secular bull market. It is still widely referenced and linked on the world wide web. We recently re-reposted the study as part of a site-wide upgrade to current internet presentation standards. It is as relevant to investors today as it was in 2001. Here is the link to the original article titled Pompous Prognosticators.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold down second day in row, trying to regain footing in early New York trading

(USAGOLD – 6/9/2019) – Gold is off another $5.50 today at $1324 and down $18 from the high-water mark posted on Friday.  Silver is level on the day at $14.73. Gold reached the $1320 level in overnight trading but seems to be regaining its footing in early New York trading. Some analysts see the downside of the past two days as a natural and healthy response to the eight straight days of upside that preceded it (and tacked $70 – or nearly 5.5% – onto the price). Others see it as the beginning of a major correction.  The next few days should tell us who has it right.  “We remain cautiously constructive on gold despite Monday’s decline as we have to suspect that the trend of a lower dollar and depressed global interest rates will continue to stay in place for some time, providing gold prices with some ballast,” INTL FCStone analyst Edward Meir told Reuters in a note.

Quote of the Day
“Gold and silver, like other commodities, have an intrinsic value, which is not arbitrary, but is dependent on their scarcity, the quantity of labour bestowed in procuring them, and the value of the capital employed in the mines which produce them.” — David Ricardo, British political economist (1772-1823)

Chart note: This long-term chart on the annual average price of gold since 1970 dispels the notion that gold is somehow volatile or unpredictable and as a result unreliable as a long-term portfolio safe haven. To the contrary, it shows gold living up to its reputation as a portfolio safe haven during times of rapidly changing economic circumstances.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold speculators post largest one week gain on record, sentiment for gold ‘coming back in favor’

(USAGOLD – 6/10/2019) – Gold corrected overnight on news that Mexico would take steps to stem migrant flow to the United States, thus avoiding the imposition of new tariffs.  It is down $11 at $1329.  Silver is downm 22¢ at $14.77.  The move to the downside comes after a week that saw gold move $65 higher from its $1275 starting point on May 30 to its $1240 close on Friday.

We asked Zac Storella from Counting Pips, a widely-acknowledged expert on the COMEX Commitment of Traders reports, what he saw in last week’s numbers.  His response is worth  noting:

“This week’s change in speculative positions (Commitment of Traders) for gold jumped by a total of +69,427 net contracts. This is the largest one-week gain on record, according to the CFTC data dating back to 1986. The current net position (long positions minus short positions) is now at the most bullish level in over a year – showing that sentiment for gold is coming back into favor.

Speculator sentiment is and has been an important aspect to a strong gold price. Speculators are generally trend-followers (buying higher prices, selling lower prices) and on a running three-year basis, we have found a strong correlation between speculator net positions and the gold price.

The week’s change did include a healthy amount of speculators covering their short positions as the total number of short positions fell by -23,413 contracts. However, the stronger case for gold is that almost twice as many long contracts positions were initated (+46,014 long contracts) compared to the short covering. With a combination of new long positions and declining short positions, any which way you look at it, this was a strong week for gold and gold bulls.

[Emphasis added.]

Bloomberg reports hedge funds boosting their “long position in bullion by the most in almost 12 years” in a revival of safe-haven demand. It also quotes INTL FC Stone’s Rhona O’Connell, the London-based gold market analyst, as saying that “bullion might reach $1400 this year.” She went on to say that “all the dominant asset classes have a question mark over them at the moment which is generally when gold comes into play.”  In short, there is much on financial markets’ table yet to be resolved not the least a push among key G-20 central banks to potentially resurrect quantitative easing and lower interest rates.

Note:  We post the Zac Storella’s Commitment of Traders review weekly here at USAGOLD.

Quote of the Day
“The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.” – Rudy Dornbusch, economist

Chart of the Day

Chart note: “Central bank net purchases reached 651.5t in 2018, 74% higher year over year,” says the World Gold Council in its year-end gold demand report. “This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. These institutions now hold nearly 34,000 tonnes of gold. Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold rises sharply on weak jobs report, Monday start to Mexico tariffs – up $70 since last Thursday

(USAGOLD – 6/7/2019) – Gold rose sharply in early U.S. trading on an unexpected deceleration in jobs creation for May and the near certainty that the United States will begin levying tariffs on Mexican imports on Monday. The yellow metal is up $10.50 at $1345.  Silver is up 15¢ at $15.04. Adding to the general market unease, the president also threatened two days ago to impose tariffs on another $300 billion in Chinese imports.

At $1345 per ounce, gold is up $70 since last Thursday – a  5.5% gain.  Though we suspect short-covering as playing a role in the upside of the past few days, it is difficult to determine with complete certainty to what degree it has been a factor. Another important contributor has been strong institutional buying in response to recession concerns and speculation that the Fed will now move to lower rates before the year is out.

“I always find it quite surprising that many people do not have a proper idea about the value performance of gold,” writes Thorsten Polleit in Degussa’s Market Report. “So let’s take a closer look at it. In the period 1970 to 2018, for instance, the annual increase in the US dollar price of gold (per ounce) was 9.9 per cent on average. Subtracting the annual increase in consumer prices (which was around 4 per cent per annum on average), the real increase in the price of gold was 5.9 per cent per year on average. That said, gold’s long-term value performance looks pretty good.” Polleit believes that “there is good reason to expect that gold’s value performance in the years to come will match, perhaps even exceed, the one seen in the last 50 years.”

Quote of the Day
“We have found that gold typically thrives amid deeper, longer-lasting and fundamentally driven bear markets, which are usually associated with a deteriorating macroeconomic outlook. Alternatively, gold’s performance is usually tepid when equities rise. A good analogy is home insurance: homeowners pay an insurance premium each year hoping the house doesn’t burn down, but if it does you redeem the policy. Here, we see gold’s “insurance characteristics” as becoming increasingly relevant for investors. But even if the insurance is not needed, gold could still offer value. If the US dollar slides (which we expect), emerging economies become wealthier while mining costs increase. Prices could therefore advance irrespective of US inflation, making gold more than just an insurance asset.” – Wayne Gordon, UBS Wealth Management

Chart of the Day

Chart note: When the United States abandoned the gold standard in 1971 and freed currencies to float against one another, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold backed the dollar, and the era from 1971 to present when it did not. Gold has had its ups and down since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold continues climb, up $62 over the past week

(USAGOLD – 6/6/2019) – Gold’s continued its recent climb after President Trump tweeted dissatisfaction with the progress in immigration talks between the U.S. and Mexico.  Its upward march abruptly halted yesterday when Senate Finance Committee chairman Charles Grassley predicted progress in those talks – giving up $10 of the roughly $15 gain on the day, but still managing to finish in positive territory on the day. It is now trading at $1337 – up $6 from yesterday’s close. Silver is up 15¢ on the day at $14.96. Adding to the general market unease, the president also threatened yesterday to impose tariffs on another $300 billion in Chinese imports.

At $1337 per ounce, gold is up $62 over the past week – a nearly 5% gain.  Though we suspect short-covering as playing a role in the upside of the past few days, it is difficult to determine with complete certainty to what degree it has been a factor. Another important contributor has been strong institutional buying in response to recession concerns and speculation that the Fed will now move to lower rates before the year is out.

“Directly above here lies the 1357.66 major resistance,” says Karen Jones, an analyst at Commerzbank. “This is the 2014-2019 resistance line. We have a myriad of resistance above here that extend to the 1392.55 2014 high and we think it will take several attempts to clear this major resistance. But longer term we continue to view this as a potential major base pattern, which once complete will target nearer 1690.”

Quote of the Day
“Picture yourself and your loved ones in the midst of a howling blizzard that lasts several years. Think about what you would need, who could help you, and why your fate might matter to anybody other than yourself. That is how to plan for a saecular winter. Don’t think you can escape the Fourth Turning. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted.” – William Strauss & Neil Howe, The Fourth Turning [1997]

Chart of the Day

Chart note: “Central bank net purchases reached 651.5t in 2018, 74% higher year over year,” says the World Gold Council in its year-end gold demand report. “This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. These institutions now hold nearly 34,000 tonnes of gold. Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets.”

 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold bolts sharply higher in delayed reaction to Powell comments, fund buying and suspected short-covering

(USAGOLD – 6/5/2019) – Gold bolted sharply higher this morning in what appears to be a delayed reaction to Fed chairman Powell’s comments on the future redeployment of near-zero interest rates and quantitative easing. When his statement first came public yesterday, we commented in a post note at our Live Daily Newsletter page that “[f]rankly we were surprised that these comments, along with a statement a la the ECB’s Draghi that the Fed ‘will do what it must to keep the near-record expansion going,’ didn’t have more of an impact in the gold market. There was an initial spike but then the price settled back into the day’s range.”

Gold’s move to the upside began in earnest during Asian trading hours last night and carried over to the open in New York.  It is now trading at $1342 – up $16 on the day.  Silver is up 14¢ at $14.98.  Obviously, the import of the Fed chair’s statement sank in; it just took about 24 hours to do so.

At $1340 per ounce, gold is up $65 since last Thursday – a 5% gain.  Though we suspect short-covering as playing a role in the upside of the past few days, it is difficult to determine with complete certainty to what degree it has been a factor. Another important contributor has been strong institutional buying in response to recession concerns and speculation that the Fed will now move to lower rates before the year is out.

“Some view gold as an inflation hedge. It isn’t,” says Mish Shedlock at his MishTalk blog.  “Gold is a hedge against the notion that the Fed has things under control. Gold fell from $850 an ounce in 1980 to $262 an ounce in 1999 with inflation every step of the way. People believed Greenspan, the great ‘maestro’ had everything under control. It was an illusion. Faith in central banks is about to be tested again.”

Quote of the Day
“The received wisdom is mistaken on how recessions are made. They are not simply caused by shocks. They are caused by a window of vulnerability in the economic cycle where the cyclical drivers of the economy have weakened to the point where it’s susceptible to a negative shock. Within that window of vulnerability, virtually any reasonable shock becomes a recessionary shock. That’s how you get a recession.” – Lakshman Achuthan, Economic Cycle Research Institute

Chart of the Day

Chart note:  Please see today’s commentary above.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold retracing a bit this morning, major players switching to defense

(USAGOLD – 6/4/2019) – Gold is retracing a bit this morning after a quiet night overseas and the strong gains of the past three days.  It is trading at $1322 – down $3.50 on the day.  Silver is trading at $14.74 – down 4¢ on the day.  Given the market drama of the past several days, investors might welcome a day to collect their thoughts and decide on a course of action.

Market sentiment has shifted in favor of defensive strategies and asset preservation. UBS Group’s Joni Teeves tells Bloomberg that “weak sentiment around the breakdown in U.S.-China trade relationship has seen investors seek safe-haven assets. . . [W]eakness in equity markets and clearly the indications of a rate cut in the U.S. has seen gold come to the fore.” Stanley Druckenmiller is among the major market players switching to defense.  The famed billionaire investor, who sold all of his stocks recently, says Treasuries are the “best game in town” and “gold’s not bad either.” Gold, says Teeves, “looks like it is getting comfortable above $1,300, with aspirations of testing this year’s highs.”

Quote of the Day
“I grew up in a purely urban family. We had no relatives in the country. I’m born in 1944. When I was a baby, my mother could only buy food because she still had some gold coins. Without gold, I would have starved. She always told me that. Therefore, this generation already has a certain gold affinity. In extreme times of crisis, this is one of the few things left to be accepted. Gold was the only thing left to the people of the city at that time. Before the silver cutlery was also traded at the farmer.” – Ewald Nowotny, European Central Bank governor

Chart of the Day

Image courtesy of HowMuch.net (Click to enlarge)

Chart note:  “In 2010,” says HowMuch, “the world’s central banks stopped selling gold and started accumulating it. As gold provides a hedge against economic uncertainty and currency manipulation, the action of these central banks gives us insight as to which countries are most capable of handling an economic storm. . .A common theme in economics is ‘those who own the gold make the rules.’ Recent statistics suggest a large disparity between the top gold holders in the world and those governments holding less of the yellow metal.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold charges ahead in Asia – now at $1315

(USAGOLD – 6/3/2019) – Gold charged ahead in overnight markets to $1318, but lost some of that momentum in early New York trading. It is now trading at $1315 – a $9.50 gain from Friday’s close and $32 higher since the trade-war-inspired reversal that began last Thursday. Silver is up 20¢ at $14.76.  Gold’s move to the upside comes as investors begin to factor in the full import of the trade wars. Both Morgan Stanley and JP Morgan alerted their clients this morning that a US-China trade deal is unlikely at the G-20 summit later this month.  A sharp drop in the 10-year yield offers a further indication of capital flows in the direction of safe-haven assets and growing unease about a settlement in either of the trade wars – China and Mexico – occurring anytime soon.

Stay tuned.  We will update later in the day if circumstances warrant. . . . . . .

In an article published at Seeking Alpha, commodities analyst Andrew Hecht offers some perspective on our favorite precious metal. “Gold has not traded below $1000 per ounce in a decade since 2009,” he says. “The price has not been below the December 2015 low and level of critical technical support at $1046.20 since 2010. At the $1305 level at the end of May, gold is still over three times the price it traded over my career. It is over four times the price that the Bank of England and the UK government thought was a good level to sell half their reserves at the turn of the century. . . . On a short-term basis, gold has been failing on rally attempts since February 2019. However, as a barometer of fear and uncertainty in markets across all asset classes, gold could be in a position to surprise on the upside over the coming months given the current state of the world.”

Quote of the Day
“I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.” – John Maynard Keynes, 1946

Chart of the Day

Chart courtesy of the World Gold Council

Chart note:  “Gold is a liquid asset,” says the World Gold Council, “ranking at levels comparable to many global stock markets as well as currency spreads. Its liquidity is often sourced during periods of stress in the markets, one of its appealing qualities.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold sharply higher on Mexico tariff stunner, short covering

(USAGOLD – 5/30/2019) – Gold is up $9 on the day at $1298 and up $15 since the last Daily Gold Market Report posted yesterday morning. The move to the upside began late morning yesterday on what looked like short-covering related to general trade and economic concerns. It then gained momentum during Asian trading hours when the president stunned markets with an announcement of new and escalating tariffs on all Mexican imports beginning June 10th.  Thus far in today’s early going, it has made two assaults on the psychologically important $1300 level only to be turned back.  It will be interesting to see if it can penetrate that top-end barrier today as investors position themselves for what could be an eventful weekend.

Howie Lee, an economist at Overseas Banking Corporation, summed-up market concerns telling Bloomberg, “the U.S. is demonstrating that they can weaponize trade on a whim.  From China to Mexico, it sends a message that no country is safe.  Gold is picking that up.” CNBC reports that market players “moved aggressively to price in deeper rate cuts by the Federal Reserve over the coming months, while the closely watched 10-year Treasury yield dropped to lows not seen since 2017.” Silver is level on the day at $14.54. The dollar and stocks are down sharply.

Quote of the Day
“There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely. Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course. They will get the maximum reward from the increase as it continues; they will be out before the eventual fall. For built into this situation is the eventual and inevitable fall.  Built in also is the circumstance that it cannot come gently or gradually. When it comes, it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape.” – John Kenneth Galbraith, A Short History of Financial Euphoria, 1990 (With thanks to John Hussman, Hussman Funds)

Chart of the Day


(Interactive chart)

Chart note: This interactive chart compares price appreciation for gold and the dollar index. Gold has consistently outperformed the dollar in twelve of the last eighteen years – a formidable record. Even if one were to add in average yields on dollar-based investments, gold still comes out the clear winner in those twelve years. Gold had an off-year in 2018 – down 1% while the dollar was up almost 7%. Given the performance record, though, contrarian investors might see the present disparity as a buying opportunity.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold inches higher under generally calm market conditions

(USAGOLD – 5/30/2019) – Gold inched higher in early U.S. trading under generally calm financial market conditions across the boards – up $2 at $1282.  Silver is up 6¢ at $14.49.  Gold has gotten a minor boost from the hardening of positions in the trade war between the U.S. and China, but it has had trouble breaking free of the current trading range.

Overriding all other market inputs, disinflation continues to be the primary influence in gold’s pricing. Such circumstances generally favor the demand side of the fundamentals equation as investors seek safe-havens globally. That physical demand, however, does not always translate to price increases – at least not until systemic and credit risks begin to crop up in the headlines and dominate investor thinking.  Then the price has had a history of moving quickly and forcefully to the upside with the 2008-2011 market being a prime example.  In that time period, gold went from $725 to nearly $1900 per ounce.

Along these lines, Electrum Group’s Thomas Kaplan joins the growing list of billionaires who subscribe to gold ownership for longer-term fundamental (supply and demand) and economic reasons. In a Bloomberg TV Peer-to-Peer interview yesterday, he said that the yellow metal was on the cusp of a new decade long bull market capable of lifting it ultimately to between $3000 and $5000 per ounce.

Quote of the Day
“Gold is money – a rather rock-steady type of money, at that – and it cannot be debased by central banks’ money printing. Thus it stands in sharp contrast to bank deposits and short-term debt. Gold also does not carry any default or credit risk. It cannot go bankrupt, so to speak. For thousands of years, gold has already served as ‘premium money’. It would be surprising if gold were not to withstand the ‘Sword of Damocles’ (in the form of unbacked paper money) that central banks have hung over the economies.” – Thorsten Polleit, Degussa Market Report

Chart of the Day

Illustration courtesy of HowMuch.net

Chart note: “You don’t fight a trade war without ammunition on both sides,” says HowMuch.net. “In compiling the data of the largest reserves–or total reserves measured in U.S. dollars – you’ll find a keen perspective as to why the markets seem to react to every headline related to the U.S.-China trade wars. Why do liquid reserves matter? As it relates to trade wars, a country’s reserve stockpile has a large say in how much economic weight it can throw around. If China stockpiles a large amount of U.S. dollars, it can influence the value of its own currency, the yuan, which is pegged in U.S. dollars. Given that China holds over $3 trillion in reserves–far higher than Japan’s second-place $1.24 trillion–any movement from China can mean massive economic consequences for the globe.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold firms in investor retreat to safe havens

(USAGOLD – 5/29/2019) – Gold firmed in overnight markets as global stocks weakened reflecting investor concern about a trade war-induced economic slowdown and a retreat to safe-havens. Gold is up $3 at $1283. Silver is up 12¢ at $14.48. In a break with the recent past, both metals rose along with the dollar in overnight markets.

As posted at our Live Daily Newsletter this morning, SafeHaven’s Alex Kimani reports one widely-followed indicator – CNN’s Fear and Greed Index – swinging notably from “greed” to “fear” over the past few weeks. (We note the Index updating to an “extreme fear” reading yesterday.) Simultaneously, he points out, wealthy investors are moving heavily into cash. At the end of the first quarter, high-net-worth investors globally had 32% of their portfolios in cash, according to a UBS AG survey. Further validating investor concern, the spread between 3 month and 10 year yields – a closely watched recession indicator – went to 13 basis points this morning, the largest inversion since 2007.

“Throughout history,” Real Investment Advice’s Lance Roberts reminds us, “financial bubbles have only been recognized in hindsight when their existence becomes ‘apparently obvious’ to everyone. Of course, by that point far too late to be of any use to investors who have already suffered a significant destruction of invested capital. This time will not be different. Only the catalyst, magnitude, and duration will be. Believing the ‘Fed has it all under control’ has historically been a bad bet.”

Quote of the Day
“The ‘threat’ is best seen through the emergence of exchange-traded funds (ETFs), which allow investors to get a proxy physical gold exposure through an investment via their stockbroker. In truth, these products are, in many cases, more expensive than trading and storing physical gold (especially for larger investors with a long-term investment time frame), have less trading flexibility, and are less secure than owning real physical gold.” – Jordan Eliseo, ABC Bullion/Australia

Chart of the Day

Chart note: J.P. Morgan Asset Management released a report recently ranking investments over the past twenty years. It shows gold as the second best performer over the period at a 7.7% average gain annually. REITs were number one at a 9.9% gain. Stocks ranked fourth at 5.6%.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold drops suddenly on China’s takeover of Baoshang Bank as bond market, yuan take hit

(USAGOLD – 5/28/2019) – Gold dropped suddenly about an hour before U.S. trading opened in response to China’s takeover of Mongolia-based Baoshang Bank late last Friday. Baoshang’s failure – the first in China in nearly 30 years – sparked a sell-off this morning in China’s bond market and undermined the yuan. Gold responded in knee-jerk fashion by dropping $7.  Silver is down 25¢ at $14.35. The strong market reaction is the result of growing worries about China’s credit markets as a whole and that Baoshang might be a canary in the coal mine for its troubled banking sector.

inChart courtesy of TradingEconomics.com

Quote of the Day
“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.” – Martin Wolf, Financial Times

Chart of the Day

Chart note:  Rate convergence, or the flattening of rates in the popular financial parlance, is the subject of much concern on Wall Street and this chart, drawn in log scale, tells the reason why in a glance. In pulling together the data for these charts, we could not help but take special note of the two previous occasions in which there was a similar convergence – in 2000 just before and during the bursting of the dotcom bubble and in 2007-2008 just before and during the Bear Sterns/Lehman Brothers’ implosions and the launch of the global financial crisis. When the financial press bemoans the flattening of rates as a portent for a future recession, it is telling only part of the tale. Beyond the threat of recession lies a much deeper concern – the threat of another all-out financial crisis.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold level today after yesterday’s solid run-up + ‘the bullish case for gold in the long run’

(USAGOLD – 5/24/2019) – Gold is level this morning at $1283 after yesterday’s solid run-up fueled by the breakdown in trade negotiations between the United States and China. Silver is down 4¢ at $14.57.  The price of gold in the paper-heavy commodities market has been unable to generate appreciable movement in either direction of late. At the same time, physical metal continues to be in strong demand among a small, but influential group of professional money managers and central banks. The determining factor in both sectors is the perceived need for a safe haven in an increasingly complicated and unpredictable global economy – a concern that is unlikely to diminish anytime soon.

“The bullish case for gold in the long run,” says Business Report’s Ryk de Clerk, “is that Russia, China and India are likely to continue to increase their gold holdings. To double Russia’s gold holdings to 38 percent from 19 percent currently will take-up 62 percent of current total annual mine production. In the case of China an increase to 4 percent from 2 percent currently will amount to 54 percent of total mine production. . .The three most relevant reasons why they invest in gold are gold’s role as a safe haven and as an effective portfolio diversifier. Gold is also universally accepted.”

Quote of the Day
“It’s a philosophic thing. Trying too hard in the short-run exposes you to the risk of doing badly. Trying to find big winners on every trade exposes you to the risk of having losers. You accomplish more by having goals that are modest but more reasonable. Put differently, trying to be a big home run hitter induces the possibility of strike-outs — and strike-outs have a very bad effect on your long-term performance. That’s why the investment business is full of people who got famous for being right once in row.” – Howard Marks, Oaktree Capital

Chart of the Day

Chart courtesy of the World Gold Council

Chart note: This chart is perhaps one of the most telling we have ever published in this section of our daily reports. It depicts the performance of various currencies against gold over the long term – past and present. Those who tout the proposition that gold is not really an inflation hedge, or that it is not really a safe-haven against currency debasement would be well-served to give it some undivided attention. Those who own gold and believe in it as a vehicle for long-term asset preservation will see it as vindication. For those who do not own gold, we hope it will serve as an inspiration and a call to action.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold sharply higher on China withdrawal from trade negotiations

(USAGOLD – 5/23/2019) – Gold rose sharply in early U.S. trading on a statement from China’s Ministry of Commerce that China was formally withdrawing from trade negotiations with the United States.  The yellow metal is up $7 as this posted at $1281. Silver is up 7¢ at $14.52. Though the markets anticipated further volleys from both sides, a complete halt with China taking the proactive role in breaking negotiations comes as a jolt. The concurrent complete breakdown in Washington involving Trump, Pelosi and Schumer raises the question of whether or not the federal government too might come to a full stop.

Stocks are down 235 and the yield on the 30-year bond hit its lowest level in over a year. Bloomberg’s Richard Breslow seemed to capture the prevailing mood: “It has been a sloppy day all around. The litany of discouraging news is there for all to see. It doesn’t feel particularly helpful to run down the list again. Suffice to say it’s an understatement that the people in charge are hardly distinguishing themselves. And that is a reality playing out all over the globe. If there is one word to describe the mood it would be, ‘discouraged.’”

“Gold prices and silver prices will go up,” says Charles Nenner, a well-known cycle and geopolitical analyst in a USAWatchdog interview.  “It’s early, and it’s better to get in early instead of when it’s exploding, and everybody knows you have to now be in gold. It’s always the clever money that is basing their money into gold stocks. The price is going much higher. Remember, my upside price target is $2,500. Right now, it is $1,270, and $2,500 is a substantial move in gold.”

Quote of the Day
“At the quarter-century mark of 1925, the great bull market was under way, and Graham*, then 31, developed what he later described as a ‘bad case of hubris.’ During an early-1929 conversation with business associate Bernard Baruch (about whom he disparagingly observed, ‘He had the vanity that attenuates the greatness of some men’), both agreed that the market had advanced to ‘inordinate heights, that the speculators had gone crazy, that respected investment bankers were indulging in inexcusable high jinks, and that the whole thing would have to end up one day in a major crash.’ Several years later he lamented, ‘What seems really strange now is that I could make a prediction of that kind in all seriousness, yet not have the sense to realize the dangers to which I continued to subject the Account’s4 capital.’ In mid-1929, the equity in the ‘Account’ was a proud $2,500,000; by the end of 1932, it had shrunk to a mere $375,000.” – Frank K. Martin, A Decade of Delusions

* Benjamin Grahm, “The father of value investing”, 1894-1976, Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949).
Chart of the Day

Chart note:  Whether or not China will begin unloading its very large hoard of U.S. debt is a subject of much concern, but its intentions are one part of the much larger global de-dollarization puzzle. This chart shows the change in U.S. debt held by foreigners and international investors in billions of dollars from 1970 to present.  The level of ownership grew proportionately over time in concert with the overall issuance of U.S. debt until 2015, when it began to fall off.  The problem is not just that foreign investment in U.S. Treasuries is on the wane.  It is that the retreat has come at a time when U.S. borrowing needs are expected to consistently exceed $1 trillion per year. The question becomes, “How is the U.S. federal debt going to get financed?”  (For more detail, please see The $12 trillion federal debt bombshell –  A NEWS & VIEWS SPECIAL REPORT)

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold grinds lower ahead of Fed minutes

No DMR today 5/22/2019, but please check back.  We will update if anything of interest develops.


(USAGOLD – Tuesday, 5/21/2019) – Gold continued to grind lower this morning despite a weaker dollar and a steadier China yuan in overnight markets.  It is down $5.50 in the early going at $1272.50.  Silver is off 4¢ at $14.44.  Thus far nothing in the way of news has surfaced to explain gold’s sudden weakness which began during European trading hours and carried over to the New York open.  With nothing pressing at the moment, we will blame the downside on traders placing bets ahead the Fed minutes release scheduled for tomorrow and leave it at that. A hawkish tone would likely send gold lower; a dovish feel could reverse this morning’s drop.

JP Morgan came out at the end of last week with a positive assessment of gold’s future, according to a Bloomberg article published yesterday. “A combination of a Federal Reserve that has stopped tightening policy,” says Bloomberg, “and investor positioning that suggests the two assets are under-owned, could see their performance as hedges improve in 2019 and 2020, wrote [JPM] strategists including John Normand in a note Friday. It’s premature to call for an end to trade tensions, which could last for years, so investors should explore the value of tactical hedges and strategic underweight positions, they argued.”

Quote of the Day
“As I had the opportunity to directly question Taleb on gold, he told me truly despises gold. He hates gold. He couldn’t care less about the gold market. Yet Taleb does invest a large share of his ‘safe assets’ in physical gold. Gold is the robust investment par excellence. In case the global economy is on the verge of collapse, gold will keep afloat and survive. Or things might go great, but even then an investment in gold will not result in enormous, unrecoverable losses and ruin. Or as some gold investors rightly remark: for a more or less regular gold coin you could buy hundreds of liters of wine centuries ago and for the value of a similar coin in present times that probably still holds true. Taleb calls this the Lindy effect: gold has been a store of value for, according to some accounts, 4,000 years. We can reasonably expect gold, therefore, to continue to be a store of value for the next 4,000 years.” – Olav Kirkmaat, Business School of Francisco Marroquin University

Chart of the Day

Chart courtesy of HowMuch.net

USAGOLD note:  “The economy is rigged,” says HowMuch.net, “That’s the message behind our recent analysis of price changes over the last 20 years. We looked at everything from mass market consumer items, like TVs, cell phones and apparel, to critical life-altering purchases, like healthcare, college tuition and textbooks. It turns out that the most important things in life keep getting more and more expensive, while the things that don’t really matter keep getting cheaper.”

Posted in dailyquotes |

Gold level after hitting lowest level since early May on Friday

(USAGOLD – 5/20/2019) – Gold is level this morning still trying to make up its mind about the latest volleys fired between the two sides in the US-China trade dispute. It is trading early in the US session at $1276.50 – its lowest level since early May.  Silver has added modestly to its price – up 5¢ at $14.43. The yellow metal ended last week in a slump that most analysts traced to a sharp drop in China’s yuan.  Questions abound about China’s willingness to defend its currency.  Like gold, it is trading sideways this morning. The stand-out market this morning is stocks – down 172 as this posted.

Over the weekend Bloomberg asked Granite Shares’ Will Rhynd a question on the mind of a good many investors. Why has gold failed to rally in the face of the present uncertainty? “The trade talks,” he responded, “and the kind of breakdown in trade talks at the moment is negative in the sense that it is manifesting itself in a more stronger dollar. The late cycle trade right now is still positive for gold and we see investors as positioning themselves that way – being more defensive and being more defensive typically means an allocation to gold.”  He went on to say that a physical gold ETF fund his firm offers has increased by well over one-third this year as a result of investors “being more defensive, adding gold to the portfolio – people looking for uncorrelated asset classes.  Since the beginning of the year, we have seen a big uptick in gold interest.”

Quote of the Day
“I’m not opposed to a new Bretton Woods conference, and if it takes place at Mar-a-Lago, I’m fine with that. But anything the U.S. does because we print the international reserve currency, unilateral action would almost instantly be accommodated by other countries. In terms of gold being involved, some people may think of that as a throwback, but I see it as a sophisticated, forward-looking approach because gold is neutral and it’s universal. It’s a well-accepted monetary surrogate that transcends borders and time. If you look at the foreign reserves of the most important countries, they keep them mostly in gold. I don’t want to read too much into it, but it proves that gold is not some barbarous relic.” – Dr. Judy Shelton, economic advisor to President Donald Trump (said to be on the inside track for appointment to the Federal Reserve’s Board of Governors)

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note:  The Trump administration introduced tariffs on selected Chinese imports in March 2018 and the China yuan immediately turned south.  After stabilizing somewhat beginning in late 2018, it again dropped sharply beginning in April 2019 as talk began to break down.  Since the March 2018 interim peak, the yuan has dropped about 10%.  Since April 2019, it has fallen about 3.5%.  There is a direct correlation between the imposition of tariffs and depreciation of the yuan.  The outstanding question at this point in time is if Chinese authorities will step back and watch or take measures to halt the decline.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold off marginally in subdued reaction to another sharp drop in the yuan

(USAGOLD – 5/17/2019) – Gold is off marginally this morning as tensions escalated between the US and China. Yesterday, gold plummeted sharply along with China’s currency.  Today the drop has been more subdued even as the yuan continued its free fall in the offshore market – a situation that signals some investors might be looking to safe havens as a worthy alternative at this juncture. Bonds – the other primary safe haven destination – are also higher this morning. The yellow metal is down $1.50 in the early going at $1284.  Silver is down 7¢ at $14.48.

In a Kitco interview yesterday, Scotiabank’s Nicky Shiels said that gold has stuck in a four year lull but that 2019 might the year it breaks out of its narrow range.  “We feel we are in a good spot for the next commodity cycle,” he said. “Gold is perking up this year, trying to break out of its four-year cycle. It is viewed generally as a hedge to the dollar alongside to being a hedge to inflationary policies and geopolitical risks. I believe gold has a chance of reaching $1,400 this year.”

Quote of the Day
“[S]ome of the biggest players in the gold sector are warning we’ve seen peak gold production. Also, the biggest pools of money on the planet – central banks – are loading up on gold. Dwindling supply met with tons of demand means higher prices.  Historically, gold has been a fantastic leading indicator of central bank policy… The metal ran from under $1,200 an ounce to nearly $1,300 an ounce prior to the Fed’s reversal in January. And if it runs higher from here, which we fully expect, it means all hell is about to break loose. I’d recommend adding to your position while you still can.” – Simon Black, Sovereign Man

Chart of the Day

Chart note: Up until the “double oughts,” the manual on gold read that it performed well under inflationary and deflationary circumstances, but not much else. However, as the decade of asset bubbles, financial institution failures, and global systemic and sovereign debt risk progressed, gold marched to higher ground one year after another. As events unfolded, it became increasingly clear that the metal was capable of delivering the goods under disinflationary circumstances as well. The fact of the matter is that, during the 2000s even as the inflation rate hovered in the low single digits (See chart, green area], gold managed to rise from just under $300 per ounce in the early 2000s to just over $1800 per ounce by 2011 — a gain of nearly 650%. Since then, gold has taken a breather. As this essay is written, it is trading in the $1285 per ounce range — still up over 425% in the new century.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold continues retreat from $1300 level

(USAGOLD – 5/16/2019) – Gold continued its retreat from the $1300 level begun yesterday.  It is trading at $1291.50 early in the US session – down $5 on the day.  Silver is down 3¢ at $14.77. “We have seen repeated attempts in the last few days to rise above $1,300 and it (gold) appears to be facing some kind of barrier. There is clearly some selling when it hits that level,” Capital Economics analyst Ross Strachan told Reuters yesterday.

Lingering hopes that the US and China might still agree to a trade deal and the Trump administration’s decision to put a six-month delay on EU auto tariffs (and avoid a two-front trade war) contributed to the pull back. In other news, Scrap Register reports that “India’s gold imports spiked by 54% to $3.97 billion in April from $2.58 billion in the same month last year, according to the latest data release from the Ministry of Commerce.” Strong seasonal demand was given an assist by rupee weakness and a correction from a five-year high in the rupee gold price.

Chart courtesy of Bullion-Rates.com

Quote of the Day
“Were Keynes alive today, he would likely be arguing along with German Chancellor Angela Merkel for more monetary discipline and a return to a more balanced international system. No doubt, however, his neo-Keynesian acolytes would be dismissing his concerns as hopelessly outdated and reactionary. Keynes was an economic theorist, but he was also a clear-eyed market analyst, and a passionate and committed speculator for his own account and for Cambridge University. If he took in today’s economic vista of near-zero interest rates and quantitative easing, it is clear that he would be buying gold hand over fist—regardless of what his disciples might think.” – Richard Hurowitz, Octavian Report (in a Wall Street Journal editorial published September 2015)

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This interesting chart on consumer prices from 1550 to present shows the direct relationship between declining purchasing power in the British pound and the sterling price of gold after 1931, the year Britain departed the gold standard. Prior to 1931, there was an occasional minor bump higher in the price of gold, as you can see, but for the most part it followed along the same flat line as consumer prices. It was only after Britain separated the pound from gold in 1931 that gold showed its true colors as portfolio defense against a depreciating domestic currency. The metal’s price moved significantly higher after 1971 when the Bretton Woods agreement was abandoned and currencies and gold were allowed to move freely in international markets. The real lesson in this chart is that when a nation-state moves away from gold-backed to fiat money, gold coins and bullion become a logical and worthwhile alternative for citizen-investors – even after centuries of relative price stability.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold up as Monday’s market dynamic reasserts itself

(USAGOLD – 5/15/2019) – Gold reasserted itself in today’s early going after taking a minor hit yesterday in the ‘day-after’ reaction to Monday’s financial market drama.  It is up $3 at $1300 early in today’s session. Silver continues to lag – up 1¢ at $14.81.  As mentioned in yesterday’s DMR, on Monday we saw the initial reaction to a major change in market atmospherics.  Over the coming days and weeks, “we could see a more sustained reaction as steadier and more determined hands take the rudder. Under the circumstances, safe havens like bonds and gold are likely to receive a fair amount of attention.” Today, we are beginning to see some signs of Monday’s market dynamic reasserting itself. Gold and bonds are both back to the upside and stocks are down sharply.

Sharps Pixley’s Lawrie Williams had a similar take yesterday. “Equities may bounce back,” he wrote, “but such a bounce could be shortlived and if so gold is likely to breach $1,300 yet again and perhaps this time the breach could be permanent.  Resistance is seen at $1,310 but many analysts see $1,350 as the key and if the gold price can get through that level in the northern hemisphere summer it could be poised for $1,400 and above in the second half of the year.”

Quote of the Day
“There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely. Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course. They will get the maximum reward from the increase as it continues; they will be out before the eventual fall. For built into this situation is the eventual and inevitable fall.  Built in also is the circumstance that it cannot come gently or gradually. When it comes, it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape.” – John Kenneth Galbraith, A Short History of Financial Euphoria, 1990 (With thanks to John Hussman, Hussman Funds)

Chart of the Day

Charts courtesy of TradingView and BullionRates.com

Chart[s] note: “The countries with the highest country risk,” says analyst Daniel LaCalle of Thinking Heads Agency, “are also those that have abused most of the financing of public spending by the central bank through the printing of currency. Argentina has a higher country risk than apparently more fragile economies due to the constant refusal on the part of the successive governments to adopt a prudent monetary policy and to defend the purchasing power of the currency.” As economies around the globe weaken, the temptations presented by the monetary printing press will become increasingly difficult to resist. In each instance, domestic gold demand is likely to rise as a consequence.  It is usually only a matter of time until the price in that currency follows suit.  The two short-term charts shown above illustrate the process.

 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold posts half-hearted, marginal loss in early going

(USAGOLD – 5/14/2019) – Gold is taking a half-hearted loss this morning and stocks are posting a half-hearted gain – not unusual after a day of heady market movement. Gold is down $2.50 at $1299 in the early going after finishing up $14 yesterday. The Dow Jones Industrial Average is up about 80 this morning after losing over 600 yesteray. Silver, on the sidelines for the most part in all of this, is up 3¢.

Though US-China trade negotiations remain front and center, rising tensions with Iran have also begun to weigh on markets. Crude oil is up 85¢ today. Britain’s foreign minister, Jeremy Hunt,  pointedly warned Monday “of a conflict happening by accident with an escalation that is unintended.” Yesterday, we had the initial reaction to a major change in market atmospherics. Over the next several days, we could see a more sustained reaction as steadier and more determined hands take the rudder. Under the circumstances, safe havens like bonds and gold are likely to receive a fair amount of attention.

Quote of the Day
“It’s all about relative supply curves – the supply curve for bullion is far more inelastic than is the case for paper money. It really is that simple.“ – David Rosenberg, Gluskin Sheff

Chart of the Day

Visualization courtesy of HowMuch.net

Chart note from HowMuch.net:  “About half of the countries in the top ten list are located in the Middle East/North Africa region.  Six of these countries–Venezuela, Saudi Arabia, Iran, Iraq, Kuwait, and Libya–are members of OPEC (Organization of Petroleum Exporting Countries). Interestingly, there is no clear correlation between the country’s size and its amount of oil reserves. For example, Kuwait, which has a landmass of 17,818 sq km, has 101.5 Gbbl in oil reserves, whereas Russia, which has a landmass almost ten times larger, only has 80 Gbbl in oil reserves.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold up sharply on safe-haven trade, inflation expectations as US-China talks hit wall

(USAGOLD – 5/13/2019) – Gold rose sharply at the New York open on clear signs emerging over the weekend that trade negotiations between the United States and China had hit a wall.  The precious metal is up $10 on the day at $1296 after trading as low as $1282.50 during Asian trading hours.  Silver is level at $14.75.  Goldman Sachs was among the first to post a reaction to the breakdown saying that the cost of tariffs has “fallen ‘entirely’ on American businesses and households, with a greater impact on consumer prices than previously expected,” according to a CNBC report.

AMP Capital Investors Nader Naeimi summed up developing sentiment in some quarters by saying that the stock market had priced in a best case scenario that was rapidly shifting to a worst case scenario.  “China demanding the U.S. drop the tariffs is setting the stage for a serious face-off,” he said. “Economic tensions can now morph into military tensions between the two countries, and then with the U.S.-Iran flexing their muscles, oil prices are at risk of spiking up. For complacent equities, a perfect storm is brewing: tariffs, higher prices, a possible spike in oil prices in the face of fragile global growth. My asset allocation is gold, oil, inflation-linked bonds and defensive positioning” [Emphasis added]

That allocation looks pretty promising this morning.  Stocks are down 500. Oil is up $1.65. Bond prices are rising and gold, as we mentioned at the top, is up $10. The dollar index, by the way, is down sharply this morning despite a notable drop in China’s yuan.

Quote of the Day
“Gold is scarce. It’s independent. It’s not anybody’s obligation. It’s not anybody’s liability. It’s not drawn on anybody. It doesn’t require anybody’s imprimatur to say whether it’s good, bad, or indifferent, or to refuse to pay. It is what it is, and it’s in your hand.” – Simon Mikhailovich, Tocqueville Funds

Chart of the Day

Chart note:  This chart shows the percent change year over year in the volatility index along with the price of gold.  As you can see, past bouts of increased volatility have preceded upward movement in the price of gold.  The last spike in volatility came at the end of last year and it matched in magnitude spikes that occurred during the 2007-2008 credit crisis.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold off to strong start on new tariff regime, presidential tweets, mixed signals in FOREX markets

(USAGOLD – 5/10/2019) – Gold is off to a strong start this morning as higher tariffs on China kick in and the President tweets that “tariffs will bring in far more wealth in our Country than even a phenomenal deal of the traditional kind.” It is now up $5 in early U.S. trading at $1289 after rising marginally in Asia overnight.  Silver is up 4¢ at $14.82. The president’s tweets this morning appear to be an attempt to acclimate Americans to the prospect of a longer-term trade war and soothe jittery financial markets.

“The dollar isn’t acting as a safe haven in stressed markets as it usually does,” writes David P. Goldman in Asia Times. “On the contrary, it is absorbing a good deal of the stress. That’s still a small black cloud rather than a thunderstorm, but it suggests that markets are pricing trade-war risk into the US dollar as well as the Chinese yuan. The implication is that the consequences of a full-blown trade war could be nasty for world capital markets.”  He goes on to point out that in recent days the dollar dropped against the euro and yen while rising against the yuan.  Amidst the confusion, gold has held its own with some evidence of being the recipient of current safe-haven capital flows, particularly during Asian trading hours. (Please see today’s Chart of the Day below.)

We invite you to check back for a possible afternoon update today.  We are monitoring what could turn out to be an interesting day in financial markets.

Quote of the Day
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – William Strauss and Neil Howe, The Fourth Turning

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note:  Gold has held steady since the initial tariff shock at the beginning of the week.  Meanwhile, China’s yuan has dropped abruptly. Speculators will likely test the waters with the yuan, i.e., see how willing China is to defend its currency under new and developing circumstances. Gold and the yuan have generally traveled in the same direction in recent years.  The chart illustrates the first signs of a potential break with that past.  It also serves as an initial warning that perhaps the old tried, true and generally accepted formulae might not work in this rapidly changing commercial and foreign exchange environment – one that increasingly looks like it might include an all-out trade war between the world’s two largest economies. 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold level today in quiet trading

(USAGOLD – 5/9/2019) – Gold is level in quiet early trading as the U.S. and China turn the page today on trade negotiations.  Silver is down 11¢ at $14.75. With a prevailing calm having descended upon financial markets this morning, we will cut this report short with a promise to update later if anything of significance develops.

Quote of the Day
“Financial markets have short memories. Of late, they’ve convinced themselves that collateralized loan obligations (CLOs) are much safer instruments than the collateralized debt obligations, or CDOs, on which they’re based and which helped precipitate the 2008 crisis. They’re wrong — and dangerously so.” – Sanjiyat Das, Bloomberg Opinion

Chart of the Day


(Interactive chart)

Chart note: This interactive chart compares price appreciation for gold and the dollar index. Gold has consistently outperformed the dollar in twelve of the last eighteen years – a formidable record. Even if one were to add in average yields on dollar-based investments, gold still comes out the clear winner in those twelve years. Gold had an off-year in 2018 – down 1% while the dollar was up almost 7%. Given the performance record, though, contrarian investors might see the present disparity as a buying opportunity.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold pushes up on Reuters report of deeper trade rift than originally thought

(USAGOLD – 5/8/2019) – Gold pushed higher in early trading on a Reuters reports released overnight that China had back-tracked on nearly all aspects of the trade negotiations with the United States. Gold is up $4.50 in early U.S. trading at $1289.50.  Silver is up 2¢ at $14.94. The report will likely serve as justification for the president’s ratcheting up of tariffs over this past weekend. At the same time, though, it will put a damper on market expectations that the rift might be short-lived.

“Gold,” says Julius Baer’s Mark Matthews in an ET Markets report, “should be about 15% higher over the next year and the basic reason is that eventually the US dollar is going to stop going up. At the same time with all these trade wars and confrontations between major powers of the world, Russia, China, the United States, there is a case for diversification away from dollars and the central banks are doing that. One of the things they are diversifying into is gold. I would say we like gold in the commodity space.” XinhuaNet, China’s official press outlet, reports overnight the Peoples Bank of China added nearly 15 tonnes to its gold reserves in April – the fifth consecutive month of additions to its holdings.
Quote of the Day
“Like liberty, gold never stays where it is undervalued.” – John S. Morrill

Chart of the Day

Chart note: “The figure,” say the authors of this study published by the St. Louis Federal Reserve, “shows that the uncertainty shocks that hit the economy in the fourth quarter of 2018 and in the first quarter of 2019 (January) have been the largest during our sample period. Based on the framework we use, this finding has potentially ominous implications for the U.S. economy.”  A fitting chart as we weigh the effects of a possible breakdown in trade talks between the United States and China. . . . . . .

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold off marginally in early going; study says 20% of wealthy worldwide will increase gold holdings in 2019

(USAGOLD – 5/7/2019) – Gold is off marginally in the early going today as East and West alike await the next turn of the wheel in the trade talk saga.  The yellow metal is off $1 at $1282.  Silver is down 5¢ at $14.88.  While the paper gold market continues to be most influenced by immediate concerns, physical buyers continue to hedge the more protracted scenario – mostly centered around gold’s longer-term role as a hedge against currency debasement within national economies.

In India, where the rupiah has declined almost 45% against the dollar since 2009, investors continue their long history of accumulating gold for asset preservation purposes. “Today,” reports India’s Financial Express, “is Akshay Tritiya, also known as Akha Teej, a Hindu festival which is considered auspicious for buying the yellow metal. The experts are bullish on buying gold today as the investment will fetch good returns from long-term investment point of view.” The Financial Express goes on to say that it has been a good year for the monsoon and that farmers, a traditionally strong market for gold, will begin accumulating the metal from today. Along these lines, it is of particular interest that 20% of the wealthy worldwide intend to increase their gold holdings in 2019, according to a recent report from KnightFrank, the British property consultancy.

Quote of the Day
“Financialization is the smiley-face perversion of Smith’s invisible hand and Schumpeter’s creative destruction. It is a profoundly repressive political equilibrium that masks itself in the common knowledge of  ‘yay, capitalism!’. Financialization is a global phenomenon. In China, it’s transmitted through the real estate market. In the US, it’s transmitted through the stock market. Financialization is the zombiefication of an economy and the oligarchification of a society.” – Ben Hunt, Epsilon Theory

Chart of the Day

Chart note: When the United States abandoned the gold standard in 1971 and freed currencies to float against one another, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold backed the dollar, and the era from 1971 to present when it did not. Gold has had its ups and down since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold level in U.S. after charge higher in Asian trading turned back

(USAGOLD – 5-6-2019) – Gold at first reacted positively to China trade negotiations breakdown rising in Asian markets as stocks slid.  In European trading though it began to turn south as China’s yuan hit the skids and it looked like the dollar would emerge as the early beneficiary in this turn of events. It is now trading at $1279 and level on the day.  Silver is down 12¢ at $14.78. We caution that it is early in the day and that it will take some time for the full effects and reactions get sorted out.  The Dow Jones Industrial Average is down sharply as this report is posted.

Though the safe-haven trade seems to have migrated to the dollar as an initial reaction, investors in China – including its government, commercial banks and central bank – could become even more aggressive than they are already in buying physical gold bullion as an alternative to the dollar.  At the very least, China is likely to continue its policy of shunning U.S. Treasuries’ purchases at a time when the U.S. is issuing debt in unprecedented volumes. In the end, a major breakdown in the trade negotiations between the United States and China could lead to unforeseen consequences for both countries that will play out in the full course of time. . . . . .  It is appropriate that we would feature the movement of gold West to East in today’s Chart of the Day.

Quote of the Day
“Most serious accidents have multiple causes. A series of mistakes or pieces of bad luck line up to allow disaster. The Torrey Canyon was hampered by an unforgiving schedule, barely adequate charts, unhelpful winds and currents, confusion over the autopilot, and the unexpected appearance of fishing boats in the intended course. But reading Richard Petrow’s contemporary account of the Torrey Canyon disaster, a clear lesson is that Capt Rugiati was too slow to adjust. He had a plan, and saw far too late that the plan was doomed to failure — and with it, his ship.” – Tim Hartford, Financial Times columnist

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This chart shows the oft-referenced flow of gold west-to-east combined with the growth of internal reserves the result of channeling mine production into central bank holdings. The principal players – China, Russia, Turkey and India – are the beating heart of the global market for physical gold bullion. There is no evidence that there will be a major reversal in this structural pattern in global supply and demand anytime soon. Please take note that the four countries combined monthly demand is now running consistently above global production, as shown on the bottom segment of the chart.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Afternoon Update

(USAGOLD 5-3-2019 PM) – Gold recovered all of what it lost over the past week in a flurry of buying at this morning’s COMEX open. (Please see accompanying chart.) It finished the day up $8.50 at $1279.50, where it began the week.  Silver closed at $14.94 – up 33¢ on the day and up 7¢ on the week. The buying was most likely related to ordinary short covering of positions put on earlier in the week combined with simple recognition that the downside of the past several days was an overdone reaction to the aftermath of the Fed meeting. The Fed’s policy actions, after all is said and done, were a deliberate affirmation of its dovish tilt – and carefully represented as such in the follow-up public statement. Reducing the rate paid on excess reserves was a clear indication that the Fed would like to keep a lid on interest rates. The market may have simply decided that actions, in the end, speak louder than words and adjusted accordingly.  As always, if anything more definitive surfaces, we will post it here, so please stay tuned. . . . .

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

No DMR today. . .

. . .but please check back.  We may post an update later if anything of interest happens.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold down on Fed chairman’s ill-timed use of the word ‘transitory’

(USAGOLD – 5-2-2019) – Gold continued to drift lower in overseas trading last night in response to the latest Fed meeting-statement-news conference onslaught. That weakness carried over to this morning’s COMEX open.  It is now trading at $1269 – down $8 on the day and $12 from just before the Fed chairman’s stepping to the podium.  Silver is down 11¢ on the day at $14.63.

Gold’s sudden drop during Jerome Powell’s press conference at first seemed devoid of explanation.  Nothing he said went beyond the most benign and inoffensive – or so it seemed.  Apparently though, according to reports this morning, gold (along with other markets) was responding to a casual reference by Mr. Powell to the “transitory” nature of low inflation – a comment that the markets read as hawkish.  The reaction was immediate.  Stocks, gold and bonds plummeted sharply.  All of which prompted Gluskin Sheff’s David Rosenberg to comment: “If Powell is so sure the decline in core inflation is transitory, why wasn’t this mentioned in the press statement?” A reasonable question posed to those who think that they might have found a backchannel to the chairman’s innermost thoughts.

“Given that there was effectively no change in the Fed’s overall position,” says Sharps Pixley’s Lawrie Williams, “and virtually all the factors Powell had noted on the assumed strength of the U.S. economy had been well triggered in advance we feel that the sharp move downwards in the gold price was largely unjustified and prices should thus recover much, if not all, the lost ground.”

Hopefully, before the week is out, my fellow goldmeisters, reason shall prevail. . .Stocks and bonds also continued their drift lower in today’s early going with oil joining the party for good measure.  Meanwhile, the chairman of the Federal Reserve is probably on his way to the office this morning wondering what just happened. . . . .

Quote of the Day
“While there will always be some standouts, it’s not clear why so many managers can claim sustained superior performance. The basic technology, data and expertise is readily available. Logically, the anomalies that the strategies rely on should dissipate. There is an inherent contradiction in that the approach exploits inefficiencies, but requires market efficiency to realign prices to generate returns. The reality is that any fund managers possessing a magic investment formula guaranteeing low risk and high returns would have no incentive to share the secret. Successful firms such as Renaissance Technologies LLC have closed some funds to outside investors, preferring to capture the returns for themselves. As legendary investor Paul Tudor Jones once noted, if there was a single easy formula to follow, then all investors would already be rich.” – Satyajit Das, Bloomberg opinion columnist

Chart of the Day

Chart note: We faithfully and painstakingly reproduced this chart developed by UK’s Colin Seymour in 2001. Posted originally at the USAGOLD website, Seymour’s chart and the annotations that went with it caused quite a stir on the internet at the turn of the century and the early stages of gold’s secular bull market. It is still widely referenced and linked on the world wide web. We recently re-reposted the study as part of a site-wide upgrade to current internet presentation standards we hope to fully unveil soon. It is as relevant to investors today as it was in 2001. Here is the link to the original article titled Pompous Prognosticators.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold edges lower as Fed concludes meeting

(USAGOLD – 5-1-2019) – Gold edged lower in advance of today’s wind-up to the Federal Reserve Open Market Committee meeting.  It is trading at $1281 and down $3 early in the COMEX session.  Silver is down 12¢ at $14.83. Despite the president’s call for a 1% cut in interest rates and a restart to quantitative easing, few expect much more than a rhetorical adjustment or two to its current already dovish policy stance.

In an interview at the Financial Sense website, well-known Lichtenstein-based analyst Ronald Stoeferle says that “we are unlikely to see strongly rising or clearly positive real interest rates in the coming years. Central banks are caught in the interest-rate trap.”  So much so that “the market is addicted to this punchbowl of cheap liquidity and central bank stimulation,” he says. “We clearly saw in the fourth quarter last year that markets really didn’t appreciate that. What we said turned out to be true because we have seen this monetary U-turn. … I have no doubt that this is also going to be positive for gold.” Stoeferle believes that the president will get his wish.  The Fed, he predicts, will again become a net buyer of U.S. Treasuries.

Quote of the Day
“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” – Ernest Hemingway

Chart of the Day

Chart note: “Venezuela’s annual inflation rate,” says TradingEconomics.com rather matter of factly, “fell to 1.62 million percent in March of 2019 from 2.3 million percent in February, according to estimates from Venezuela’s opposition-led Congress. It is the lowest annual inflation rate since November. Inflation Rate in Venezuela averaged 21,261.89 percent from 1973 until 2019, reaching an all-time high of 2,688,670 percent in January of 2019 and a record low of 3.22 percent in February of 1973.” We are happy to see that things are improving in Venezuela.

 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold treading water ahead of Fed, Rosenberg says ‘cyclically-adjusted GDP contracting’

(USAGOLD – 4-30-2019) – Gold is priced at $1282 and level with yesterday’s close ahead of today’s Fed meeting.  Silver is down 4¢ at $14.90.  With oil moving sharply to the upside this morning and the dollar down, the quiet gold market is a bit of an anomaly. Fed Week, though, is typically a drag on the gold price and that might be the dominant mindset in today’s early going.  The yellow metal traded firmly in Asia overnight – up $6 at one point – but gave back those gains at the COMEX open.

The gold market (along with financial markets in general) has yet to completely digest completely the unusual GDP/PCE report issued last Thursday, i.e., the one to which it reacted by rising $9 out of the gate. We came across this assessment from Gluskin Sheff’s widely-followed David Rosenberg and thought it worth passing along: “This was a low-quality GDP report. All one-offs – lower imports, higher inventories & Pentagon spending. Real final private sales a puny 1.3%. Removing more lipstick from this pig shows cyclically-adjusted GDP contracting at a 2% annual rate; deepest decline in nearly a decade.”

There will be those sitting around the table at today’s meeting of the Federal Open Market Committee for whom that 2% cyclically-adjusted contraction will have a sobering effect. If a more dovish public posture on the part of the Fed is the result, it could have a positive effect on the gold market.

Quote of the Day
“There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely. Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course. They will get the maximum reward from the increase as it continues; they will be out before the eventual fall. For built into this situation is the eventual and inevitable fall.  Built in also is the circumstance that it cannot come gently or gradually. When it comes, it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape.” – John Kenneth Galbraith, A Short History of Financial Euphoria, 1990 (With thanks to John Hussman, Hussman Funds)

Chart of the Day

Chart note:  The OECD measures consumer confidence in various economies including the United States. A reading above 100 indicates a positive outlook toward the future economic situation.  Values below 100 reflect a more pessimistic outlook.  As you can see, we are now at a level in consumer confidence that has signaled downturns in the past.  In fact, consumer confidence is now ahead of where it was just before the 2008-2009 recession and just below the level it registered before the dot.com stock market bust in 2000.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold opens week lower, Asian buyers push bullion premiums higher

(USAGOLD – 4-29-2019) – Gold opened lower on the COMEX this morning after a listless night overseas.  It is trading at $1282.50 – down $3.75 from Friday’s close. Silver is down 9¢ at $14.99. Reuters reported early Friday that gold demand in Asia is picking up at currently low prices. Buying in India is strong for wedding season while bullion premiums in China are at the highest in two years. The event of the week will be the Fed meeting Tuesday and Wednesday.  Though no surprises are expected, Friday’s unexpectedly low PCE inflation reading raised a few eyebrows and sent the gold price up $9 on the day. Financial Times says that “inflation’s persistent weakness is troubling the Fed” and a sign that “the economy may be weaker than thought.”

Quote of the Day
“I hear people saying: ‘Maybe the Federal Reserve can use the reduction of interest rates forever. Maybe the central banks can just use quantitative easing forever, continuously buy securities and pop liquidity into the economy. And, maybe we don’t ever have to have a slowdown again.’ Simply put: ‘It’s different this time.’ But how much money would you want to bet on that? Is it really possible that we will never have a recession again? I’m not sold on this because the riskiest thing in the world is to believe that there is no risk. When people sense that the risk of an economic slowdown has been eliminated, they will take steps to ensure that there is plenty of risk present, in particular by bidding up security prices too high. People create risk through their own behavior.” – Howard Marks, the Market NZZ interview

Chart of the Day


Chart courtesy of Sentimentrader.com

Chart note: “Maximum optimism Dumb Money Confidence,” writes Sentimentrader’s Jason Goepfert, “has been climbing steadily for a month, and stocks have so far shrugged off that extreme optimism. Now it has reached its highest level in a decade. Every date that saw this high of a reading in the past 20 years sported a negative return in the S&P 500 at some point between the next 2-8 weeks. This is also one of the handful of times since 1999 when Dumb Money was highly confident about a market rally two weeks into an earnings reporting month.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold shuns GDP report, reacts instead to PCE – up $6 in early trading

(USAGOLD – 4-26-2019) – Gold was ambling along lazily this morning until the Bureau of Economic Analysis announced GDP (an unexpectedly strong +3.2%) and PCE (a very weak 1.3%) numbers.  Gold’s immediate response was to go sharply lower, then it turned on a dime and went sharply higher.  Obviously, it registered a stronger response to the downbeat PCE report, the Fed’s preferred inflation gauge, than it did to the upbeat GDP number, the widely-followed measure of general economic performance. All, in the hearts and minds of Wall Street’s best and brightest, rests upon what the Fed might or might not do next. As it stands, gold is up $6 on the day $1285.  Silver is up 8¢ at $15.05.

ThomsonReuters-Zawya reports that “[t]he record levels of gold buying by central banks which bolstered the price of the yellow metal in 2018 (Please see our Chart of the Day below) has continued into the first couple of months of 2019, with 51 tonnes bought in February alone. Speaking at the Dubai Precious Metals Conference earlier this month, Ross Norman, CEO of London-based gold bullion broker Sharps Pixley, said that demand from central banks in January and February ‘amounted to 90 tonnes of fresh buying’, which is 61 percent higher than the 56 tonnes bought in the first two months of 2018, and the highest rate of growth since the first two months of 2008.” India announced recently that it plans to add 46.7 tonnes of gold to its reserves in 2019.  India’s additions are part of “a wider picture across developing economies that are looking at de-dollarizing their foreign-exchange reserves,” according to SP Angel, the commodities brokerage (as reported at Scrap Register).

Quote of the Day
“At the quarter-century mark of 1925, the great bull market was under way, and Graham*, then 31, developed what he later described as a ‘bad case of hubris.’ During an early-1929 conversation with business associate Bernard Baruch (about whom he disparagingly observed, ‘He had the vanity that attenuates the greatness of some men’), both agreed that the market had advanced to ‘inordinate heights, that the speculators had gone crazy, that respected investment bankers were indulging in inexcusable high jinks, and that the whole thing would have to end up one day in a major crash.’ Several years later he lamented, ‘What seems really strange now is that I could make a prediction of that kind in all seriousness, yet not have the sense to realize the dangers to which I continued to subject the Account’s capital.’ In mid-1929, the equity in the ‘Account’ was a proud $2,500,000; by the end of 1932, it had shrunk to a mere $375,000.” – Frank K. Martin, A Decade of Delusions

Chart of the Day

Chart note: “Central bank net purchases reached 651.5t in 2018, 74% higher year over year,” says the World Gold Council in its year-end gold demand report. “This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. These institutions now hold nearly 34,000 tonnes of gold. Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold edges higher on sharp increase in oil prices, unemployment claims surge

(USAGOLD – 4-25-2019) – Gold edged higher in a somewhat confused reaction to conflicting reports on the economy and another strong surge in the oil price.  It is trading at $1277 and up $2.50 on the day.  Silver is down 2¢ at $14.90.  The Labor Department reported an unexpected uptick in applications for unemployment, the biggest rise in 19 months.  Contrasting that, durable goods [refrigerators, washing machines, etc] orders rose 2.7%, the largest increase in eight months.  As we go to post today’s report, it seems that oil’s rise is winning the day in the gold market. After a brief drop following the durable goods report, it is back to the upside.

Bert Dohmen, Dohmen Capital Research, offers some contrarian perspective on recent weakness in the gold price. “In 2018, bullish sentiment for gold and silver was at a multi-year low,” he says. “Very few people were interested. That’s usually the time to take a fresh look, technical and fundamental. If everything lines up, my analysis would go against the bearish majority. The chart below [not shown] shows the exposure to gold of managed money in gold futures and options. It shows that the allocation to gold was at its lowest point on this chart in October 2018, at least since 2006. Also important is that in spite the extremely low interest in gold, the gold price (yellow line) in 2018 was higher than at the gold low in 2016. I call this a very important long-term, bullish divergence.”

Quote of the Day
“The ‘threat’ is best seen through the emergence of exchange-traded funds (ETFs), which allow investors to get a proxy physical gold exposure through an investment via their stockbroker. In truth, these products are, in many cases, more expensive than trading and storing physical gold (especially for larger investors with a long-term investment time frame), have less trading flexibility, and are less secure than owning real physical gold.” – Jordan Eliseo, ABC Bullion/Australia

Chart of the Day

Chart note: J.P. Morgan Asset Management released a report recently ranking investments over the past twenty years. It shows gold as the second best performer over the period at a 7.7% average gain annually. REITs were number one at a 9.9% gain. Stocks ranked fourth at 5.6%.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold, silver trading level this morning, ‘delayed lift’ possible on tighter Iran sanctions

(USAGOLD – 4-24-2019) –  Gold and silver are trading level at $1272 and $14.83 per ounce respectively as the U.S. session opens.  No explanation of substance has surfaced with respect to yesterday’s sell-off though both metals did recover much of their early losses during the course of the day. China took the lead overnight in rejecting tighter sanctions on Iran’s crude oil exports. Financial markets, with the notable exception of crude oil itself, have underplayed rising Mideast tensions thus far.

We find ourselves in the same camp with Bloomberg’s Jake Lloyd Smith on the matter. “Gold,” he says, “is due for a delayed lift from the U.S. upping the ante against Iran with the decision to end the sanctions waivers. That move, if enforced, puts a U.S. boot on Tehran’s windpipe and sets the scene for further tensions. Iran is already talking about choking off the Strait of Hormuz, the vital maritime conduit for Persian Gulf shippers. While RBC Capital Markets reckons that the U.S. Fifth Fleet could handle a direct challenge in that area, any flare up would boost both crude and bullion.”

Quote of the Day
“In 2018, bullish sentiment for gold and silver was at a multi-year low. Very few people were interested. That’s usually the time to take a fresh look, technical and fundamental. If everything lines up, my analysis would go against the bearish majority. The chart below shows the exposure to gold of managed money in gold futures and options. It shows that the allocation to gold was at its lowest point on this chart in October 2018, at least since 2006. Also important is that in spite of the extremely low interest in gold, the gold price (yellow line) in 2018 was higher than at the gold low in 2016. I call this a very important long-term, bullish divergence.” – Bert Dohmen, Dohmen Capital Research – Forbes article

Chart of the Day


Chart courtesy of the World Gold Council (GoldHub)

Chart note:  The last time we visited this chart, we noted that managed money net long positions had begun increasing as of December 2018.  The price responded in the first quarter with an uptick.  Since then, managed money long positions have leveled out and the price has been rangebound between $1275 and $1310.  Thus far we have not seen the same level of turnaround in managed money positions that we did in 2016, 2017 and 2018 – something that a number of technical analysts see as a future possibility. In this morning’s Quote of the Day, we feature the thinking of Bert Dohmen (Dohmen’s Capital Research).  “Gold, ” he says in the analysis linked above, “could have a secular bull market until 2030. That means the gold bull market could have about 11 more years to go. Historically, the final phase of a bull market is the most spectacular.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold plunges under mysterious circumstances similar to a week ago

(USAGOLD – April 23, 2019) – Gold plunged this morning falling below the $1275 support zone to trade at $1269 – down $6 on the day.  Silver is down 22¢ at $14.81.  Once again the sharp drop occurred in the absence of significant news, at the COMEX open, involving roughly the same volume (a little over $1.5 billion in notional paper gold) and exactly one-week to the hour from the last paper dump April 16th.  We note also that the dollar moved sharply to the upside at the precisely the same moment.

Last time around, we first blamed one or more algo-based trading systems – institutional short sellers attempting to take advantage of a quiet, thinly-traded gold market. We then settled a few days later on the more likely possibility of a paper sale connected to Venezuela’s liquidation of bullion reserves.  Whether or not we will repeat the same sequence this time around remains to be seen. We must admit though to starting out in the same place we did a week ago – in a complete quandary.  Please stay tuned for further updates if more information surfaces.

Above: Chart of the COMEX open, April 16, 2019, with volumes just after the open.
Below:  Chart of the COMEX open, April 23, 2019, with volumes just after the open.

Quote of the Day
“Why does the cycle move as it does? What causes these periodic alternations, this ebb and this flow, in the national priorities? If it is a genuine cycle, the explanation must be primarily internal. Each phase must flow out of the conditions – and contradictions – of the phase before and then itself prepare the way for the next recurrence. A true cycle is self-generating. It cannot be determined, short of catastrophe, by external events. Wars, depressions, inflations may heighten or complicate moods, but the cycle itself rolls on, self-contained, self-sufficient and autonomous. . .The roots of cyclical self sufficiencylies deep in the natural life of humanity. There is a cyclical pattern in organic nature — in the tides, in the seasons, in night and day, in the systole and diastole of the human heart.” – Arthur M. Schlesinger, Jr., The Cycles of American History

Chart of the Day

Chart note: National security advisor John Bolton recently focused attention on the national debt saying that it was “a threat to the society.” The national debt now stands at over $22 trillion and nearly $1.5 trillion was added in 2018. “And that kind of threat,” he added, “ultimately has a national security consequence for it.” An obvious consequence is that interest payments eat up what might otherwise be spent on the national defense. Perhaps that is what has Mr. Bolton worried. As you can see in this final chart of our series on the national debt, there is a strong relationship between growth in the national debt and gold – one that goes all the way back to the early 1970s.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold level despite new Iran oil sanctions

(USAGOLD – 4-22-2019) – Gold is trading quietly this morning after a minor surge in the overnight markets on reports that the United States was preparing economic sanctions against nation-states that did not halt imports of oil from Iran.  It is level on the day at $1276. Silver is up 4¢ at $15.05.  Brent crude is up 2.5% at $73.70 per barrel.  Iran, in turn, is threatening to close the Straits of Hormuz, the vital choke point for oil shipments from the Middle East.  Things may change as the day progresses and investors reorient themselves after the Easter break.  If so, we will report back. For now though, the markets – with the exception of the energy complex – are reacting rather mildly to what might turn out to be an important turn of events.

Quote of the Day
“The U.S. posted its biggest monthly budget deficit on record last month, amid a 20 percent drop in corporate tax revenue and a boost in spending so far this fiscal year. The budget gap widened to $234 billion in February, compared with a fiscal gap of $215.2 billion a year earlier. That gap surpassed the previous monthly record of $231.7 billion set seven years ago, according to data compiled by Bloomberg. February’s shortfall helped push the deficit for the first five months of the government’s fiscal year to $544.2 billion, up almost 40 percent from the same period the previous year.” – Bloomberg report, 3-22-2019

Chart of the Day

Chart note:  This chart depicts U.S. government receipts and expenditures from 1950 to present.  Note the growing gap between incoming and outgoing – the difference for the most part filled by additions to the national debt.  Given the established trend, that gap in all likelihood would have continued widening without the imposition of the new tax reduction program and simultaneous growth in government spending.  With tax reductions now in place, the distance between the two lines is likely to widen even further.  This is the second last installment in our series on the national debt.  Tomorrow, we will post the final entry.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold remains on straight and narrow, second successive ‘no-change’ day

(USAGOLD – April 18, 2018) – Gold – at $1274 per ounce – remains on the straight and narrow this morning posting its second successive no-change day thus far and looking about for incentive to move in one direction or the other.  Silver is down 1¢ at $14.97.  As reported yesterday, Thursday’s sell-off appeared related to Venezuela’s liquidation of $400 million worth of its gold reserves.  As for the Monday’s follow-through decline, Commerzbank attributes it to “technical selling after the price dropped below the technically important 100-day moving average . . .We do not understand why the gold price should be weak given the very loose monetary policy pursued by many Western central banks – apparently the ECB [European Central Bank] is even considering price-level targeting.” [Scrap Register, 4-16-2019] We agree that stimulus and response in the gold market seem out of kilter at the moment.

Quote of the Day
“Were Keynes alive today, he would likely be arguing along with German Chancellor Angela Merkel for more monetary discipline and a return to a more balanced international system. No doubt, however, his neo-Keynesian acolytes would be dismissing his concerns as hopelessly outdated and reactionary. Keynes was an economic theorist, but he was also a clear-eyed market analyst, and a passionate and committed speculator for his own account and for Cambridge University. If he took in today’s economic vista of near-zero interest rates and quantitative easing, it is clear that he would be buying gold hand over fist—regardless of what his disciples might think.” – Richard Hurowitz, Octavian Report (in a Wall Street Journal editorial published September 2015)

Chart of the Day

Chart note: This quarterly chart zeroes-in on why the national debt matters. Elevated interest rates and massive growth in the gross debt will push federal government interest expense much higher – so much so that it could exceed in the near future what the nation spends on national defense. One would think that, like Italy or Greece, at some point the level of debt and interest payments will affect the national credit rating. Last, please note the acceleration in debt payments over the last twelve months (the last bar represents Q4-2018).

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold level this morning, Venezuela sells $400 million in bullion

(USAGOLD – April 17, 2019) – Gold is level this morning at $1276.50 as it attempts to stabilize after the sell-off which began last Thursday. Silver is up 7¢ at $15.08. Since Thursday, we have alluded to the mysterious behavior in the gold price but admitted to being unable to attach cause and effect.  Now facts are beginning to emerge that shed some light on might have happened. Bloomberg reported late Monday that Venezuela had sold $400 million in physical gold through “firms in the United Arab Emirates and Turkey.” Venezuela also recorded a drop in its gold reserves on Friday (4-12-2019).  The sharp drop in the FOREX market on Thursday corresponded roughly with business hours in the Mideast, so there is some credibility to the claim. In short, and this might come off as somewhat anticlimactic, Thursday’s price drop could have been the result of a one-off hedge placed by the institutional buyer[s] to cover its position.

Quote of the Day
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – William Strauss and Neil Howe, The Fourth Turning

Chart of the Day

Chart note:  According to economists Ken Rogoff and Carmen Rinehart, the established danger zone for the debt to GDP ratio, begins at 90%. The current debt to GDP ratio for the United States is 106%.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold drops on $2 billion paper dump at the COMEX open

(USAGOLD – April 16, 2019) – Overnight weakness in the gold market spilled over to the COMEX open this morning. In what looks like an algo-based trade that dumped $2 billion worth of paper gold onto the market (see chart below), gold dropped to $1279.50 and is now down $9 on the day.  Silver is down 9¢ at $14,93.  Theories abound as to gold’s mysterious weakness in the face of a falling dollar and generally favorable economic incentives, i.e., technical selling, a retreat from safe havens, etc.  Until a more convincing explanation surfaces, we will blame it on institutional short sellers attempting to take advantage of a quiet, thinly-traded market.

Here is a chart on what the sell-off this morning looked like, volumes included. . . .

Quote of the Day
“The world clings to its old mental picture of the stock market because it’s comforting; because it’s so hard to draw a picture of what has replaced it; and because the few people able to draw it for you have no interest in doing so.” ― Michael Lewis, Flash Boys

Chart of the Day

USAGOLD note:  The U.S. federal government added $1.481 trillion to the national debt in 2018, the third largest increase on record.  The Republicans do not talk about the deficits because it is an embarassment.  The Democrats do not talk about the deficits because they do not want to draw attention to the uncontrolled spending debt issuance to sponsor government social programs.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold’s mysterious downside drift continues to start the week

(USAGOLD – April 15, 2019) – Gold is starting the week in a continuation of the downtrend that began late last week.  It is off $6 at $1284.  Silver is down 5¢ at $14.91.  With the dollar also down on the day, analysts will be searching for a rationale to explain gold’s push to back below the $1300 mark.  The Wall Street Journal reported over the weekend (Pact Hems Beijing Currency Moves) that the United States and China had reached an agreement that would limit China’s ability to manipulate its currency downward for export purposes.  One would think that such dollar-negative news would translate as favorable for gold, but the precious metal seems to be trading on technical factors instead. As expressed in our reporting at the end of last week, this latest downside drift remains a mystery searching for an explanation.

Quote of the Day
“So, we were just chatting away there in friendly conversation and then Volcker walks in, you can’t miss him because I think he’s about six-and-a-half feet tall. So, he walks in and I thought, ‘well I have to shake his hand and say hello.’ He didn’t even look at me. He didn’t come to me. He went straight to his staff and he said, ‘what’s the price of gold?’ So, I thought, ‘gold is important to him’ and I still think it’s every bit as important to Fed people now because it is the ultimate measurement of the dollar. They can rig it and monkey around with it and play games, but ultimately, the market will have its say.” – Ron Paul from a Mises Institute Interview with Jeff Deist

Chart of the Day

USAGOLD note:  As of Friday, April 12, 2019, the national debt stood at $22,027,837,127,788.04 – $966 billion higher than a year ago, $2.081 trillion higher than when Donald Trump took office January 20, 2017, and nearly double where it was ten years ago. The health of the country, the prosperity we care about, and the security we care about are just inextricably linked,” says former chairman of the Joint Chiefs of Staff Mike Mullen, “. . .and we keep looking away hoping it will get better, and it gets worse.  It’s about the debt levels, and the inability to pay our own bills, and if we don’t get our fiscal house in order, it’s going to dramatically affect our security of our country.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold sell-off yesterday possibly Japanese yen related

(USAGOLD – April 12, 2019) – At $1292 per ounce, gold is level in early trading after yesterday’s sell-off.  Silver is up 6¢ at $15.04. Mystery lingers as to the cause of yesterday’s sudden $17 retreat.  The dollar index this morning has already given up yesterday’s gains and more. The Japanese yen, on the other hand, remains in a downtrend against the dollar supporting the notion that yesterday’s abrupt market movement could have been the result of a trader or traders reacting to that country’s monetary and currency policies. We note that though the price of gold dropped in dollar terms yesterday, it rose sharply in Japanese yen.

The World Silver Survey is out this morning and it reports strong demand for silver among investors in 2018. “[P]hysical demand increased 4% in 2018,” reads the survey, “propelled by a modest rise in jewelry and silverware fabrication, and a jump in coin and bar demand. Indeed, investment in silver bars and coins grew by an impressive 20% last year, driven by an exceptionally strong demand sentiment in India.” In addition to the strong demand from India, the WSS reports strong bullion demand from Chinese domestic banks that “thought the silver price attractive.”

Quote of the Day
“The Fed will be forced to participate as avoiding deflation will be the number 1 priority – not the profitability of the banking sector. Investors should contemplate a brave new world of negative Fed Funds, negative US 10y and 30y bond yields, 15% budget deficits and helicopter money. Sounds ridiculous, doesn’t it? What I said in 2006 sounded ridiculous too.” – Albert Edwards, Society Generale

Chart of the Day

Chart note: The Volatility Index pushed to levels late last year and early this year not seen since the financial crisis in 2008. December 2018 was the worst month for stocks since the Great Depression. According to the Bank of America, not even the stock market rally early in the year was enough to convince investors to stay put. They were net sellers of $26 billion in U.S. stocks and $7 billion in European stocks in January. Meanwhile, gold bullion accumulation continued to advance steadily. Gold ETFs, the favored vehicle for funds and institutions, added almost 72 tonnes to their holdings in January and 185 tonnes since the beginning of October. ETF stockpiles now stand at their highest level since 2013.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold selloff pushed by Brexit deadline extension, short-term profit taking

(USAGOLD – April 11, 2019) – Gold’s selloff today began modestly in Asia overnight then gathered pace in London after leaders of the EU and UK announced an agreement to extend the Brexit deadline to the end of October. The metal is down $12 on the day at $1296.  Silver is down 23¢ at $15.02. The downtrend for gold comes after four straight days of gains that took the metal from $1285 to near $1310 last night in Asian trading. Technical, algo-based short-term profit-taking could also be playing a role in the reversal.

Sprott’s Trey Reik sees the recurrent retreats below the $1300 price level as temporary phenomena. “After a lot of late-March huffing and puffing in COMEX markets to achieve a month-end close for spot gold below $1,300,” he says in a report released yesterday, “trading in physical gold markets proved especially robust during the first week of April. To us, this suggests gold’s sub-$1,300 spot price is destined to be short lived.”

Quote of the Day
“Money, again, has often been a cause of the delusion of multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper. To trace the history of the most prominent of these delusions is the object of the present pages. Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds (1841)

Chart of the Day

Chart note:  This chart shows the change in U.S. debt held by foreigners and international investors in billions of dollars from 1970 to present.  The level of ownership grew proportionately over time in concert with the overall issuance of U.S. debt until 2015, when it began to fall off.  The problem is not just that foreign investment in U.S. Treasuries is on the wane.  It is that the retreat has come at a time when U.S. borrowing needs are expected to consistently exceed $1 trillion per year. The question becomes, “How is the U.S. federal debt going to get financed?”  (For more detail, please see The $12 trillion federal debt bombshell –  A NEWS & VIEWS SPECIAL REPORT, February 2019)

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold seesaws overnight, remains indecisive in early New York trading

(USAGOLD – April 10, 2019) – Gold turned in a see-saw performance in overnight trading and that same indecisiveness carried over to the New York open.  It is now priced at  $1302.50 and down $2.50 on the day.  Silver is down 4¢ on the day at $15.20.  The Labor Department’s consumer price report is out this morning showing a 0.4% increase for March and 1.9% annualized. Though the numbers are higher than expected, it has not had much of an impact on precious metal pricing this morning. White House pressure on the Fed to ease monetary policy, the global de-dollarization movement and central bank gold purchases remain the three primary influences on gold demand and pricing at present.

In a Kitco interview yesterday, market analyst Adrian Day offered an interesting insight worth passing along. “Certainly, declining rates did not help gold,” he said, “particularly from 2011 to the end of 2016. However, a central bank that lowers rates because it can’t raise them is a different matter. Concerns about a slowing economy and particularly the impact of higher rates on the massive amounts of debt – at the government corporate and consumer level – will keep rates low and this remains very positive for gold.”

Quote of the Day
“Fueling the markets are statements from past and present Fed Governors that are not only dovish but discuss a resumption of QE and negative interest rates. Former Fed Chairman, Janet Yellen, recently said the Fed needs more tools to battle a financial crisis. This is the same Janet Yellen that, in June of 2017, stated that she did not believe we would have a financial crisis in our lifetimes. The Fed is sounding the alarms.” – Michael Lebowitz, RIAPRO.net

Chart of the Day

Chart courtesy of OPTIONAlpha

Chart note: As was the case this past November (the last time we posted this chart), we continue to guesstimate that we are somewhere between “Euphoria” and “Anxiety” on stocks and “Depression” and “Hope” on gold and silver.  Recent statistics showing a significant migration of investor capital from stocks to cash and to gold coins, bullion, ETFs and mining stocks supports that determination. Market sentiment has changed markedly since last September, in our view, when we put stock market sentiment at somewhere between “Thrill” and “Euphoria” and gold somewhere between “Despondency” and “Depression.” 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold tacks on fresh gains – up $7 in early NY trading

(USAGOLD – April 9, 2019) – Gold tacked on fresh gains in today’s early trading – up $7 at $1305.  Silver is up 4¢ at $15.30. The upside move began overnight during Asian trading hours then gained some momentum at the New York open.  White House pressure on the Fed to ease monetary policy, the global de-dollarization movement and central bank gold purchases remain the three primary influences on gold demand and pricing at present.

France’s Societe Generale forecasts “gold prices to progressively rise over the year as investors seek refuge from risk assets going into a recessionary period in 2020.” In a report cited at Scrap Register yesterday, it goes on to say that it looks for “gold prices to average $1,400 an ounce in the first quarter of 2020. The monetary U-turn of the Fed and the ECB [European Central Bank] in recent weeks also offers some respite to non-yielding assets.”

J.P.  Morgan Asset Management released a report last week ranking investments over the past twenty years. It shows gold as the second best performer over the period at a 7.7% average gain annually.  REITs were number one at a 9.9% gain.  Stocks ranked fourth at 5.6%.


We explore the issues mentioned above more fully in the April edition of our monthly newsletter released yesterday.


Quote of the Day
“A lot of economic, market and bank supervisory theory is based on the premise that financial actors are largely rational. The crisis convinced me that they are not. It was not rational for very experienced financial leaders to make their companies hostage to short-term financing that was, in the final analysis, secured by the irrational assumption that house prices will always go up. It was not rational for Dick Fuld to reject offers because their terms offended his pride. It was not rational for money market fund investors to flee all money market funds just because one fund made a bad bet. It was not rational for some lenders, at the height of the crisis, to stop accepting even Treasuries as collateral. The crisis convinced me that greed, ego, fear, short-sightedness, group-think and other human foibles have at least as much, if not more, to do with financial behaviour as rational thinking does.” – Mike Silva, former chief of staff to New York Fed president Tim Geithner during the 2008 financial crisis (Speech to the LBMA, October 2018)

Chart of the Day

Chart note: Up until the “double oughts,” the manual on gold read that it performed well under inflationary and deflationary circumstances, but not much else. However, as the decade of asset bubbles, financial institution failures, and global systemic and sovereign debt risk progressed, gold marched to higher ground one year after another. As events unfolded, it became increasingly clear that the metal was capable of delivering the goods under disinflationary circumstances as well. The fact of the matter is that, during the 2000s even as the inflation rate hovered in the low single digits (See chart, green area], gold managed to rise from just under $300 per ounce in the early 2000s to just over $1800 per ounce by 2011 — a gain of nearly 650%. Since then, gold has taken a breather. As this essay is written, it is trading in the $1200 per ounce range — still up over 425% in the new century.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold surges $11 in early trading, silver 17¢

(USAGOLD–April 8, 2019) – Gold pushed sharply higher in overnight and early U.S. trading transcending once again the psychologically important $1300 mark. It is up $11 at $1302.50.  Silver is up 17¢ at $15.30. In looking around for an explanation for this morning’s price surge, we note three possibilities.  First and foremost is President Trump’s statement late last week that he thought the Fed should lower rates and launch a new quantitative easing program. Second, Reuters reports that Saudi Arabia is threatening to “ditch” the dollar if Congress goes through with its proposed NOPEC legislation. (That measure, if passed, would expose Saudi Arabia and other oil producing countries to anti-trust lawsuits.) Third, China announced over the weekend that it had acquired another 11.2 tonnes of gold last month “adding to optimism,” as Bloomberg put it, “that central banks globally will continue to build holdings.”

Quote of the Day
“A lot of the bank issues in the United States and around the world have been solved. But migrating the problem to the sovereign balance sheets. So the banks look pretty good, but the Fed has $4 trillion of debt on its balance sheet. And it’s even more, we are not in a European audience. In Europe, they would really know what they meant because all the European banking system is fixed but Europeans are all also buying up all the debt. The budget deficits haven’t contracted, they’ve widened. The banks buy the debt, then walk over to the European Central bank, finance it. . . You wonder is the next crisis going to be a sovereign crisis. And if it is, it will just be a continuation. People will look back and say ‘what we really did, we didn’t fix the outcome of the financial crisis. We left that open and as a result, its really been a thirty-year workout.’” – Lloyd Blankfein, Goldman Sachs

Chart of the Day

Chart note: This long-term gold chart is drawn in log-scale. “Common percent changes,” says Investopedia of log-scale charts, “are represented by an equal spacing between the numbers in the scale. For example, the distance between $10 and $20 is equal to the distance between $20 and $40 because both scenarios represent a 100% increase in price.” On a linear chart, the lesser values are compressed to the point that it diminishes the strength of a price move. The greater values likewise are extended to a degree that they tend to dramatize a price move. The log-scale chart presents data in a more realistic framework for making investment decisions.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold down on still another jobs report; speculators punching at phantoms in the night

(USAGOLD–April 6, 2019) – Gold’s downside yesterday started with a reaction to a jobs report and its upside began with a jobs report.  The unusual circumstances ended with gold posting a surprise $10 reversal from its $1283 intraday low point.  Silver followed in its wake with a 20¢ reversal from its intraday bottom.  This morning gold is back on the downside with the release of still another jobs report – this time non-farm payrolls – that showed a strong rebound in employment.  As it is, gold is down $7 on the day at $1286. Silver is down 6¢ at $15.11.

The feckless financial markets continue to react in knee jerk fashion to numbers that verge on meaningless to a Fed chairman who has repeatedly raised concerns about the quality, not the quantity, of jobs – who places his primary emphasis on the fact that nearly 80% of employed Americans live paycheck to paycheck.  Physical gold owners with an eye to the longer-term would be well-advised to properly discount the activity of shadow-boxing traders/speculators punching at phantoms in the night. . . . . . . . .

Quote of the Day
“I grew up in a purely urban family. We had no relatives in the country. I’m born in 1944. When I was a baby, my mother could only buy food because she still had some gold coins. Without gold, I would have starved. She always told me that. Therefore, this generation already has a certain gold affinity. In extreme times of crisis, this is one of the few things left to be accepted. Gold was the only thing left to the people of the city at that time. Before the silver cutlery was also traded at the farmer.” – Ewald Nowotny, European Central Bank governor

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This interesting chart on consumer prices from 1550 to present shows the direct relationship between declining purchasing power in the British pound and the sterling price of gold after 1931, the year Britain departed the gold standard. Prior to 1931, there was an occasional minor bump higher in the price of gold, as you can see, but for the most part it followed along the same flat line as consumer prices. It was only after Britain separated the pound from gold in 1931 that gold showed its true colors as portfolio defense against a depreciating domestic currency. The metal’s price moved significantly higher after 1971 when the Bretton Woods agreement was abandoned and currencies and gold were allowed to move freely in international markets. The real lesson in this chart is that when a nation-state moves away from gold-backed to fiat money, gold coins and bullion become a logical and worthwhile alternative for citizen-investors – even after centuries of relative price stability.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold drops $9 on strong jobless claims report

(USAGOLD–April 4, 2019) – Gold dropped abruptly this morning after the Labor Department reported jobless claims at their lowest level since 1969. It is trading at $1284, down $9 on the day. Silver is down 19¢ $14.95. A number of technical analysts have reverted to a more bearish forecast over the past week with the $1250 area once again being touted as the downside support area.*  Many of those same technical analysts, though, have a significantly more positive outlook for the longer term.

Among that group is Gary Wagner of the Wagner Financial Group who sees $1267 or even $1247 as possibilities in the short run, but also forecasts the possibility of $1800 to $2200 in the longer run.  “Our research,” he explains in an article published yesterday at the Singapore Bullion Market Association website, “suggests that gold is in the final phase of a major long-term impulse cycle. This model also provides a look-back at the final major bullish wave could be traced back to end of 2015, following a correction to $1,040. This corrective fourth wave developed from the all-time high at $1,900 in 2011. The model suggest that gold could re-test the record highs that, if taken out, could see an extensive surge to between $1800 and $2200 per troy ounce.”


* At USAGOLD, it bears repeating, we have always advocated the ownership of both gold and silver coins and bullion for long-term asset preservation purposes rather than short-term speculative gain.  Though we report on the short-term, we do so with the caveat that anything can happen.  The analyst who forecasts a short-term downside today can quickly change his or her outlook to the upside tomorrow – or vice versa.  The long term charts for gold and silver, though, reveal a consistent upward trend that has served investors well in the period since 1971 when the global monetary system departed the gold standard and entered the fiat money era.


Quote of the Day
“[JP Morgan’s Marko] Kolanovic, who has dominated Institutional Investor’s annual rankings of top strategists for a decade or so, was out with a research note Thursday arguing that President Donald’s Trump’s isolationist foreign policy is a ‘catalyst for long-term de-dollarization.’ Put another way, the dollar is in jeopardy of no longer being the world’s primary reserve currency and all the benefits that go along with that, such as interest rates that are lower than they otherwise might be and the government’s ability to fund budget deficits in perpetuity.” – Robert Burgess, Bloomberg opinion columnist

Chart of the Day

Chart note: When a combination of currency debasement and inflation strikes an economy, the effects can be sudden and severe, as indicated in the two charts shown above. “Consumer prices in Venezuela,” reports TradingEconomics.com, “jumped 1,300,000 percent year-on-year in November of 2018, up from a 833,997 climb in October, according to estimates from Venezuela’s opposition-led congress. Inflation rate in Venezuela averaged 3268.55 percent from 1973 until 2018, reaching an all time high of 833997 percent in October of 2018 and a record low of 3.22 percent in February of 1973. The USDVEB traded at 248,520.9000 on Wednesday January 23. Historically, the Venezuelan Bolivar reached an all time high of 248520.90 in August of 2018 and a record low of 0.05 in January of 1989.” It does not take a great deal of imagination to contemplate what the effects might have been on the price of gold in Bolivars.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold struggles in early going; Bloomberg Intelligence analyst sees it ‘in similar extreme coiled-spring as in 1997’

(USAGOLD–April 3, 2019) –  Gold is struggling to keep its head above water in early U.S. trading and is level on the day at $1292.50.  Silver is down 4¢ at $15.12.  Topping the news this morning is a Financial Times report that China and the United States are drawing closer to a trade deal. Both sides have strong incentives to complete a deal at this juncture.  The White House would like to put a feather in its cap as it ramps up for the 2020 election. China would like to do something to stabilize its sliding, debt-ridden economy. Conversely, the same issues that have been obstacles to a completed agreement over the past several months remain sticking points now.

Bloomberg Intelligence analyst Mike McGlone is among those who see gold as reaching a major turning point. “Stuck close to $1,300 an ounce in 1Q,” he says, “gold is set to head for resistance at $1,400 instead of continuing to consolidate and revisit $1,200. It’s been six years since gold traded above $1,400 vs. just a few months ago when it was below $1,200, yet headwinds are dropping fast, with a lofty dollar the primary remaining holdout. The unlikely is necessary for gold not to resume the rally it began about two decades ago, in our view. Gold is in a similar extreme coiled-spring condition as in 1997, but with the dollar at multiyear highs such as in 2002. Unless the greenback can manage further appreciation, gold should, which is what we expect.” [Emphasis added.]

Link to full Bloomberg Intelligence article

Quote of the Day
“It’s all about relative supply curves the supply curve for bullion is far more inelastic than is the case for paper money. It really is that simple.“ – David Rosenberg, Gluskin Sheff

Chart of the Day

Visualization courtesy of HowMuch.net

Chart note from HowMuch.net:  “About half of the countries in the top ten list are located in the Middle East/North Africa region.  Six of these countries–Venezuela, Saudi Arabia, Iran, Iraq, Kuwait, and Libya–are members of OPEC (Organization of Petroleum Exporting Countries). Interestingly, there is no clear correlation between the country’s size and its amount of oil reserves. For example, Kuwait, which has a landmass of 17,818 sq km, has 101.5 Gbbl in oil reserves, whereas Russia, which has a landmass almost ten times larger, only has 80 Gbbl in oil reserves.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold attempts to gain momentum; perfect storm thesis briefly outlined

(USAGOLD–April 2, 2019) – Gold appears determined to gain momentum in early U.S. trading after a see-saw night overseas – now up $2 at $1289.  Silver is down 12¢ at $14.98.  News is sparse this morning.  Currencies and commodities are quiet.  Quietly though, bond yields continue to slide perhaps portending economic events (like a possible recession) yet to come. Some analysts have gone so far as to say that the inverted yield curve has more to do with a perception of economic reality rather than the economic reality itself.  They usually add that such thinking could augur a self-fulfilling prophecy.  Such are the times in which we live.

“Gold’s ‘perfect storm’ investment thesis argues that gold is at the beginning of a multiyear bull market with ‘a few hundred dollars of downside and a few thousand dollars of upside,” says Quadriga Assets Managers’ Diego Parilla. “The framework is based on three phases: testing the limits of monetary policy, testing the limits of credit markets, and testing the limits of fiat currencies.” Parilla’s summation is admirable.  I would suggest another sentence exactly like the last in that quote in which every use of the word “limits” is replaced with the word “perceptions.”  It is in the testing of those perceptions that the objective, forward-looking investor will find the need for safe-haven gold and silver.

Quote of the Day
“The price of gold is up in most currencies over the year so far. 2018 was clearly positive for gold across many major global currencies, with the exception of USD, JPY, and CHF. In many currencies, such as AUD and CAD, gold is trading at or close to all-time highs! The average annual performance from 2001 to 2019 has been +9.1%. During this period gold has outperformed practically every other asset class  and in particular every currency, despite intermittent, sometimes substantial corrections.” – Ronald-Peter Stoeferle and Mark J. Valek, Incrementum’s In Gold We Trust Preview Chart-Book

Chart of the Day

Chart courtesy of the World Gold Council
Click to enlarge

Chart note: This chart is perhaps one of the most telling we have ever published in this section of our daily reports. It depicts the performance of various currencies – past and present – against gold over the long term. Those who tout the proposition that gold is not really an inflation hedge, or that it is not really a safe-haven against currency debasement would be well-served to give it some undivided attention. Those who own gold and believe in it as a vehicle for long-term asset preservation will see it as vindication. For those who do not own gold, we hope it will serve as inspiration and a call to action.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold bumps higher in early New York trading; U.S. Mint reports bullion coin sales running well ahead of last year

(USAGOLD–April 1, 2019) – Gold bumped higher in early New York trading after a rocky end to last week that saw the metal decline nearly $20. It is now trading at $1296.50 and up $4.50 on the day.  Silver is up 8¢ at $15.22. 

Searching around to find an explanation for last week’s decline we came up empty.  As a result, we will chalk it up simply as end-of-the-month/quarter profit taking. If that turns out to be the correct analysis, we might see a recovery over the next few days as traders re-establish their long positions. For those who prefer a racier explanation for the sell-off, we refer you to London gold trader Andrew Maguire’s scenario as posted here.

The U.S. Mint reports sales of American Eagle gold and silver bullion coins running well ahead of last year’s pace at the end of March. Gold Eagle sales are up 33.3% over last year’s first quarter performance while Silver Eagle sales are up 37.9% over the same period.  Month over month, Gold Eagle sales are more than three times higher than sales from March of last year.  Silver Eagle sales are down 7% when compared to March of last year. Many analysts consider bullion coin sales a bellwether for interest in the precious metals. This year’s strong uptick indicates increased activity among American investors interested in including gold and silver in their holdings as safe-haven hedges and an underpriced asset class.

Quote of the Day
“Gold is money – a rather rock-steady type of money, at that – and it cannot be debased by central banks’ money printing. Thus it stands in sharp contrast to bank deposits and short-term debt. Gold also does not carry any default or credit risk. It cannot go bankrupt, so to speak. For thousands of years, gold has already served as ‘premium money’. It would be surprising if gold were not to withstand the ‘Sword of Damocles’ (in the form of unbacked paper money) that central banks have hung over the economies.” – Thorsten Polleit, Degussa Market Report

Chart of the Day

Chart note:  During the course of this past week we heard much about the inverted yield curve in 3-month and 10-year Treasuries.  This is what that event looks like on a chart.  Note the inverted yield curves prior to the recessions of 2001 and 2008.  Gold, it should be added, began to move higher on both occasions as the Fed loosened monetary policy – something it seems inclined to do again at this point in the economic cycle.
Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold subdued today, looking for direction

(USAGOLD – March 21, 2019) – Gold is in a bit of a quandary this morning following the Fed’s surprise policy maneuvers yesterday. The response was strong out of the gate, but things cooled overnight and that subdued mood carried over to the New York open. Gold, as a result, is level on the day as is silver. We suspect that the markets are in for a re-calibration having its beginnings in countless strategy meetings in investment offices across the globe this morning. Most expected the Fed to be come out dovish after yesterday’s meeting. Few expected it to come out as dovish as it did. Though an easier monetary policy is welcome news among investors, the economic weakness it implies is not. It might take a day or two for the real reaction to find its way to the financial marketplace. We await that outcome. . . . .



Gone fishin’. . .
Back first week of April


Quote of the Day
“’The granaries in all the towns are brimming with reserves, and the coffers are full with treasures and gold, worth trillions,’ wrote Sima Qian, a Chinese historian living in the 1st century BC. ‘There is so much money that the ropes used to string coins together rot and break, an innumerable amount. The granaries in the capital overflow and the grain goes bad and cannot be eaten.’ He was describing the legendary surpluses of the Han dynasty, an age characterised by the first Chinese expansion to the west and south, and the establishment of trade routes later known as the Silk Road, which stretched from the old capital Xi’an as far as ancient Rome.” – Charles Clover and Lucy Hornby, Financial Times

Chart of the Day

Posted in dailyquotes |

Gold subdued today, looking for direction

(USAGOLD – March 21, 2019) – Gold is in a bit of a quandary this morning following the Fed’s surprise policy maneuvers yesterday. The response was strong out of the gate, but things cooled overnight and that subdued mood carried over to the New York open. Gold, as a result, is level on the day as is silver. We suspect that the markets are in for a re-calibration having its beginnings in countless strategy meetings in investment offices across the globe this morning.  Most expected the Fed to be come out dovish after yesterday’s meeting.  Few expected it to come out as dovish as it did.  Though an easier monetary policy is welcome news among investors, the economic weakness it implies is not. It might take a day or two for the real reaction to find its way to the financial marketplace.  We await that outcome. . . . .

Quote of the Day
“’The granaries in all the towns are brimming with reserves, and the coffers are full with treasures and gold, worth trillions,’ wrote Sima Qian, a Chinese historian living in the 1st century BC. ‘There is so much money that the ropes used to string coins together rot and break, an innumerable amount. The granaries in the capital overflow and the grain goes bad and cannot be eaten.’ He was describing the legendary surpluses of the Han dynasty, an age characterised by the first Chinese expansion to the west and south, and the establishment of trade routes later known as the Silk Road, which stretched from the old capital Xi’an as far as ancient Rome.” – Charles Clover and Lucy Hornby, Financial Times

Chart of the Day

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold edges tentatively higher; fourth straight up day

(USAGOLD – March 20, 2019) – Gold edged tentatively higher for the fourth straight day after spending a quiet night overseas.  It is up $3 from yesterday’s close at $1309, but up $6 from Asia’s low earlier this morning. Silver is up 3¢ at $15.41.  The fact that gold has traded marginally higher during the week of an FOMC meeting is in itself noteworthy.  Typically it struggles during Fed Week. The fact that it held its own tells us that investors are expecting a dovish result from today’s statement and press conference. That’s not to say that the Fed is incapable of delivering a surprise.

Will Rhind, CEO of Granite Shares ETFs, has a positive outlook on gold. “You’ve had a bit of a V-shaped recovery in the market,” he recently told CNBC, “but [with] gold prices selling off, this could well be a buying opportunity for gold at this point. . .That’s a weaker dollar platform in my mind, one of the key things that helps drive gold prices. So, for me, I think: Look at this price and think about defensive positioning.”  The selling off he mentions came when gold dipped below the $1300 level earlier this month.  Gold is up $25 from those lows.

Quote of the Day
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – William Strauss and Neil Howe, The Fourth Turning

Chart of the Day

Chart note:  This chart shows the percent change year over year in the volatility index along with the price of gold.  As you can see, past bouts of increased volatility have preceded upward movement in the price of gold.  The last spike in volatility came at the end of last year and it matched in magnitude spikes that occurred during the 2007-2008 credit crisis.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold pushes steadily higher in advance of today’s Fed meeting

(USAGOLD – March 19, 2019) – Gold pushed steadily higher overnight in advance of today’s Fed meeting – up $7 at $1310.  Silver is up another 8¢ this morning at $15.42. The advance which began in Asia carried over to European trading and the open in New York.  It’s principal influence remains an anticipated dovish result to the meeting on two fronts – the direction of interest rates and an announcement of a time certain for ending the Fed’s quantitative tightening program. 

In a report that asks if the world is running out of gold,  Germany’s Deutche Welle answers with a quote from CFRA researh analyst Matthew Miller:  “The largest and most prolific reserves have already been found. Gold miners are struggling to grow reserves in line with their production.” John Ing, an analyst at Canada’s Maissons, offers a different take on the situation. “Finding gold is a function of the gold price,” he says. “There is no shortage of gold in the world but just at this price there is a shortage. It’s quite possible that gold will be $2,000 per ounce, you will see a rush of exploration and more deposits being found.” 

Quote of the Day
“If you could go back to 2007 would you really choose these policies again? Had they been used as short-term shock therapy only, the central bankers might have got away with it. As it is they now made our economies more dysfunctional than ever – and, worse, they can’t find a way out. . .They helped get us into this. They are not having much luck getting us out. But our elected governments have still ceded such enormous power over our financial system to them that we have no choice but to listen to their every word – if we want to have a chance of figuring out how the next (inevitable) crisis will play out, that is. Of all the things that have happened since 2007 that, I think, is the one that makes the least sense of all.” – Merryn Somerset Webb, Editor-in-Chief, Money Week

Chart of the Day

Chart note: This quarterly chart zeroes-in on why the national debt matters to ordinary Americans. Rising interest rates and massive growth in the gross debt will push these numbers much higher – so much so that it will exceed in the near future what the nation spends on national defense. . . .and the higher interest rates grow the greater the problem will become. One would think that like Italy or Greece, at some point, the level of debt and interest payments will affect the national credit rating. Last, please note the acceleration in debt payments over the last twelve months (the last bar represents Q3-2018).

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold edges higher to start Fed Week

(USAGOLD – March 18, 2019) – Gold is off to a positive start on the week trading at $1305.50 and up $3 on the day.  Silver is up 11¢ at $15.38.  With the Federal Reserve Open Market Committee meeting tomorrow and Wednesday, this morning’s upside is something of a victory for the yellow metal in that Fed Week is typically spent trading sideways to down. 

The Wall Street Journal this morning ran an article with the headline “Fed is likely to signal rate boost isn’t near” which summarizes pretty much where Wall Street stands on the meeting. Adding to that assessment, Wall Street Journal Fed reporter Nick Timiraos offered this insight in Saturday’s edition:  “New York Fed President John Williams, Fed governor Lael Brainard and Mr. Clarida, who are often in sync with Fed Chairman Jerome Powell, have all made recent statements compatible with this assessment by underscoring the need for a very cautious approach right now.” In doing so, Timiraos somewhat surprisingly enters Powell’s name on a list of Fed players known for their dovish sentiments.

Quote of the Day
“I remember being told many years ago on a South African game reserve that the buffalo was the most dangerous of the big five game animals. In large part, this is because of the complacency shown towards them relative to the other, more obviously dangerous big five game animals (ie the lion, leopard, rhino and elephant). It’s also a fact that unlike the other big five, the buffalo gives no warning of an imminent charge (see link). It’s complacency that gets you killed, and the same goes for investors with the macro-risks. We all know what the big macro-imbalances are out there, caused by years of loose money, but investors continue to ignore them at their peril.” – Albert Edwards, SocGen

Chart of the Day

Chart courtesy of HowMuch.net

Chart note: As you can see, after the United States and China, GDP for the rest of the nation states falls off quickly. Japan is a distant third and Germany an even more distant fourth. The European Union as a whole even without the United Kingdom, however, would replace China as number two if counted as a whole. This visualization drives home what’s at stake in the trade war between the United States and China. It involves the two largest economies in the world by far and nearly 40% of the global economy.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

DMR–Gold in recovery mode on China trade progress, chart technical support

(USAGOLD – March 15, 2019) – Gold is in recovery mode this morning following yesterday’s sell-off – trading now at $1303 and up $7 on the day. Silver is up 16¢ at $15.33. Gold began its rebound in early Asian trading, stayed steady during the European session, then leveled off in New York.  The rebound in Asia coincided with a report published in the South China Morning Post that the US and China had made “concrete progress” on a trade agreement in a telephone conversation between Chinese Vice-Premier Liu He,  U.S. trade rep Robert Lighthizer and Treasury Secretary Steve Mnuchin.

Technical traders might see gold’s consolidation and support at the $1295 level as a hopeful sign.  Several days ago, we mentioned gold’s history of taking the stairs up and the elevator down.  Is it now beginning the slow ascent back up the stairs? A quick of review of short-term chart leads us to answer with a strongly-held “Maybe. . . .” We will leave it to the chart technicians to render the final judgment.

Quote of the Day
“. . .[I]f you go down the line of currencies around the world, you don’t find many attractive opportunities. And that’s why I say if the world were to give up on dollars and give up on euros, they’d probably go back to the old standby, which is gold. And I don’t mean by gold, government run gold standard, like we had in the late 19th century. That’s politically impossible. Governments will never be willing to subordinate their policies to the constraints of a hard commodity ever again… So how could gold make a revival as a sort of international money? Well, we don’t actually need a government run gold standard anymore…since people have always had confidence in gold as a long-term store of value, there’s no reason why it couldn’t play that role.” – Benn Steil, Director of International Economics, Council on Foreign Relations

Chart of the Day

Chart note: “The figure,” say the authors of this study published by the St. Louis Federal Reserve, “shows that the uncertainty shocks that hit the economy in the fourth quarter of 2018 and in the first quarter of 2019 (January) have been the largest during our sample period. Based on the framework we use, this finding has potentially ominous implications for the U.S. economy.”  A fitting chart for the Ides of March 2019. . . . . . .


Laura E. Jackson, Kevin L. Kliesen, and Michael T. Owyang, “A Bad Moon Rising? Uncertainty Shocks and Economic Outcomes,” Economic Synopses, No. 6, 2019. https://doi.org/10.20955/es.2019.6
Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold sells off in Asia and Europe, steadies in U.S.

(USAGOLD – March 14, 2019) – Gold sold off steadily during Asian trading hours on weakness in both China’s yuan and Japan’s yen. That weakness in turn is the result of economic stimulus policies sponsored by both countries’ central banks.  In addition, reports that U.S.-China trade talks had stalled did not help matters. The downside picked up some momentum in London trading on a House of Commons vote rejecting a “no-deal Brexit.” The developing European economic crisis, as a result, appears tabled for the moment – at least that part of it inspired by Britain’s leaving the Union. That, however, could all change in a heartbeat. Gold steadied at the New York open, but it did not improve.  It is off $12 at $1298 in early trading.  Silver is off 21¢ at $15.25. 

Quote of the Day
“Gold is scarce. It’s independent. It’s not anybody’s obligation. It’s not anybody’s liability. It’s not drawn on anybody. It doesn’t require anybody’s imprimatur to say whether it’s good, bad, or indifferent, or to refuse to pay. It is what it is, and it’s in your hand.” – Simon Mikhailovich, Tocqueville Funds

Chart of the Day

Chart note: This long-term chart on the annual average price of gold since 1970 dispels the notion that gold is somehow volatile or unpredictable and as a result unreliable as a long-term portfolio safe haven. To the contrary, it shows gold living up to its reputation as a portfolio safe haven during times of rapidly changing economic circumstances.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold moves higher on Brexit, emerging global stimulus programs

(USAGOLD – March 13, 2019) – Gold moved higher in international markets for the second straight day – up $6 at $1308. Silver is up just 2¢ at $15.47.  Gold climbed steadily in Asian trading overnight in a carryover response to yesterday’s Brexit defeat in the House of Commons for the May goverment and a more dovish position on rates and the Fed’s balance sheet reinforced over the weekend by Jerome Powell during a 60-Minutes interview. The dollar has been in a modest, but steady, slide since last week. 

Gold broke from its lethargy last Friday when the European Central Bank’s Mario Draghi warned of weakening European economy and announced new measures to prop up the banks.  The Peoples Bank of China has also moved to stimulate a lagging economy.  Growing concern about a global slowdown, in short, has driven capital in the direction of gold as a safe haven.

Quote of the Day
“For we have reached a critical point. In a sense, it is true that the mists are lifting. We can, at least, see clearly the gulf to which our present path is leading. Few of us doubt that we must, without much more delay, find an effective means to raise world prices; or we must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what outcome we cannot predict.” – John Maynard Keynes, The Means to Prosperity (1933)

Chart of the Day

Charts courtesy of TradingEconomics.com

Chart note: These four charts show the central bank balance sheet debt holdings of the top four largest economies – the United States, China, Japan and the European Union. Together the four central banks hold an astonishing nearly $17 trillion in debt instruments, and not all are of the highest quality. The US Federal Reserve is in the process of trimming its balance sheet, but that process is expected to come to a halt before the year is out. The European Central Bank was scheduled to begin reducing its holdings later this year, but then altered course again just last week. The Bank of Japan, for its part, says it will continue with its acquisition program as long as it deems necessary.  Though China marginally reduced its balance sheet over the past few months, recent weakness in its economy may force the central bank to put further reductions on hold.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Afternoon Update

(USAGOLD – March 12, 2019) – Gold pushed back over the $1300 mark today with an $8.50 gain to stand at $1301 in late afternoon trading. Silver is up 14¢ at $15.44.  Gold gained early in the day on the weaker inflation data from the Labor Department. It got another push later in the day on the news that UK’s parliament rejected the Brexit arrangement the May government negotiated with Brussels. Gold’s current assault on the $1300 level began last Friday on expectations that the major central banks were going dovish to varying degrees on monetary policy to counter a softening global economy.  That sentiment underpins all else in the gold market at the moment.

Posted in dailyquotes, Today's top gold news and opinion |

Gold off to quiet start for the week

No DMR today 3-12-2019.  Please check back though.  We may post an update later.


(USAGOLD – March 11, 2019) – Gold gave back a small portion of Friday’s gains this morning as the week got off to a quiet start – moving off the $1300 mark to trade down $1.50 at $1297.50.  Silver is level on the day at $15.30.  The slowdown in global growth continues to be the headline story for markets today.  For the most part, though, there is not much in the way of news of interest to the gold market at the New York open. We will post later in the day if things change.

Quote of the Day
“Nobody knows what would happen if Britain’s LCH or Germany’s Eurex Clearing came under stress. They have thin layers of capital compared to banks. Before the 2008 crisis most derivatives were cleared by trading parties in direct dealings. The G20 shift has lifted the share of CCPs [central counterparties] for interest rate derivatives from 20 to 60 percent. The effect is to concentrate risk. The BIS warns that the system may encourage a rush for the exit in events of extreme stress. The International Monetary Fund has also flagged the dangers. It warned this year that CCPs ‘increase the risk of a failure of the infrastructure itself’ and could lead to a ‘catastrophe’ if the all layers of defense were overrun by a big default. It would be like the failure of the Maginot Line.” – Ambrose Evans-Pritchard, BIS warns of seizure at heart of financial clearing system

Chart of the Day

Chart note: The chart on gold and silver since September of last year is an impressive one even with the recent correction factored into the equation. Gold is up 8.5% and silver is up 9% as of last Friday’s close.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold reverses engines, moves sharply higher

(USAGOLD – March 8, 2019) – Gold reversed its engines this morning and moved sharply higher – rising $13 to the $1299 level.  Silver followed suit – up 18¢ at $15.27.  Suddenly, investors are returning to a safe-haven mindset following reports of abrupt slowdowns in both China and Europe. Central banks in both states have moved quickly to announce stimulus measures and support for their banking systems.  Those measures, rather than instilling confidence in the markets, created a sense that the oft-predicted global slowdown might actually be in its early stages. Adding to concerns, the U.S. Labor Department reported an anemic payrolls increase of 20,000 – a number far short of the 180,000 increase expected. Gold began its rise during Asian trading hours and gained momentum at the New York open when that report came public. Technical analysts have been eyeing the $1275-1285 price level as a support zone for gold and that is where the overnight buying materialized.

Quote of the Day
“There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely. Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course. They will get the maximum reward from the increase as it continues; they will be out before the eventual fall. For built into this situation is the eventual and inevitable fall.  Built in also is the circumstance that it cannot come gently or gradually. When it comes, it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape.” – John Kenneth Galbraith, A Short History of Financial Euphoria, 1990 (With thanks to John Hussman, Hussman Funds)

Chart of the Day


Charts courtesy of TradingView and BullionRates.com

Chart[s] note: “The countries with the highest country risk,” says analyst Daniel LaCalle of Thinking Heads Agency, “are also those that have abused most of the financing of public spending by the central bank through the printing of currency. Argentina has a higher country risk than apparently more fragile economies due to the constant refusal on the part of the successive governments to adopt a prudent monetary policy and to defend the purchasing power of the currency.” As economies around the globe weaken, the temptations presented by the monetary printing press will become increasingly difficult to resist. In each instance, domestic gold demand is likely to rise as a consequence.  It is usually only a matter of time until the price in that currency follows suit.  The two short-term charts shown above illustrate the process.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold, silver looking to consolidate at current levels

(USAGOLD – March 7, 2019) – Gold and silver are looking to consolidate at current levels – $1285 and $15 respectively – but one would have to say that the jury is still out whether or not the reversal that began at the $1345 level has fully run its course. Sierra Alpha Research Chief Strategist David Keller is one technical analyst who sees gold as “attractive” at current prices having moved slowly over the past few months from “weakness to strength.” In a Bloomberg presentation yesterday, he said that gold looks “attractive” if it can hold above the $1275 Fibonacci support level.  As it is, gold has traded down eight of the last ten trading sessions and it is down $3 in today’s early going at $1284.  Silver is down 8¢ at $15.04.

The ECB’s Mario Draghi today announced a weakening European economy and still another lending program for troubled European banks.  The euro promptly hit the skids against the dollar. The response in the gold market thus far has been a mixed bag.  While a weakened euro is likely to hurt gold, increased physical safe-haven demand is likely to help it as European investors move to safeguard their assets. In short, quantitative easing is alive and well in Europe and perhaps a portent of things to come in other parts of the world experiencing the same economic weakness.

Quote of the Day
“I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.” – John Maynard Keynes, 1946

Chart of the Day

Chart courtesy of the World Gold Council (Click to enlarge)

Chart note:  “Gold is a liquid asset,” says the World Gold Council, “ranking at levels comparable to many global stock markets as well as currency spreads. Its liquidity is often sourced during periods of stress in the markets, one of its appealing qualities.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold clings to $1285 price level unmoved by unsettling trade gap report

(USAGOLD – March 6, 2019) – Gold found itself clinging to the $1285 mark for the second day in a row at the New York open – down $3 on the day.  Silver is down 4¢ at $15.11.  Other markets find themselves in similar straits with stocks, commodities and bonds all trading indecisively early.  The Commerce Department this morning reported a $621 billion trade deficit for 2018 – the largest since the 2008 financial crisis. For December the trade gap was $59.8 billion with China accounting for $38.7 billion of it. If the tariffs are having an effect, it is buried somewhere in those numbers. Seemingly unmoved by the unsettling trade report, gold thus far today remains stuck in the technical sell-off that began last Friday.


Chart courtesy of TradingEconomics.com

Quote of the Day
“The population of the world is increasing at the rate of five thousand four hundred every hour. A small percentage of these people will become gold hoarders, people who are frightened of currencies, who like to bury some sovereigns in the garden or under the bed. Another percentage needs gold fillings for their teeth. Others need gold-rimmed spectacles, jewelry, engagement rings. All these new people will be taking tons of gold off the market every year. New industries need gold wire, gold plating, amalgams of gold. Gold has extraordinary properties which are being put to new uses every day. It is brilliant, malleable, ductile, almost unalterable, and more dense than any of the common metals except platinum. There’s no end to its uses. But it has two defects. It isn’t hard enough. It wears out quickly, leaving itself on the linings of our pockets, and in the sweat of our skin. Every year, the world’s stock is invisibly reduced by friction. I said that gold has two defects…The other, and by far the major defect, is that it is the talisman of fear. Fear, Mr Bond, takes gold out of circulation and hoards it against the evil day. In a period of history when every tomorrow may be the evil day, it is fair enough to say that a fat proportion of the gold that is taken out of one corner of the Earth is at once buried again in another corner.” – Ian Fleming, Goldfinger

Chart of the Day

Chart note: Popular belief holds that foreign investors and central banks hold the lion’s share of the nearly $22 trillion federal debt. These charts from the St. Louis Federal Reserve tell the real story. Though it has not always been the case, private domestic investors now hold the largest share of the national debt at $13.1 trillion. Foreign investors are number two at $6.2 trillion. Federal Reserve banks are number three at $2.8 trillion. As you can see, federal debt held by private investors is on an ascending curve while both foreign and Federal Reserve banks’ purchases have leveled off. At present, private investors hold more than half the national debt (59.3%) as shown in the pie chart at the very top. Foreign investors hold 28.1% of the U.S. federal debt.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold pushes still lower, Goldman still bullish on the precious metals

(USAGOLD – March 5, 2019) – Gold pushed still lower this morning shaving another $4.00 off the price to trade at $1283.50.  Silver is level on the day at $15.10.  We will stick with our earlier contention that two primary factors influenced the sell-off –  algo-based, technical trading having to do with resistance near the $1350 mark, and a resurgence of stubborn disinflationary tendencies in the overall economy and the Fed’s publicly stated position that it would delay enacting policies to deal with it until the third quarter of the year. Goldman Sachs is out with a report this morning that it has turned cautious on the commodities complex after many months of touting their upside. Commodities, it says, are “no longer significantly undervalued relative to their current fundamentals.” Having gone sour on commodities in general, Goldman remains bullish on gold and silver according to this morning’s Bloomberg Open report.  The firm revised its six and twelve-month gold forecasts to $1400 and $1450 respectively based on a weakening dollar and ramped-up geopolitical tensions.

Quote of the Day
“Picture yourself and your loved ones in the midst of a howling blizzard that lasts several years. Think about what you would need, who could help you, and why your fate might matter to anybody other than yourself. That is how to plan for a saecular winter. Don’t think you can escape the Fourth Turning. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted.” – William Strauss & Neil Howe, The Fourth Turning [1997]

Chart of the Day

Chart note: “Central bank net purchases reached 651.5t in 2018, 74% higher year over year,” says the World Gold Council in its year-end gold demand report. “This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. These institutions now hold nearly 34,000 tonnes of gold. Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets.”

 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold sheds another $9 as funds retreat from inflation bets

(USAGOLD – March 4, 2019) – Gold shed another $9 this morning to trade at $1284.  Silver is down 13¢ at $15.10.  The Wall Street Journal may have put its finger on the problem for precious metals this morning in a piece headlined “Investors Pull Back Inflation Bets.”  Though the piece centered on Treasury inflation protected securities, or TIPS, some money managers put gold and silver in that same category. Hence the fund-led paper market sell-off in precious metals over the past several days.

At the same time, as inflation moves down the worry list, disinflation and deflation move up – a sentiment change of which the Fed is well aware, according to the article. The central bank, it reports, is now interested in allowing inflation to go over its target levels in order to assure investors that deflation is not in our collective futures. We are reminded in this context that disinflation fueled the 2008 systemic meltdown and that gold subsequently rose more than 250% as investors around the world embraced it as a safe haven and portfolio insurance.

Quote of the Day
“Were Keynes alive today, he would likely be arguing along with German Chancellor Angela Merkel for more monetary discipline and a return to a more balanced international system. No doubt, however, his neo-Keynesian acolytes would be dismissing his concerns as hopelessly outdated and reactionary. Keynes was an economic theorist, but he was also a clear-eyed market analyst, and a passionate and committed speculator for his own account and for Cambridge University. If he took in today’s economic vista of near-zero interest rates and quantitative easing, it is clear that he would be buying gold hand over fist—regardless of what his disciples might think.” – Richard Hurowitz, Octavian Report (in a Wall Street Journal editorial published September 2015)

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This interesting chart on consumer prices from 1550 to present shows the direct relationship between declining purchasing power in the British pound and the sterling price of gold after 1931, the year Britain departed the gold standard. Prior to 1931, there was an occasional minor bump higher in the price of gold, as you can see, but for the most part it followed along the same flat line as consumer prices. It was only after Britain separated the pound from gold in 1931 that gold showed its true colors as portfolio defense against a depreciating domestic currency. The metal’s price moved significantly higher after 1971 when the Bretton Woods agreement was abandoned and currencies and gold were allowed to move freely in international markets. The real lesson in this chart is that when a nation-state moves away from gold-backed to fiat money, gold coins and bullion become a logical and worthwhile alternative for citizen-investors – even after centuries of relative price stability.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

A few words on Friday’s selloff

SATURDAY UPDATE

(USAGOLD – March 2, 2019) – When first viewing the chart shown below, the eye immediately wanders to the right and the vivid red lines describing the last few days’ drop.  While doing so, however, the discerning eye cannot help but note the strong upward trajectory preceding it.  Though gold took a significant hit on Friday, it is still up about 6.5% from the August-September lows. Leveraged speculators who bought in the trough are understandably taking profits at what has been resistance in the past. That profit-taking developed into a broader liquidation that sent the market into a tailspin.

In Friday’s DMR, we mentioned gold liking to take the elevator down and the stairs up. The chart below offers a telling illustration of the process. At the same time, since the 2008 financial crisis, hedge funds, financial institutions and central banks capable of deploying huge amounts of capital quickly have become a strong and consistent presence in the market. A good many in that group like to buy the dips.  Abrupt turnarounds, like the one this past November, have been the result. We at USAGOLD work with investors all the time who like to buy on weakness as well. We suspect, based on past experience, that activity among that group will begin to pick-up as of Monday.

Repost from 3-2-2019

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold continues rapid slide, trading now near previous support

(USAGOLD – March 1, 2019) – Gold continued its rapid slide toward the $1300 level this morning.  It is now trading at $1305 and down $9 on the day.  Silver is down 19¢ at $15.44.  Less than two weeks ago it was probing the $1345 level and two days ago it was attempting to hold its own at the $1330 level. The decline has been swift. As the old saying goes: Gold likes to take the elevator down and the stairs up. The market continues to be influenced primarily by technical factors in combination with a Federal Reserve policy that appears in practice to be more restrictive over the near term than what was projected in theory just a couple of weeks ago.  In the recent past gold has found short-term support near the $1300 level. We could find out as early as today whether or not buyers are going to materialize at that level.

Quote of the Day
“Most serious accidents have multiple causes. A series of mistakes or pieces of bad luck line up to allow disaster. The Torrey Canyon was hampered by an unforgiving schedule, barely adequate charts, unhelpful winds and currents, confusion over the autopilot, and the unexpected appearance of fishing boats in the intended course. But reading Richard Petrow’s contemporary account of the Torrey Canyon disaster, a clear lesson is that Capt Rugiati was too slow to adjust. He had a plan, and saw far too late that the plan was doomed to failure — and with it, his ship.” – Tim Hartford, Financial Times columnist

Chart of the Day


(Interactive chart)

Chart note: This interactive chart compares price appreciation for gold and the dollar index. Gold has consistently outperformed the dollar in twelve of the last eighteen years – a formidable record. Even if one were to add in average yields on dollar-based investments, gold still comes out the clear winner in those twelve years. Gold had an off-year in 2018 – down 1% while the dollar was up almost 7%. Given the performance record, though, contrarian investors might see the present disparity as a buying opportunity.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold surges in Asia, falls back in New York; Romania contemplates gold repatriation

(USAGOLD – February 28, 2019) –  Gold made a fairly strong move to the upside in overnight trading on the announcement that talks had broken down between the United States and North Korea reaching the $1327 level.  It then ran into a wall of selling at the New York open (once again) and fell back to $1320 where it is trading as we post this report.  Silver is down 5¢ at $15.70.  The sharp drop in gold is coincident with an equally sharp rise in the dollar giving credence to the notion that geopolitical events in Asia – trade and military – are pushing capital in the greenback’s direction. The better than expected GDP number announced this morning is also playing a role in gold’s pricing in that it puts interest rate increases back into the mix.

On a more fundamental note, Bloomberg reports Romania is contemplating repatriation of 61 tonnes of gold deposited at the Bank of England.  If the relocation proceeds, Romania will join a list of countries that have decided to repatriate their gold reserves which includes Germany, Austria and Hungary – among others.  The rehabilitation of gold as a national asset has become one of the primary factors underlying gold’s price resurgence since 2016.

Quote of the Day
“The ‘threat’ is best seen through the emergence of exchange-traded funds (ETFs), which allow investors to get a proxy physical gold exposure through an investment via their stockbroker. In truth, these products are, in many cases, more expensive than trading and storing physical gold (especially for larger investors with a long-term investment time frame), have less trading flexibility, and are less secure than owning real physical gold.” – Jordan Eliseo, ABC Bullion/Australia

Chart of the Day

Chart note 1: Sometimes the facts just get in the way. Though China might be tempted to choose devaluation as a tactic in the trade war, it creates other problems for the country that it has tried to avoid in the past – most notably capital flight. The fact of the matter is that China has chosen to do just the opposite. It has kept the yuan in a tight band against the U.S. dollar and sold from its pool of U.S. Treasuries as a means to stabilizing its currency. Since 2014 China’s foreign exchange reserves, as a result, went from nearly $4 trillion to just above $3 trillion since 2014. Meanwhile, the yuan has traded in a narrow channel between 14.5¢ and 16.5¢.

Chart note 2: PBoC governor Yi Gang has stated repeatedly and unambiguously that China “will not engage in competitive devaluation, and will not use the exchange rate as a tool to deal with trade frictions.” Part of the narrative behind the dollar’s strong showing of late has been concern that China would ‘weaponize’ the yuan in the trade war. If China is successful in keeping the yuan within a band, it will indirectly offer a helping hand to gold.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold, like the Fed, ‘patient and watchful’ – biding its time

(USAGOLD – February 27, 2019) – Gold climbed back toward the $1330 mark in Asia overnight on a sudden escalation of tension between India and Pakistan. It then leveled off during European trading hours and is now trading at $1327 – down $2.50 on the day. Silver is trading at $15.89  – down 10¢ on the day. Gold held up well yesterday in the face of February options expiration and Congressional testimony from a “patient” and “watchful” Fed Chair Jerome Powell.  The metals’ market, in our view, is likely to read the market’s response to yesterday’s center-stage events as reinforcing the underlying, longer-term upward bias.

As it is, the gold market continues to move sideways within a tight range – biding its time and awaiting the next turn of events. It too is being patient and watchful.  Along these lines, International Adviser published an interesting quote from Merion Global Investors fund manager Ned Naylor-Leyland. “[N]ormalisation in rate hikes and the unwinding of central bank balance sheets,” he says, “has really gone the way of the dodo recently and that is very significant for gold because gold is about hedging your forward-looking purchasing power issues, and generally these things shift in very secular ways . . . But because everybody is a momentum investor now, I think that when it happens it will happen rather quickly because of this herd-like behaviour that you see now in respect to all assets.

Quote of the Day
“We have found that gold typically thrives amid deeper, longer-lasting and fundamentally driven bear markets, which are usually associated with a deteriorating macroeconomic outlook. Alternatively, gold’s performance is usually tepid when equities rise. A good analogy is home insurance: homeowners pay an insurance premium each year hoping the house doesn’t burn down, but if it does you redeem the policy. Here, we see gold’s “insurance characteristics” as becoming increasingly relevant for investors. But even if the insurance is not needed, gold could still offer value. If the US dollar slides (which we expect), emerging economies become wealthier while mining costs increase. Prices could therefore advance irrespective of US inflation, making gold more than just an insurance asset.” – Wayne Gordon, UBS Wealth Management

Chart of the Day

Chart note: When the United States abandoned the gold standard in 1971 and freed currencies to float against one another, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold backed the dollar, and the era from 1971 to present when it did not. Gold has had its ups and down since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold stubbornly holding its ground, Mint shuts down silver American Eagle production

(USAGOLD – February 26, 2019) – Gold is stubbornly holding its ground just below the $1300 level this morning – down $1.50 at $1326. Silver is down 2¢ at $15.88.  Technical factors are keeping the downside at bay for gold while uncertainty about the outcome on a bevy of economic and geopolitical concerns keep a check on the upside.  The markets at this juncture, including gold, would be best described as taking a wait and see approach though that might not last.  Fed chairman Powell will testify before Congress today.  The Trump-Kim summit in Viet Nam begins tomorrow.  The United States Mint surprised the gold and silver markets once again with another shutdown of silver American Eagle production late last week – a problem that seems to occur whenever we get a ramp-up in investor demand.  We have options expiration today on the COMEX February contract for both gold and silver, so we could see more downside as the trading session progresses.

Quote of the Day
“While there will always be some standouts, it’s not clear why so many managers can claim sustained superior performance. The basic technology, data and expertise is readily available. Logically, the anomalies that the strategies rely on should dissipate. There is an inherent contradiction in that the approach exploits inefficiencies, but requires market efficiency to realign prices to generate returns. The reality is that any fund managers possessing a magic investment formula guaranteeing low risk and high returns would have no incentive to share the secret. Successful firms such as Renaissance Technologies LLC have closed some funds to outside investors, preferring to capture the returns for themselves. As legendary investor Paul Tudor Jones once noted, if there was a single easy formula to follow, then all investors would already be rich.” – Satyajit Das, Bloomberg opinion columnist

Chart of the Day

Chart courtesy of World Gold CouncilHUB

Chart note: “Tactically,” says the World Gold Council, “gold presents an interesting opportunity. Gold speculative positioning in futures markets remains low by historical standards. While CME-managed money net long positions increased in December 2018, they were at record lows, since data was first broken down by investor type in 2006, earlier in the year. Net combined speculative positions, which go back further, were at their lowest for the first time since December 2001. And in recent years, a large increase in short positions has been followed by a sharp rally in gold as we started to witness towards the end of 2018.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold gains momentum to start the week

(USAGOLD – February 25, 2019) – Gold steadied in overnight trading then gained enough momentum at the New York open to push back over the $1330 mark – up $4 at $1331.50.  Silver is up 6¢ at $15.96.  The White House decision to hold off on additional tariffs is probably the principal influence in gold’s pricing this morning (The Shanghai Composite Index closed up 5.6%), but underlying that is the solid technical picture that has unfolded over the past several months. All in all, we are off to a relatively quiet start for the week with little in the way of news other than the China trade developments.  We will update later if anything of interest develops.

Quote of the Day
“This flagrant abuse of property rights and the rule of law sent the economy into a deep dive. From 2000 to 2008, real G.D.P. per capita contracted on average by 8.29% per year. During this period, Zimbabwe ran large fiscal deficits financed by printing money and experienced the second most severe case of hyperinflation in history. On November 14, 2008, the annual inflation rate peaked at 89.7 sextillion percent every day, making Zimbabwe’s 100 trillion dollar notes worthless. In the end, the government was forced to scrap the Zimbabwean dollar, because Zimbabweans simply refused to use it.” – Steven Hanke, Zimbabwe’s Monetary Death Spiral, 1-1-2019

Chart[s] of the Day

The price of gold in four of the world’s most troubled currencies





Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold attempts to stabilize after yesterday’s steep sell off

(USAGOLD – February 22, 2019) – Gold is attempting to stabilize at just below the $1330 mark after yesterday’s steep sell-off.  It is trading at $1329 and up $2.50 on the day.  Silver, likewise, is up 5¢ at $15.90. The magnitude of yesterday’s decline – about $15 – took many by surprise.  Some saw it as an over-reaction and misinterpretation of the Fed’s clear intention to ratchet down its bond-selling, quantitative tightening program (Please see our Chart of the Day.) Overnight, gold hit a low of $1322 but opened in New York with a push to the upside.

Today could be an important day for gold.  If it manages to stabilize here and finish higher, the stage could be set for another attempt at the $1350 level next week.  In a Wall Street Journal article yesterday under the headline, Wary Investors Reach for Gold, Neuberger Berman’s Hakan Kaya is quoted as saying “A lot of people see a bad moon rising, and if you want to have a downside hedge, gold is the instrument.” If today’s early trend remains intact, gold will finish the week on the plus side despite yesterday’s stiff correction.

Quote of the Day
“To suppose that the value of a common stock is determined purely by a corporation’s earnings discounted by the relevant interest rates and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin and believed Orson Welles when he told them over the radio that the Martians had landed.” – James Grant, Interest Rate Observer

Chart of the Day

Chart note: Quantitative tightening – the process depicted on the far right of the chart – is progressing now at the fastest pace since its launch in January 2018. At his press conference in late January, Fed chair Powell suggested that the Fed would temper its bond selling program sooner rather than later – a gate opener for both the stock and gold markets in early 2019.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold turns lower on Fed minutes and volatile yuan trading

(USAGOLD – February 21, 2019) – Gold turned lower today in early trading after six straight days of upside. It is now down $6.50 at $1334.  Silver is down 17¢ at $15.92.  The first signs of weakness showed up yesterday immediately following the FOMC minutes release when it became apparent that board members were somewhat non-committal on rates and quantitative tightening. At the time, gold was trading in the $1345 range. The plan to move the decision on quantitative tightening to the end of 2019 is likely to be seen as especially halfhearted.

In Asia overnight, a sharp move higher in the yuan followed by an equally sharp move lower belied a Bloomberg report late yesterday that “a pledge of yuan stability has been discussed in multiple rounds of talks, and both sides [the U.S. and China] have tentatively agreed it will be part of a final deal.” The volatility only added to gold’s discomfort so far today and will likely raise questions on China’s commitment to future yuan stability.

Scrap Register this morning passes along a positive note on gold from TD Securities. “While the [commodities] complex has benefited from expectations of a very dovish Fed with a contingent of the market still expecting cuts — which keeps the bar elevated for the Fed to avoid disappointing the market — we think that CTAs [Commodity Trading Advisors] have played a notable role in helping gold and platinum prices rally . . . We continue to expect trend followers to add a significant amount of length to their gold holdings.”

Quote of the Day
“[S]ome of the biggest players in the gold sector are warning we’ve seen peak gold production. Also, the biggest pools of money on the planet – central banks – are loading up on gold. Dwindling supply met with tons of demand means higher prices.  Historically, gold has been a fantastic leading indicator of central bank policy… The metal ran from under $1,200 an ounce to nearly $1,300 an ounce prior to the Fed’s reversal in January. And if it runs higher from here, which we fully expect, it means all hell is about to break loose. I’d recommend adding to your position while you still can.” – Simon Black, Sovereign Man

Chart of the Day


Chart courtesy of OPTIONAlpha

Chart note: As was the case this past November (the last time we posted this chart), we continue to guesstimate that we are somewhere between “Euphoria” and “Anxiety” on stocks and “Depression” and “Hope” on gold and silver.  Recent statistics showing a significant migration of investor capital from stocks to cash and to gold coins, bullion, ETFs and mining stocks supports that determination. Market sentiment has changed markedly since last September, in our view, when we put stock market sentiment at somewhere between “Thrill” and “Euphoria” and gold somewhere between “Despondency” and “Depression.” 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold nudges higher, ‘now has a life of its own’

(USAGOLD – February 20, 2019) – Gold nudged higher again today following yesterday’s strong performance to trade at $1344 – up $4.50 on the day.  If today’s upside holds, it will mark six straight days of increases.  Silver is up another 9¢ and over the $16 mark at $16.06. Three baseline factors underlie the upward trend –  the Fed’s dovish monetary tilt, Washington’s indifference to the burgeoning national debt and possible rapprochement between the U.S. and China on trade.

In turn, technical trading has become a factor with indications that computer-driven short covering has begun to wield some clout. We will not be able to verify that conjecture though until the CFTC brings its shutdown-delayed COT reports current.  “Gold is powering higher even as the U.S. dollar index rises,” said George Gero, managing director with RBC Wealth Management in a Scrap Register report. “Gold now has a life of its own. Bulls have start of the upper hand.”

Quote of the Day
“If you look at the history of currency, gold has a unique role and I don’t think it’s accidental. Some people say that if gold hadn’t been selected as a currency thousands of years ago, it would not have a role today. I don’t agree. Gold has a lot of useful properties and unique features so I don’t think its status is in any way accidental. It’s a monetary asset and I think if you replayed history another way, you would come out with gold again . . . As we have less and less paper currency, there will still be a need to store wealth, to have privacy and to carry out transactions between parties who don’t trust one another – gold fills that role. It’s probably the best substitute for paper currency so it’s hard to imagine its transaction value won’t go up over time. And there are all kinds of uses for gold in new technology that nobody even thought of years ago. So overall, it’s hard to see gold’s role diminishing,” – Ken Rogoff, Harvard University (World Gold Council, 2-12-2019, The curse of cash and the allure of gold)

Chart of the Day

Chart note:  Over the long haul, gold (blue line) has outperformed the commodities complex (orange line) as shown in the chart above. It has also done a better job of retaining gains during downturns.  In short, since the turn of the new century, gold  has been the less volatile, more consistent performer when compared to a basket of commodities, as represented by the S&P Goldman Sachs Commodity Index (GSCI)

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold pushes solidly over the $1330 mark – at $1333. . .

(USAGOLD – February 19, 2019) – Gold pushed solidly over the $1330 mark in early New York trading after a strong showing overseas.  It is now trading at $1333 – up $6.50 on the day.  Silver is level on the day thus far. The trade talks between the U.S. and China scheduled to begin this week are providing impetus to gold as hopes rise that the two might settle their differences and pump new life into the commodities market.  Also helping gold is a growing recognition in financial markets that neither political party is all that interested in addressing head-on the rapidly escalating national debt.

With gold now pushing past the $1330 mark, precious metals’ analyst John Rubino says that “from a technical standpoint, piercing $1,350 resistance should trigger a big, fast move to the next resistance level somewhere in the high $1,400s.”  Crossing that $1350 barrier was problematic for gold in 2014, 2016 and 2018.  Economic circumstances, though, have changed in 2019 – the Fed’s stated dovish intentions being the chief difference.  We might soon find out whether or not that change is enough to propel gold over its $1350 nemesis.

Quote of the Day
“A lot of economic, market and bank supervisory theory is based on the premise that financial actors are largely rational. The crisis convinced me that they are not. It was not rational for very experienced financial leaders to make their companies hostage to short-term financing that was, in the final analysis, secured by the irrational assumption that house prices will always go up. It was not rational for Dick Fuld to reject offers because their terms offended his pride. It was not rational for money market fund investors to flee all money market funds just because one fund made a bad bet. It was not rational for some lenders, at the height of the crisis, to stop accepting even Treasuries as collateral. The crisis convinced me that greed, ego, fear, short-sightedness, group-think and other human foibles have at least as much, if not more, to do with financial behaviour as rational thinking does.” – Mike Silva, former chief of staff to New York Fed president Tim Geithner during the 2008 financial crisis (Speech to the LBMA, October 2018)

Chart of the Day

Chart note: Up until the “double oughts,” the manual on gold read that it performed well under inflationary and deflationary circumstances, but not much else. However, as the decade of asset bubbles, financial institution failures, and global systemic and sovereign debt risk progressed, gold marched to higher ground one year after another. As events unfolded, it became increasingly clear that the metal was capable of delivering the goods under disinflationary circumstances as well. The fact of the matter is that, during the 2000s even as the inflation rate hovered in the low single digits (See chart, green area], gold managed to rise from just under $300 per ounce in the early 2000s to just over $1800 per ounce by 2011 — a gain of nearly 650%. Since then, gold has taken a breather. As this essay is written, it is trading in the $1200 per ounce range — still up over 425% in the new century.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold continues 2019 advance, up $6 on day

(USAGOLD – February 18, 2019) – Gold continued its 2019 advance pushing higher in both Asian and U.S. markets to stand at $1327  – up $6 on the day.  Silver is up 9¢ at $15.86.  Gold has gained momentum of late the result of dovish overtures from the Fed coupled with mounting concern about financing the massive federal deficits.  It is also getting an assist from a stronger commodities market responding to the possibility of progress in U.S.-China trade talks and a strengthening Chinese economy.

Doug Noland, the widely-read market analyst whose weekly reports we rarely miss, offered this insight on the current market psychology over the weekend: “Bubbles have become a fundamental geopolitical device – a stratagem. Things have regressed to a veritable global Financial Arms Race. As China/U.S. trade negotiations seemingly head down the homestretch, each side must believe that rallying domestic markets beget negotiating power. Meanwhile, emboldened global markets behave as if they have attained power surpassing mighty militaries and even nuclear arsenals.”  History tells us that such hubris rarely goes without comeuppance.

Quote of the Day
“Well, nobody knows how much of this money printing we can do. And of course we have politicians who like – and are in both parties, who like to believe that it doesn’t matter how much you do. That we can ignore the whole subject and just print money as convenient. Well, that’s the way the Roman Empire behaved, then it was ruined. And that’s the way the Weimar Republic was ruined. And – it’s – there is a point where it’s dangerous. You know, and of course, my attitude when something is big and dangerous is to stay a long way away from it. Other people want to come as close as possible without going in. That’s too tricky for me. I don’t like it.”  – Charlie Munger, 2-14-2019, CNBC interview

Chart of the Day

Chart note:  Gold closed 2018 at $1282.30 and settled Friday,  February 15, at $1321.25 – a 3.0% gain.  Silver closed 2018 at $15.44 and settled Friday at $15.75 – a 2% gain thus far in 2019.  Since hitting their respective bottoms in the third quarter of last year, gold is up 12.4% and silver is up 11.8%.

 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

DMR–Gold advances in Asia, stays firm in early U.S. trading

(USAGOLD – February 14, 2019) – Gold climbed overnight in Asia, leveled out in European trading and remained firm into the New York open.  Gold is now trading in the $1320 range and up $8 on the day. Silver is up 7¢ at $15.69.  By way of summary, gold is up 4.75% on the year and up 12.4% since its August 2018 lows.  Silver is roughly level for 2019, but up 11.8% since reaching its interim low in September.  The consensus opinion on gold today seems to be that it is gaining strength on hopeful signs that China and the United States are moving toward a trade agreement.  Yesterday’s drop in retail sales is also helping gold in that it provides incentive for the Fed to stay the course on its recent tilt to the dovish side of the monetary ledger.

Quote of the Day
“So, we were just chatting away there in friendly conversation and then Volcker walks in, you can’t miss him because I think he’s about six-and-a-half feet tall. So, he walks in and I thought, ‘well I have to shake his hand and say hello.’ He didn’t even look at me. He didn’t come to me. He went straight to his staff and he said, ‘what’s the price of gold?’ So, I thought, ‘gold is important to him’ and I still think it’s every bit as important to Fed people now because it is the ultimate measurement of the dollar. They can rig it and monkey around with it and play games, but ultimately, the market will have its say.” – Ron Paul from a Mises Institute Interview with Jeff Deist

Chart of the Day

Chart note:  This chart shows the change in U.S. debt held by foreigners and international investors in billions of dollars from 1970 to present.  The level of ownership grew proportionately over time in concert with the overall issuance of U.S. debt until 2015, when it began to fall off.  The problem is not just that foreign investment in U.S. Treasuries is on the wane.  It is that the retreat has come at a time when U.S. borrowing needs are expected to consistently exceed $1 trillion per year. The question becomes, “How is the U.S. federal debt going to get financed?”  (For more detail, please see The $12 trillion federal debt bombshell –  A NEWS & VIEWS SPECIAL REPORT, February 2019)

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold jumps on NY open after overnight test of the $1300 level

(USAGOLD – February 14, 2019) – Gold pushed higher at the New York open to trade at $1310.50 and up $3 on the day.  Silver is level on the day at $15.52. Overnight gold once again dropped near the $1300 mark before finding support at the $1303 level then bolting $8 higher in early New York trading.

A run of somewhat anemic reports – unemployment, retail sales and producer prices – looked responsible for the quick jump at the COMEX open, but as of this writing that momentum appears to have been lost. If anything could be said of today’s reports, they give the appearance of the same stubborn disinflationary mode that has dominated this economy for over a decade.  Disinflationary thinking, in turn, translates to concerns about systemic risk and elevates the safe-haven trade particularly among funds and institutions with a longer-term, capital preservation outlook.

Quote of the Day
Money, again, has often been a cause of the delusion of multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper. To trace the history of the most prominent of these delusions is the object of the present pages. Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds (1841)

Chart of the Day

Chart note: This quarterly chart zeroes in on why the national debt matters to ordinary Americans. Rising interest rates and massive growth in the aggregate debt will push these numbers much higher – so much so that it will exceed in the near future what the nation spends on national defense. One would think that like Italy or Greece, at some point, the level of debt and interest payments will affect the national credit rating. Last, please note the acceleration in debt payments over the last twelve months (the last bar represents Q3-2018).

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold gains momentum this morning on ‘healthy demand from investors’

FEBRUARY 13, 2019

Gold appears to be gaining some momentum this morning in early New York trading. It is up $5 on the day thus far at $1316.  Silver is up 8¢ at $15.78. Commerzbank’s Eugen Weber neatly summarized the market situation for the yellow metal this morning by telling Reuters, “Overall there is healthy demand from investors for gold.” The Labor Department this morning reports consumer prices logging in at a 1.6% annualized gain for December – a number likely to reassure the Federal Reserve that it did the right thing by tilting dovish a couple of weeks ago.  In general, the markets appear cautiously hopeful this morning on progress in US-China trade talks and averting another federal government shutdown.  Without a lot of fanfare, the U.S. national debt went over $22 trillion yesterday.

Quote of the Day
“The world clings to its old mental picture of the stock market because it’s comforting; because it’s so hard to draw a picture of what has replaced it; and because the few people able to draw it for you have no interest in doing so.” ― Michael Lewis, Flash Boys

Chart of the Day

Chart note: The Volatility Index pushed to levels late last year and early this year not seen since the financial crisis in 2008. December 2018 was the worst month for stocks since the Great Depression. According to the Bank of America, not even the stock market rally early in the year was enough to convince investors to stay put. They were net sellers of $26 billion in U.S. stocks and $7 billion in European stocks in January. Meanwhile, gold bullion accumulation continued to advance steadily. Gold ETFs, the favored vehicle for funds and institutions, added almost 72 tonnes to their holdings in January and 185 tonnes since the beginning of October. ETF stockpiles now stand at their highest level since 2013.

Posted in dailyquotes |

Gold firms overnight on stronger yuan, yen; hits wall at NY open

FEBRUARY 12, 2019

Gold firmed overnight in Asian and European markets finding support at the $1307 level and climbing as high as $1314.50 before hitting a wall at the New York open. It is now trading at $1311 – up $3 on the day. Silver is up 3¢ at $15.73. A recoveries in both the yuan and yen in Asian trading were an influence along with a strong showing in the energy commodities, led by crude oil (up about 3% on the day). Reuters cites the positive effects OPEC production cuts beginning to take hold as the reason for the price jump.

One of the more telling developments to surface over the past two days is evidence of rapidly changing sentiment among investors. This morning CNBC reports stock owners fleeing to cash despite the rally in January as a more bearish sentiment begins to take hold. It cites a Federal Reserve Bank of New York report yesterday that “most households predict they will be worse off financially in one year – only 38.6 percent think they will be better off, the lowest reading in more than two years.” The article goes on to say that 55% of fund managers say they are “pessimistic about the economy.”

Quote of the Day
“We are big gold believers here. Now gold is at $1,300, we think gold is going to $1,400-$1,500. We suggest that everybody have a little bit of gold in their portfolio.” – Jim Cramer, CNBC

Chart of the Day

Chart note: From time to time we re-post this chart on the average annual price of gold since 1971 – the year the U.S. severed the tie between the dollar and gold and launched the fiat money era. It dispels the notion that gold is somehow volatile or unpredictable and as a result unreliable as a long-term portfolio safe haven. To the contrary, it demonstrates at a glance gold’s strong performance as a portfolio holding over the long haul and emphasizes its role as a reliable long-term portfolio safe haven and means to long-term wealth preservation.

Posted in dailyquotes |

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Gold slides in Asia, China announces 12 tonne gold acquisition in January

FEBRUARY 11, 2019

Gold slid in Asia overnight following China’s yuan lower in a less than auspicious beginning to the Year of the Pig. It is now trading at $1306 and down $8 on the day. Silver is down 11¢ at $15.75. The downward trend carried over to European trading and into the New York open. Gold once again finds itself perilously close to the $1300 level where it found support last week.

The South China Morning Post reports this morning that China added to its gold reserves for the second straight month acquiring another roughly 12 tonnes of the metal. “China,” says the Post, “has joined a global central bank gold rush in the last two months by increasing its official gold reserves, even though the purchase remains modest compared to the volume of the mainland’s foreign exchange reserves, according to data released by the People’s Bank of China on Monday.” (Please see our Chart of the Day below)

Quote of the Day
“The Fed will be forced to participate as avoiding deflation will be the number 1 priority – not the profitability of the banking sector. Investors should contemplate a brave new world of negative Fed Funds, negative US 10y and 30y bond yields, 15% budget deficits and helicopter money. Sounds ridiculous, doesn’t it? What I said in 2006 sounded ridiculous too.” – Albert Edwards, Society Generale

Chart of the Day

Chart note: “Central bank net purchases reached 651.5t in 2018, 74% higher year over year,” says the World Gold Council in its year-end gold demand report. “This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. These institutions now hold nearly 34,000 tonnes of gold. Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets.”

Posted in dailyquotes |

Gold’s bounce off $1300 level provides renewed impetus

FEBRUARY 8, 2019

Gold’s close encounter with the $1300 level yesterday seems to have given it renewed impetus this morning. It is trading at $1315 – up $4.50 on the day. Silver is up 10¢ at $15.87. Asian trading was quiet in keeping with the Chinese New Year celebration but showed a spark of life in London on continuing Brexit concerns. Financial Times reports this morning that the British government is hatching a secret plan to deal with a possible “no-exit” end to the stalemated talks with the European Union. That revelation will send a clear message likely to be heard by nervous investors on both sides of the English Channel. As we have reported over the past several months, physical and ETF gold demand is running strong in Europe as investors prepare for a worst-case scenario. The small spark in London became something more as the action moved to New York and news surfaced that the U.S.-China trade talks might be more seriously strained than previously thought.

Quote of the Day
“[JP Morgan’s Marko] Kolanovic, who has dominated Institutional Investor’s annual rankings of top strategists for a decade or so, was out with a research note Thursday arguing that President Donald’s Trump’s isolationist foreign policy is a ‘catalyst for long-term de-dollarization.’ Put another way, the dollar is in jeopardy of no longer being the world’s primary reserve currency and all the benefits that go along with that, such as interest rates that are lower than they otherwise might be and the government’s ability to fund budget deficits in perpetuity.” – Robert Burgess, Bloomberg opinion columnist

Chart of the Day

Chart courtesy of the World Gold Council

Chart note: This chart is perhaps one of the most telling we have ever published in this section of our daily reports. It depicts the performance of various currencies – past and present – against gold over the long term. Those who tout the proposition that gold is not really an inflation hedge, or that it is not really a safe-haven against currency debasement would be well-served to give it some undivided attention. Those who own gold and believe in it as a vehicle for long-term asset preservation will see it as vindication. For those who do not own gold, we hope it will serve as inspiration and a call to action.

Posted in dailyquotes |

Gold advances in minor rally, finds support near $1300

February 7, 2019

Gold is advancing in a minor rally this morning after trading perilously close to the $1300 mark overnight. It is now priced at $1310.50 and up $4 on the day. Silver is up 5¢ at $15.70. Today’s pricing action provides the first inkling of price support at the $1300 price level. Gold hit bottom in Asian trading at $1302. Support came in during the London trading session and carried over to the New York open. Stocks in Europe, at the same time, took a hit after European Council president Donald Tusk proclaimed that there was “a special place in hell” waiting for those who pushed UK’s leave campaign. In the United States, the markets are still attempting to digest a confluence of new inputs – the Fed’s dovish tilt, a subsequent White House dinner between the president and chairman Powell, and a promise-laden State of the Union speech that if implemented would greatly boost spending for a government already running $1 trillion in the red annually.

Quote of the Day
“I grew up in a purely urban family. We had no relatives in the country. I’m born in 1944. When I was a baby, my mother could only buy food because she still had some gold coins. Without gold I would have starved. She always told me that. Therefore, this generation already has a certain gold affinity. In extreme times of crisis, this is one of the few things left to be accepted. Gold was the only thing left to the people of the city at that time. Before the silver cutlery was also traded at the farmer.” – Ewald Nowotny, European Central Bank governor

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This chart shows the price of gold in China’s yuan. We hear a great deal about the Chinese people’s attachment to gold and the vast amounts it imports. What we rarely hear about is how that attachment is working out for the people who own it. Since last August, it has worked out very well. Gold is up over 9% in yuan terms.

Additional note: We would like to thank Nick Laird, proprietor of the Gold ChartsRUs website, for his kind permission to feature the series of charts we are posting this week under the Chart of the Day section in our Daily Market Report.

Posted in dailyquotes |

Uninspired, gold and other markets moving sideways again this morning

FEBRUARY 6, 2019

Gold moved sideways in international markets overnight – uninspired and continuing with its muted reaction to the Fed’s policy changes announced last week. It is trading level on the day at $1315. Silver is down 4¢ at $15.80. Gold is not alone in trying to find its way. Stocks are equally subdued, the dollar rangebound, and the commodities complex sidelined. Financial Times’ Robin Wiggleworth’s comments a few days ago seem to capture best the mind-set at work in the financial markets –at least at this juncture. “Forget fear and greed,” he says, “Confusion is now the markets’ watchword.” In that article, he quotes one fund manager as saying “No one has a view and everyone is positioned accordingly.”

Hereaus, the Swiss based gold refiner, released a report with a generally positive outlook for the precious metal in 2019. “Both political and economic uncertainty,” it says, “are increasing which could also entice some safe-haven buying of gold. From Europe, with Brexit still unresolved and demonstrations in France, to the US, which has a partial government shutdown and the Senate and the House of Representatives controlled by different parties, politics is becoming more fractious. Meanwhile, economic growth is slowing, and while the US is currently focusing its trade agenda and tariffs on China, this could shift to other regions.”

Its price expectations are reasonable: “Near term, gold has upside momentum with a seasonally strong period for the price ahead. Further market turbulence and confrontational politics could keep gold in investors’ sights. The gold price is expected to trade in a range between $1,225/oz and $1,450/oz, with the outlook broadly for further upside, though no doubt with some pullbacks along the way.”

Quote of the Day
“Global gold-backed ETFs continued their strong growth in January. Holdings in global gold-backed ETFs and similar products rose in January by 72 tonnes(t) to 2,513t, equivalent to US$3.1bn in inflows, marking the fourth consecutive month of net inflows. Notably, total holdings have not been this high since March 2013, when the price of gold was 22% higher. Global gold-backed ETF holdings have grown 6% over the past two months, driven by market uncertainty and a shift in sentiment that drove the price of gold 3.5% higher in January alone. Global assets under management (AUM) rose by 6% in US dollars to US$107bn over the month.” – World Gold Council report released this morning

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This chart shows the direct relationship between the price of gold and growth in ETF holdings from 2017 to present. Please note the successive weekly gains from last October to present coinciding with the sharp rise in the price of gold. Gold ETFs are the favored investment vehicle among professional money managers capable of having a strong impact on the gold market both as buyers and sellers. If you are a student of the markets, you are probably already aware of the public position taken by a large number of well-known fund and institutional money managers who have publicly announced their acqusitions of gold for safe-haven purposes.

Additional note: We would like to thank Nick Laird, proprietor of the Gold ChartsRUs website, for his kind permission to feature the series of charts we are posting this week under the Chart of the Day section in our Daily Market Report.

Posted in dailyquotes |

Gold cautiously higher after Trump-Powell dinner meeting

Yesterday we described gold as being “introspective” following the Fed’s tilt to the dovish side of the monetary spectrum. The cautious tone carried over somewhat to today’s trading though gold is showing some signs of life. It is up $3.50 at $1315.50. Silver is up 5¢ at $15.92.

President Trump had dinner last night with Fed chairman Jerome Powell, vice-chairman Richard Clarida, and Treasury Secretary Steve Mnuchin. Following the meeting, the Fed issued a cursory statement leaving the impression that not much of substance was discussed. We would be surprised if Wall Street accepted that unadorned statement as the final word on the meeting’s agenda. If anything, it will likely see the dinner meeting as reinforcing chairman Powell’s dovish sentiments as expressed last week. With that in mind, the important question becomes whether or not it will read the newfound teamwork as good for financial markets. It looks like the lean in the gold market is toward the positive – at least for the moment.

Quote of the Day
“Gold and silver, like other commodities, have an intrinsic value, which is not arbitrary, but is dependent on their scarcity, the quantity of labour bestowed in procuring them, and the value of the capital employed in the mines which produce them.” — David Ricardo, British political economist (1772-1823)

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This chart shows the price of gold in a basket of twenty currencies versus the U.S. dollar price of gold. From 2000 through 2015, the two rose in tandem. Since early 2015, however, the dollar price of gold has lagged the Index – a divergence that some global money managers and investors might view as an opportunity. Of course, the two lines could once again converge the result of a correction in the Index as well. The increase in the Index reflects at some level demand among the citizenry as a hedge against the well-publicized debt and currency problems in a long list of so-called emerging countries.

Additional note: We would like to thank Nick Laird, proprietor of the Gold ChartsRUs website, for his kind permission to feature the series of charts we are posting this week under the Chart of the Day section in our Daily Market Report.

Posted in dailyquotes |

Gold turns introspective as it digests the Fed’s dovish shift

We suggested as early as last summer that the Fed might be moving toward a dovish tilt the indications of which, as it turns out, coincided with early September’s price bottom in gold and silver. Last week the Fed moved definitively from indications to confirmation taking a stance that the markets could no longer ignore, and simultaneously sending a signal that perhaps the markets do not want to hear. The economy could be slowing.

Gold’s initial reaction last week was to go higher. Today it has become more introspective as it attempts, along with other financial markets, to gauge what the Fed might be signaling with respect to the economy’s future. As we post this morning’s report, it is trading at $1312, down $6 on the day. Silver is down 11¢ at $15.76. The St. Louis Fed’s James Bullard made an interesting comment in this morning’s Wall Street Journal. “You’re in an environment,” he said, “where interest rates seem low but they are actually high.” We will let that sink in without further comment.

In the recent past, the Fed’s more dovish inclinations have had a positive influence on gold. Since late last summer, gold it is up about 13%.  Carter Worth of Cornerstone Macro, a technical analyst who called gold’s rally several months ago during a CNBC interview, now says that gold’s rally is only in its early stages and that “he likes what he sees.” That assessment blends well with the developing market psychology.

Quote of the Day
“’The granaries in all the towns are brimming with reserves, and the coffers are full with treasures and gold, worth trillions,’ wrote Sima Qian, a Chinese historian living in the 1st century BC. ‘There is so much money that the ropes used to string coins together rot and break, an innumerable amount. The granaries in the capital overflow and the grain goes bad and cannot be eaten.’ He was describing the legendary surpluses of the Han dynasty, an age characterised by the first Chinese expansion to the west and south, and the establishment of trade routes later known as the Silk Road, which stretched from the old capital Xi’an as far as ancient Rome.”Charles Clover and Lucy Hornby, Financial Times

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This chart shows the oft-referenced flow of gold west-to-east combined with the growth of internal reserves the result of channeling mine production into central bank holdings. The principal players – China, Russia, Turkey and India – are the beating heart of the global market for physical gold bullion. There is no evidence that there will be a major reversal in this structural pattern in global supply and demand anytime soon. Please take note that the four countries combined monthly demand is now running consistently above global production, as shown on the bottom segment of the chart.

Additional note: We would like to thank Nick Laird, proprietor of the Gold ChartsRUs website, for his kind permission to feature the series of charts we are posting this week under the Chart of the Day section in our Daily Market Report.

 

Posted in dailyquotes |

No DMR today. . .

. . .But please check back.  We will update this afternoon if anything of interest happens.

Posted in dailyquotes |

Gold gains ground on dovish Fed policy confirmation

Gold gained more ground in overnight and early U.S. trading on the Fed’s confirmation yesterday that it would put a hold on interest rate increases and its balance sheet asset sales. The metal is trading at $1325 and up almost $6 on the day. Silver is up 9¢ at $16.14. After a strong initial run-up the stock market seems to be taking some time to digest the Fed’s latest moves. The dollar, probably for similar reasons, is steady this morning. Commodities are showing modest strength.

Fund guru Jeffrey Gundlach, according to a Reuters report last night, reads the latest shift in Fed policy as “caving-in” to the stock market. CNBC’s Cramer says the Fed should not be seen as “caving-in” but saving Main Street America economically. For his part, the Fed chairman says that the Fed’s motivation is to do the right thing for the economy and the American people. “The situation calls for patience,” he said. “I think its the right thing. . . I feel strongly it is.” Motivations aside, the results for better or worse amounted to an “Hallelujah!” shouted from the rooftop of the financial markets. Stocks immediately rallied over 400 points. Commodities moved higher. Gold jumped $10 higher. The dollar dropped sharply.

Powell answers question about the “Powell put” (CNBC)

Quote of the Day
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – William Strauss and Neil Howe, The Fourth Turning

Chart of the Day

Chart note: Here at USAGOLD, we suggested early on and repeatedly that the Fed was moving toward a dovish tilt. Yesterday the Fed moved from indications to confirmation. Gold reacted positively, as we might have guessed, quickly moving $10 higher out of the gate. Since the indications started rolling in late last summer, gold is up 12.8%.

Posted in dailyquotes |

Gold drifts sideways ahead of Fed meeting, Powell press conference

Gold is drifting sideways this morning as the markets await the results of today’s Fed meeting and chairman Powell’s press conference later this afternoon.  It is up $1 on the day at $1312.  Silver is up 7¢ at $15.91 and looking ready to knock on the door at the $16 level.

In its assessment this morning of what we might expect from the Fed and Mr. Powell, Financial Times predicted a “steady course” and the possibility that the word “patience” might show up in the final public statement. On the question of the balance sheet – the issue on the minds of many – it cites Yale professor Bill English as saying “they’re feeling their way and seeing how the reserve market reacts.” Confirmation of a change of direction on its balance sheet approach could create major reverberations in the financial markets including gold.

Above all, the Fed will make every effort to present the appearance of quiet deliberation and keep the market guessing by leaving its options open.  Whether or not it is successful in that endeavor is what adds interest to the proceedings and figures largely into prospects for gold and other assets in the days and weeks ahead.

We will report back later today if there are any surprises. . .

 

Quote of the Day
“A lot of the bank issues in the United States and around the world have been solved. But migrating the problem to the sovereign balance sheets. So the banks look pretty good, but the Fed has $4 trillion of debt on its balance sheet. And it’s even more, we are not in a European audience. In Europe they would really know what they meant because all the European banking system is fixed but Europeans are all also buying up all the debt. The budget deficits haven’t contracted, they’ve widened. The banks buy the debt, then walk over to the European Central bank, finance it. . . You wonder is the next crisis going to be a sovereign crisis. And if it is, it will just be a continuation. People will look back and say ‘what we really did, we didn’t fix the outcome of the financial crisis. We left that open and as a result, its really been a thirty-year workout.’” – Lloyd Blankfein, Goldman Sachs

Chart of the Day

Chart note:  “The  Economic Policy Uncertainty Index,” says the St. Louis Federal Reserve, “calculates the proportion of newspaper stories that discuss uncertainty, changes to tax codes, and disagreement among forecasters.”  As you can see, a sustained rise in the index corresponds with a rising gold price – some would say leads it.  At present, it looks to be in a rising trend that began in 2016 in sync with gold’s rising price over the same period.  On Friday, gold pushed through the $1300 barrier for the first time since April of last year amidst a flurry of concern on a range of economic and geopolitical issues.

Posted in dailyquotes |

Gold jumps in London trading on Brexit concerns

DAILY MARKET REPORT

Gold made its latest dash to the upside overnight at the London AM Fix – a solid indication that it had to do with Brexit. It is trading at $1309 – up $5 on the day – well above the previously daunting $1300 threshold. Silver has followed suit – up 10¢ on the day at $15.87.

On occasion, we have pondered what a hard Brexit might mean for the gold market with London and its banks being the global center of the gold physical and trading businesses. Whether or not today’s move to the upside is related directly to that, or general concerns about the consequences of Britain departing the EU without an agreement, is something of an open question.

A Bloomberg headline sums things up: May rips up divorce plan to keep party united. The United Kingdom for all the months – make that years – of wrangling seems back at square one. The European Union, for its part, is a long way from budging on its position that the agreement on the table is the only agreement possible. Bloomberg informs us that there will be a five and half hour debate in Parliament this afternoon with Theresa May on the hot seat.

And we point that gold moved solidly over the $1300 mark on the day the Fed will convene its deliberations on interest rates, the balance sheet drawdown, etc.

Quote of the Day
Venezuela’s economy has collapsed. This is the result of years of socialism, incompetence, and corruption, among other things. An important element that mirrors the economy’s collapse is Venezuela’s currency, the bolivar. It is not trustworthy. Venezuela’s exchange rate regime provides no discipline. It only produces instability, poverty, and the world’s highest inflation rate for 2018. Indeed, Venezuela’s annual inflation rate at the end of 2018 was 80,000%.” – Steve Hanke, Johns Hopkins University, economic advisor to former Venezuelan president, Rafael Caldera (1995-1996)

Chart of the Day


Chart courtesy of TradingEconomics.com

Chart note: When a combination of currency debasement and inflation strikes an economy, the effects can be sudden and severe, as indicated in the two charts shown above. “Consumer prices in Venezuela,” reports TradingEconomics.com, “jumped 1,300,000 percent year-on-year in November of 2018, up from a 833,997 climb in October, according to estimates from Venezuela’s opposition-led congress. Inflation rate in Venezuela averaged 3268.55 percent from 1973 until 2018, reaching an all time high of 833997 percent in October of 2018 and a record low of 3.22 percent in February of 1973. The USDVEB traded at 248,520.9000 on Wednesday January 23. Historically, the Venezuelan Bolivar reached an all time high of 248520.90 in August of 2018 and a record low of 0.05 in January of 1989.” It does not take a great deal of imagination to contemplate what the effects might have been on the price of gold in Bolivars.

Posted in dailyquotes |

Gold sidetracked in early trading by upcoming Fed meeting

DAILY MARKET REPORT

Gold trundled to a sidetrack this morning in anticipation of this week’s Fed meeting scheduled to begin tomorrow and end with a statement and press conference on Wednesday. The metal is trading as this is posted right at $1300 – down $3.30 on the day. Silver is down 8¢ at $15.66. Gold historically spends Fed Week in either a wait-and-see mode or moving to the downside. On rare occasion though, as was the case in December, it pushes higher. Taking Friday’s Fed-based move to the upside into consideration, it will be interesting to see how the market reacts this time around. The dollar index seems to be similarly sidetracked this morning despite fairly strong moves higher overnight in both the yuan and yen. Commodities and stocks are down sharply. Such as it is, we will sign off for now and report back if anything of interest develops later this afternoon.

Quote of the Day
“So why gold? People buy gold to protect their savings not because it is rare, yellow or shiny, but because of what it isn’t. Gold isn’t debt, equity or any other financial promise. It doesn’t rely on anyone else’s survival to exist. It can’t be destroyed any more than it can be created at will. Call it the ‘gut level case for gold’ – an urgent, all-consuming need to buy a dumb lump of metal which does so little, it doesn’t even rust, but which people in all ages and all cultures have used to store value.” – Adrian Ash, Bullion Vault

Chart of the Day

Chart note: The chart on gold and silver since September of last year is an impressive one. Gold is up 9% and silver is up 12% as of Friday’s close.

Posted in dailyquotes |

Weekend update – Gold pushes through $1300

DAILY MARKET REPORT

Gold reached escape velocity yesterday pushing beyond the atmospheric test at the $1300 price level. It finished up $21.50 on the day at $1303.50.  Silver ended the day 43¢ higher at $15.78. For gold, the move represented a nearly 1.5% gain.  For silver, the gain was a noteworthy 2.8%. Media reports of a possible reining-in of the Fed’s quantitative tightening program seemed the prime incentive for the rise.  What surprised a good many, though, was not simply that metals had gone higher on the news, but the sheer strength of the move and the unexpected close above the $1300 barrier.

In past installments of this report, we have not shied away from identifying one-off, incongruous paper sales on the COMEX for gold’s occasional waterfall drops. Usually, though, we try to mention that the short-selling can set the stage for rocket launch recoveries when those traders return to the market to cover their positions.  (Please see: Gold – A reverse bubble in search of a pin)

Yesterday’s charts on the COMEX action (please see below) show high volumes on the buy side for both metals. Our sense is the push higher was driven largely by traders taking the long side of the market. However, we would not be surprised to learn that a strong dose of short-covering also played an important role. We won’t know to what degree, though, until the CFTC resumes its Commitment of Traders reports suspended earlier this month due to the government shutdown.

Posted in dailyquotes |

Gold accelerates on possible end to quantitative tightening

DAILY MARKET REPORT

Gold accelerated higher at the New York open today gaining $10 to trade near the $1292 level. Silver is sharply higher at $15.57 – up 27¢ on the day.

Moving the metals this morning is a report that appeared at both CNBC and the Wall Street Journal websites that the Fed was contemplating an end to its quantitative tightening program much sooner than expected – a move that would quell some of the disenchantment on Wall Street with current Fed monetary policy. The Wall Street Journal report directly references increased market volatility as one of Fed chairman Jerome Powell’s concerns: “Mr. Powell said this month he doesn’t think the Fed’s portfolio changes are a major culprit in recent volatility but that the central bank would change its drawdown, if officials came to a different conclusion.”

Those of you who read these daily reports know that volatility, particularly with reference to its effect on the price of gold, is something we monitor closely. The latest chart is included just below for those who would like to see what might be motivating the Fed’s change of heart – if a change of heart is actually what is in the offing. It shows that gold has reacted positively to increased market volatility on a delayed basis.

The Fed meets next week and, according to both articles, will make suspending the liquidation of its still $4 trillion balance sheet part of the discussion. Whether or not today’s news was orchestrated by the Fed was not mentioned but it looks from the outside like it might have been.

Quote of the Day
“Officials are still resolving details of their strategy and how to communicate it to the public, according to their recent public comments and interviews. With interest rate increases on hold for now, planning for the bond portfolio could take center stage at a two-day policy meeting of the central bank’s Federal Open Market Committee next week.” – Nick Timiraos, Wall Street Journal article, 1-25-2019

Chart of the Day

Posted in dailyquotes |

Gold continues minor consolidation below the $1300 level

Gold pushed lower overnight in Asian and European trading in a mild, but steady downtrend, then moved abruptly higher at the New York open from the $1278 mark. In doing so, it erased most of the loss overnight and is now down about $1.00 at $1283.50. Silver is level on the day at $15.36. Recession concerns have suddenly moved to the forefront with several top money managers warning of impending danger at the Davos conference. At the same time, the Labor Department this morning reported jobless claims falling to a 49-year low – a development obviously in direct opposition to the recession forecasts. To sum up the day thus far, it looks like the minor consolidation that began at the $1297 level is still in place at least for now. On the other side of the equation, the downside has been restrained giving impetus to the argument that perhaps gold is gathering itself for another run at $1300 resistance.

Quote of the Day
“Our central bank monetary-led boom has made debt replace wealth for a long time. That’s not sustainable, of course. (We are ‘mining’ our soil for short-term gain.) We’ll see a return to the significance of productive stuff again I think, and that even includes farming – maybe especially farming. And the Midwest has a pretty good track record with productive stuff. Hard assets will matter again. But of course, I sound ridiculous even saying such things. Like a grumpy old grandpa.” – Mark Spitznagel, Universa Investments (as quoted by columnist, P.J. O’Rourke)

Chart of the Day

Chart courtesy of SentimenTrader.com/Jason Goebfert

Chart note: Recently, we touched base with Sentiment Trader’s Jason Goepfert to ask about his latest reading on gold market sentiment. We thought it might be a good time to check to see if there were any changes now that the price is approaching the $1300 level. He graciously sent over the chart posted below along with the following comment: “Our measure reached a point of maximum pessimism in August and has been climbing pretty steadily ever since. It reached the upper end of neutral recently before falling off a bit. Bull markets tend to see optimism stay above 40 during the pullbacks so the next one will be interesting to watch. We got the surge off of the extreme pessimism, and now if it can hold above 40ish and starting bouncing again, it would argue strongly that the longer-term trend has changed for the better.”

Posted in dailyquotes |

Gold down on one-off, high volume trade

DAILY MARKET REPORT

Gold traded quietly overseas then hit a wall once again at the New York open reminiscent of last Friday’s waterfall price drop. In both instances nothing significant occurred on the international news front – just what looks like a one-off, high volume, probably silicon-based trade executed at today’s COMEX open. As it is the amount of damage is $5 per ounce, as this written, with the yellow metal now selling for $1281. Silver thus far has escaped any glaring spillover – down 4¢ at $15.30. We shall see as the day progresses whether or not the bulls see opportunity in the drop.

A couple news items worth noting in today’s report:

First, according to Coin World, the U.S. Mint reports silver American Eagle bullion coin sales at 3,556,000 one-ounce coins through January 21 – a pace well ahead of last year’s (up +10% over all of January last year). American Eagle gold bullion coins were also selling at a pace well ahead of last January’s. The Mint’s January numbers follow a report published in The Alchemist of a 23% year over year increase in aggregate sales globally of mint-produced gold bullion coins.

Second, Russia climbed into the number five position in official sector rankings for gold bullion reserves surpassing China – at least with respect to what we know publicly about that country’s holdings. According to a Reuters report this morning, Russia now holds 67.9 million ounces of gold to China’s 59.2 million ounces. Russia’s build-up comes the result of purchases from its domestic mines which produced 8.8 million ounces over the period. Central bank acquisitions were 8.5 million ounces indicating that 3 million ounces were acquired in the open market.

Here’s the chart on this morning COMEX gold trading:

Quote of the Day
“At the quarter-century mark of 1925, the great bull market was under way, and Graham*, then 31, developed what he later described as a ‘bad case of hubris.’ During an early-1929 conversation with business associate Bernard Baruch (about whom he disparagingly observed, ‘He had the vanity that attenuates the greatness of some men’), both agreed that the market had advanced to ‘inordinate heights, that the speculators had gone crazy, that respected investment bankers were indulging in inexcusable high jinks, and that the whole thing would have to end up one day in a major crash.’ Several years later he lamented, ‘What seems really strange now is that I could make a prediction of that kind in all seriousness, yet not have the sense to realize the dangers to which I continued to subject the Account’s4 capital.’ In mid-1929, the equity in the ‘Account’ was a proud $2,500,000; by the end of 1932, it had shrunk to a mere $375,000.” – Frank K. Martin, A Decade of Delusions

* Benjamin Grahm, “The father of value investing”, 1894-1976, Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949).

Chart of the Day

Chart note: As shown in the chart, the market dynamic for gold and stocks suddenly switched in August of last year. Since then, gold is up 10% while stocks are down 8%. “If gold is anything to go by,” write Henry Sanderson and Neil Hume in Financial Times, “investors are increasingly anxious about the state of the world. Volatile equity markets and fears of a global economic slowdown have helped gold rally 10 percent from its August lows, putting it among the best performing metals over that period. It is a sharp contrast to much of the past two years . . . . “

Posted in dailyquotes |

Gold regains some of the ground it gave up last two trading sessions

DAILY MARKET REPORT

Gold pushed higher this morning regaining some of the ground it gave up over the past two trading sessions. It is trading early at $1284 – up $4 on the day. Silver is up 6¢ at $15.37. Most of the financial reports this morning center around a sudden shift back to a safe-haven mind set driven by a litany of concerns starting with the apparent slow-down in China and U.S. federal government’s inability to come to a resolution on the shutdown. Funds and institutions have responded with a strong push into precious metals as a hedge the most prominent evidence of which is the growth in gold ETF assets as highlighted further below. A recent IMF report warning of a global slowdown turned sentiment. Bridgewater’s Ray Dalio just threw a log on the fire by issuing a warning at the Davos conference that he sees “significant risk” of a possible recession in 2020.

Quote of the Day
“While there will always be some standouts, it’s not clear why so many managers can claim sustained superior performance. The basic technology, data and expertise is readily available. Logically, the anomalies that the strategies rely on should dissipate. There is an inherent contradiction in that the approach exploits inefficiencies, but requires market efficiency to realign prices to generate returns. The reality is that any fund managers possessing a magic investment formula guaranteeing low risk and high returns would have no incentive to share the secret. Successful firms such as Renaissance Technologies LLC have closed some funds to outside investors, preferring to capture the returns for themselves. As legendary investor Paul Tudor Jones once noted, if there was a single easy formula to follow, then all investors would already be rich.” – Satyajit Das, Bloomberg opinion columnist

Chart of the Day

Chart note: We faithfully and painstakingly reproduced this chart developed by UK’s Colin Seymour in 2001. Posted originally at the USAGOLD website, Seymour’s chart and the annotations that went with it caused quite a stir on the internet at the turn of the century and the early stages of gold’s secular bull market. It is still widely referenced and linked on the world wide web. We recently re-reposted the study as part of a site-wide upgrade to current internet presentation standards we hope to fully unveil soon. It is as relevant to investors today as it was in 2001. Here is the link to the original article titled Pompous Prognosticators.

Posted in dailyquotes |

Gold slightly lower on quiet trading day, China posts worst GDP number in 28 years

Today’s gold market activity will be muted with COMEX floor trading closed in observance of Martin Luther King Day and settlements pushed to tomorrow.

Overnight gold was steady to slightly down in Asia and Europe and is now trading on the FOREX market at $1280 – down about $2 on the day. Silver is trading at $15.25 – down 10¢ on the day. Taking precedence today in the statistical category, China reported its weakest GDP growth in 28 years. As Trading Economics.com explains it, that numbers comes “amid intense trade dispute with the US, weakening domestic demand and alarming off-balance-sheet borrowings by local governments.” Both the yuan (down slightly) and the Shanghai stock market (margnally higher) took the news with relative aplomb.

We will end today’s report with an interesting quote from Ross Norman, the London gold dealer, as published at News Max this morning: “Measuring our net worth in local currencies, we might be rather pleased with ourselves – smug even. However we chose to ignore the fact that the yardstick is not a constant … it is shrinking and sometimes really quite fast. It’s the natural corrosive effect of inflation. Knowing this, governments give us a gauge for yardstick shrinkage to use such as RPI or CPI, to reassure you that the shrinkage is minimal… and then lie about it.” Norman goes on to say that gold has offset these hidden losses to inflation with an average annual gain since 2000 of 10% compounded.

Quote of the Day
“Most serious accidents have multiple causes. A series of mistakes or pieces of bad luck line up to allow disaster. The Torrey Canyon was hampered by an unforgiving schedule, barely adequate charts, unhelpful winds and currents, confusion over the autopilot, and the unexpected appearance of fishing boats in the intended course. But reading Richard Petrow’s contemporary account of the Torrey Canyon disaster, a clear lesson is that Capt Rugiati was too slow to adjust. He had a plan, and saw far too late that the plan was doomed to failure — and with it, his ship.” – Tim Hartford, Financial Times columnist

Chart of the Day

Chart note: Rate convergence, or the flattening of rates in the popular financial parlance, is the subject of much concern on Wall Street and this chart, drawn in log scale, tells the reason why in a glance. In pulling together the data for these charts, we could not help but take special note of the two previous occasions in which there was a similar convergence – in 2000 just before and during the bursting of the dotcom bubble and in 2007-2008 just before and during the Bear Sterns/Lehman Brothers’ implosions and the launch of the global financial crisis. When the financial press bemoans the flattening of rates as a portent for a future recession, it is telling only part of the tale. Beyond the threat of recession lies a much deeper concern – the threat of another all-out financial crisis.

Posted in dailyquotes |

DMR late report

1-18-2019

[OPINION] To be straightforward about it, we are hard pressed to find a reason for today’s $11.50 drop in the price of gold (trading at the close at $1281).  The dollar is up, but no one would call the move an attention-grabber.  Bonds are steady. Stocks are up but, if reports are to be believed, because of positive developments in the U.S.-China trade wrangle – news that typically would have sent gold higher along with the Dow. Commodities are up – led once again by the energy complex – another situation that normally would register as a positive for gold.  So frankly we are at a loss except to say that after the recent run-ups and attempts to push through the $1300 barrier, gold simply ran out of gas. The stall to the upside in turn encouraged [probable] silicon-based short sellers to jump-in during the opening hours of today’s New York trading session – as shown to the left in the chart below.

Posted in dailyquotes |

No DMR today. . . . . .

. . . .but please check back.  We may post an update later in the day.

Posted in dailyquotes |

Gold continues to seesaw aimlessly, Goldman bullish on commodities including gold

DAILY MARKET REPORT

Gold continued to see-saw aimlessly this morning unable to make up its mind convincingly on a direction. It is down $3.00 early at $1290.50. Silver is off 14¢ at $15.49. A stronger dollar and weaker commodities complex are not helping matters. Today’s weakness aside, Goldman Sachs has come public with a bullish outlook for commodities – gold and oil included. It cites four reasons for the positive outlook including China’s economic stimulus program which it sees as igniting demand, a weaker dollar in 2019, decreased oil supply and a more dovish position from the Federal Reserve. The general reaction to the Brexit vote earlier this week continues to be muted in most markets. As reported at our Live Daily Newsletter though there are reports, however, of a very strong demand in the United Kingdom for physical gold coins and bullion.

Quote of the Day
“I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.” – John Maynard Keynes, 1946

“Were Keynes alive today, he would likely be arguing along with German Chancellor Angela Merkel for more monetary discipline and a return to a more balanced international system. No doubt, however, his neo-Keynesian acolytes would be dismissing his concerns as hopelessly outdated and reactionary. Keynes was an economic theorist, but he was also a clear-eyed market analyst, and a passionate and committed speculator for his own account and for Cambridge University. If he took in today’s economic vista of near-zero interest rates and quantitative easing, it is clear that he would be buying gold hand over fist—regardless of what his disciples might think.” – Richard Hurowitz, Octavian Report (in a Wall Street Journal editorial published September 2015)

Chart of the Day

Chart courtesy of the World Gold Council/GOLDHUB

Chart note: Post a more than 5% gain, the Long USD Gold Index outperformed other assets during 2018 based on this chart with a global perspective from the World Gold Council. The Long USD Gold Index from Solactive measures performance of a “hypothetical long position in physical gold and a short position in a basket of non-USD currencies.” Henning Kahre, head of Research at Solactive says that “the new index offers investors exposure to gold as though they’ve purchased it in a basket of foreign currencies.”

Posted in dailyquotes |

Gold joins the rest of the markets in generally benign early reaction to Brexit vote

Gold joined other financial markets in a generally benign early reaction to yesterday’s Brexit vote in the House of Commons – what Financial Times described as a “crushing” defeat for Theresa May’s ruling government. It is trading at $1292 – up about $2 on the day – after a range-bound effort in overnight Asian and European trading. European stock, bond and forex markets are quiet as well. Perhaps the operative word in all of this is “delay” – as in a delay in Britain’s departure from the EU and by that at least a temporary respite from a near-term disastrous outcome.

As for gold, the consensus opinion among analysts continues to grow that 2019 will be a strong year for physical demand with the growing array of threats facing the global economy. Commerzbank reports a strong increase in gold demand on both sides of the English Channel, and as reported here earlier today ETF demand is running at high levels in January signaling rekindled interest among hedge funds and financial institutions.

In a report referenced at the Kitco website yesterday, International FC Stone’s Edward Meir reflects the thinking of a good many professional investors. “Gold,” he says, “[will] do better this year than it did in 2018. During 2019, we see gold trading roughly between $1,200-$1,400. Especially if prices manage to bust through psychologically important $1,300 resistance and make a stab at testing the 2018 highs. . .Powell’s remarks imply that the Fed will not be ‘fighting’ the gold market for the moment, as it was indirectly doing for much of last year when it raised rates four times in fairly rapid fashion.”

Quote of the Day
“The record of fiat currencies through history, 100%, is eventual failure. The record of gold for 5000 years, 100%, is lack of failure.” – Simon Mikhailovich, Tocqueville Funds

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This interesting chart on consumer prices from 1550 to present shows the direct relationship between declining purchasing power in the British pound and the sterling price of gold after 1931, the year Britain departed the gold standard. Prior to 1931, there was an occasional minor bump higher in the price of gold, as you can see, but for the most part it followed along the same flat line as consumer prices. It was only after Britain separated the pound from gold in 1931 that gold showed its true colors as portfolio defense against a depreciating domestic currency. The metal’s price moved significantly higher after 1971 when the Bretton Woods agreement was abandoned and currencies and gold were allowed to move freely in international markets. The real lesson in this chart is that when a nation-state moves away from gold-backed to fiat money, gold coins and bullion become a logical and worthwhile alternative for citizen-investors – even after centuries of relative price stability.

Posted in dailyquotes |

Gold inches higher ahead of vote on Brexit plan

DAILY MARKET REPORT

Gold inched higher in early U.S. trading after a relatively quiet night overseas – up $1.50 at $1293 – as the world’s attention shifted to the United Kingdom and today’s vote on Brexit. Silver is down 1¢ at $15.67. A House of Commons’ vote is scheduled for later this afternoon. A firmer U.S. dollar is helping to keep gold constrained this morning.

The major news services are predicting a defeat for the current plan for Britain’s departure from the European Union leaving it a guessing game as to what might happen next in the world’s fifth largest economy. We have seen estimates of up to $1 trillion in capital flight from Britain as a result of that departure. Safe haven demand for gold on both sides of the English Channel has been one of the hallmarks of the departure wrangling.

U.S. Global Investors’ Frank Holmes offers the following summation of the current gold market: “Gold, meanwhile, is set for its fourth weekly gain, marking its longest rally since October. Traders surveyed by Bloomberg are bullish on the yellow metal for a ninth straight week. . .ETFs backed by gold saw 10 straight days of inflows, adding 37,174 troy ounces on Thursday alone. This year’s net purchases so far are 762,975 troy ounces, according to data compiled by Bloomberg.”

Quote of the Day
“But the same analysis applies to debased or light-weight coins driving out full-bodied coins. Examples abound in the ancient literature of the consequences of coinage debasement. From the very beginning of coinage, generally assumed, on the authority of Herodotus, to originate with 7th century Lydia, coinage was overvalued. The earliest coins were made of electrum, a natural alloy of about 70 percent gold and 30 percent silver. But hoards of the earliest coins found in the Temple of Artemis at Ephesus in 1904 contained ;artificial’ electrum coins with much lower gold contents. The weights of the stater coins (or its fractions) were uniform but the gold contents were as low as 30 percent. The Lydians and Greeks had not only learned how to use ancient Egyptian techniques of metallurgy, but also how to overvalue coins by using less of the more expensive metal and exploit the monetary prerogative as a fiscal device.” – Robert Mundell, Uses and Abuses of Gresham’s Law in the History of Money

Chart of the Day

Chart and note courtesy of the World Gold Council/GoldHub

Chart note: “Large net short positions,” says the World Gold Council, “are often prone to covering, creating buying opportunities for investors. In addition, gold speculative positioning in futures markets remains low by historical standards after hitting record lows in the final months of 2018. CME managed money net long positions stand near record low since 2006 – when data was first broken down by investor type. Furthermore, net combined speculative positions, which go back further, are negative for the first time since December 2001. And large net short positions have historically created buying opportunities for strategic investors, as such positions are prone to short-covering adding momentum to rallies in the gold price.”

Posted in dailyquotes |

Gold lays groundwork for solid start to the week, hits a wall in early NY trading

DAILY MARKET REPORT

Gold was in the process of laying some groundwork for a very good start to the week – trading up to the $1296 level in Asian and European markets overnight – until it hit a wall of what looked to be programmed trading at the open in New York and dropped almost $8 in a matter of minutes.  It has retraced some of those losses since and is now priced at $1292 and up $5 on the day.  Silver is up 6¢ on the day at $15.64.

Much of the gold’s gain overseas can be tracked to a stronger yuan and concerns about a less than inspiring earnings period ahead of us. Adding to the stock market’s woes is a report out of China this morning that its trade deficit with the United States grew 17% despite the imposition of tariffs. Lurking in the shadows, and not getting a great deal of attention in the United States, UK’s parliament votes on Brexit this week and that could be a catalyst for surprise capital rearrangements that few anticipated.

Quote of the Day
“I think we’re getting to the point now where the breakout is going to be on the inflation upside. The only question is when.” – Alan Greenspan, February 2018

Chart of the Day


(Interactive chart)

Chart note: This interactive chart compares price appreciation for gold and the dollar index. Gold has consistently outperformed the dollar in twelve of the last eighteen years – a formidable record. Even if one were to add in average yields on dollar-based investments, gold still comes out the clear winner in those twelve years. Gold had an off-year in 2018 – down 1% while the dollar was up almost 7%. Given the performance record, though, contrarian investors might see the present disparity as a buying opportunity.

Posted in dailyquotes |

No DMR today. . .

but please check back.  We will update if anything of interest develops.

Posted in dailyquotes |

Gold trades sideways, markets looking for direction

DAILY MARKET REPORT

Gold is trading sideways this morning after a quiet overnight session – down $1 at $1292. Silver is down 8¢ at $15.67. The markets, in general, seem unsure how to react to a slew of global political and economic events over the past few days and looking for a functional narrative upon which it can proceed.

Two pieces of news yesterday might provide that direction as time goes on. One is Fitch’s warning that it might drop the U.S.’ AAA credit rating if things do not improve in Washington. The credit agency’s warning came hours before the president walked out of a meeting with Congressional Democrats at the White House. The other is the Bloomberg report of “a steep decline in demand” at the U.S. Treasury’s bond auctions. That piece of unsettling news comes at a time when the federal government’s needs are growing rapidly as China and Japan, the two largest holders of U.S. sovereign debt, have moved to the sidelines.

Neither development is minor or easily dismissed as passing phenomena. As mentioned yesterday, when Standard & Poor’s lowered its credit rating of the United States from AAA to AA+ on August 5, 2011, it set off a strong rally in the gold price. On August 4, the price stood at $1662. Within four days it was trading at over $1800. By August 21st it had hit its all-time highs of over $1900 per ounce.

Quote of the Day
“The great Russian opera singer, Feodor Chaliapin, lost his entire fortune–then worth more than a million pounds–in the Russian revolution. This disaster seared him. He left Russia after the Revolution and went to live in France where in 1931 he bought gold bars and put them in a safe in his cellar in Paris. He was interviewed by the British Sunday Express newspaper on the 5th of May 1935, when he said, ‘People in Britain think governments cannot collapse. They think banknotes are money; banks are impregnable. But I have had everything I made in 25 years stripped from me. I was reduced to singing for tea in which there was sawdust, and bread in which there was wood. With my bar of gold and a pen knife I shall never go hungry.’” — Anecdote told by Haruko Fukuda, World Gold Council chair, in 2000 to the Business Club Zurich

Chart of the Day

Chart note: This long-term gold chart is drawn in log-scale. “Common percent changes,” says Investopedia of log-scale charts, “are represented by an equal spacing between the numbers in the scale. For example, the distance between $10 and $20 is equal to the distance between $20 and $40 because both scenarios represent a 100% increase in price.” On a linear chart, the lesser values are compressed to the point that the viewer misses the strength of a price move, and the greater values are extended to a degree that they tend to dramatize a price move – up or down. The log-scale chart presents data in a more realistic framework without the drama. As you can see from the chart above, the upward trend of the gold price since the early 2000s is not nearly as strong as the move between 1970 and 1980 in percentage terms leading some analysts to believe that we have considerable upside yet to be charted.

Posted in dailyquotes |

Gold resumes climb on trade talk progress, strong yuan

DAILY MARKET REPORT

Gold – up $6.00 at $1291 – resumed its climb this morning after a dull session overseas. News that trade talks between the United States and China had made some progress pushed the yuan sharply higher. The commodity complex in general led by crude oil is also sharply higher on the day. Silver is up 10¢ at $15.76.

A World Gold Council report released on Monday indicated a strong rebound in gold ETF buying on the part of funds and institutions in December to end what had been a year of luke-warm demand for the bullion funds. Strong interest among professional money managers indicates a possible change of sentiment in the global money centers that often drives gold market pricing. Today’s strong move at the New York open is part and parcel of the generally growing interest in precious metals. Here at USAGOLD, we have experienced a steady increase in activity among private investors in both gold and silver – in terms of both fresh buying and first-time inquiries.

Quote of the Day
“. . .[I]f you go down the line of currencies around the world, you don’t find many attractive opportunities. And that’s why I say if the world were to give up on dollars and give up on euros, they’d probably go back to the old standby, which is gold. And I don’t mean by gold, government-run gold standard,like we had in the late 19th century. That’s politically impossible. Governments will never be willing to subordinate their policies to the constraints of a hard commodity ever again… So how could gold make a revival as a sort of international money? Well, we don’t actually need a government-run gold standard anymore…since people have always had confidence in gold as a long-term store of value, there’s no reason why it couldn’t play that role.” – Benn Steil, Director of International Economics, Council on Foreign Relations

Chart of the Day

Chart note: With the US dollar the centerpiece of interest in recent months, we thought it appropriate to post the long-term overlay chart of the gold price and the major-currency version of the US Dollar index. As you can see, the dollar has been in a secular, long-term decline against other major currencies since the early 1970s when the U.S. abandoned gold-backing for the currency and the world switched to free-floating gold and currency prices. Despite all the talk of a strong dollar and how Treasury secretaries historically back the concept, the reality is the opposite – a weak dollar when measured against its major competitors over the long term. In the end, unencumbered ownership of physical gold coins and bullion, as this chart amply illustrates, has proven to be an effective defense in the on-going process.

Posted in dailyquotes |

Gold turns south on technical/trading issues

DAILY MARKET REPORT

Gold ran into significant resistance just short of the $1295 early yesterday. It subsequently turned south and that sell-off carried over to today’s open. Gold is trading now at the $1281 level and off about $8 on the day. Silver is down 5¢ at $15.63. The turn south looks more like a technical/trading issue than anything substantive.

Recent dovish pronouncements from the Fed chairman and the possibility of some kind of rapprochement between the United States and China on trade underlies psychology in the gold market at the present. “Any kind of agreement should be bullish for gold because of a stronger Chinese renminbi,” Commerzbank analyst Carsten Fritsch told Reuters overnight. “Gold is in positive environment. It had such a strong year-end, it is not surprising to see some profit taking,” he said. As it is, the dollar is trading to the upside this morning and gold has taken the opposite tack.

Quote of the Day
“Take some advice from two observers who have been around for awhile: The long term gets here before you know it. . . .Instead, we’d be dependent on foreign investors’ acquiring most of our debt — making the government dependent on the ‘kindness of strangers’ who may not be so kind as the I.O.U.s mount up. We can’t let that happen — not if we want an America that is able to provide growth and stability at home while maintaining global leadership. We would risk returning with a vengeance to stagflation — the ugly combination of inflation and economic stagnation that we tasted in the 1970s.” – Paul A. Volker and Peter G. Peterson

Chart of the Day

Chart note: The subject of much controversy as to its positive or ill-effects, the Federal Reserve continues to reduce its original $4.5 trillion balance sheet albeit at a very slow pace. Thus far, the Fed has allowed about $350 billion to run-off the balance sheet and its total holding is now about $4.14 trillion. The pace of quantitative tightening is expected to ratchet-up as 2019 progresses and this is causing concern among some analysts. “We believe the increase in the speed of the Fed balance sheet runoff could have a significant impact on the market,” says Brandywine Global Investment Management in a Seeking Alpha report this morning, “especially the long-end of the Treasury curve, as most of the Fed’s holdings are long-dated. With almost all major central banks reversing quantitative easing – including the European Central Bank’s recent coda to its asset purchases – we could face more of a dollar liquidity shortage.”

Posted in dailyquotes |

Gold sharply higher on Powell’s promise to be patient on rates, China reserves increase

DAILY MARKET REPORT

Gold moved sharply higher in early trading today as the effect of Friday’s job numbers receded and Fed chairman Jay Powell’s promise to be “patient” on rates moved to the pole position. The yellow metal is trading up $8 at $1293. Silver is up 9¢ at $15.77.

Gold is enjoying a run of positive forecasts of late and acquisition recommendations from various financiers. BlackRock, one of the world’s largest hedge funds, came out in gold’s favor over the weekend. “’We’re constructive on gold,” portfolio manager Russ Koesterich told Bloomberg on Friday. “We think it’s going to be a valuable portfolio hedge. We’re multi-asset investors: we think about its effect on the entire portfolio, and what we see value in right now is gold’s value as a diversifier.”

Also, helping gold this morning is a report out of China that the Peoples Bank of China increased its holdings by roughly 10 tonnes – the first such report of an upgrade since 2016.

Quote of the Day
“Debasement was limited at first to one’s own territory. It was then found that one could do better by taking bad coins across the border of neighboring municipalities and exchanging them for good with ignorant common people, bringing back the good coins and debasing them again. More and more mints were established. Debasement accelerated in hyper-fashion until a halt was called after the subsidiary coins became practically worthless, and children played with them in the street, much as recounted in Leo Tolstoy’s short story, Ivan the Fool.” – Charles P. Kindleberger, Manias, Panics and Crashes

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note: If you follow the on-going trade war between the United States and China with even passing interest, you have no doubt come across references to China selling U.S. Treasuries as its ultimate hole card. This chart shows something that few, including many financial journalists, acknowledge: China has been unloading exchange reserves since 2014 when they peaked at nearly $4 trillion. Most of those reductions, which have taken China’s reserves to a little over $3 trillion (a 25% reduction) came as part of its policy to smooth the yuan exchange rate against the dollar and prevent wholesale capital flight. It is unclear at this juncture to what extent China would be willing to drain reserves in defense of the yuan in the future. Trading Economics, as the chart shows, projects further reserve reductions in the future.

Posted in dailyquotes |

Gold retreats from $1300 mark, tumbles on jobs report

DAILY MARKET REPORT

Gold, in bullish fashion, made a charge at the $1300 mark in Asian trading overnight. Unable to keep the momentum, it retreated quietly during European trading and then tumbled in New York on the release of this morning’s surprisingly strong jobs report. It is now down $17 at $1278 – a wholly unpleasant end to what up until now had been a fairly good start to the year. Silver kept its composure through it all and is now down a modest 13¢ at $15.61.

Given the fact that gold’s problems this morning have not spread to other sectors, this morning’s sell-off could turn out to be a temporary affair. Oil is up sharply again. Commodities in general look firm. The yen is down but not dramatically so. Meanwhile, the global economy itself is still in dangerous waters despite the feel-good jobs number. Perhaps we would be well-served to see how it all plays out before casting judgement. . . . . . . .

Gold, after all is said and done, is roughly level on the week and still up over 4.5% since December 1.

Quote of the Day
“Problems are likely to continue in emerging markets, compounded by rising interest rates and the US Fed’s monetary policy which has drained global dollar liquidity. We have already seen the impact on the Turkish and Argentinian currencies. We remain concerned about geo-political problems including Brexit, North Korea and the Middle East, at a time when populism is spreading globally. The resolution of these problems in this unpredictable era will surely be difficult. In 9/11 and in the 2008 financial crisis, the powers of the world worked together with a common approach. Co-operation today is proving much more difficult. This puts at risk the post-war economic and security order. In the circumstances our policy is to maintain our limited exposure to quoted equities and to enter into new commitments with great caution.” – Lord Jacob Rothschild, RIT Capital Partners, Half-Yearly Financial Report, June 30, 2018

Chart of the Day

Chart note: When the United States abandoned the gold standard in 1971 and freed currencies to float against one another, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold backed the dollar, and the era from 1971 to present when it did not. Gold has had its ups and down since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.

Posted in dailyquotes |

Silver up sharply, breaks ranks with gold

DAILY MARKET REPORT

Gold is higher for the second day running in 2019, but it is silver that is capturing the attention of traders this morning – up 17¢ at $15.67. Gold is up $2 at $1288. The metals are holding much of the ground gained overnight in response to a sudden surge in the value of the Japanese yen. Since then the yen and gold have settled into a range, but silver, seemingly determined to strike out on its own, has broken ranks and is up over 1% on the day thus far.

Clive Maund, the London-based commodities analyst, says that silver’s breakout “may well be the opening shot of a major bull market. . . The PM sector has been about the only one that hasn’t become a bubble in recent years, and the way things are shaping up, it could wind up being the only sector that becomes a bubble while most everything else is dropping through the floor.”

Oil is up sharply and the rest of the commodities complex looks firm confounding early year expectations that the Chinese economy will slow in 2019 and push commodity prices lower.

Quote of the Day
“As the unwind continues, Financial Assets inflated by the free-money effects of QE are still finding new equilibrium valuations. Markets will remain volatile. Tech change and supply fundamentals will continue to shock us – look at oil prices for an example; turning a good year for oil and energy into a question market. Or look at how iPhone sales in India have fallen off a cliff as people buy cheaper phones that do the same – commoditisation! The thing that scares me most is liquidity – the lack of it.” – Bill Blain, Blain’s Morning Porridge

Chart of the Day

Chart note: Gold’s for the most part sideways performance in 2018 aside, it has been a steady performer since the turn of the 21st century – registering gains in fourteen of the first eighteen years.

Posted in dailyquotes |

Gold up tenuously to start the new year

DAILY MARKET REPORT

Gold is putting its best foot forward to start the New Year – trading up $3.50 at $1285 in today’s early going. Silver, not quite as enthusiastic about the turn of the year, is down 6¢ at $15.41. With the dollar strengthening overnight on reports of an economic slowdown in China, the positive start for gold appears on the surface a bit tenuous. With that in mind, many will call it a good start for the year if gold simply holds its ground in positive territory by the end of the day. Commodity markets in general are off with oil down over 2.5% on the day.

Today’s upside adds to a rally that began in mid-November at the $1200 level. As it is, gold finished up 5% for December, but down 2.6% for 2018. Silver, always more volatile than gold on both the up- and downsides, finished up 8% for December, but down about 9.3% for 2018.

Quote of the Day
Central bankers are coy about gold’s importance as a monetary metal. Former Fed Chair Benjamin and presidential candidate [Emphasis added]Bernanke, at one of our hearings, claimed flatly that gold was not money. When I pressed Bernanke on why, then, do central banks hold gold, he declared after a long pause that it was merely ‘tradition.’ He had no interest in my suggestion that the gold could be sold off to the American people if it’s not money. The point is that due to today’s impending crisis, many governments are now accumulating more gold—while others are holding onto what they have with the expectation it will once again be used in the monetary system.” – Ron Paul, former Congressman and presidential candidate [Emphasis added]

“Students of monetary history should recall that global growth shrank in the wake of the Smoot-Hawley Tariff Act of 1930, and the US was forced to devalue the dollar against gold in January 1934 with the result that the gold price rose by 70% (from $20.67 to $35.00).” – Martin Murenbeeld, Gold Monitor newsletter

Chart of the Day

Chart note: From time to time we re-post this chart on the average annual price of gold since 1971 – the year the U.S. severed the tie between the dollar and gold and launched the fiat money era. It dispels the notion that gold is somehow volatile or unpredictable and as a result unreliable as a long-term portfolio safe haven. To the contrary, it demonstrates at a glance gold’s strong performance as a portfolio holding over the long haul and emphasizes its role as a reliable long-term portfolio safe haven and means to long-term wealth preservation.

Posted in dailyquotes |

No DMR until January 2

Please check back though. We will update if circumstances warrant. . .

Posted in dailyquotes |

Gold, silver up sharply in early trading, beneficiaries of major, on-going capital rotation

DAILY MARKET REPORT

Normally, we would take a break from posting the DMR during this last week of the year, but given the unusual circumstances in financial markets and the large number of visitors to the site, we thought a few comments might be in order.

Gold is up another $11 at $1279 in early trading today as investors, including funds and institutions continue to rotate capital out of traditional stock markets and into safe-haven alternatives.  Silver is up a steep 39¢ at $15.17 and solidly over the $15 barrier.  The climb began overnight in Asian and European markets and carried over to the New York COMEX open. Bonds are also a beneficiary amidst the shifting currents.

A detailed article in this morning’s Wall Street Journal points up something we have warned for years about on this page and what many see to be the primary influence in this stock market sell-off, i.e., the over-wrought presence and dominance of computer-based trading. With respect to the ill-effects, our characterization remains the same: Live by the algo. Die by the algo. And just as the momentum in a football game can turn on a single event, so too can it turn in financial markets. Massive capital that poured into stocks for a good many years will now be looking for a place to go. To what degree, this capital tsunami will affect the much thinner gold market remains to be seen.

As we approached the holiday break last week, we learned of a meeting of the Working Group for Financial Markets called by Treasury Secretary Mnuchin and also his contact with several of the large banks on their liquidity levels. Whether or not the plunge protection team can turn the tide will dominate Wall Street concerns over the next few days, and the rest of us will be watching closely as well.

Quote of the Day
“The speed and magnitude of the move probably are being exacerbated by the machines and model-driven trading. Human beings tend not to react this fast and violently.” – Neal Berger, Eagle’s View Asset Management, as quoted in today’s Wall Street Journal

Chart of the Day

Chart note: This chart illustrates the changing sentiment in financial markets since early October of this year. Stocks have suffered in the worst late year market performance since the Great Depression. Gold has been a beneficiary as investors seek a safe haven.

Posted in dailyquotes |

Something in the air as we approach holiday season

CHRISTMAS MESSAGE

Gold’s come off a bit from yesterday’s nearly $20 rise, but that is to be expected.  We mentioned late last week that the upcoming Fed Week might be different from the rest.  Little did we know how different it would be. One would have to reach deep into the memory banks to find a comparison if there is one.

 As the smoke begins to clear from the past week’s events, though, we sense that sentiment in the financial marketplace has been fundamentally altered – a significant and surprising overturning of a way of thinking that has driven markets for a very long time. One hesitates to suggest such a thing because that governing mindset has been with us for a very long time.

Yet it would be hard to deny that something is in the air, as very significant developments have begun to emerge in the political realm as well.  Today’s Chart of the Day featuring gold and volatility speaks to that shift in sentiment. So, as we bring 2018 to a close, the word change superimposes itself over our Christmas message  – change that likely will present challenges and test our skills in the year ahead. We will be called upon, it appears, to adjust and prepare as investors for what could be tumultuous times ahead.

Wishing you and yours the very best for the holidays from all of us at USAGOLD!

Quote of the Day
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasury. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship. The average age of the world’s great civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency from complacency to apathy, from apathy to dependency, from dependency back to bondage.” – Alexander Tyler, 18th-century historian and jurist

Chart of the Day

Chart note: High volatility in the past has preceded upward movement in the gold price. In an article this morning under the headline “Wild days return to stock market as VIX surges like never before,” Bloomberg points out that volatility now is running at levels not seen since the 2007-2008 breakdown and, in fact, “the biggest annual surge on record.” In yesterday’s Chart of the Day, we featured the lag in gold’s response to the early phases of the 2007-2008 financial crisis. The move upward came later after investors came to realize the full extent of the crisis and it culminated at all-time highs.

Posted in dailyquotes |

Gold surges to higher ground on confluence of factors

DAILY MARKET REPORT

Gold’s surge to higher ground began overnight in Asia and Europe then carried over to early U.S. trading. It is up $16 at $1260 as we post today’s DMR and now well over the $1250 psychological barrier. Silver is up 16¢ on the day at $14.80.

To really get a feel for what is driving gold we would encourage you to read through the last two day’s posts and visit the links that gain your attention. The current situation encompasses a confluence of factors including. . . . .

(a) gold’s strong upside bias over the past three years in the wake of the December Fed conclave (as illustrated in the graph posted in yesterday’s DMR), and

(b) the central bank’s open options approach to 2019 on interest rates – a more dovish stance that has been slowly put together by the Powell Fed over the last several weeks

Those two factors in turn are encouraging

(c) short-covering, in our view, among major market players though we won’t know that for certain until after the COMEX data comes public

(d) fresh purchases of physical and paper metal as a hedge against a complex set of unknown and unknowable economic and financial possibilities

Some will point to the sharp decline in the dollar overnight (see below) as the sole cause of gold’s upside, but that is an easy explanation that leaves much to be desired. What we just outlined could very well be – in fact is likely to be – only part of a more complex story. Stay tuned to USAGOLD as we will update as the situation comes into better focus.

Quote of the Day
“Why does the cycle move as it does? What causes these periodic alternations, this ebb and this flow, in the national priorities? If it is a genuine cycle, the explanation must be primarily internal. Each phase must flow out of the conditions – and contradictions – of the phase before and then itself prepare the way for the next recurrence. A true cycle is self-generating. It cannot be determined, short of catastrophe, by external events. Wars, depressions, inflations may heighten or complicate moods, but the cycle itself rolls on, self-contained, self-sufficient and autonomous. . .The roots of cyclical self sufficiency lies deep in the natural life of humanity. There is a cyclical pattern in organic nature — in the tides, in the seasons, in night and day, in the systole and diastole of the human heart.” – Arthur M. Schlesinger, Jr., The Cycles of American History

Chart of the Day

Chart note: As the chart above illustrates, gold does not always react to the start of a crisis as anticipated. As the credit crisis gained momentum in 2008, gold declined as the dollar rose – acting in much the same way it is reacting now to the emerging markets crisis and U.S.-China trade war. It was not until late 2008, when the full extent of the crisis became all too apparent, that it began to move higher. Thereafter, from 2009 to September 2011, it rose to its all-time high of $1895 – a 215% gain in three years.

Posted in dailyquotes |

Fed moves cautiously, nothing brought down from Sinai today etched in stone

AFTERNOON UPDATE [12-19-2018]

Gold: $1243 [-$7.00]; Silver: $14.59 [-5¢]

OPINION – We know the media is playing today’s Fed decision to the hilt – the equivalent of Moses descending from Mt. Sinai tablets in hand – but, all in all, it is a pretty benign move on the part of the Fed. At first blush, we would read in it what the Fed seems to have intended – a mildly dovish stance with the option to get more or less aggressive in 2019 as conditions dictate.

Gold turned lower in the aftermath, but it was already losing ground from the day’s highs well before the announcement was made.  Stocks, as it turns out, might end up on the losing end of the bargain. Powell, in essence, discarded the notion that the stock market’s woes would alter Fed policy, i.e., there will be no Powell put, not at least for now.

If somebody would have told me yesterday that the Fed was going to go through with its planned .25% rate increase and drop the planned hikes for 2019 to two from three, I would have shrugged my shoulders and said “Sounds about right to me.” We will wait for the dust to settle on today’s events before drawing any lasting conclusions – in fact take to heart what the Fed chairman suggested early in his Q&A session and not read too much into the current deliberations. Nothing that came down from Mt. Sinai today – except the anticipated .25% rate increase – is etched in stone.

Posted in dailyquotes |

Gold peeks head above $1250 mark, looks around. . . .bolts higher

Gold peeked its head cautiously above the $1250 mark in overnight trading, looked around and decided to bolt higher. It is now up $8.00 on the day at $1258. Silver is up 16¢ at $14.83. The rest of the financial universe appears equally optimistic as it awaits today’s Fed decision on rates and more importantly its concluding statement followed by chairman Powell’s press conference. Stocks, bonds and commodities are all up in early trading. The dollar appears to be the outlier with the index down sharply as this posted. Festivities will begin with the statement at 2 pm ET. The press conference is scheduled for 2:30 pm. Given gold’s recent history as discussed below, short covering might also be a factor in today’s price action.

Gold market analyst Arkadiusz Sieron posted an interesting chart at Gold Eagle in which he notes gold trending down in advance of December Fed meetings since 2015, then turning higher thereafter into the start of the new year. That chart is reproduced immediately below.  The green boxes encompass December Fed Week. We will be back later in the day if events warrant. . . .

Quote of the Day
“Nobody knows what would happen if Britain’s LCH or Germany’s Eurex Clearing came under stress. They have thin layers of capital compared to banks. Before the 2008 crisis most derivatives were cleared by trading parties in direct dealings. The G20 shift has lifted the share of CCPs [central counterparties] for interest rate derivatives from 20 to 60 percent. The effect is to concentrate risk. The BIS warns that the system may encourage a rush for the exit in events of extreme stress. The International Monetary Fund has also flagged the dangers. It warned this year that CCPs ‘increase the risk of a failure of the infrastructure itself’ and could lead to a ‘catastrophe’ if the all layers of defense were overrun by a big default. It would be like the failure of the Maginot Line.” – Ambrose Evans-Pritchard, BIS warns of seizure at heart of financial clearing system

Chart of the Day

Chart note: Growth in the money supply continues to be stubbornly restrained. That circumstance, however, does not necessarily signal weakness in the price of gold. As this chart illustrates, the effect can be just the opposite. As the 2008 credit crisis unfolded, gold to the surprise of many proved its mettle as a hedge under disinflationary circumstances. Demand flourished among investors worldwide concerned about potential bank failures and a stock and bond market crashes. Even in the more placid economic setting since early 2016, gold has risen as monetary growth has slowed, mostly among global investors seeking a safe-haven against financial system risks.

Posted in dailyquotes |

Gold moves cautiously sideways amidst widespread concern about tomorrow’s Fed meeting

DAILY MARKET REPORT

Gold is moving cautiously sideways this Tuesday before the Wednesday of Fed Week – the day the U.S. central bank’s governors sit down for a fateful meeting amidst widespread concern in financial markets. This morning’s market action across the boards has all the look of the calm before the storm: Stocks, defying the general concern, are pushing higher. Bonds are running laterally. Commodities are quiet. The dollar is up slightly. Gold, too, is non-commital – up just $1.50 at $1247.50 after yesterday’s strong performance that took once again near the $1250 mark. Silver is up 2¢ at $14.69.

The Wall Street Journal reports this morning that the Fed is weighing carefully what will be said in its closing statement and how it will be said – and well it should. Much hangs in the balance including the potential effect on the dollar and by proxy – gold. The fact of the matter is that the Fed plans to stay the course on a .25% in interest rates – but that speaks to the present. The markets are concerned about the future and will be sifting through the grit of the closing statement to find the gemstone.

Univest Wealth Management’s Timothy Chubb, quoted in this morning’s Journal, captured the spirit of the moment: “Investors are losing confidence in the direction and the progress we’re making on monetary policy and trade. Powell has to be careful with his words because investors are looking for any doubt in the Fed’s mind that the global economy is on strong footing.”

Quote of the Day
“The cost of living has skyrocketed in recent years. Let’s look at the cost of goods in services in terms of a salary earned by a full college professor. In the 1980s, our ‘full professor’ needed to pay almost 15 minutes of his salary to buy one kilogram of beef. Today, in July 2017, our full professor needs to pay the equivalent of 18 hours to buy the same amount of beef. During the 1980s, our full professor needed to pay almost one year’s salary for a new sedan. Today, he must pay the equivalent of 25 years of his salary. In the 1980s, a full professor with his monthly salary could buy 17 basic baskets of essential goods. Today, he can buy just one-quarter of a basic basket. And what about the value of our money? Well, in March 2007, the largest denomination of paper money in Venezuela was the 100 bolivar bill. With it, you could buy 28 US dollars, 288 eggs, or 56 kilograms of rice. Today, you can buy .01 dollars, 0.2 eggs, and 0.08 kilograms of rice. In July 2017, you need five 100-bolivar bills to buy just one egg.” – Timothy D. Terrell, on life in Venezuela (2018)

Chart of the Day

Chart courtesy of HowMuch.net

Chart note: “Looking at a map of economic freedom for the entire world reveals distinct pockets of freedom and repression,” says HowMuch.net, the creator of this chart. “The freest continuous group of countries stretches from the United States and Canada over to northern Europe and the Baltic countries. Russia is the only country touching the Arctic Ocean in a color other than dark and light green. Australia and New Zealand also stand out in the Pacific as bastions of freedom, especially combined with the other countries in Southeast Asia. On the other hand, almost all of South America, Africa, and Asia (at least on the continent itself) remain repressed.”

Chart note 2: It is also interesting to note that it is among the “mostly unfree” and “repressed countries” where the current emerging country currency and debt crisis resides.

Posted in dailyquotes |

Announcement CP

Posted in Announcements, dailyquotes | Tagged |

Gold pushes quietly higher to start Fed Week

DAILY MARKET REPORT

Gold pushed quietly higher early today, a fete that normally would pass without much notice or comment. It is Fed Week, however, and typically speculators would be anticipating gold’s text-book weakness when the FOMC meets and hoping to gain some short-term advantage. As we mentioned in an earlier note, though, this time around – with the Fed looking to pull back on its march to higher interest rates – things might be different. The dollar took a sharp turn to the south today in early trading and commodities turned north – both beneficiaries of the same sentiment. With much on the table politically, geopolitically and monetarily, it could turn out to be an interesting week as we go into the final leg of the holiday season. Gold is up $2.50 on the day at $1241.50. Silver is up 6¢ at $14.62.

Quote of the Day
“For we have reached a critical point. In a sense, it is true that the mists are lifting. We can, at least, see clearly the gulf to which our present path is leading. Few of us doubt that we must, without much more delay, find an effective means to raise world prices; or we must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what outcome we cannot predict.” – John Maynard Keynes, The Means to Prosperity (1933)

Chart[s] of the Day

Charts courtesy of TradingEconomics.com

Chart note: These three charts show the central bank balance sheet debt holdings for three of the top four largest economies – the United States, Japan and the European Union.Together the three central banks hold an astonishing nearly $13 trillion in debt instruments, and not all are of the highest quality. The US Federal Reserve is in the process of trimming its balance sheet, albeit on a slow fuse. The European Central Bank is scheduled to begin reducing its holdings later this year. The Bank of Japan, for its part, says it will continue with its acquisition program as long as it deems necessary.

Posted in dailyquotes |

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Posted in dailyquotes |

Gold abruptly turns south coincident with sharp drop in yuan

DAILY MARKET REPORT

Gold abruptly turned south in overnight and early U.S. trading coincident with a sharp drop in China’s yuan. The yuan in turn fell abruptly on growth numbers that fell short of expectations and speculation that the Peoples Bank of China might move to lower interest rates. Not helping matters, the European Central Bank formally announced plans to halt its quantitative easing program, but also stated it would reinvest proceeds from maturing bonds. In addition, it reassured markets that it would refrain from raising interest rates until late next year.

In short, China and Europe went dovish at a time when the Fed is scheduled next week to raise U.S. interest rates another .25%. The dollar index jumped over a half a point in response and gold dropped about the same. As today’s DMR is posted, gold is down $7.50 at $1235. Silver is down 20¢ at $14.54. Stocks are not all that happy with overnight developments either – down nearly 200 in futures’ trading.

Quote of the Day
“Buying gold today is a statement that you believe that global economic events may spiral out of the control of Central Bankers. It is insurance against some sort of massive monetary policy mistake that cannot be fixed without re-conceptualizing the global economic regime – hyperinflation in a developed nation, the collapse of the Euro, something like that – not an expression of a commonly shared belief in some inherent value of gold.. . . . The stronger the Narrative of Central Banker Omnipotence, the more likely it is that the price of gold goes down. The weaker the Narrative – the less established the Common Knowledge that central bank policy determines market outcomes – the more likely it is that the price of gold will go up. In other words, it’s not central bank policy per se that makes the price of gold go up or down, it’s Common Knowledge regarding the ability of central banks to control economic outcomes that makes the price of gold go up or down.” – W. Ben Hunt, Epsilon Theory

Chart of the Day

Chart note: This chart shows the gains or losses in gold from the same month a year earlier. Since the Fed began raising interest rates in early 2016, gold has gone higher in 22 out of the past 34 months. That means that you could have purchased gold in any one of those months a year earlier and showed a gain 12 months later, and sometimes that gain was significant – as much as 10% to 22%!

Posted in dailyquotes |

Gold continues to track sideways, some cheerful technical analysis ($1300 by year-end?)

DAILY MARKET REPORT

Gold continued to track sideways this morning – down $2.50 at $1243.50. The metal was stable in Asian trading then dropped moderately on minor speculative selling on London AM fix associated with Theresa May’s surviving a Tory vote of no-confidence. All in all, the wait-and-see, sideways pattern established earlier in the week seems to have gained the upper hand for now. Barring a major event, we could remain in a narrow range until after Wednesday’s meeting of the Federal Open Market Committee. Silver is up 2¢ on the day $14.77.

Anna Couling, who posts technical commodity analysis at Investing.com, offers a hopeful note as we move toward the conclusion to 2018. In a short analysis titled Some Christmas Cheer for Gold Bugs [LINK], she says –

“Last week’s price action was seminal, with gold breaking through strong resistance in the $1238 per ounce region. In addition, this price action was supported with excellent volume and in agreement, with the trend monitor confirming the transition to the bullish sentiment. A recovery to $1280 per ounce now seems possible and possibly to $1300 per ounce, provided this is supported with strong and rising volume on the weekly chart. And of course, further weakness in the USD may well provide additional help given the FED’s pace of rate increases which looks set to slow.”

With those words of reassurance, we will close out today’s report and wish you a pleasant rest of your day.

Quote of the Day
“Reality is far more vicious than Russian roulette. First, it delivers the fatal bullet rather infrequently, like a revolver that would have hundreds, even thousands of chambers instead of six. After a few dozen tries, one forgets about the existence of a bullet, under a numbing false sense of security. Second, unlike a well-defined precise game like Russian roulette, where the risks are visible to anyone capable of multiplying and dividing by six, one does not observe the barrel of reality. One is capable of unwittingly playing Russian roulette – and calling it by some alternative ‘low risk’ game.” ― Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

Chart of the Day

Chart note: Since the turn of the new century, gold consistently provided a real rate of return on investment when measured against inflation. In fact, it provided a real rate of return in twelve of the eighteen years represented on the chart. The period was one of subdued inflation. Gold’s performance, as a result, took many analysts and professional money managers by surprise and altered the perception among money managers that the precious metal is solely an inflation hedge.

Posted in dailyquotes |

Gold seesaws in range, biding its time

Gold seesawed in the $1242-1247 range unable to make up its mind on direction in overseas trading. By the time New York opened, though, it appeared comfortable with the northern edge of the range – up $3 on the day at $1246. Silver is up 13¢ at $14.72 and making progress toward the important $15 mark. Yesterday’s producer price report came in at a benign .1% and today’s consumer price report showed a 2.2% rise in prices – numbers unlikely to cause even a ripple among Wall Street traders.

The markets today are entertaining the notion of a thaw in the U.S.-China trade battle but it was another conflict – the one between the White House and Congressional Democrats – that dominated national attention yesterday. The president declared he would be “proud” to shut down the government over financing for a wall at the Mexican border. Those with a memory for major market events recalled that it was another shutdown in 2011 that caused Standard & Poor’s to downgrade the U.S government’s credit rating. Another downgrade now could have deadly consequences at a time when foreign creditors are already backing away from the U.S. treasuries’ market.

Gold, through all of it, appears to be biding its time, but seemingly at the ready. . . . . . . .

Quote of the Day
“A common feature of all these earlier troubles was that, having happened, they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. (Not only were a record 12,894,650 shares sold on 24 October; precisely the same number were bought.) The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next twenty-four months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.” – John Kenneth Galbraith, The Great Crash: 1929

Chart of the Day

Chart note: This long-term gold chart is drawn in log-scale. “Common percent changes,” says Investopedia of log-scale charts, “are represented by an equal spacing between the numbers in the scale. For example, the distance between $10 and $20 is equal to the distance between $20 and $40 because both scenarios represent a 100% increase in price.” On a linear chart, the lesser values are compressed to the point that the viewer misses the strength of a price move, and the greater values are extended to a degree that they tend to dramatize a price move – up or down. The log-scale chart presents data in a more realistic framework without the drama. As you can see from the chart above, the upward trend of the gold price since the early 2000s is not nearly as strong as the move between 1970 and 1980 in percentage terms leading some analysts to believe that we have considerable upside yet to be charted.

Posted in dailyquotes |

No DMR today.

Please check back.  We will update if anything of interest develops.

Posted in dailyquotes |

Gold encounters resistance at $1250 mark in overnight trading, a possibly tumultuous week directly ahead

DAILY MARKET REPORT

Gold encountered what appears, at least for now, to be minor resistance at the $1250 mark with a tumultuous week for markets behind us and a new and perhaps even more imposing week looming ahead. I say imposing because the markets face a minefield of reports and events this week any one of which could dish out a fair share of damage in financial markets. Today we have the auction of short-term Treasury bills (3- and 6-month). Tomorrow we have the producer price index and crude oil stocks. Wednesday we have the core inflation rate, jobless claims and another bond auction (30-year). If the markets are looking to get a reading of the economy, the coming week will provide plenty of statistical fodder.

As it is, gold is down $3 on the day at $1245.50 after nudging the $1250 mark in overseas trading. Silver is down 3¢ at $14.61.

Quote of the Day
“I spoke to bankers at the time who said that what happened was supposed to be impossible, it was like the tide going out everywhere on Earth simultaneously. People had lived through crises before – the sudden crash of October 1987, the emerging markets crises and the Russian crisis of the 1990s, the dotcom bubble – but what happened in those cases was that capital fled from one place to another. No one had ever lived through, and no one thought possible, a situation where all the credit simultaneously disappeared from everywhere and the entire system teetered on the brink. The first weekend of October 2008 was a point when people at the top of the global financial system genuinely thought, in the words of George W. Bush, ‘This sucker could go down.’ RBS, at one point the biggest bank in the world according to the size of its balance sheet, was within hours of collapsing. And by collapsing I mean cashpoint machines would have stopped working, and insolvencies would have spread from RBS to other banks – and no one alive knows what that would have looked like or how it would have ended.” – John Lanchester, After the Fall

Chart of the Day

Chart note: Rate convergence, or the flattening of rates in the popular financial parlance, is the subject of much concern on Wall Street and this chart, drawn in log scale, tells the reason why in a glance. In pulling together the data for these charts, we could not help but take special note of the two previous occasions in which there was a similar convergence – in 2000 just before and during the bursting of the dotcom bubble and in 2007-2008 just before and during the Bear Sterns/Lehman Brothers’ implosions and the launch of the global financial crisis. When the financial press bemoans the flattening of rates as a portent for a future recession, it is telling only part of the tale. Beyond the threat of recession lies a much deeper concern – the threat of another all-out financial crisis.

Posted in dailyquotes |

Jobs drop, gold pops; stocks face ‘psychological and algorithmic leverage’ and ‘computer herding’

The jobs number dropped and gold popped in early Friday trading – up $7 at $1245.  Silver is up 9¢ at $14.60.

Gold’s recent stability – we hesitate to call it strength at this juncture – should be traced directly to dovish remarks emanating from the Fed. A perceived agreement on oil production among members is also adding to gold’s appeal today as are concerns about the trade negotiations between the U.S. and China – particularly in light of the arrest of Huawei’s chief financial officer, Meng Wanzhou, daughter of the company’s founder. “After Ms. Meng’s arrest,” says Financial Times this morning, “the deadline for progress looks like a timebomb.” Meanwhile, the president, as if nothing unusual just happened, tweets this morning that the trade talks with China “are going very well.”

On another page in the Financial Times, columnist Gillian Tett makes an attempt to explain the wild swings in financial markets, a trend that seems to be snowballing.  She passes along an interesting observation from Seth Klarman, founder of the Blaupost hedge fund. “In 2008,” he says, “we had massive disguised [debt] leverage.  Now we have less financial leverage, but there is psychological leverage.”  Is that another way of saying that the markets are on the verge of panic?

Klarman goes on to warn about “algorithmic leverage” and “computer herding” – problems we have written about on these pages for years. [Link to the full editorial] Ms Tett, who has written with distinction about the markets and their tendency toward crisis for a good many years, ends with the observation that the propensity toward wild swings rather than a sudden, full-out crash gives “seasick investors opportunity to jump ship.” That is a course of action worth pondering as we head deeper into what could be an eventful closing month to the year.

Jumping ship, we will point out, is one thing, establishing a solid portfolio hedge is another.  The first without the second may turn out to be an empty exercise.

Quote of the Day
“Our central bank monetary-led boom has made debt replace wealth for a long time. That’s not sustainable, of course. (We are ‘mining’ our soil for short-term gain.) We’ll see a return to the significance of productive stuff again I think, and that even includes farming – maybe especially farming. And the Midwest has a pretty good track record with productive stuff. Hard assets will matter again. But of course, I sound ridiculous even saying such things. Like a grumpy old grandpa.” – Mark Spitznagel, Universa Investments (as quoted by columnist, P.J. O’Rourke)

Chart of the Day

Chart note: After all is said, as of yesterday, gold is down just less than 2% on the year. The last twelve months have been a struggle for the yellow metal but not as much the annus horribilis some would have us think. Predictions for 2019 have begun to show up in the financial media and most surprisingly strike a positive chord. Recently published observations from ABN-Amro’s Georgette Boele are a case in point. “Gold prices,” she says, “have declined so far this year. But 2019 and 2020 should be positive again because we expect a lower dollar, lower US Treasury yields, a recovery of the Chinese yuan and higher jewellery demand. Speculators are expected to cut their substantial short positions and gold prices should rise to above the 200-day moving average. We keep our year-end target for 2019 at USD 1,400 per ounce.”

Posted in dailyquotes |

Gold takes pause after three-day rally, stock market gets needed breather

Gold took pause this morning after a three-day, $25 rally that took it over the $1240 mark. It is now trading at $1238.50 and level on the day. Silver is down 2¢ at $14.55. The dollar is also trading sideways as the stock and bond markets suspend trading for the day for the funeral of former president George H. W. Bush.

After yesterday’s chaotic nearly 800 point stock market rout, a breather might be just what the stock market needs. Then again, there is the possibility that a day of reflection will give rise to even more powerful animal spirits (to resurrect an old, but still lingering, allusion). The yuan is down a bit but generally holding steady even with China coming-off as hesitant on commitments it reportedly made at the Trump-Xi dinner.

Trading in bonds is having what can only be described as a profound effect on stocks in recent sessions. Much, it seems, hangs on how the relationship between various maturities plays out, i.e., inverted yields and their perceived dangers. What transpires will likely affect the value of the dollar and consequently gold – not to speak of future monetary policy. It is a time for current and would-be gold owners to be vigilant if not proactive.

Quote of the Day
“I’m fond of saying how crazy things get near the end of Bubbles. Convinced this is History’s Greatest Bubble, I’ve been anticipating a pretty astonishing variety of ‘crazy.’ Watching this all unfold with increasing trepidation, I sense an important line has been crossed. It’s time to retire ‘crazy’ – find a replacement that conjures up something more foreboding – more disturbing. And markets, well, they’re seemingly fine with it all; at times almost giddy. And that’s the fundamental problem: Dysfunctional markets continue to promote incredibly risky policy behavior – the polar (bear) opposite of imposing discipline.” – Doug Noland, Credit Bubble Bulletin

Chart of the Day

Chart courtesy of St. Louis Federal Reserve [FRED], Board of Governors, IBA

Chart note: With the US dollar the centerpiece of interest the past several weeks, we thought it appropriate to post the long-term overlay chart of the gold price and the major-currency version of the US Dollar index. As you can see, the dollar has been in a secular, long-term decline against other major currencies since the early 1970s when the U.S. abandoned gold-backing for the currency and the world switched to free-floating gold and currency prices. Despite all the talk of a strong dollar and how Treasury secretaries historically back the concept, the reality is the opposite – a weak dollar when measured against its major competitors over the long term. In the end, unencumbered ownership of physical gold coins and bullion, as this chart amply illustrates, has proven to be an effective defense in the on-going process.

Posted in dailyquotes |

Gold continues trek higher on yuan strength, short-covering

DAILY MARKET REPORT

Gold continued its trek higher this morning rising another $10 in the early-going to trade at $1241.50. Silver is up another 22¢ at $14.63. Lost in the media focus on trade and interest rates has been the on-going reduction in short positions on the COMEX in both metals, an indication that traders might have begun the process of squaring those positions before year end. We will know more about that at the end of week when the Commitment of Traders of report is released for public consumption.

In addition to the possible short-covering, we also take note of the improving scenario for China’s yuan over the past few days. Note the upward spike that began in Asian trading immediately after the Trump-Xi dinner. As noted in the Bloomberg article below by John Authers, tellingly a stronger yuan/weaker dollar is what Trump and Xi wanted. Gold, in the process, has become one of the beneficiaries.

 

Quote of the Day
“Sir Isaac Newton was asked by the British Treasury officials and financiers of his day why the monetary pound had to be a fixed quantity of precious metal. Why, indeed, must it consist of precious metal, or have any objective reality? Since paper currency was already accepted, why could not notes be issued without ever being redeemed? The reason they put the question supplies the answer; the government was heavily in debt, and they hoped to find a safe way of being dishonest. But Newton was asked as a mathematician, not a moralist. He replied: ‘Gentlemen, in applied mathematics, you must describe your unit.’ Paper currency cannot be described mathematically as money.” – The God of the Machine, Isabel Paterson (1943)

Chart of the Day

Table courtesy of the World Gold Council/GoldHub

Table note: Global gold demand in physical form for jewelry, central bank reserves and private investment continues to grow steadily. Private investment demand stands out as particularly robust – up 30% from 2010 through 2017.

Posted in dailyquotes |

Gold pushes convincingly to higher ground

DAILY MARKET REPORT

Gold pushed convincingly to higher ground this morning – up $11 at $1233. Silver is up 38¢ at $14.55 – a move of more than 2.5%% that outpaces gold’s less than 1% gain.

Two developments over the weekend fueled the surge, both with important implications in the overall commodities complex. First, the president’s announcement that China and the United States had negotiated a “major” trade deal. Second, Vladimir Putin’s announcement of an agreement on oil production between Russia and Saudi Arabia. In Friday’s DMR we pointed to “major changes in financial markets dynamics” in the making. Over the weekend we saw some progress in that direction.

In addition to those two commodity-based developments we will add a third (and perhaps the most important of all with respect to the overall market psychology), i.e., the Fed’s apparent interest in ratcheting down rising interest rate expectations. The Dallas Fed’s Robert Kaplan buttressed that message over the weekend when he told Financial Times “I want to avoid a situation where we have overdone it. I think because inflation readings are more muted, we have the luxury to be patient and be very vigilant here, and try to avoid making that mistake.”

All in all, a positive 48-hours for the gold market. . . . . .

Quote of the Day
“We sometimes forget that central banking, as we know it today, is, in fact, largely an invention of the past hundred years or so, even though a few central banks can trace their ancestry back to the early nineteenth century or before. It is a sobering fact that the prominence of central banks in this century has coincided with a general tendency towards more inflation, not less. By and large, if the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with ‘free banking.’ The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy.” – Paul Volcker

Chart of the Day

Charts courtesy of TradingEconomics.com

Chart courtesy of TradingView.com

Chart note: The top chart shows Argentina’s inflation rate. The middle chart shows the number of Argentine pesos it took to buy a dollar. The bottom chart shows the price of gold in Argentina pesos. Over the past twelve months, gold has increased in value 107.57% while the peso has declined nearly 60% and the inflation rate has risen 80%. All in all, the three charts provide convincing proof of gold’s role as a hedge against rapid currency depreciation.

Posted in dailyquotes |

Gold resumes ‘wait-and-see’ posture

DAILY MARKET REPORT

Gold resumed its wait-and-see posture this morning as major changes in financial market dynamics seem to be in the making. Minutes to the October FOMC meeting released yesterday point to a drift among governors toward a more dovish overall position. Markets are still digesting that drift along with the dovish tilt in chairman Powell remarks to the Economic Club of New York this past Tuesday. A change to easy money – or even easier money – will have wide-ranging effects in financial markets, particularly with respect to the dollar and consequently gold.

Adding to the tense market environment, on Saturday the presidents of the United States and China will meet for what many believe will be fateful dinner – one that will likely become a centerpiece in future historical accounts of the era. Goldman came out with its view this morning that the most likely outcome of the Trump-Xi parlay will be an escalation in the trade war, with a “pause” as a close second. Trade negotiator Robert Lighthizer, on the other hand, says he expects the dinner to be a “success.”

The stock market can’t seem to make up its mind on how all of this will work out. It rallies, then it falls. Gold, through it all, has taken a more steadfast, even-keeled approach. For today though, the mood has swung back to cautious. The yellow metal is down $3 on the day at $1221.50. Silver is down 10¢ at $14.23.

Quote of the Day
“Let it be emphasized once more, and especially to anyone inclined to a personally rewarding skepticism in these matters: for practical purposes, the financial memory should be assumed to last, at a maximum, no more than 20 years. This is normally the time it takes for the recollection of one disaster to be erased and for some variant on previous dementia to come forward to capture the financial mind. It is also the time generally required for a new generation to enter the scene, impressed, as had been its predecessors, with its own innovative genius.” ― John Kenneth Galbraith, A Short History of Financial Euphoria

Chart of the Day

Chart note: Since 2008, eruptions in the volatility index have preceded upward moves in the gold price. Volatility is on the rise at the present but the increase is not nearly as dramatic as in 2009, 2011, and 2015. If the volatility index is an indicator of sentiment, investors appear worried but, at this juncture, not the level of worry that would cause a mass exodus to gold and other safe havens. According to a report in Financial Times this past weekend, however, conservative investors have begun to pull money out of corporate bond funds and transfer that capital to gold. Inflows into gold ETFs, FT reports, are up for the seventh week running.

Posted in dailyquotes |

Optimism creeps quietly into gold market with Powell’s dovish tilt

Optimism crept quietly into the gold market beginning about mid-day yesterday. It took the form of a $6 advance immediately following Fed chairman Powell’s dovish tilt in a speech before the Economic Club of New York. It then gathered pace overnight in Asian and European markets and carried over to the U.S. open. Gold is now trading at $1226 and up $5 from yesterday’s FOREX close. Silver is up 5¢ at $14.37.

Some will see yesterday’s remarks as acquiescence to the president who two days ago said he was “not even a little bit happy” with the Fed chairman. Others will see it as a needed adjustment to worrying signs beginning to surface in the economy mostly centered around wobbly stock and bond markets and an overly strong dollar. Perhaps, in the end, it is a little of both. . . .

Also helping gold this morning are reports that Saudi Arabia is pushing hard behind the scenes for oil production cutbacks to address falling prices and a report from Reuters that Russia is “becoming increasingly convinced it needs to reduce oil output in tandem with OPEC.”

Quote of the Day
“Gold is scarce. It’s independent. It’s not anybody’s obligation. It’s not anybody’s liability. It’s not drawn on anybody. It doesn’t require anybody’s imprimatur to say whether it’s good, bad, or indifferent, or to refuse to pay. It is what it is, and it’s in your hand.” – Simon Mikhailovich, Tocqueville Funds (with thanks to Ron Stoeferle and Mark Valek at Incrementum AG)

Chart of the Day

Chart note: As we head into the final month of the year, we thought it might be a good time to post a chart on gold’s performance thus far in 2018. As of November 23, gold is down 5.1% on the year. The downside is not as amplified as the day-to-day headlines might suggest and for value investors, the upturn over the last several weeks might indicate a change in sentiment and direction for the gold market – particularly with the latest stock market weakness taken into account and the Fed chairman’s migration to a dovish tilt in comments before the Economic Club of New York yesterday.

Posted in dailyquotes |

DMR Update–Gold bolts higher on Powell comments

(USAGOLD, Wednesday 11/28/2018) – Gold bolted $6 higher immediately after Fed chairman Jerome Powell stated in a speech that interest rates are “just below” the neutral range, an indication that the Fed might slow interest rate increases in 2019. It is now trading at $1220.50, up $6 on the day. Silver is up 16¢ at $14.33.

Posted in dailyquotes |

DMR Update–Clarida comments tank gold market

No sooner had we posted today’s DMR than Fed Vice Chair Richard Clarida gave a speech widely interpreted as ‘hawkish’ on interest rates. Gold immediately spiked lower in response.  It is now down $8.75 on the day at $1214.  Silver is down 10¢ at $14.16. Clarida tried to strike a middle-ground stance, but the markets are not reading it that way.

Posted in dailyquotes |

Gold tracking in a narrow range, president says ‘Fed a bigger problem than China’

Gold is tracking within a narrow range this morning essentially taking a wait-and-see approach to a number of issues on the event calendar. Caution prevails. Topping the list are policy speeches from top Fed officials, tenuous talks between China and the United States at the upcoming G-20 conference and lingering concerns about vulnerable global stock markets. Gold made an attempt to go higher in Europe overnight then thought better of it – now at $1222 and down $1 on the day. Silver, similarly disposed, is up 2¢ on the day at $14.27. The president has little doubt about what tops the economic agenda these days. “I think the Fed right now is a much bigger problem than China,” he said in an interview yesterday.

Quote of the Day
“Europe has brought us a depression worse than 1929. It has led to entire peoples being broken and humiliated, like the Greeks, all for the sake of preserving the infernal instrument of the euro. This whole disaster has been adorned by a chain of lies, shouted ever louder because they are afraid that the colossal damage they have done will be discovered.” – Claudio Borghi, Catholic University of Milan

Chart of the Day


Chart courtesy of the World Gold Council

Chart note: This chart shows global net gold ETF assets in tonnes since their inception in 2004. Note the steady overall growth since 2016. Generally speaking, ETFs are the preferred method for gold ownership among funds and institutions. For market-watchers, it indicates the level of interest among major market participants. As you can see North American growth is up marginally since the beginning of 2016 but European interest has grown markedly. In the United States, stock market over-valuation and interest rates head up fund and institutional concern. Brexit and the possibility of a instability in Italy are at the forefront of European investor concerns.

Posted in dailyquotes |

Gold pushes marginally higher, shifting sentiment leans in gold’s favor

DAILY MARKET REPORT

Gold pushed marginally higher in early trading – up $2 on the day at $1225. Silver is up 4¢ at $14.33. As we close out November and move into the final month of the year, there has been something of a rhetorial shift at the Fed, hopes for raprochement between the U.S. and China at the Buenos Aires G-20 have been raised and tech stocks have corrected sharply – some market stalwarts by nearly 25%. And then there is Bitcoin’s headline fall from grace – down nearly 40% (!) so far this year (Please see our Chart of the Day.) . . . . If shifting sentiment seems to lean in gold’s favor, it is because the current mood is such a departure from the negative script that has plagued our favorite precious metals for much of the second half of the year.

Oil seems keen to stage a turnaround this morning, but much remains in its way. Gold is better situated having held firm last week while a long list of commodities buckled. We will hope for the best, as many, including now Goldman Sachs, tells us that commodities – including gold – are set for a major turnaround in 2019.

Quote of the Day
“Reflect on what happens when a terrible winter blizzard strikes. You hear the weather warning but probably fail to act on it. The sky darkens. Then the storm hits with full fury, and the air is a howling whiteness. One by one, your links to the machine age break down. Electricity flickers out, cutting off the TV. Batteries fade, cutting off the radio. Phones go dead. Roads become impassible, and cars get stuck. Food supplies dwindle. Day to day vestiges of modern civilization – bank machines, mutual funds, mass retailers, computers, satellites, airplanes, governments – all recede into irrelevance. Picture yourself and your loved ones in the midst of a howling blizzard that lasts several years. Think about what you would need, who could help you, and why your fate might matter to anybody other than yourself. That is how to plan for a saecular winter. Don’t think you can escape the Fourth Turning. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted.” – William Strauss & Neil Howe, The Fourth Turning [1997]

Chart of the Day

Chart courtesy of BarChart.com (Enlarged version)

Chart note: A sea of red. . . .If misery loves company, then gold has plenty of it as we head for the finish line in 2018. Thus far this year, a full fifty of sixty-one entries shown above are in the red – 82% of investments tracked. All in all, it has not been a very good year for financial markets.

Posted in dailyquotes |

Gold refuses to succumb to oil’s bruising fall yesterday – the ‘worst day of an awful year’ for financial markets

DAILY MARKET REPORT

Gold refused to succumb to pressure from a drop in commodities’ markets yesterday, particularly crude oil which dropped a bruising 6% in yesterday’s trading. Oil has recovered a bit this morning – up almost 2% in early trading. Gold, in fact, is up $5 on the day at $1227. Silver is up 13¢ on the day at $14.49. Yesterday was not a particularly good day for financial markets across the boards. Bloomberg labeled it “the worst day of an awful year” that left “no corner of the market unscathed.” Though few, at least publicly, are prepared to press the panic button on stocks, one would have to say that the worrying trends are beginning to look somewhat entrenched. Gold is trying to rise above it all. This will be the last report until Monday. . . Have a Happy Thanksgiving!

Quote of the Day
“If we don’t quite know what the future holds, there is little point in getting carried away by very fancy mathematical calculations of optimal portfolios. Don’t rely on past data to be a good guide. Try to think through what mix of assets gives you the best chance of surviving some big event. That must mean including assets that are negatively correlated or uncorrelated in your portfolio. And I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.” – Mervyn King, former Governor, the Bank of England

Chart of the Day

Chart note: The United States dollar has lost more than 96% of its purchasing power from 1913 to present – a 105 year period. The 2018 dollar is now worth 3.8% the 1913 dollar. Put another way, what the consumer could buy with $1 in 1913, it takes $26 today.

Posted in dailyquotes |

Gold inches higher as stock sell-off becomes more entrenched

DAILY MARKET REPORT

Gold inched higher in quiet pre-Thanksgiving trading – up $1 on the day at $1225. Silver is down 2¢ at $14.43. Gold is attempting an interim base in an around the $1220 mark and searching for a good reason to bolt higher. Stocks are the big story this morning with the DJIA set to open 400 points lower. The NASDAQ, led lower by Apple, looks to open almost 2.5% lower.

Gold continues to gather support the result of dovish Fed rumblings, concerns about the dispute between China and the U.S. and weakness in equity markets – weakness that seemingly becomes more entrenched with each passing day. Goldman Sachs surprised market participants prior to today’s open by advising its clients to get defensive and move a portion of their portfolios to cash because it now offers positive inflation-adjusted returns. “Cash,” says Goldman, “will represent a competitive asset class to stocks for the first time in many years.” We have not seen a recommendation based on that particular rationale in a very long time.

Quote of the Day
“At the quarter-century mark of 1925, the great bull market was under way, and Graham*, then 31, developed what he later described as a ‘bad case of hubris.’ During an early-1929 conversation with business associate Bernard Baruch (about whom he disparagingly observed, ‘He had the vanity that attenuates the greatness of some men’), both agreed that the market had advanced to ‘inordinate heights, that the speculators had gone crazy, that respected investment bankers were indulging in inexcusable high jinks, and that the whole thing would have to end up one day in a major crash.’ Several years later he lamented, ‘What seems really strange now is that I could make a prediction of that kind in all seriousness, yet not have the sense to realize the dangers to which I continued to subject the Account’s4 capital.’ In mid-1929, the equity in the ‘Account’ was a proud $2,500,000; by the end of 1932, it had shrunk to a mere $375,000.” – Frank K. Martin, A Decade of Delusions

* Benjamin Grahm, “The father of value investing”, 1894-1976, Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949).

Chart of the Day

Chart courtesy of OPTIONAlpha

Chart note: We guesstimate that we are somewhere between “Euphoria” and “Anxiety” on stocks and “depression” and “hope” on gold and silver. In short, the time might be right for starting to leg-out of stocks and ladder-into gold. The last time we featured this chart in late September, we put stock market sentiment at somewhere between “Thrill” and “Euphoria” and gold somewhere between “Despondency” and “Depression.”
Posted in dailyquotes |

Gold surges $11 at COMEX open on Brexit, Powell comments

DAILY MARKET REPORT

Gold surged at the COMEX open this morning – up $11 at $1225. Silver is up 10¢ at $14.40. We detect two principal factors driving today’s trading. One is ominous and clear-cut – UK’s Brexit woes. The other is less concrete but probably more influential in the marketplace – guarded comments from Fed chairman Powell that came off as an early warning that a change of direction might be brewing at the Fed on interest rates. Suddenly the possibility of a “pause” has entered market thinking. Adding to the “pause” argument, CNBC ran a blazing headline this morning: “Cramer says CEOs are telling him off the record the economy has quickly cooled.” Such anecdotal evidence might be what was behind Powell’s remarks two days ago.

As we mentioned yesterday, the unfolding Fed scenario might serve as incentive for traders to begin squaring the enormous short position at the COMEX which requires buying gold contracts as an offset. With a shaky weekend ahead of us, the prudent course of action might be to buy today.

Quote of the Day
“I remember being told many years ago on a South African game reserve that the buffalo was the most dangerous of the big five game animals. In large part, this is because of the complacency shown towards them relative to the other, more obviously dangerous big five game animals (ie the lion, leopard, rhino and elephant). It’s also a fact that unlike the other big five, the buffalo gives no warning of an imminent charge (see link). It’s complacency that gets you killed, and the same goes for investors with the macro-risks. We all know what the big macro-imbalances are out there, caused by years of loose money, but investors continue to ignore them at their peril.” – Albert Edwards, SocGen

Chart of the Day


Chart note: This interactive chart from the St. Louis Federal Reserve shows the average annual price of gold from 1970 through the present. It demonstrates at a glance gold’s strong performance as a portfolio holding over the long haul and emphasizes its role as a reliable long-term portfolio safe haven.

Posted in dailyquotes |

Gold pushes cautiously higher on Powell reference to economic ‘headwinds’ in 2019

Gold cautiously pushed higher again today as a carryover from yesterday’s strong rise. It is up another $3 in early trading at $1214, and up about $15 over the past two days. Although one could point to any number of factors to explain yesterday’s sudden jump higher, the one thing that stands out is Fed chairman Jerome Powell’s remarks that the U.S. economy could face “headwinds” in 2019. In a clear break with previous public posturing, he cautioned that the Fed would be “thinking about how much further to raise rates and the pace at which we will raise rates.”

However one parses the whole of Powell’s speech and Q&A session yesterday, this revelation provides a hint as to what the Fed chairman might be thinking. It is likely to be read as a loosening of the more hawkish rhetoric in weeks past and perhaps an early indication of a shift at the Fed.

Gold, we believe, is responding to that possibility. It, in fact, might inspire some squaring of the record short postion at the COMEX. At the moment the dollar appears to be leaning toward an upward bias based on what is occurring in Europe (the UK and Italy) and continuing wariness on further easing in China. That reaction might eventually take a back seat though to a softening at the Fed. Silver is up 5¢ on the day at $14.19.

* Bloomberg: Powell says solid economy faces headwinds as Fed mulls rates

Quote of the Day
“This is a terrible fiscal situation we’ve got ourselves into. The administration is doing tax cuts and a spending decrease, but he’s doing them in the wrong order. What we need right now is to focus totally on reducing the debt. We’re in a stage where if nothing is changed, we’re about to go from stagnation to stagflation, with a significant rise in inflation and a wholly significant imbalance in the economy, which is very difficult to anticipate at this stage. But the outlook is not exactly terrific.” – Alan Greenspan, 12/2017, CNBC interview

Chart of the Day

Chart note: The St. Louis Federal Reserve recently released this new chart on tax receipts. It shows corporate tax receipts plummeting and taxes on production and imports rising. This might be a new set of circumstances brought about by the Trump administration’s tax cuts and tariff programs. In the aggregate, tax receipts represented by the thick black line are falling at a time when government debt is expected to increase – and by some accounts increase significantly. For a prescient observation as to what all of this might lead to, we refer you to the quote from Mr. Greenspan immediately above.

Posted in dailyquotes |

Gold on the fence as global tangle dominates trading

DAILY MARKET REPORT

Gold continues to ping-pong on either side of the $1200 mark unable to make a convincing move up or down. It, in fact, is right at $1200 as we write this report and down $3.50 on the day. Silver similarly is stuck in and around the $14 mark and down marginally on the day.

The precious metals are experiencing headwinds from weakness in both the yuan and euro in recent days.  The situation in Europe – most notably having to do with Brexit and the budget situation in Italy – does not lend itself to quick or easy resolution.  With respect to China, there have been rumblings of lower interest rates and a weakening economy.  That prognosis is balanced in the United States against the prospect of rising inflationary expectations and concerns about stability in financial markets.

“Demand for copper shall be positive next year and in the coming years,” Marcin Chludziński, head of copper mining giant KGHM Polska Miedz SA, told Bloomberg yesterday. “The trade conflict may affect demand to some extent,” he concludes, “but on the other hand China is changing its growth model and starting to accelerate internal consumption in order to rely less on exports and more on its domestic market.”

In an odd break with standard operating procedure, ex-Fed chair Janet Yellen voiced her concerns about the dollar being too strong – a prospect she feels could widen the U.S. trade gap. It seems that much is up in the air at the moment on the global stage and gold is content to remain on the fence as a result – at least for now. That, as always though, is subject to change without notice. . . . . . . .

Quote of the Day
“[T]he object of speculation may vary widely from one mania or bubble to the next. It may involve primary products, especially those imported from afar (where the exact conditions of supply and demand are not known in detail), or goods manufactured for export to distant markets, domestic and foreign securities of various kinds, contracts to buy or sell goods or securities, land in the country or city, houses, office buildings, shopping centers, condominiums, foreign exchange. At a late stage, speculation tends to detach itself from really valuable objects and turn to delusive ones. A larger and larger group of people seeks to become rich without a real understanding of the processes involved. Not surprisingly, swindlers and catchpenny schemes flourish.” – Robert Z. Aliber and Charles P. Kindleberger, Manias, Panics and Crashes – Anatomy of a Typical Financial Crisis (2001)

Chart of the Day

Chart note: As the chart above illustrates, gold does not always react to the start of a crisis as anticipated. As the credit crisis gained momentum in 2008, gold declined as the dollar rose – acting in much the same way it is reacting now to the emerging markets crisis and U.S.-China trade war. It was not until late 2008, when the full extent of the crisis became all too apparent, that it began to move higher. Thereafter, from 2009 to September 2011, it rose to its all-time high of $1895 – a 215% gain in three years.

Posted in dailyquotes |

Gold consolidating at $1200, looking to regain its footing

DAILY MARKET REPORT

Gold looks to be consolidating around the $1200 mark in early trading with the combined effects of last week’s Fed meeting and election now behind us. The stock market’s initial reaction to last week’s events was euphoric. Now with yesterday’s more than 600 point drop/reality check, and a weak open this morning, it looks to be having second thoughts. Gold plummeted initially. Now though it is attempting to regain its footing and muster support at the $1200 level.

China’s yuan keeps getting in the way of those aspirations – down sharply again today after a price rally failed in overnight trading. Financial markets are jittery about China with an economic slowdown and potentially lower interest rates worrying investors. Reuters reports Hong Kong bargain-hunters returning to the gold market the past few days.

As it stands, gold and silver are both level on the day at $1202 and $14.04 respectively.

Quote of the Day.
“The world hasn’t seen inflation in a decade now. But it’s coming. And while the Fed is raising rates to combat inflation, there’s zero chance it hits the perfect mix to keep markets chugging along. Remember, we’ve already seen the stock market and real estate panic crash in response to a small interest rate hike. And I think there’s more pain ahead as inflation really starts to work its way into the economy. With inflation looming, I’d want to own some gold.” – Simon Black, Sovereign Man

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note:Producer prices for final demand in the US,” says TradingEconomics, “rose by 0.6 percent in October 2018, following a 0.2 percent advance in September and easily beating market expectations of 0.2 percent. It was the biggest monthly gain in producer prices since September 2012 mainly boosted by a jump in costs for energy (2.7 percent vs -0.8 percent in September) and trade services (1.6 percent vs 0.1 percent). Prices also rose for foods (1 percent vs -0.6 percent) and transportation and warehousing services (0.6 percent vs 1.8 percent).”

 

Posted in dailyquotes |

Gold continues push in southerly direction

DAILY MARKET REPORT

Gold continued to push in a southerly direction early today in a continuation of last week’s Fed-related downside. It is off $4.50 this morning at $1205. Silver is 8¢ lower at $14.07. Most of gold’s downside came during Asian trading hours in response to China’s yuan. The weakness carried over to the New York open and gained momentum as the dollar index opened at 18-month highs. With little in the way of news, today’s trading looks technically oriented at this juncture. Thus far, it has been a slow day for economic and market news. We will update if anything of interest surfaces here at our Online Daily Newsletter.

Quote of the Day
“[James] Grant makes the point that the debt has been increased and decreased on a regular basis but never until today was there a view that the deficit didn’t matter and could be increased indefinitely. He points out that it took the United States 193 years to accumulate its first trillion dollars of federal debt. And amazingly, that it will add that much in the current fiscal year alone.” – James Rickards, Daily Reckoning

Chart of the Day

Chart note: In the article linked above, James Rickards goes on to quantify the established danger zone for the debt to GDP ratio, which according to economists Ken Rogoff and Carmen Rinehart begins at 90%. The current debt to GDP ratio for the United States is 106%.


Subscription recommendation: James Grant’s Interest Rate Observer

 

 

 

Posted in dailyquotes |

Gold suffering after-effects of Fed announcement

DAILY MARKET REPORT

Gold is suffering the after-effects of yesterday’s Fed announcement – one in which the central bank essentially pledged to stay the course on interest rates for the foreseeable future. Gold is down $12.00 on the day at $1211. Silver is down 22¢ at $14.24. A weaker yuan is also a factor in gold’s pricing this morning. Most of the damage was done during European trading hours where the weak euro/strong dollar sentiment continues to weigh on financial markets. Meanwhile, back in the United States, core producer prices registered a .6% gain, or 7.2% annualized – the largest increase since 2012 and something of a vindication for the Fed’s interest rate stance.

Quote of the Day
“I think we’re getting to the point now where the breakout is going to be on the inflation upside. The only question is when.” – Alan Greenspan, February 2018

Chart of the Day


(Interactive chart)

Chart note: This interactive chart compares price appreciation for gold and the dollar index. Gold has consistently outperformed the dollar in twelve of the last eighteen years – a formidable record. Even if one were to add in average yields on dollar-based investments, gold still comes out the clear winner in those twelve years. Gold is having an off-year thus far in 2018 – down 4.6% while the dollar is up almost 6%. Given the performance record, though, contrarian investors might see the present disparity as a buying opportunity.

Posted in dailyquotes |

Gold drifts marginally lower in advance of Fed announcement

Gold drifted marginally lower in advance of today’s FOMC results to be announced later in the day. Following that announcement, we should get a read on gold’s true intentions – up, down or sideways. As it is, gold is $1 lower at $1225. Silver is down 11¢ at $14.46.

The markets, it appears, are still sorting out how the elections might affect the economy. The one immediate development that stands out on the economic front, though, is Trump/McConnell’s reach across the political divide on the possibility of a bipartisan infrastructure bill. Though the bulk of Americans might agree that such a program would be good for the country, the downside would be adding even more fiscal stimulus to an already strong economy leaning towards inflation. If one thing stands out from this election it is that neither side is interested in anything approaching genuine fiscal discipline.

Quote of the Day
“The best thing is, don’t play the game, because it is pros against you. We spend hundreds of millions of dollars a year to get an edge, and others do that too. So it’s very difficult for the individual investor to assume that he [or she] can pick something better. The best thing you can do is know how to have a balanced portfolio … because you ain’t going to win that game.” – Ray Dalio, Bridgewater Associates, speaking at the Harvard Kennedy School’s Institute of Politics

Chart of the Day

Chart note: Gold gets its share of press, not all of it good. In recent months, the financial media has hammered away at the mistaken notion that gold does not do well in a rising interest rate environment. Nothing could be further from the truth as revealed in our Chart of the Day. Since the Fed started raising interest rates in late 2015, gold has been in a sustained uptrend punctuated with bouts of weakness. The Fed funds rate has gone from .12% in November 2015 to 2.25% now. Gold simultaneously has gone from $1062 to $1225 for a gain of 15% – even at the current lows – during the initial stages of this rate raising period.

Posted in dailyquotes |

Markets, including gold, letting the dust settle from the mid-term elections

As trading opens in U.S. financial markets, it seems the prevailing attitude is to let the dust settle from the mid-term elections and take some time to put the results into perspective. Gold pushed higher overseas, leveled, then gave up its gain before the New York market opened. The stock market’s reaction has been equally non-commital though the Dow is up 125 at the moment. Reactions in the FOREX and bond markets thus far have been low-key as well. In general, it looks like investors are taking a breather this morning, though that could all change as we move along. We remind our readers that, though the election is behind us, the Federal Reserve Open Market Committee meeting is upon us. Proceedings start today and end tomorrow and that could be contributing to gold’s tepid performance thus far today. Fed meetings – even those like this one which is expected to be low-profile – have been known to act as a drag on the gold price.

Quote of the Day
“Simple: Prices remain distorted by the long-term effects of the QE era. The blind central bank binging on corporate debt of the QE era continues to distort because prices have not yet fully adjusted downwards. (Liquidity is also stalled by technical reasons, like market making being regulated out of existence – a story for another day..) The smart buyers aren’t going to buy bonds at these levels – they are waiting for the correction. Inflation hovers in the background, and who wants to buy at rates that would leave holders with a real negative return? Anyone prepared to buy at current levels is making an implicit bet central banks will step back into distort the market again by keeping rates artificially low…” – Bill Blain, Blain’s Morning Porridge (10-23-2018)

Chart of the Day

Chart note: Last week national security advisor John Bolton focused attention on the national debt saying that it was “a threat to the society.” The national debt now stands at $21.7 trillion and $1.2 trillion has been added thus far in 2018. “And that kind of threat,” he added, “ultimately has a national security consequence for it.” This article is a bit vague as to what that “national security consequence” might be. An obvious one, though, is that interest payments eat up what might otherwise be spent on the national defense. Perhaps that is what has Mr. Bolton worried – particularly with interest rates on the rise. As you can see, there is a strong relationship between growth in the national debt and gold – one that goes all the way back to the early 1970s.

Posted in dailyquotes |

Gold, financial markets cautiously on hold – at least for now

DAILY MARKET REPORT

Gold pressed cautiously higher in Asia overnight then gave up most of those gains at the New York open. Today’s election outcome and tomorrow’s Fed meeting have the U.S. market on hold – at least for now. Stocks, bonds and the dollar are all similarly in a wait and see mode. We won’t belabor the point. If anything of interest develops during the course of the day, we will be back with an update. As it is, gold is even on the day $1232. Silver is down 3¢ at $14.62

Quote of the Day
“Deflation is a threat posed by a critical breakdown of the financial system. Slow growth and recurrent recessions without systemic financial disturbances, even the big recessions of 1975 and 1982, have not posed such a risk. The real danger comes from encouraging or inadvertently tolerating rising inflation and its close cousin of extreme speculation and risk taking, in effect standing by while bubbles and excesses threaten financial markets. Ironically, the ‘easy money,’ striving for a ‘little inflation’ as a means of forestalling deflation, could, in the end, be what brings it about. That is the basic lesson for monetary policy. It demands emphasis on price stability and prudent oversight of the financial system. Both of those requirements inexorably lead to the responsibilities of a central bank.” – Paul Volcker, Keeping At It: The Quest for Sound Money and Good Government (2018)

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note: Bloomberg reported early Friday that the president had instructed the cabinet to prepare documents for a new trade agreement with China. Euphoria. The stock market shot higher. A few hours later White House economic advisor, Larry Kudlow, said no such order had been given. Chagrin. The stock market promptly reversed those gains losing nearly 500 points on the intraday swing. Sandwiched between the two media stories, the Commerce Department reported U.S. imports setting an all-time record at $266.billion, and that is probably the development of abiding interest to the Trump administration. China’s exports to the United States rose 4.5% even as tariffs kicked into gear.

Posted in dailyquotes |

Gold off to ho-hum start for the week– election, Fed loom

DAILY MARKET REPORT

Gold got off to a ho-hum start this week but we should not be surprised. Two events of more than passing interest loom – tomorrow’s election and Wednesday’s Fed meeting. Results from the first are up-in-the-air; the outcome of the second already baked into the cake to a large extent, but the markets always worry about “surprises.” In addition, gold rarely does well in advance of an FOMC meeting, though it has been known to press on the accelerator after the Fed governors adjourn. As it is, gold is pretty much level on the day at $1232. Silver is down 5¢ at $14.70. More of what we have to say about the precious metals markets this morning is contained underneath our Chart of the Day immediately below.

Quote of the Day
“I think we’re getting to the point now where the breakout is going to be on the inflation upside. The only question is when.” – Alan Greenspan, February 2018

Chart of the Day

Chart note: Since October 1, gold is up 3.9% as of Friday’s close. Silver is up 1.9%. Silver has been more volatile than silver as is usually the case. Driving gold in the background, physical sales globally are on the rise with two sectors, according to analysis from the World Gold Council last week, leading the way – private investors and central banks. Both groups are purchasing gold for the same reasons – to balance their portfolios and to protect against currency, inflation and systemic risks. Whether or not these first signs blossom into something more, however, remains to be seen. We note with interest that, at the very least, the past month’s price action has represented a clear break with the past. Gold and silver have gone up while the stock market has gone down – a straight-forward indication of gold’s return as a safe haven destination.

Posted in dailyquotes |

Gold, silver power higher in surprise overnight move

DAILY MARKET REPORT

Gold and silver powered higher this morning driven for the most part by a stronger yuan in overnight trading. Given the degree of strength – gold is up 1.3% on the day and silver 2.75% – we cannot help but think that there might be more to the move than a pedestrian appreciation in China’s currency.

One possibility could be short-covering. The enormous, record short position built-up on the COMEX over the past year still needs to be resolved and there is some advantage for traders to get ahead of the crowd – particularly with the year-end rush on the horizon. Another possibility, of course, is a reaction to the U.S. election – now just five days away. A Democratic sweep could send both gold and the yuan in an upward trajectory. Whatever the cause of today’s upside surprise, the momenturm seems to have slowed in New York. That could change as the day progresses and, if it does, we will keep you posted. As it is, gold is up $13.50 on the day at $1230 and silver is up 35¢ at $14.62.

Quote of the Day
“. . .[I]f you go down the line of currencies around the world, you don’t find many attractive opportunities. And that’s why I say if the world were to give up on dollars and give up on euros, they’d probably go back to the old standby, which is gold. And I don’t mean by gold, government-run gold standard, like we had in the late 19th century. That’s politically impossible. Governments will never be willing to subordinate their policies to the constraints of a hard commodity ever again… So how could gold make a revival as a sort of international money? Well, we don’t actually need a government-run gold standard anymore…since people have always had confidence in gold as a long-term store of value, there’s no reason why it couldn’t play that role.” – Benn Steil, Director of International Economics, Council on Foreign Relations

Chart of the Day

Chart note:  In the early stages of the trade war, supply lines are being redrawn, but commodities in general led by oil, as the chart shows, are rising in price. Over the past twelve months, the GSCI is up 14.4%. Whether or not the trend will continue remains to be seen and relies heavily on whether or not global demand falls off a cliff or simply continues to be rerouted. As for gold, recent history since the early 2000s shows it tends to lag the commodities complex and that, perhaps, explains gold’s performance over the past year. It looks like it has some catching up to do.
Posted in dailyquotes |

Gold tracking lower on day but headed to possible 2% gain in tumultuous October

Gold continued to track lower from the $1243 high achieved this past Thursday. Today’s bout of selling began in Asia on concerns about the yuan pushing ever closer to the problematic 7.00 per dollar level. It then carried over to Europe where a weak economic growth report raised the possibility of the ECB watering down quantitative tightening expectations. Gold opened New York with the momentum to the downside. It is down $8 in early trading at $1214.50. Silver is down 15¢ at $14.32. Should gold manage to hold onto current price levels it will finish the tumultuous month of October with 2% gain. Likewise, if the Dow hold on to early gains this morning, it will finish the month with a 6.5% loss.

Quote of the Day
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.” – A Tale of Two Cities, Charles Dickens

Chart of the Day

Chart note: This chart supports the notion that the Fed’s policy of raising rates could turn out to be too aggressive. As you can see the money supply is not displaying the kind of growth that normally lends itself to future inflation. That’s not to say that the trend could not suddenly change. In fact anecdotal evidence of inflation seems to be cropping up at every turn, and some of it, oddly enough, is not the result of monetary policy per se but tariffs on imports.

Posted in dailyquotes |

Gold weakens on higher dollar, China trade war concerns

DAILY MARKET REPORT

Gold weakened some in early trading taking its cue from a higher dollar. In turn, the stronger dollar is taking its cue from the president’s warning in a Fox news interview that he will crank-up tariffs if China fails to come around on trade negotiations next month. The Wall Street Journal reports this morning that “China guided yuan to weakest official level in a decade on Tuesday – a move that could fuel expectations of further, self-reinforcing slide.” That weakness spilled over to trading in the gold market – hence the $6 drop this morning to the $1224 level. Silver is up 2¢ on the day at $14.50.

Quote of the Day
“A lot of the bank issues in the United States and around the world have been solved. But migrating the problem to the sovereign balance sheets. So the banks look pretty good, but the Fed has $4 trillion of debt on its balance sheet. And it’s even more, we are not in a European audience. In Europe they would really know what they meant because all the European banking system is fixed but Europeans are all also buying up all the debt. The budget deficits haven’t contracted, they’ve widened. The banks buy the debt, then walk over to the European Central bank, finance it. . . You wonder is the next crisis going to be a sovereign crisis. And if it is, it will just be a continuation. People will look back and say ‘what we really did, we didn’t fix the outcome of the financial crisis. We left that open and as a result, its really been a thirty-year workout.’” – Lloyd Blankfein, Goldman Sachs

Chart of the Day

Chart note: This quarterly chart zeroes-in on why the national debt matters to ordinary Americans. Rising interest rates and massive growth in the gross debt will push these numbers much higher – so much so that it will exceed in the near future what the nation spends on national defense. . . .and the higher interest rates grow the greater the problem will become. One would think that like Italy or Greece, at some point, the level of debt and interest payments will affect the national credit rating. Last, please note the acceleration in debt payments over the last twelve months (the last bar represents Q3-2018).

Posted in dailyquotes |

Gold marginally higher today in dollar terms, up 6% in euro so far this year and 5% in yuan

DAILY MARKET REPORT

Gold is trading marginally lower this morning in quiet trading – off $3 at $1230.50 Silver is down 2¢ at $14.69. The dollar is also trading in a narrow range. Markets in general seem to be taking a break as the week begins, though the Dow at the moment is up about 300.

Quietly, in the background, while market attention has been focused elsewhere, the euro has been steadily losing ground against the dollar. It is down almost 10% on the year. Merkel’s role – now more fully determined after yesterday’s state election in Germany – played a role in that decline, but so did the dovish ECB/hawkish Fed scenario. Beyond on the narrow fate of Angela Merkel and the CDU, there is the moe generalized political and economic upheaval in Europe. Germany, in the process, has developed a healthy appetite for physical gold. Since the beginning of October, gold is up about 6% in euro terms.

Meanwhile, across the Pacific, another drama is unfolding with China’s yuan. The Chinese central bank trenchantly warned off speculators against the currency late last week – a shot across the bow that pretty much defines where the country stands on its currency. This, too, could have positive implications for gold as the year concludes. Speculators, algos at the ready, are waiting to see if the government and central bank give ground. For its part, the citizenry in China, like its counterpart in Germany, continue to accumulate gold as a precautionary measure. Gold is up over 5% in yuan since the beginning of October.

Quote of the Day
“Although there are countless scourges which in general debilitate kingdoms, principalities, and republics, the four most important (in my judgment) are dissension, [abnormal] mortality, barren soil, and debasement of the currency. The first three are so obvious that nobody is unaware of their existence. But the fourth, which concerns money, is taken into account by few persons and only the most perspicacious. For it undermines states, not by a single attack all at once, but gradually and in a certain covert manner.” – Copernicus

Chart of the Day

Chart note: Since gold’s current rally began in early 2016, silver has kept up with its sibling metal in fits and starts. Presently, at a ratio of almost 84 to 1, silver is greatly undervalued relative to gold. The gap between the two metals, as you can see in the chart, has become accentuated in recent months leading some to think silver is overdue for a catch-up rally. There is precedent for such a rally. Silver languished behind in gold in early 2016 only to stage a sharply accelerated rally beginning in April of that year that closed the gap. Silver enthusiasts are hoping for similar performance in 2018.
Posted in dailyquotes |

Gold pushes warily higher

Gold pushed warily higher this morning after emerging unscathed from yesterday’s off-month options expiration. It showed signs overnight of breaking higher then reversed a bit when GDP came in 3.5% higher and the Fed’s favorite inflation indicator registered a benign 1.6% gain.

Stocks traded nervously lower despite those readings with major tech companies announcing less than inspiring earnings. It is likely to be a tense day on Wall Street with the weekend coming up and so much politically, geopolitically and economically stacking up against it. A severe test there could translate to the gold market as the day progresses. (Please see today’s Chart of the Day for more background.) As it is, the markets, including gold, appear to be in a bit of a quandary thus far this morning.

Gold is up $4 at $1336 and showing an inclination to go higher. (It got as high as $1238 in overnight trading.) Silver is up 6¢ at $14.72. We will be back with an update if any of this coalesces into a firm reading on direction.

Quote of the Day
“What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.” – Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable

Chart of the Day

Chart note: On Jim Cramer’s “Mad Money” recently, Carley Garner of DeCarley Trading made an interesting observation about gold’s price behavior of late. “[It] hasn’t reacted to the current trade war,” she says, “or the exploding deficit or even the recent uptick in inflation.” True enough. However, as we reported in yesterday’s DMR, gold is beginning to act again like the ultimate safe haven and asset of last resort. While the Dow has lost 8% in Shoctober, gold has gained 3.8%.

Posted in dailyquotes |

The realm is quiet early on, gold up 3.8% so far in Shoctober

The realm is quiet this morning, but a sense impending danger still hangs in the air after yesterday’s stock market mayhem. Gold, for its part, is down marginally from our FOREX closing price yesterday. We are reminded that today is options expiration and that options-related trading is usually a drag on the market, even in the off-months like November. Stocks are trading to the upside, but few trust early-day strength these days. The big sell-offs of late have come toward the end of trading sessions – always a bad sign for experienced traders as it is seen as the time when smart money makes its move.

Up 3.8% in Shoctober, gold has reacted positively to weakness in stocks – something we have not seen in recent months. Because of today’s options’ expiration, though, we may have to wait until tomorrow or early next week to see if there is any further reaction to weak stock markets globally. Then again if something happens today, i.e., if it rolls through options expiration unscathed, it likely will be seen as a conspicuous show of strength. At the moment gold is down $4 on the day at $1230.50. Silver is down 5¢ at $14.65. (It is also options expiration day for the November silver contract.)

Quote of the Day
“In recent decades, mainstream economists insisted that markets are highly efficient, and do a near perfect job of digesting available information and correctly pricing assets today to take account of future events based on that information. In fact, nothing could be further from the truth. Markets do offer valuable information to analysts, but they are far from efficient. Markets can be rational or irrational. Markets can be volatile, irrationally exuberant, or in a complete state of panic depending upon the emotions of investors, herd behavior, and the specific array of preferences when a new shock emerges.” – James Rickards

Chart of the Day

Chart note: This chart shows monthly returns from the same month the previous year from 2000 to present. Gold is down 6% thus far in 2018 and down 7.1% from September of last year. The down years 2013-2016 followed gold’s dynamic performance from 2002 through 2012 when it posted a 652% gain and achieved an all-time high of $1813 based on the London Fix. Gold once again posted consistently positive month over month returns in 2016, 2017 and early 2018 (through May).

Posted in dailyquotes |

Gold quietly higher, foreigners cut back Treasury purchases (WSJ report)

Gold moved quietly higher in early trading after yesterday’s solid run-up.  The markets in general seem to be looking for direction this morning. Gold and stocks both see-sawed between plus and minus territory in overnight trading, the volatility apparent. They are now trading right about where they were at the close yesterday.

The most important story in today’s Wall Street Journal was not something headlined in the main section which featured the president’s review of the Fed chair Jerome Powell’s performance thus far. Rather, it appeared on the front page of the second section under the banner – Foreigners Cut Back Purchases of Treasuries as Deficit Grows. We addressed the problem of financing the federal government’s debt in last Monday’ DAILY MARKET REPORT in the Chart of the Day section.

Foreign investor participation in U.S. Treasury auctions is on the wane. Collective holdings leveled-off at about $6 trillion beginning in 2013 and have not moved higher since. Most of that decline in participation has come the result of China and Japan withdrawing from the market. Private domestic buyers have picked up the slack thus far, but at higher rates. Going back to what broke the stock market earlier this month, the sharp rise in the 10-year yield clearly played an important, if not deciding, role.

What caught my eye in the article was a quote from the head of foreign exchange strategy at TD Securities, Mark McCormick. “Yields are rising,” he said, “to reflect risk premium, rather than healthy growth. People are concerned about how reliable a store of value the dollar is right now.” Such thinking generally finds its way to gold, especially among players with a global outlook. Immediately below, we repost the chart from last Monday for those who missed it, along with our comments.

Chart note: Popular belief holds that foreign investors and central banks hold the lion’s share of the nearly $22 trillion federal debt. These charts from the St. Louis Federal Reserve tell the real story. Though it has not always been the case, private domestic investors now hold the largest share of the national debt at $13.1 trillion. Foreign investors are number two at $6.2 trillion. Federal Reserve banks are number three at $2.8 trillion. As you can see, federal debt held by private investors is on an ascending curve while both foreign and Federal Reserve banks’ purchases have leveled off. At present, private investors hold more than half the national debt (59.3%) as shown in the pie chart at the very top. Foreign investors hold 28.1% of the U.S. federal debt.

Quote of the Day
“Gillian Tett (Financial Times): ‘Do you think that gold is currently a good investment?’

Alan Greenspan (private citizen): ‘Yes. Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.'” – Council on Foreign Relations meeting, November, 2014

Chart of the Day

Chart note: Gold has delivered a solid real rate of return in twelve of the past sixteen years. In seven of those years, gold’s appreciation significantly outstripped the inflation rate during a disinflationary period fraught with systemic risks. Note also gold’s strong performance during the 1970s episode of runaway inflation. With gold currently trading at cyclical lows, the investor can now combine hedging a worst-case scenario with the extra advantage of securing an asset that is generally viewed as undervalued.

Posted in dailyquotes |

Gold surges, a crisis looking for an excuse to happen

American investors awoke to a surprise this morning – a resurgent gold price pushing against the $1240 mark. Silver was also hopping. Since then, both have cooled a bit. Gold is now trading at $1236.50 – up $14 on the day. Silver is at $14.74 – up 22¢ as this report is posted.

A confluence of factors is working on the price starting with the ever-present trade war, the worsening difficulties with Italy’s sovereign debt and the unsettling developments in the Middle East. Over-arching all though is a prevailing sense that things are unraveling in the financial markets – a lurking crisis looking for an excuse to happen.

London analyst Bill Blain (Shard Capital) is out front with a concern rattling around the back of many minds: “Is this the unwind? It might be to pay-up the costs of the many unintended consequences of the Global Financial Crisis? . . . . Similar ‘wake-up-and-smell-the-coffee’ moments triggered the Asian Crisis of 1997, the dot.com crash of 2001, and the bursting of the mortgage bubble in 2007.”

“The smart buyers,” he concludes, “aren’t going to buy bonds at these levels – they are waiting for the correction. Inflation hovers in the background, and who wants to buy at rates that would leave holders with a real negative return? (EdNote: Please see today and tomorrow’s Chart of the Day) Anyone prepared to buy at current levels is making an implicit bet central banks will step back into distort the market again by keeping rates artificially low…” Blain says he is looking at “alternative real assets.”

Quote of the Day
“Debasement was limited at first to one’s own territory. It was then found that one could do better by taking bad coins across the border of neighboring municipalities and exchanging them for good with ignorant common people, bringing back the good coins and debasing them again. More and more mints were established. Debasement accelerated in hyper-fashion until a halt was called after the subsidiary coins became practically worthless, and children played with them in the street, much as recounted in Leo Tolstoy’s short story, Ivan the Fool.” – Charles P. Kindleberger, Manias, Panics and Crashes

Chart of the Day

Chart note: During that 18-year period from 2000 to present, the one-year Treasury provided a positive real rate of return in only six years. The rest of the time, the real rate of return was negative. The real rate of return is also important in the context of Federal Reserve interest rate policy in that it signals the performance of the dollar against other currencies and gold. At the moment, the consensus opinion is that the Fed will keep interest rates below the inflation rate in order to keep the economy from swinging into a downturn, a situation causing some analysts to question the longer-term staying power of the recent rally in the dollar. Note also the long period of positive annual real rates of return in the period before 2000 in contrast to the radical change from 2008 to present. Tomorrow, we will review the real rate of return on gold.

Posted in dailyquotes |

Gold marginally higher, headed for third straight weekly gain

DAILY MARKET REPORT

Gold is trading marginally higher at $1228 early – up $2.50 on the day. Silver is up 10¢ at $14.72. Concerns about a slowdown in China’s economy – a restraint on gold and the commodities complex over the past few weeks – dissipated somewhat on an announcement from China’s Bureau of Statistics that its GDP had grown at a 6.5% clip. The gold market will likely view the report as a positive for gold and commodities in the near term, though concerns linger about its stock and debt markets. Oil also bumped higher in the early going. SPDR, the gold ETF, reports a 2.5% increase in its holdings over the past two weeks, an indication of institutional buying. Gold is headed for gains three weeks running if current prices at least hold through today’s close, and holding its own despite headwinds from dovish Asian and European interest rate policies favorable to the dollar.

Quote of the Day
“They are the strong hands who patiently await to scoop up shares when markets falter. As the smart money, these players unload inflated shares to the ‘dumb’ money or retail investors at ‘FOMO’ or fear-of-missing-out emotional peaks. The masses are advised to blind buy and hold. Retail investors are cajoled as ‘brave’ if they ‘ride it out.’ And whatever ‘it’ is can be counted in years, even decades. Time is precious to us mere mortals. Our lives are finite; Wall Street lives on forever. The precious time it takes to break-even is ignored. Not relevant. One of my favorite Nashville-based songwriters Drew Holcomb begins a song with a seminal line: ‘Time steals every paradise I’ve been looking for.’ When Wall Street prospers, Main Street doesn’t necessarily follow a similar, prosperous path.” – Richard Rosso, Real Investment Advice

Chart of the Day


Chart courtesy of Advisor Perspectives

Chart note: The relationship between margin credit and stock market performance is interesting to monitor. With interest rates extremely low historically, investors borrowed at extreme levels to buy stocks. Now with interest rates rising, one wonders how long it will be until these same forces either choose to sell because of the carrying costs are forced to sell because of margin calls. Shades of 1929. . . . .

Posted in dailyquotes |

Gold sideways but stable, ignores past influences

DAILY MARKET REPORT

Gold at $1223 is sideways for the third day running and that might be an achievement in itself given what is going on around it. The yuan at a nine-week low is experiencing a renewed bout of weakness. The euro is under pressure as the EU edges toward a budget confrontation with both Italy and Spain. Last but not least, rising rates continue to hound the U.S. bond market with 10-year yields once again pushing higher somewhat aggressively.

Such readings in the past usually coincided with strength in the dollar weakness in the gold market. Today, the dollar is up and gold is stable – even showing some minor strength at short intervals. At one point in European trading overnight it pushed once more toward the $1230 barrier before falling back. All of this rekindles the safe-haven argument for gold and offers a hint that gold might be preparing for a break with the immediate past.

Last, we bring to your attention a nearly 3% drop in the Shanghai stock market overnight and remind that a similar drop a little over a week preceded the more than 1000 drop in the Dow Jones Industrial Average. Like it or not, the fate of the two stock markets might be more mingled than some would be willing to admit.

Quote of the Day
“The great Russian opera singer, Feodor Chaliapin, lost his entire fortune–then worth more than a million pounds–in the Russian revolution. This disaster seared him. He left Russia after the Revolution and went to live in France where in 1931 he bought gold bars and put them in a safe in his cellar in Paris. He was interviewed by the British Sunday Express newspaper on the 5th of May 1935, when he said, ‘People in Britain think governments cannot collapse. They think banknotes are money; banks are impregnable. But I have had everything I made in 25 years stripped from me. I was reduced to singing for tea in which there was sawdust, and bread in which there was wood. With my bar of gold and a pen knife I shall never go hungry.’” — Anecdote told by Haruko Fukuda, World Gold Council chair, in 2000 to the Business Club Zurich

Chart of the Day

Chart note: This chart demonstrates gold’s strong performance as a portfolio holding over a long period of time. It depicts the year-end price of gold since 1970. It dispels the notion that gold is somehow volatile or unpredictable and as a result unreliable as a long-term portfolio safe haven. To the contrary, it shows gold living up to its reputation as precisely the opposite – stable in the face of rapidly changing economic circumstances, predictable in that it reacts directly to those circumstances and reliable in that has performed as advertised over an extended period of time – in fact, as a hedge against the concurrent and continuous depreciation in the value of the US dollar since 1971.

Posted in dailyquotes |

Gold running sideways again this morning, Italy concerns resurface

DAILY MARKET REPORT

Gold is running sideways again today at $1225 after a brief dip in overseas trading. Gold got as low as $1221 in Asian trading hours, reversed in Europe as concerns worked their way back to the surface about Italy’s recently submitted budget proposal. Giuseppi Conte, Italy’s prime minister, told the European Commission that “Austerity is no longer viable” as the country proposed a budget deficit three times larger than what the European Union deems allowable. Italian 10-year yields jumped on the news and gold turned higher – at one point trading at $1228, a $7 turnaround. Italy’s ruling political coalition, some think, is pushing for a break with the euro and reintroduction of the lira.

Also influencing the gold market this morning, the Dow Jones Industrial Average reversed a portion of yesterday’s gains – down 128 as this report is posted. We also note with more than passing interest that gold is holding its own, even displaying an occasional burst of strength, on a day when the dollar is advancing sharply against other currencies.

Quote of the Day
“The best thing is, don’t play the game, because it is pros against you. We spend hundreds of millions of dollars a year to get an edge, and others do that too. So it’s very difficult for the individual investor to assume that he [or she] can pick something better. The best thing you can do is know how to have a balanced portfolio … because you ain’t going to win that game.” – Ray Dalio, Bridgewater Associates, speaking at the Harvard Kennedy School’s Institute of Politics

Chart of the Day

Chart courtesy of HowMuch.net

Chart note: As you can see, after the United States and China, GDP for the rest of the nation states falls off quickly. Japan is a distant third and Germany an even more distant fourth. The European Union as a whole even without the United Kingdom, however, would replace China as number two if counted as a whole. This visualization drives home what’s at stake in the trade war between the United States and China. It involves the two largest economies in the world by far and nearly 40% of the global economy.

Posted in dailyquotes |

Gold drifts sideways, a palpable, eerie calm hangs over markets this morning

DAILY MARKET REPORT

Gold drifted sideways this morning under quiet market circumstances – up $2 on the day at $1229. Silver is up 2¢ at $14.75. In a report published at Scrap Register, Germany’s Commerzbank has some interesting things to say about the current gold market environment. It attributes recent price increases primarily to short covering and points to the 100-day moving average as an incentive for the yellow metal to go even higher. “If it settles down above the 100-day moving average (currently at around $1,227) in any lasting fashion, we expect to see technical follow-up buying that should push the price further up.”

A palpable, eerie calm hangs over the markets this morning. “Everything is but one headline away from sharp reversals,” writes Bloomberg’s Richard Breslow. “Confusion and uncertainty are rife, and fear of loss has gained the upper hand over greed,” he goes on. “That’s a prescription for very unhealthy markets with informational content that should be consumed with care.”

Quote of the Day
“Picture yourself and your loved ones in the midst of a howling blizzard that lasts several years. Think about what you would need, who could help you, and why your fate might matter to anybody other than yourself. That is how to plan for a saecular winter. Don’t think you can escape the Fourth Turning. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted.” – William Strauss & Neil Howe, The Fourth Turning [1997]

Chart[s] of the Day

Chart note 1: Sometimes the facts get in the way. Though China might be tempted to choose devaluation as a tactic in the trade war, it creates other problems for the country that it has tried to avoid in the past – most notably capital flight. The fact of the matter is that China has chosen to do just the opposite. It has kept the yuan in a tight band against the U.S. dollar and sold from its pool of U.S. Treasuries as a means to stabilizing its currency. China’s foreign exchange reserves as a result went from nearly $4 trillion to just above $3 trillion since 2014. Meanwhile, the yuan has traded in a narrow channel between 14.5¢ and 16.5¢.

Chart note 2: PBoC governor Yi Gang stated unambiguously over this past weekend that China “will not engage in competitive devaluation, and will not use the exchange rate as a tool to deal with trade frictions.” Part of the narrative behind the dollar’s strong showing of late has been concern that China would ‘weaponize’ the yuan in the trade war. Yi’s statement negates that concern. If China is successful in keeping the yuan within a band, it will kick one of the props out from under the recently strong dollar and in doing so indirectly offer a helping hand to gold.

Posted in dailyquotes |

Gold regains initiative as we start the week

DAILY MARKET REPORT

Gold regained the initiative as we start the week after Friday’s modest drop – up $11 in the early going at $1229. Silver is up 18¢ at $14.76. Concerns that the China-U.S. trade war could escalate to a more generalized ‘cold war’ are playing a key role in gold’s turnaround that began last Thursday. Potential sanctions against Saudi Arabia and the implications for the oil market are also preying on investors’ minds. Underlying all, though, is the rising interest rate environment and its generalized effect on a number of markets ranging from emerging countries to global debt markets and U.S., Asian and European stock markets. Gold is trading at a 3-month high.

Quote of the Day
“Take some advice from two observers who have been around for awhile: The long term gets here before you know it. . . .Instead, we’d be dependent on foreign investors’ acquiring most of our debt — making the government dependent on the ‘kindness of strangers’ who may not be so kind as the I.O.U.s mount up. We can’t let that happen — not if we want an America that is able to provide growth and stability at home while maintaining global leadership. We would risk returning with a vengeance to stagflation — the ugly combination of inflation and economic stagnation that we tasted in the 1970s.” – Paul A. Volker and Peter G. Peterson

Chart of the Day

Chart note: Popular belief holds that foreign investors and central banks hold the lion’s share of the nearly $22 trillion federal debt. These charts from the St. Louis Federal Reserve tell the real story. Though it has not always been the case, private domestic investors now hold the largest share of the national debt at $13.1 trillion. Foreign investors are number two at $6.2 trillion. Federal Reserve banks are number three at $2.8 trillion. As you can see, federal debt held by private investors is on an ascending curve while both foreign and Federal Reserve banks’ purchases have leveled off. At present, private investors hold more than half the national debt (59.3%) as shown in the pie chart at the very top. Foreign investors hold 28.1% of the U.S. federal debt.

Posted in dailyquotes |

Gold finishes up $30 on the day on safe-haven buying, possible short covering

AFTERNOON UPDATE

Gold finished the day up a solid $30 and well over the $1200 mark at $1224.50. Silver finished 27¢ higher at $14.60. The mainstream financial media was in a huff all day on who to blame for stock market plunge – the White House or the Fed. The markets though, with all due respect, do not care who’s to blame. It is the effect that has investors worried, not the cause.

This is the first time in 2018, a cursory review tells us, that gold has gone up when the Dow Jones Industrial Average has gone down more than 1000 points – a break with recent trends that speaks to a possible resurgence of gold’s safe haven status. Too, we should not overlook the possible role of short-covering in today’s rally. Speculators have built-up a record short volume on the COMEX and will need to reverse those positions in order to lock-in profits. As an early indicator that sentiment might be shifting among funds and institutions, gold ETFs yesterday recorded net purchases of eight tonnes – “the first daily inflow since July” according to Commerzbank.

Posted in dailyquotes |

Gold moves convincingly to the upside in wake of global stock turmoil

DAILY MARKET REPORT

Having steadied itself the past few trading sessions, gold moved convincingly to the upside in the wake of yesterday’s global stock market turmoil. It is up $14 in the early going at $1208.50. Silver is up 15¢ at $14.47. The fact that gold broke ranks with other investment markets at a time of crisis is notable. In the recent past, its reaction to major disruptions has been to follow along with the crowd in the first stages – at least until the nature of the crisis took form. Capital this time around is moving in the direction of gold on short notice.

A significant portion of today’s upside occurred during Asian and European trading hours, but there was an additional surge higher (about $6) coming at New York’s open. “It was the perfect storm that gave U.S. stocks their worst day in eight months,” reports Bloomberg’s Justina Lee, sending European shares to the lowest since December 2016 and driving more than 1,000 Chinese companies to fall by the daily limit.”

We have reported on the “perfect storm” brewing in the global economy consistently over the past several months including the items mentioned in this Bloomberg report – interest rates, the trade war, the crisis among emerging countries, etc. What is particularly alarming about the current market situation is the widespread unleashing of primal forces all at the same time each fed by and contingent on the other – a pandora’s box that defies simple solution. Even if the current sell-off is contained over the next few days, we are likely to be left with a sense that it isn’t over, that there is more to come.

Quote of the Day
“A common feature of all these earlier troubles was that, having happened, they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. (Not only were a record 12,894,650 shares sold on 24 October; precisely the same number were bought.) The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next twenty-four months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.” – John Kenneth Galbraith, The Great Crash: 1929

Chart[s] of the Day

Chart note: Gold’s strong performance this morning after the stock market dropped almost 5% yesterday is notable because it breaks with the recent past and demonstrates, if the trend gains momentum, a resurgence of the safe-haven trade. (See the full DMR above for details.)

 

Posted in dailyquotes |

Gold quiet but dollar, stock market weakness might yet provoke a reaction

DAILY MARKET REPORT

The gold market is quiet again this morning with the metal off $2 at $1188. Silver is down 14¢ at $14.27. The tranquility in gold though stands in stark contrast to a sharp sell-off this morning in U.S. stocks led by the tech sector. Today’s sell-off makes it five sessions in a row that stocks have traded lower. The bond market is also lower. Not helping matters for Wall Street, Treasury Secretary Mnuchin upped the ante in U.S.-China trade talks by warning China against further devaluation of its currency. He also stated that an understanding on the yuan will need to be part of any future trade deal. Those comments combined with new rumblings from the White House on Fed interest rate policy sent the dollar index down sharply. We might yet see a reaction in the gold market before the day is out.

Added note:  Further down the page, you will find an interesting article in the context of today’s sell-off in stocks.  The Coming Crash features the views of Fred Hickey, editor of The High Tech Strategist, who now recommends gold as a contrarian opportunity. 

Quote of the Day
“I spoke to bankers at the time who said that what happened was supposed to be impossible, it was like the tide going out everywhere on Earth simultaneously. People had lived through crises before – the sudden crash of October 1987, the emerging markets crises and the Russian crisis of the 1990s, the dotcom bubble – but what happened in those cases was that capital fled from one place to another. No one had ever lived through, and no one thought possible, a situation where all the credit simultaneously disappeared from everywhere and the entire system teetered on the brink. The first weekend of October 2008 was a point when people at the top of the global financial system genuinely thought, in the words of George W. Bush, ‘This sucker could go down.’ RBS, at one point the biggest bank in the world according to the size of its balance sheet, was within hours of collapsing. And by collapsing I mean cashpoint machines would have stopped working, and insolvencies would have spread from RBS to other banks – and no one alive knows what that would have looked like or how it would have ended.” – John Lanchester, After the Fall

Chart of the Day

Chart note 1: When the Federal Reserve bailed out the financial system by purchasing U.S. Treasuries and mortgage-backed securities, it included those items as assets on its balance sheet. Much of that capital was then redeposited with the Federal Reserve as excess reserves creating a liability on the central bank’s balance sheet. Now, the Fed with much fanfare is reducing the asset side of its balance sheet. What is often neglected in the analysis is that it is also reducing liabilities. The chart below is a big-picture representation of the Fed’s balance sheet reductions – both assets and liabilities. In 2016, Federal Reserve bailout-related assets were roughly $4.5 trillion. Bailout-related liabilities were about $2.5 trillion. At present, assets are $4.2 trillion and liabilities $1.8 trillion.

Chart note 2: Since the process began in 2016, liabilities have run off the Fed’s balance sheet at a much faster rate than assets signaling the central bank’s inflationary bias. Keeping in mind Milton Friedman’s widely accepted dictum that there is an 18 to 24 month lag between monetary stimulus and response, the first signs of inflation appear to be right on schedule. By September 2017 – two years from the initial draw downs – the inflation rate had climbed back to the 2% mark. As of the September Consumer Price Index release, it had reached 2.8%.

Posted in dailyquotes |

Gold lolls in quiet waters as U.S.-China trade war evolves to something else

DAILY MARKET REPORT

Gold lolled in quiet waters this morning gathering itself after yesterday’s trouncing. It is down $3 in early trading at $1187. Silver is down 7¢ at $14.26.

This morning’s Wall Street Journal highlights two editorials – one by Gerald Seib and the other by Walter Russel Mead – putting special emphasis on Vice-President Pence’s speech the other day before the Hudson Institute. It is the same speech I referenced in a MarketWatch interview last Friday. The headlines to the articles pretty much define the Journal’s viewpoint: The Significance of China’s Broadside (Seib) and Mike Pence Announces Cold War II (Mead).

As summarized in a market update yesterday, in our view, there will come a time when market sentiment associating this sort of thing with a stronger dollar will migrate to the bigger issue – an unraveling global economy and the very large systemic risks it represents. When that happens, gold will be understood again for what it is – a true depository of wealth that transcends the problems of nation states and their currencies and, come hell or high water, a better alternative than the dollar.

Quote of the Day
“In the United States-China relationship, China is very clearly the bank. But the conventional wisdom about what China might — or might not — be prepared to do could be wrong. China has lately reduced its holdings of United States government debt, and a growing number of financiers, economists and geopolitical analysts are quietly raising the prospect that China may look to its ability to influence interest rates as its ultimate Trump card.” – Andrew Sorkin, New York Times, 10-9-2018

Chart of the Day

Chart note: “Interest expense on Federal government debt is currently $320.3 billion,” writes Tocqueville Asset Management’s John Hathaway, “but the interest rate hovers near a 10-year low at 2.47%. It is amazing that despite the low nominal rate, the budgetary outlay for interest is the highest since 2005. Average maturity is relatively short at 65 months and 42% matures in two years or less. The sensitivity of the fiscal deficit to a rise in rates is high. Each 1% increase in federal interest expense would add around $150 billion, or approximately 15% of the expected 2018 deficit.” [Full report]

Posted in dailyquotes |

Gold takes hit on China developments

DAILY MARKET RPORT

Gold took a hit in Asian and European markets overnight that carried over to early U.S. trading today. It is down $16 at $1187.50. Silver is down 27¢ at $14.35. Two major factors are at work in today’s pricing, both having to do with China. The Peoples Bank of China moved overnight to cut commercial bank reserve requirements as a way to push more money into its flagging economy. Second, talks between U.S. Secretary of State Pompeo and China foreign minister Wang Yi broke down in recriminations and accusations from both sides sending relations between the two countries to a new low. The two together sent China’s stock market and currency into tailspins. The Shanghai Index promptly dropped 3.7% – a plunge that would equate to a 975 point drop in the Dow. Caught up in this latest maelstrom, gold dropped as well.

Quote of the Day
“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

Chart of the Day

Chart notes: Often forgotten, or in some quarters deliberately ignored, gold performed extraordinarily well in the disinflationary aftermath of the 2007-2008 financial crisis appreciating from $650 per ounce in January, 2007 to over $1800 in August, 2011. The consumer price index, on the other hand, was bumping along either side of zero and had the potential to evolve to a full deflationary spiral. Inflation, in short, was not an issue. Though gold is generally considered an historically-proven inflation hedge, it is also an historically-proven disinflation hedge as the post 2007-2008 example demonstrates. Investors from 2007 on were interested in gold for its safe-haven characteristics and as a refuge from a potential full-out financial system breakdown. One of the great advantages of being a gold owner is that it is an investment for all seasons protecting its owners against inflation, disinflation, deflation or hyperinflation.
Posted in dailyquotes |

Gold gains traction as market doubts surface

DAILY MARKET REPORT

Gold is once again striving doggedly to gain traction above the $1200 level. It is up $3 on the day $1202. Silver is up 4¢ at $14.66. The strongest influence in the markets this morning seems to be the continuing sell-off in the bond market that began early in the week, gathered momentum yesterday, and spread to stock and bond markets globally.

“A severe bond sell-off that began on Wall Street rippled out across global markets on Thursday,” reports Financial Times, “triggering the biggest US equity decline in nearly four months. Bonds yields have been rising on optimism about the world economy and expectations that central banks will tighten policy, but fears that rates could climb high enough to restrain growth hit stocks in Europe, the US and Asia.”

That “hit” continued in Asian and European markets overnight and has carried over to a weak open for the Dow and the bond market in U.S. trading. Gold’s upside this morning is taking place under the unusual circumstance of stocks, bonds and the dollar all trading lower – something we have not seen for awhile. Gold’s reaction is a break with the recent past and an indication that its safe-haven role might be regaining some traction as doubts surface in the other markets.

Quote of the Day
“Yet gold has special properties that no other currency, with the possible exception of silver, can claim. For more than two millennia, gold has had virtually unquestioned acceptance as payment. It has never required the credit guarantee of a third party. No questions are raised when gold or direct claims to gold are offered in payment of an obligation; it was the only form of payment, for example, that exporters to Germany would accept as World War II was drawing to a close. Today, the acceptance of fiat money — currency not backed by an asset of intrinsic value — rests on the credit guarantee of sovereign nations endowed with effective taxing power, a guarantee that in crisis conditions has not always matched the universal acceptability of gold.” – Alan Greenspan, former Fed chairman

Chart of the Day

Chart courtesy of MacroTrends.net

Chart note: Silver is significantly more volatile than gold. In bull markets, it tends to rise faster than gold. In bear markets, it tends to drop faster than gold. This dynamic is reflected in the gold-silver ratio shown in our Chart of the Day, i.e., the number of ounces of silver it takes to buy an ounce of gold. At the present, the ratio is at its second highest level since 1991 and the highest level since the secular bull market for precious metals began in the early 2000s. To learn more about the important role silver can play in a well-diversified precious metals portfolio, we invite you to contact our Order Desk.

Posted in dailyquotes |

Gold moves decisively to the upside on safe-haven impetus

DAILY MARKET REPORT

Gold moved decisively to the upside this morning. In early trading it is up $7 at $1205.50. Silver is up 12¢ at $14.75. Precious metals, as well as the stock, bond and currency markets, are still processing the Fed chairman’s remarks of two days ago – a somewhat confusing reference to the central bank’s target for interest rates. Bonds continued in a down trend that began yesterday and stocks are down 175 as we post this report. The dollar index is down sharply.

Gold, on the other hand, is tracking higher – a situation under this set of circumstances that points to its safe-haven role once again gaining impetus. Along these lines, the IMF issued a warning this morning that “the world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reforms needed to protect the system from reckless behaviour,” according to an article in The Guardian, a British newspaper.

Quote of the Day
“At the quarter-century mark of 1925, the great bull market was under way, and Graham*, then 31, developed what he later described as a ‘bad case of hubris.’ During an early-1929 conversation with business associate Bernard Baruch (about whom he disparagingly observed, ‘He had the vanity that attenuates the greatness of some men’), both agreed that the market had advanced to ‘inordinate heights, that the speculators had gone crazy, that respected investment bankers were indulging in inexcusable high jinks, and that the whole thing would have to end up one day in a major crash.’ Several years later he lamented, ‘What seems really strange now is that I could make a prediction of that kind in all seriousness, yet not have the sense to realize the dangers to which I continued to subject the Account’s4 capital.’ In mid-1929, the equity in the ‘Account’ was a proud $2,500,000; by the end of 1932, it had shrunk to a mere $375,000.” – Frank K. Martin, A Decade of Delusions

* Benjamin Grahm, “The father of value investing”, 1894-1976, Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949).

Chart of the Day

Chart courtesy of OPTIONAlpha

Chart note: We guesstimate that we are somewhere between “thrill” and “euphoria” on stocks and “despondency” and “depression” on gold and silver. In short, the time might be right for starting to leg-out of stocks and ladder-into gold.
Posted in dailyquotes |

No DMR today

We will update though if anything of interest surfaces.

Posted in dailyquotes |

Gold, silver up sharply, three factors stand out

Gold surged $18 in early trading again breaking through the $1200 barrier and reaching $1206 as this report is posted. Silver is up 40¢ at $14.90. Looking around among the usual indicators that might explain the sharp increase in prices, nothing stands out. In the absence of anything else, we reduce the possibilities to three that override the others.

– The first is the announcement yesterday (reported below) that Saudi Arabia will not open the production floodgates to forestall oil’s rise to $100 per barrel – an inflation threat.

– The second is that the downside has simply reached the point of maximum exhaustion, particularly for silver which is leading the way higher for both metals.

– The third is related to the second and has to do with the beginnings of short-covering in both gold and silver as we move into the fourth quarter of the year.

There is no direct confirmation of the latter at this point other than the anecdotal message delivered in the price itself and the absence of other prominent drivers. Investors should keep in mind the huge outstanding short position in both metals that needs to be covered. It will encourage big traders to ‘leg-in’ over a period of time – a process, though, that could be compromised as traders compete with each other to be first through the exit.

We will update if anything of defining interest surfaces.

UPDATE 1

In the past we have featured charts showing waterfall drops in gold accompanied with high volumes on the COMEX. Those volumes were part and parcel of the enormous short position that has been built up on the exchange and reported weekly in the Commitment of Traders reports. Here – in this chart – we see the first signs of an equal and opposite reaction. . . .a rocket-launch ascent.

Quote of the Day
“The population of the world is increasing at the rate of five thousand four hundred every hour. A small percentage of these people will become gold hoarders, people who are frightened of currencies, who like to bury some sovereigns in the garden or under the bed. Another percentage needs gold fillings for their teeth. Others need gold-rimmed spectacles, jewelry, engagement rings. All these new people will be taking tons of gold off the market every year. New industries need gold wire, gold plating, amalgams of gold. Gold has extraordinary properties which are being put to new uses every day. It is brilliant, malleable, ductile, almost unalterable, and metals except platinum. There’s no end to its uses. But it has two defects. It isn’t hard enough. It wears out quickly, leaving itself on the linings of our pockets, and in the sweat of our skin. Every year, the world’s stock is invisibly reduced by friction. I said that gold has two defects…The other, and by far the major defect, is that it is the talisman of fear. Fear, Mr Bond, takes gold out of circulation and hoards it against the evil day. In a period of history when every tomorrow may be the evil day, it is fair enough to say that a fat proportion of the gold that is taken out of one corner of the Earth is at once buried again in another corner.” – Ian Fleming, Goldfinger

Chart of the Day

Chart note: What keeps the chairman of the Federal Reserve up nights? As shown on today’s Chart of the Day, the last time interest rates converged like they have over the past six months, it was 2006-2007 just before the financial crisis.


 

Posted in dailyquotes |

American silver Eagle sales soar in September

Gold is tracking marginally lower as we begin the week and the final quarter of the year. The yellow metal traded as low $1185 overnight, bounced back to $1192 at the COMEX open, and is trading now at $$1188.50 – down $3.50 on the day. Silver is down 20¢ this morning at $14.44 shedding about half of Friday’s strong gain.

The U.S. Mint reports soaring sales of American silver eagle bullion coins. According to its month-end report, it placed 2.897 million of the popular one-ounce coins through its wholesale network during the month of September – a gain of 89% over August’s 1.53 million ounces in sales and a more than 900% gain over the same month last year. The performance bodes well for demand as we move into the perennially strong fourth quarter of the year. Wholesalers report dealers stocking up for that demand and to get ahead of the Mint’s annual production shutdown later in the year.

“The Mint ran out of silver Eagle bullion coins Sept. 6. Sales resumed Sept. 17,” reports Numismatic News. “Supplies as they are produced are being rationed. The Mint expects this situation to continue through the end of 2018. The Mint calls rationing “allocation.” The biggest regular buyers get the biggest allocations among the official Authorized Purchasers.”

Quote of the Day
“Money, again, has often been a cause of the delusion of multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper. To trace the history of the most prominent of these delusions is the object of the present pages. Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds (1841)

Chart of the Day

Chart note: Last September was one of the worst in years for silver Eagle sales. The Mint sold only 320,000 coins. Last month was a different story entirely with the Mint selling almost 2.9 million silver eagles – an 89% gain over last month’ strong number and 900% gain over September last year. As reported previously here, low Mint sales in both metals over the past two years reflected broker/dealer inventories being sourced from the secondary markets following a string of record demand years prior to 2017. That secondary market supply suddenly dried-up in August though channeling demand back to the Mint, as reflected in the chart above.  The surge in sales indicates a reawakening of strong investor interest in silver at currently low price levels. Gold American Eagle bullion coins turned in a more modest performance with sales of 20,500 ounces in September. That total is down slightly from August of this year but an encouraging nearly double sales from September of last year.

Posted in dailyquotes |

Isolationism, de-dollarization and gold: A research note from JP Morgan market strategist, Marko Kolanovic

DAILY MARKET REPORT

Gold is up $2.50 at $1186 in today’s early going. Silver is up sharply (25¢) at $14.51.

Here is an interesting snippet from Bloomberg opinion columnist Robert Burgess published yesterday:

“[JP Morgan’s Marko] Kolanovic, who has dominated Institutional Investor’s annual rankings of top strategists for a decade or so, was out with a research note Thursday arguing that President Donald’s Trump’s isolationist foreign policy is a ‘catalyst for long-term de-dollarization.’ Put another way, the dollar is in jeopardy of no longer being the world’s primary reserve currency and all the benefits that go along with that, such as interest rates that are lower than they otherwise might be and the government’s ability to fund budget deficits in perpetuity. ”

At the moment, no one wants to believe that the current market paradigm can come to an end, but, unless history is stood on its head, end it will. JP Morgan’s Marko Kolanovic may have put his finger on what could turn out to be the catalyst – trade policy and its effect on the dollar.  Overshadowed in the political tumult of the past week was President Trump’s address to the United Nations. In it, he outlined what might come to be known as the Trump Doctrine.

Here in part is what he said:

“Each of us here today is the emissary of a distinct culture, a rich history, and a people bound together by ties of memory, tradition, and the values that make our homelands like nowhere else on Earth. That is why America will always choose independence and cooperation over global governance, control, and domination. I honor the right of every nation in this room to pursue its own customs, beliefs, and traditions. The United States will not tell you how to live or work or worship. We only ask that you honor our sovereignty in return.”

And. . .

America’s policy of principled realism means we will not be held hostage to old dogmas, discredited ideologies, and so-called experts who have been proven wrong over the years, time and time again. This is true not only in matters of peace, but in matters of prosperity. We believe that trade must be fair and reciprocal. The United States will not be taken advantage of any longer.

And, last. . .

America is governed by Americans. We reject the ideology of globalism, and we embrace the doctrine of patriotism. Around the world, responsible nations must defend against threats to sovereignty not just from global governance, but also from other, new forms of coercion and domination.

Whether you like Trump or not, whether you agree or disagree with his trade and tariff policies, the UN speech outlines something other than business as usual and it should be taken into account. That something has yet to be reflected in asset prices. Many will discount the UN speech as more presidential bombast and go about their business. Yet, these are policies that are already in place – realities not proposals.

In a separate article, Bloomberg’s Cecile Gutscher passes along one of the conclusions from Kolanovic’s study: “Gold, which tends to benefit from a weaker greenback, also offers a hedge for any tentative push to de-dollarize. And it’s looking decidedly cheap right now . . . U.S. unilateral policies risk bringing major powers of China, Europe and Russia closer, and such an alliance could profoundly impact the dollar-centric financial system.”

Quote of the Day
“We are hurtling towards a financial crisis in the next couple of years as sure as night follows day, and even with 4 per cent growth it doesn’t get you out of this. We had this massive tax cut and we now have trillion-dollar deficits as far as the eye can see. I have been a huge supporter for tariffs but I find it ironic that on the day that we actually sign the [Article 301 investigation into China’s practices] we pass a bill that is going to create these deficits and China is the financier of last resort for those deficits.” – Steve Bannon, former White House advisor

Chart of the Day

Chart courtesy of HowMuch.net

Chart note: “You can see the same top-heavy trend when looking at which continents have the highest reserves,” says HowMuch. “Asia clearly leads the way on the right side of the map, second to the green countries from Europe (thanks only to Switzerland). Every other continent is comparably tiny. Take a look at North and South America compared to Asia. It’s not even close. And where is the entire continent of Africa in our visualization? Since we excluded countries with less than $5B in reserves, only four orange countries made it onto the map.”

Posted in dailyquotes |

Gold breaks to downside on peculiar heavy COMEX short-selling

Gold broke sharply to the downside at the open of futures trading this morning on heavy short-selling. Nearly 15,000 contracts were dumped within the first hour of trading, the equivalent of 1,500,000 troy ounces, or nearly 45 metric tonnes. Looking around for a motivation for such aggressive selling, the culprits are few and far between. The Fed announcement from yesterday was devoid of anything remotely jarring. The GDP number for July was confirmed at 4.2%, but this is a revision that confirms a number already well-known and understood. China’s yuan is down but marginally. The rest of the markets – bonds, stocks and the commodities – are trading quietly. So, gold market trading this morning, for lack of better adjective, looks “peculiar” and distinctly algo-driven – a description with which we will stick until something better comes along.

Quote of the Day
“We have to sell a lot of Treasury bonds, and we as Americans will not be able to buy all those treasury bonds. The Federal Reserve will have to print more money to make up for the deficit, will have to monetize more, and that’ll cause a depreciation in the value of the dollar. . .Two years out is when I’m worried about. It’ll be more of a dollar crisis than a debt crisis, and I think it’ll be more of a political and social crisis.”” – Ray Dalio, Bridgewater Associates, September, 2018

Chart of the Day

Chart note: “Central banks,” reports the World Gold Council, “added a net total of 193.3 tonnes of gold to their reserves in the first six months of 2018, an 8% increase from the 178.6 bought in the same period last year. This marks the strongest first half for central bank gold since 2015.” Since the beginning of 2017, the biggest buyers were Russia – 383.3 tonnes; Turkey –125.8 tonnes and Kazakhstan – 68.4 tonnes. A surprise on the list, and reported here earlier this month, is India – 15.3 tonnes. The Peoples Bank of China, who many analysts believe to be the largest buyer, does not report publicly on its purchases. Some sources report though that its purchases could be as high as 500 tonnes per year.

Please see full report: Central bank buying activity/World Gold Council/9-20-2018

Also, please see this in-depth analysis – PBoC Gold Purchases: Secretive Accumulation on the International Market/Bullion Star

Posted in dailyquotes |

Gold hit by double-whammy of options expiration and Fed interest rate announcement

DAILY MARKET REPORT

The double-whammy of options expiration and today’s anticipated higher interest rate announcement pushed gold in a southerly direction this morning. It is off $6 at $1195.50. Silver is down 9¢ on the day at $14.42. The dollar is up against most currencies and commodities look mixed.

Pushed to the back burner, but perhaps undeservedly so, the geopolitical/military confrontation in the Pacific between the U.S. and China has escalated over the past week. Just before China called off the latest round of trade talks last weekend, the U.S. sanctioned its military over jet purchases from Russia. Yesterday, the U.S. announced the ramped-up sale of military equipment to Taiwan – a maneuver that prompted a stiff Chinese response. Yesterday China blocked a U.S. warship port of call visit to Hong Kong. The leakage of trade war animosity into the military theater has been overlooked in financial markets, but perhaps we should all be paying closer attention.

Quote of the Day
“If we don’t quite know what the future holds, there is little point in getting carried away by very fancy mathematical calculations of optimal portfolios. Don’t rely on past data to be a good guide. Try to think through what mix of assets gives you the best chance of surviving some big event. That must mean including assets that are negatively correlated or uncorrelated in your portfolio. And I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.” – Mervyn King, former Governor, the Bank of England

Chart of the Day

Chart note 1: Yesterday we published a chart on the debasement of the Roman denarius that stretched over nearly three centuries. During the period, the silver coin went from 98% to 5% silver. Similarly, the United States dollar has lost 96% of its purchasing power from 2013 to present – a 105 year period. The timeline for the dollar’s debasement has been compressed to roughly one-third that of the denarius. The one feature both share in common, however, is a relentless progression.

Chart note 2: In 1933, the dollar was backed by gold and silver. In 1933, the federal government seized gold bullion from its citizenry, replaced the gold and silver coinage with gold-backed paper money and suspended domestic convertibility. In 1971, the United States suspended international convertibility and instituted a pure fiat money system. The 1933 dollar was worth 78% the 1913 dollar. The 1971 dollar was worth 25% the 1913 dollar. The 2018 dollar is worth 3.8% the 1913 dollar. What the consumer could buy with $1 in 1913, it takes $26 today.

Posted in dailyquotes |

Gold holding up surprisingly well for Fed Week

DAILY MARKET REPORT

Gold is holding up well so far this week under the typically debilitating effects of a Fed Open Market Committee meeting. Today, it is up $2 thus far at $1202 – a break with convention. Silver, in a relative show of strength, is up 10¢ at $14.38. By tomorrow afternoon we will have a decision on rates and a statement as to how the Fed sees the economy at this juncture with the usual hints of what might be in store for the future. At the moment, the markets seem to be reading those effects as benign.

Improvement in the commodities indices this past week comes as a surprise given the actual imposition of tariffs as of midnight last night. The CRB Index is up 2.32% on the week; the LME +5.06% and the GSCI +2.05%. That, more than anything, explains gold holding up well during Fed Week. Off in the distance October rumbles. . . the month when volatility reigns supreme, when stock markets have been known to go bump in the night and when gold traditionally begins to reap the positive effects of its seasonal cycle.

Quote of the Day
“Now one interesting thing with all this inflation* should be a great comfort to us: historians of prices in the Roman Empire have come to the conclusion that despite all of this inflation — or perhaps we should say, because of all of this inflation — the price of gold, in terms of its purchasing power, remained stable from the first through the fourth century. In other words, gold remained, in terms of its purchasing power, a stable value whereas all this other coinage just became increasingly worthless.” – Joseph Peden, professor of history, Baruch College of the City University of New York (1984 speech)

* Roman denarius debasement as charted below.

Image courtesy of Nicolas Perrault III [CC0], from Wikimedia Commons

Chart note 1: It is no accident that the debasement of the Roman denarius silver coin coincided with the decline and fall of the Roman empire – a period stretching roughly from 31 BC to 300 AD. During Augustus reign, the denarius contained 98% silver. From there it steadily. During Nero’s time, it was debased to 93.5%. By 148 BC, the denarius was minted at 83.5% purity. In 241, it was 48% silver. Under Marcus Aurelius in 274 AD, the denarius fell to a silver purity of 5%.

Chart note 2: Historians argue whether or not inflation was a cause or an effect in the decline and fall of Rome, but there is no doubt that the two occurred simultaneously. Even today, hobbyists and archeologists turn up hoards of silver coins stashed by inflation conscious savers who were attempting to beat the relentless march of inflation. The equivalent pursuit today is swapping paper currency for gold and silver coins and bullion. Tomorrow, we will publish a more contemporary chart that looks quite a bit like the one above.

Posted in dailyquotes |

Gold firms as we enter Fed Week

DAILY MARKET REPORT

Gold appears determined to hold on to the $1200 price level as we enter Fed Week. In fact, it is up firmly in today’s early going at $1203.50 – a $3.50 increase over Friday’s closing price level. Silver is up 3¢ at $14.30.

The dollar has taken an abrupt turn to the south this morning helping the gold price. Also providing an assist, oil is sharply higher on concerns about Iran sanctions and OPEC’s unwillingness to pump more oil to make up the difference. In a surprise, European Central Bank president Mario Draghi warned today of a “relatively vigorous pick-up in underlying inflation” in Europe.

In Friday’s DMR we attributed gold’s sudden $14 drop to aggressive selling of gold on the COMEX, perhaps by a single seller. Bloomberg also made reference to the one minute, one-million ounce sale quoting BMO Capital Markets’ Tai Wong as saying “Someone had a lot to sell and wasn’t clever about it.”

Quote of the Day
“The market does not have the supply response for a potential disappearance of 2 million barrels a day in the fourth quarter [the result of Iran sanctions]. In my view, that makes it conceivable to see a price spike north of $100 a barrel.” – Daniel Jaeggi, Mercuria Energy Group, as quoted in a Bloomberg article, 9-23-2018

Chart of the Day

Chart note 1: With oil on a tear of late – up over 36 % over the past 12 months and 6.5% just over the past month – we thought it would be a good time to take a look at the gold-oil overlay chart. The historical association between the two is well-known, but since April, yellow gold took a turn south while black gold continued to head north. Oil has clearly outperformed gold since early 2016 nearly doubling while gold has risen about 15% – a divergence leading some to think that gold is due for a make-up rally.

Chart note 2: Columbia University’s Jason Bordoff offers an insight on why the price of oil is rising in the United States even though America is generally considered to be energy independent. “The US still needs OPEC to provide relief on oil prices,” he says in a Financial Times article. In an integrated global market, he explains, U.S. prices are still affected by global supply and demand issues regardless of import and export volumes. In short, the price is determined globally and applied locally – an important factor to keep in mind with respect to the potential for oil-generated inflation both now and in the future.

Posted in dailyquotes |

Gold hammered lower on combination of Fed Week and upcoming options expiration

DAILY MARKET REPORT

Today’s sell-off in gold – down as much as $14 at $1193 in early trading – came on the COMEX open and coincided with a major sell-off of foreign currencies across the board led by the British pound. Given the broad circumstances, our best guess is that the downside is a reaction to next week’s Fed meeting. It is a given that the U.S. central bank will raise interest rates by a quarter point. The gold and FOREX markets though are probably registering concern about an announcement, or allusion, to further increases running into 2019. We also have October gold and silver options expiration Tuesday next week. Gold has a history of selling off during Fed Week. It also has a history of selling off at options expiration. Perhaps the combination of the two – even though October is a light month for futures volume – served as inspiration to the shorts, or perhaps even one aggressive short, to unceremoniously hammer gold lower. As we post today’s report, we see the metal has retraced some of its earlier losses – down now about $10 on the day.

We will update later if more information surfaces.

Quote of the Day
“Those who held funds in dollars, pounds or other stable currencies, or in gold, saved their capital. The government set up rigid exchange controls as the inflation proceeded. As usual under such conditions, a black market flourished. The ones who fared best were the small minority who had the foresight to exchange marks into foreign money or gold very early, before new laws made this difficult and before the mark lost too much value.” – Scientific Market Analysis, The Nightmare German Inflation

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note: This chart illustrates how quickly things can swing from placid to nearly out of control. As you see, for six years between 2008 and 2014, the Argentina peso held relatively steady against the U.S. dollar (right scale). Then the wheels came off. Argentina is now seen as something of a poster child for emerging countries debt and currency problems. Those who own gold in Argentina understand the value of laying in the proper hedge ahead of a currency crisis and few would argue with the wisdom offered in our Quote of the Day. Few believe that Argentina’s problems will vanish as quickly as they appeared.

Posted in dailyquotes |

Gold subdued but inching forward on early signs of sentiment shift

DAILY MARKET REPORT

Gold is up marginally in early trading this morning in a somewhat subdued reaction to a show of strength among the major currencies. The yuan, euro, franc, yen and pound are all notably higher. Gold is up a modest $3 at $1207. Silver is steady at $14.26. Gold’s inching higher is noteworthy nevertheless.

Sentiment seems to be shifting a bit against the dollar and in gold’s favor. China’s public proclamation yesterday in support of the yuan is the chief driving factor. Other early signs have begun to emerge. The bond market decline stands out, as does yesterday’s industrial metals’ rally based, Financial Times tells us, on “robust demand.” (Where did that come from?) In an unusual turn of events, a Bloomberg article this morning offers the possibility that the Fed’s widely expected rate hike next week will present, of all things, a sell signal for the dollar.

“Going into year-end,” says Invesco’s Noelle Corum, “we would expect fundamentals will begin to drive markets again, and this will drive the dollar weaker.’’ Similarly, BNP Paribas’ Momtchil Pojarliev says that “We have a turning point where the dollar is going to weaken” and that the dollar is at the “maximum positive point.”

The way things are shaping up, we could have further news as the day progresses. If so, we will update.

Quote of the Day
“So why gold? People buy gold to protect their savings not because it is rare, yellow or shiny, but because of what it isn’t. Gold isn’t debt, equity or any other financial promise. It doesn’t rely on anyone else’s survival to exist. It can’t be destroyed any more than it can be created at will. Call it the ‘gut level case for gold’ – an urgent, all-consuming need to buy a dumb lump of metal which does so little, it doesn’t even rust, but which people in all ages and all cultures have used to store value.” – Adrian Ash, Bullion Vault

Chart of the Day

Chart note: The collective wisdom on gold has changed over the years. Gold has traveled a long and winding road from abandoned orphan and shunned castaway (the 1990s), to grudgingly respected over-achiever (the 2000s), and finally established portfolio stalwart for millions of global investors (the 2010s). That renaissance is illustrated tellingly by the substantial change in volumes at the COMEX since 2000. The ramped-up volumes are the product of burgeoning demand for gold globally among private investors, institutions and funds. It is the latter two – institutions and funds – that are most responsible for volumes rising to the record levels of the last few years.

Posted in dailyquotes |

Gold seesawing around $1200, but higher this morning on firming yuan, China premier comments

Gold continued to seesaw around the $1200 mark this morning. At report post-time, it is trading in the $1203 range and up $3 on the day. Silver is up 4¢ at $14.23. Overnight, gold got as high $1206 after Chinese Premier Li Keqiang was quoted on Bloomberg as saying China would refrain from devaluing the yuan to boost exports. The yuan is also higher in early trading.

The yield on the 10-year Treasury went vertical yesterday to 3.048% on a TIC report showing a minor reduction in Chinese holdings of U.S. sovereign debt. In keeping with Li Kequiang statements this morning, China might be forced to sell U.S. government paper in order to defend the yuan. Yield on the 10-year is even higher this morning at 3.074%, an indication that the market has not backed-off from yesterday’s assessment. Julius Baer’s Norbert Ruecker told Reuters this morning that “Overall, we are constructive for gold and we are telling our clients to start to build a long-term position. Negative sentiment and positioning looks like it has hit rock bottom, so this will start normalizing and support gold.”

Chart courtesy of TradingEconomics.com

Quote of the Day
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – William Strauss and Neil Howe, The Fourth Turning

Chart of the Day

Chart note: The CBOE SKEW Index signals when option traders are concerned about a black swan event. In August, the SKEW hit its highest level since inception in 1999. Since then it has backed-off marginally, but the trend in sentiment and the danger signal remain intact.

Posted in dailyquotes |

Gold unmoved by trade war escalation

DAILY MARKET REPORT

Gold had a muted reaction to today’s trade war escalation with the price going sideways. The U.S./China trade war thus far has had a negative effect on commodities across the board including gold, so holding its own and not retreating further comes as something of a surprise. Alibaba’s Jack Ma came out over the weekend predicting a protracted struggle that could last twenty years. Thus far, the reaction in the West to the trade conflict has been subdued. That sentiment, however, could change as the trade war moves from peripheral concern to immediate reality. In China, the trade wars have done little to put a damper on gold imports. It is on track this year to import another 2000+ metric tonnes of the metal – two-thirds of the annual global mine production.

Quote of the Day
“Two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war. We can also say that if … things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit.” – Ray Dalio, Bridgewater Securities

Chart of the Day


Chart courtesy of HowMuch.net

Chart note: “One thing is immediately clear, ” says HowMuch. “Imports and exports are both on an upward trajectory year over year, but imports tend to grow faster. In other words, when looking at the graph you will notice the gap between the two numbers has gotten larger and larger while the space between the two circles has also become darker and darker. In short, the trade deficit used to be relatively small, averaging less than $150B year over year in the 1990s, but then it exploded in the 2000s. The single biggest increase occurred in 2004 when it jumped from $532B to $655B—a whopping $122B in one year.”

Posted in dailyquotes |

Gold up $11 on technical factors, oversold conditions

Gold got the week off to a strong start nudging back over the $1200 level to $1205 – up $11.00 on the day. Silver is up 21¢ at $14.25. The move began overnight during Asian trading hours. It then carried over to Europe and got a bit of a kicker in early New York trading. Gold seems to be trading on technical factors and oversold conditions today rather than any specific political or economic development. Last week’s Commitment of Traders numbers revealed some minor short-covering that might be indicative of a trend. The record short-position in gold and silver remains the prime factor in the paper gold market. A number of analysts have made the case for a healthy rally once the short-covering begins in earnest. Turkey’s banks are reportedly selling physical gold to allay the effects of the lira crisis. If there has been an effect on the market price, it has been minimal thus far.

Quote of the Day
“Banks in the United States have the potential to increase liquidity suddenly and significantly – from $12 trillion to $36 trillion in currency and easily accessed deposits—and could thereby cause sudden inflation. This is possible because the nation’s fractional banking system allows banks to convert excess reserves held at the Federal Reserve into bank loans at about a 10-to-1 ratio. Banks might engage in such conversion if they believe other banks are about to do so, in a manner similar to a bank run that generates a self-fulfilling prophecy. . . What potentially matters about high excess reserves is that they provide a means by which decisions made by banksnot those made by the monetary authority, the Federal Reserve System – could increase inflation-inducing liquidity dramatically and quickly.” – Christopher Phelan, economist, Minneapolis Federal Reserve

Chart of the Day

Chart note 1: Though it is probably too early to confirm a correlation, this chart offers some early clues that Christopher Phelan’s scenario outlined in our Quote of the Day might be coming to fruition. In January 2015, the inflation rate was at its nadir under zero percent. Excess reserves were near their peak at $2.6 trillion. In September 2015, commercial banks began siphoning off excess reserves, leveraging that capital and lending it into the economy. Keeping in mind Milton Friedman’s widely accepted dictum that there is an 18 to 24 month lag between monetary stimulus and response, the first signs of inflation appear to be right on schedule. By September 2017 – two years from the initial draw downs – the inflation rate had climbed back to the 2% mark. As of last week’s Consumer Price Index release, it had reached 2.8%.

Chart note 2: This past June, the Fed lowered the rate on excess reserves to match the Fed Funds rate adding even more incentive for the banks to accelerate their draw downs.

Related: Please see Gold a safe haven in an ocean of excess reserves (Gold was trading at $1060 when this article was first-published.) Also see, the more recent update Excess reserve statement by chairman Powell moves markets

Posted in dailyquotes |

A word on the ten-year anniversary of the Lehman Brothers’ collapse

DAILY MARKET REPORT

Gold pushed back below the $1200 mark this morning in lackluster trading – down $4 on the day at $1198. Silver is down 4¢ at $14.14.

Much of the news and opinion the past few days has centered around the Lehman Brothers’ collapse ten years ago this weekend. One of the more telling features is the amount of analysis pointing to a repeat crisis before 2020. JP Morgan, Ray Dalio, Moody’s Analytics, SocGen are prominent among a group warning of a Lehman moment at some point over the next two years. Even former Fed chairman, Ben Bernanke, says there will be a Wile E. Coyote moment in 2020.

The rush to the podium (so to speak) among analysts to make sure they are on the record with their warnings is something to behold. It is a much different spectacle from the financial elite’s We-Didn’t-See-It-Coming mantra first uttered in 2008 and religiously ever since. The Queen of England was among the group to hear that rationalization. Her response was classically discreet: “People had got a bit lax, had they?” Today, the financial elite display great care. The general public though has become alarmingly lax. Complacency is a word often bandied about in this context. In 2008, it was the other way around: The financial capitals were lax but the public was vigilant – as evidenced by the strong gold demand at the time.

Day to day, financial media tend to center their gold coverage around the price. The safe-haven argument for gold is offered but routinely muddied in the same paragraph. We tend to forget that the real reason to own gold is not to make speculative gains, but to protect against the kind of excesses the Lehman moment represents. The aftermath of 2008 is testament to gold’s role as the asset of last resort. The Queen’s question fittingly came, by the way, during a visit to the Bank of England’s gold room in 2012. The sight of all that gold must have set the wheels in motion. . . . .

Quote of the Day
“Why then is so much writing on the subject of money so needlessly complicated, with dense, impenetrable language and equations that make sense to only a handful of academicians? And why do so many people insist that bad ideas about monetary policy, like ‘inflation is needed to increase employment,’ are as settled and unassailable as scientific principles?” – Steve Forbes and Elizabeth Ames, Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It

Chart of the Day

Chart note: ““When President Nixon closed the gold window at the U.S. Treasury on August 15, 1971,” writes Economic Prism’s MN Gordon, “he told several whoppers. He said it was to, ‘defend the dollar against the speculators.’ He also said the action would, ‘suspend temporarily, the convertibility of the dollar into gold.’ Furthermore, he told Americans that, ‘your dollar will be worth just as much tomorrow as it is today.’ Nixon’s actions came on the heels of 60-years of gradual steps to remove gold’s backing of the dollar. In effect, $1 today has the same buying power that $0.16 had when Nixon took these ‘temporary’ actions. Over this same period, the U.S. national debt has run up from about $398 billion to over $21 trillion, and the economy has been utterly warped.” We sometimes become so immersed in the short-term ripples that we forget the long-term waves.

Posted in dailyquotes |

CPI report stops gold in its tracks

DAILY MARKET REPORT

A benign U.S. consumer price report stopped yesterday’s gold rally in its tracks this morning. Early on, the metal pushed past the $1210 mark and was up nearly $4 on the day. It is now down $3 on the day at $1204. Silver is down 4¢ on the at $14.21. Reuters reports that “Despite the moderation in price increases last month, inflation pressures are steadily building up, driven by a tightening labor market and robust economic growth.” The news service goes on to cite price increases building up in the supply pipeline resulting from tariffs on Chinese imports.

Yesterday, we posted our guess that some traders covered shorts in anticipation of the report. Those traders, if our hunch was correct, have apparently retreated to the sidelines – at least for now.  Yesterday’s rally is a reminder how quickly things can change once sentiment shifts.

“[T]he net short on COMEX,” writes GFMS’ Rhona O’Connell in a report released yesterday, “was at record levels at end-August since the CFTC introduced its ‘managed money’ classification, at 244 tonnes. With outright shorts standing at 593 tonnes. Some short covering has ensued; we expect more and a sharp short covering rally is not out of the question.”

Inflation worries are one in a long list of concerns that could instigate the short-covering rally many gold market professionals anticipate.

Quote of the Day
“I wish Montagu Norman, Philip Snowden and the monetary experts were admirals or generals. I can sink them if necessary. But when I am talking to bankers and economists, after awhile they begin to talk Persian, and then they sink me instead.” – Winston Churchill, 1924

Chart of the Day

Chart note: Growth in the money supply continues to be stubbornly restrained. That circumstance, however, does not necessarily signal weakness in the price of gold. As this chart illustrates, the effect can be just the opposite. As the 2008 credit crisis unfolded, gold to the surprise of many proved its mettle as a hedge under disinflationary circumstances. Demand flourished among investors worldwide concerned about potential bank failures and a stock and bond market crashes. Even in the more placid economic setting since early 2016, gold has risen as monetary growth has slowed.

 

Posted in dailyquotes |

Might be short covering ahead of tomorrow’s CPI report

(USAGOLD) –– The gold market suddenly took a turn for the better just after 9am MT (11am ET). The timing coincides roughly with the release of the producer price report which came in under expectations. We are not certain, though, why this relatively benign PPI report would have been enough to inspire a strong uptick in the gold price. The move could be interest-rate/Fed related but we are not convinced. Our gut reaction? Short-covering ahead of the tomorrow’s Consumer Price Index release. A Reuters’ survey of economists estimates the report will show an increase in the .3% range, i.e. a 3.6% annualized rate of inflation. If inflation is indeed entering the picture, it could be enough to inspire fund and institution position covering in both the dollar and gold. As it stands gold is $11 higher at $1208. Silver is up 14¢ at $14.27.

We will update again if anything of interest surfaces. . . . .

Posted in dailyquotes |

Gold in modest retreat, little to explain drop during London session

DAILY MARKET REPORT

Gold finds itself in a modest retreat this morning. Scanning the usual indicators turns up little in the way of explanation. The drop occurred suddenly during the London session. We are left to think that it might have been the result of a one-time sale of some size. Gold at the moment is down $3.00 at $1192 and attempting to claw back earlier losses. Silver is down 7¢ sympathetically, it would seem, at $14.08. The gold-silver ratio at 84 to 1 now stands at its highest level in nearly three decades.

Quote of the Day
“The cost of living has skyrocketed in recent years. Let’s look at the cost of goods in services in terms of a salary earned by a full college professor. In the 1980s, our ‘full professor’ needed to pay almost 15 minutes of his salary to buy one kilogram of beef. Today, in July 2017, our full professor needs to pay the equivalent of 18 hours to buy the same amount of beef. During the 1980s, our full professor needed to pay almost one year’s salary for a new sedan. Today, he must pay the equivalent of 25 years of his salary. In the 1980s, a full professor with his monthly salary could buy 17 basic baskets of essential goods. Today, he can buy just one-quarter of a basic basket. And what about the value of our money? Well, in March 2007, the largest denomination of paper money in Venezuela was the 100 bolivar bill. With it, you could buy 28 US dollars, 288 eggs, or 56 kilograms of rice. Today, you can buy .01 dollars, 0.2 eggs, and 0.08 kilograms of rice. In July 2017, you need five 100-bolivar bills to buy just one egg.” – Timothy D. Terrell, on life in Venezuela (2018)

Chart of the Day


CLICK TO ENLARGE
Chart courtesy of HowMuch.net

Chart note: “Looking at a map of economic freedom for the entire world reveals distinct pockets of freedom and repression,” says HowMuch.net, the creator of this chart. “The freest continuous group of countries stretches from the United States and Canada over to northern Europe and the Baltic countries. Russia is the only country touching the Arctic Ocean in a color other than dark and light green. Australia and New Zealand also stand out in the Pacific as bastions of freedom, especially combined with the other countries in Southeast Asia. On the other hand, almost all of South America, Africa, and Asia (at least on the continent itself) remain repressed.”

Chart note 2: It is also interesting to note that it is among the “mostly unfree” and “repressed countries” where the current emerging country currency and debt crisis resides.

 

Posted in dailyquotes |

Quiet prevails, could be punctured later in the week

DAILY MARKET REPORT

Quiet prevails. The markets are running sideways – stocks, bonds, gold, silver, the dollar, commodities. Even the Argentine peso, at least for the moment, looks stable. Gold is trading at $1197; silver at $14.22. The quiet, however, could be punctured later in the week. The Labor Department releases its latest consumer price report on Thursday. In the meanwhile, a feel-good story comes from Australia this morning. Miners at work in the Beta Hunt nickel mine, owned by RNC Minerals of Canada, hit the mother lode last week – a single blast producing 9000 troy ounces of gold worth $10,000,000. One 200-pound rock contains “2400 ounces of high-grade gold,” according to reports. The mining company will auction off the find as collectors’ items. It, by the way, says the mine might be even richer as it goes deeper.

Stay tuned. We will update if things change.

Quote of the Day
“Because Chinese and American leaders have all sorts of carrots and sticks (e.g., economic, military, cyber, etc.) that they can use, they are now determining which ones to use, how far to push the testing, and how far the other will go in inflicting pain and enduring it. The escalations come in the form of tit-for-tats—i.e., a series of escalations that can become progressively larger and more painful, and that take different forms that can extend beyond trade (e.g., to include capital wars). It’s this series of escalations that the wise Chinese leader that I referred to conveyed can easily get beyond anyone’s control.” [Emphasis added]

Chart of the Day

Chart note: With the US dollar the centerpiece of interest the past several weeks, we thought it appropriate to post the long-term overlay chart of the gold price and the major-currency version of the US Dollar index. As you can see, the dollar has been in a secular, long-term decline against other major currencies since the early 1970s when the U.S. abandoned gold-backing for the currency and the world switched to free-floating gold and currency prices. Despite all the talk of a strong dollar and how Treasury secretaries historically back the concept, the reality is the opposite – a weak dollar when measured against its major competitors. In the end, unencumbered ownership of physical gold coins and bullion, as this chart amply illustrates, has proven to be a very effective defense in the on-going process.

Posted in dailyquotes |

Gold seesaws around $1200 level, silver gets unexpected boost

Gold continued to seesaw above and below the $1200 mark overseas and in early New York trading unable to make up its mind how to react to the latest stew of news and analysis. Gold is trading at $1298.50 – down $3.00 on the day. Silver is up 6¢ at $14.24.

We do sense in recent days’ trading some semblance of a positive reaction to inflationary news – detectable but muted. We saw it with the uptick in the PCE index and we are seeing it again today with the reported increase in wages. Beyond the day-to-day inflationary influences, there remains the big one – the imposition of tariffs on Chinese imports. With anecdotal evidence of price increases mounting, especially from American manufacturers and wholesalers, we may come to a place where the basic market reaction will not be to an increase in interest rates but to rising prices instead. We see signs of that tug-of-war at play in today’s back and forth trading.

Silver is getting an unexpected boost from reports of investor demand gaining some momentum. The Mint suddenly is having trouble keeping up with demand – buying no doubt sprung from attractively lower pricing courtesy of the speculative paper market where prices are set. Please scroll below for our comments on the situation.

Quote of the Day
“I’m fond of saying how crazy things get near the end of Bubbles. Convinced this is History’s Greatest Bubble, I’ve been anticipating a pretty astonishing variety of ‘crazy.’ Watching this all unfold with increasing trepidation, I sense an important line has been crossed. It’s time to retire ‘crazy’ – find a replacement that conjures up something more foreboding – more disturbing. And markets, well, they’re seemingly fine with it all; at times almost giddy. And that’s the fundamental problem: Dysfunctional markets continue to promote incredibly risky policy behavior – the polar (bear) opposite of imposing discipline.” – Doug Noland, Credit Bubble Bulletin

Chart of the Day

Chart note: When the United States abandoned the gold standard in 1971 and freed currencies to float against one another, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold backed the dollar, and the era from 1971 to present when it did not. Gold has had its ups and down since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.

Posted in dailyquotes |

Gold climbs back over $1200 on short-covering, a weak jobs report and emerging country capital reshuffle

Gold climbed back over the $1200 mark this morning with two London-based sources reporting short-covering in Europe. It is trading $1207 – up $9 on the day. Silver is trading at $14.26 – up 7¢ on the day. Gold also got an assist this morning from the release of the ADP jobs report which came in below expectations. Beyond those immediate influences, some of the flow from an on-going re-shuffling of capital out of emerging nation stocks and bonds is making its way into gold. The demand is coming both internally from beleaguered citizens within those countries and externally from global funds and institutions who see gold as an under-priced asset. Financial Times quotes Pimco’s Gene Frieda as saying “We’ve had a series of idiosyncratic shocks, but this week it has felt like a more generalized sell-off than an idiosyncratic one. Some investors just want to get out now.”

Quote of the Day
Our central bank monetary-led boom has made debt replace wealth for a long time. That’s not sustainable, of course. (We are ‘mining’ our soil for short-term gain.) We’ll see a return to the significance of productive stuff again I think, and that even includes farming – maybe especially farming. And the Midwest has a pretty good track record with productive stuff. Hard assets will matter again. But of course, I sound ridiculous even saying such things. Like a grumpy old grandpa.” – Mark Spitznagel, Universa Investments (as quoted by columnist, P.J. O’Rourke)

Chart[s] of the Day

Charts courtesy of TradingEconomics.com

Chart note: These three charts show the central bank balance sheet debt holdings for three of the top four largest economies – the United States, Japan and the European Union. Together the three central banks hold an astonishing nearly $13 trillion in debt instruments, and not all are of the highest quality. The US Federal Reserve is in the process of trimming its balance sheet, albeit on a slow fuse. The European Central Bank is scheduled to begin reducing its holdings later this year. The Bank of Japan, for its part, says it will continue with its acquisition program as long as it deems necessary.

Posted in dailyquotes |

Gold in recovery mode, emerging nation problems raise developed country contagion worries

Gold is in recovery mode in today’s early going – up $5 on the day at $1197 – as the markets attempt to gauge the extent and depth of the contagion spreading through emerging markets from Asia, South America, Africa and Europe’s soft under-belly. Financial Times even lists China among the countries analysts are monitoring for deeper problems.

That same article exposes what many see as the greatest source of vulnerability in this developing crisis: “The rise in the US dollar since April,” says FT, “has exacerbated troubles in several emerging economies with the amount of dollar-denominated debt they have more than doubling to $3.7tn over the past decade, according to the Bank for International Settlements.” That level of debt warns of a very large problem that is not going to be easily swept under the financial markets’ carpet as one country after the other tumbles into crisis.

So what happens when the debt repayments come due and these countries declare the lack of resources to meet their obligations? The IMF does not have the resources to engineer a emerging country bailout at the level that might be required. Where will emerging countries go for relief? Or do they simply default – in which case the crisis rolls unimpeded into New York, London, Frankfurt and financial centers beyond.

Please see: Emerging market sell-off spreads beyond Turkey and Argentina / Financial Times / 9-5-2018

Quote of the Day
“We have been in a state of stagnation since 2008. We’re moving towards stagflation. It feels good right now but it’s a false dawn.” – Alan Greenspan, May, 2018

Chart of the Day

Chart courtesy of VisualCapitalist.com

Chart note: In a note accompanying this chart Visual Capitalist notes that ” If you add up all the money that national governments have borrowed, it tallies to a hefty $63 trillion. In an ideal situation, governments are just borrowing this money to cover short-term budget deficits or to finance mission critical projects. However, around the globe, countries have taken to the idea of running constant deficits as the normal course of business, and too much accumulation of debt is not healthy for countries or the global economy as a whole.”

Too, we should not ignore the interlocking nature of global debt – a vulnerability that became all too evident during the last financial crisis and its aftermath. The emerging country debt and currency disaster now unflolding across the globe has its antecedents in that crisis. Cheap money, widespread bailouts, more reckless borrowing and a wobbly repayment structure – all threaten to come home to roost as a disinflationary crisis (like 2008), a long-anticipated surge in global inflation, or as Alan Greenspan suggests in our Quote of the Day, as stagflation, a combination of the slow growth and inflation. Greenspan advocates owning gold as a precautionary measure.

Posted in dailyquotes |

Gold turns sharply lower on China ambassador’s yuan comments over the weekend

Gold took a sharp turn below the $1200 mark in Asia overnight that carried over to early trading in New York. The metal is down $10 on the day at $1191. Silver followed suit – down 41¢ on the day at $14.08. The bulk of the damage came from a drop in the yuan.

FOREX markets’ concerns about the yuan took a turn for the worse over the weekend. Tui Tiankai, China’s ambassador to the United States gave a speech in which he stated that “On what to do next, for China it is very clear. I wish to advise people to give up the illusion that another Plaza Accord could be imposed on China. They should give up the illusion that China will ever give in to intimidation, coercion or groundless accusation.”

The Plaza Accord was an agreement among major industrial countries in 1985 to drive down the value of the dollar against other currencies, particularly the Japanese yen. Cui’s comments were reported in Xinhua, China’s official press organ. The market reaction has been swift and gold is not the only casualty. The Dow is down 120. Bond yields are climbing and commodities across the boards, with the exception of oil, are taking a hit.

How much of this is posturing on the part of China and how strongly the Trump administration is likely to react to the statement are both open questions. The president has already made it clear that he would like the Fed’s cooperation in driving the dollar lower, so there is no doubt that the currency situation is at the top of his agenda.

Quote of the Day
“If we are lucky, the next Fed-caused downturn will cause only a resurgence of 1970s-style stagflation. The more likely scenario is the type of widespread economic chaos not seen in America since the Great Depression. The growth of cultural Marxism, the widespread entitlement mentality, and the willingness of partisans of various sides to use force against their political opponents suggests that this economic crisis will result in civil unrest that will be used to justify new crackdowns on individual liberty. Those who understand the causes of, and cures for, our current predicament have two responsibilities. First, prepare a plan to protect your family when the crisis occurs. Second, do all you can to spread the truth in hopes the liberty movement reaches critical mass so it can force Congress to make the changes necessary to avert disaster. Since the crisis will result in a rejection of the dollar’s world reserve currency status, individuals should consider alternatives such as gold and other precious metals.” – Ron Paul, 8/27/2018

Chart of the Day

Chart note: To learn why this chart is important to current and prospective gold owners, please see: Gold: A reverse bubble in search of a pin – The victim could quickly find itself the beneficiary.

 

Posted in dailyquotes |

Gold pushes higher in Asia, backs off in London-New York on mixed news

Gold pushed higher in overnight Asian markets reaching $1208 before backing off just after the London Fix. In the early New York trading it is priced at $1202, still up $2 on the day despite a sharp rally in the U.S. dollar. Silver is level at $14.57. Supporting gold overnight were currency and debt problems in a host of emerging nation states with Argentina and Turkey the most visibly pressed. Argentina raised interest rates to 60% yesterday, a 15% rise. Keeping a lid on the gold price was news of U.S. intentions to impose tariffs on a another $200 billion in Chinese imports.

Quote of the Day
“The ‘threat’ is best seen through the emergence of exchange-traded funds (ETFs), which allow investors to get a proxy physical gold exposure through an investment via their stockbroker. In truth, these products are, in many cases, more expensive than trading and storing physical gold (especially for larger investors with a long-term investment time frame), have less trading flexibility, and are less secure than owning real physical gold.” – Jordan Eliseo, ABC Bullion/Australia

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note: The Argentina peso and Turkish lira are the center of attention in foreign exchange markets today. Both have roughly halved in value since the beginning of the year. Yesterday Argentina pushed interest rates to 60% – a 15% rise. Turkey’s interest rate is at 17.75%. Wall Street investors are concerned about the potential for a contagion along the lines of the late 1990s Asian financial crisis that nearly resulted in a global economic meltdown. This time around the debts are much larger and the dangers much more widespread geographically. Though concern mounts among financial market participants with each passing day, the White House uncharacteristically has remained mum on the situation and the Federal Reserve has only made passing mention.

 

Posted in dailyquotes |

Gold pushes through $1200 mark to downside as inflation heats-up (?)

DAILY MARKET REPORT

Gold pushed back through the $1200 mark to the downside this morning as the Fed’s favored PCE Index’ number for headline inflation came in over the target level at 2.3%. Silver is down 21¢ at $14.55. The push to the downside is largely driven by computer algorithms that ignore gold’s role as an inflation hedge. Instead the machines are programmed to read any inflationary news as cause for the Fed to push harder on the interest rate accelerator. Thus gold is down on the day when logic tells us that it should be up. The prices posted though will look very attractive to the citizenry of emerging countries, including China and India, beset by increasingly entrenched currency and debt problems. The historic comeuppance for artificially cheap prices is increased physical demand – demand that the real market will need to supply.

Quote of the Day
“What we have to reckon with now is that, contrary to the basic assumption of 2012-2013, the crisis was not in fact over. What we face is not repetition but mutation and metastasis. The financial and economic crisis of 2007-2012 morphed between 2013 and 2017 into a comprehensive political and geopolitical crisis of the post-cold war order.” – Eshe Nelson, reviewing Adam Tooze’s How a Decade of Crises Changed the World

Chart of the Day

The $74 Trillion Global Economy in One Chart

Courtesy of: Visual Capitalist
USAGOLD note: Numbers 1 and number 2 by a wide margin over the rest of the world are going at it head to head in the trade wars. For China, trade with the United States has played a major role in its quick ascent to number two. For the United States, cheap Chinese manufactured goods has played a major role in containing inflation. Now both advantages have become endangered species.
Posted in dailyquotes |

Gold attempts to regain footing amidst mixed signals

DAILY MARKET REPORT

Gold is attempting to regain its footing this morning after yesterday’s options-related sell-off. It is up $2.50 on the day at $1205.50. Silver is down 3¢ at $14.74. Emerging country debt and currency problems are back on the financial pages. Turkey’s lira is down 3% and Argentina’s peso and India’s rupee hit all-time lows overnight. The Fed will be looking to strike a balance between two extremes: A warming domestic U.S. economy versus a cooling, even threatening, global economy fueled by a too-strong dollar.

Quote of the Day
“At the 1955 stock-market hearings, [economist John Kenneth] Galbraith was followed at the witness table by the aging speculator and ‘adviser to presidents’ Bernard M. Baruch. The committee wanted to know what the Wall Street legend thought of the learned economist. ‘I know nothing about him to his detriment,’ Baruch replied. ‘I think economists as a rule—and it is not personal to him—take for granted they know a lot of things. If they really knew so much, they would have all of the money, and we would have none.'” – James Grant, Wall Street Journal editorial (10-1-2010)

Chart of the Day

Chart courtesy of Advisor Perspectives

Chart note: There are a couple of things unsettling about this chart. First is the sheer amount of investor margin debt present in the current stock market – over $650 billion. Second is the correlation between the growth of that debt and ascent of the S&P 500. With that amount of leverage in the stock market and the influence it has on price levels, if and when the margin calls arrive, the tumble could be fast and extreme. FINRA (Financial Industry Regulatory Authority) warns that “many investors may underestimate the risks of trading on margin and misunderstand the operation of, and reason for, margin calls.” Shades of 1929.

Posted in dailyquotes |

Afternoon Update

(USAGOLD, 8-28-2018) – In the absence of any market altering news to speak of, it was surprising to see gold drop about $8 in the last two hours of trading, and silver 15¢.  Looking around for a good reason to explain the sell-off, our best guess is options-related selling. Today is options expiration day on the September contract for both gold and silver. Gold finished at the $1201 mark, down $10.50 on the day. Silver finished at $14.70, down19¢ on the day.

Posted in dailyquotes |

Gold down on quiet news day thus far

Gold is down $3 at $1208 – with nothing of earth-shaking importance having developed overnight or early in the New York market session. Aiding gold, China’s yuan is showing some strength today, as is the yen, while the rest of the currencies seem to be carried in their wake. Silver is down 5¢ thus far at $14.85.

Quote of the Day
“Speculators in gold price futures are short 670 tonnes – the biggest bearish position in 25 years. . .ANZ analysts Daniel Hynes and Soni Kumari say in the past, ‘such extreme levels of short positions have led to a rally in prices: 1999, short positions rose fivefold to hit a then record level of 80,000 contracts. Not long after, gold prices rallied 16% from USD250/oz to USD290/oz over the course of two months. Short positions spiked again in July 2005 and January 2016, with gold prices rallying 12% and 14% respectively over the subsequent three months. In both these cases, the net long position was extremely close to being negative. This raises the spectre of investors closing out their record level of short positions, and thus starting a short covering rally.” – Frik Els, Mining.com

Chart of the Day

Chart note: While commodities have held their own during this stage of the trade wars, gold has declined dramatically by comparison – a break in the long-term pattern of the two moving in the same direction. Some believe gold could play catch-up as we move into the last third of the year. Much of the downside for gold has been the result of the short position built to record levels on the commodities exchange – a position that will need to be covered in order for the speculators to claim their gains. In the past, as Frik Els points out in our Quote of the Day, covering those short positions has led to price rallies in 1999, 2005 and 2016. We might add there was a less pronounced example of short-covering in 2017 as well.

 

Posted in dailyquotes |

Gold up $6 in continuation of trend begun Friday

Gold pushed another $6 higher at $1212 in a continuation of the upward trend begun on Friday. Overseas trading was quiet. Silver is up 10¢ at $14.89. Gold is up $27 since last Thursday’s close. As we reported last week, the market is being driven by a combination of three major developments – dovish remarks from the Fed chairman in a speech delivered on Friday, China’s moves to strengthen the yuan, and the perceived potential for short covering from speculators squaring the record short position at the COMEX (if not actual covering). The dollar is down sharply in early trading.

Quote of the Day
“President Trump’s actions over trade, which appear to have some short-term successes, are driving countries away from her sphere of influence. Ultimately this will prove counterproductive. Speculators buying into Trump’s short-termism and the Fed’s normalization policies are for the moment driving the dollar higher, without realizing that foreigners, far from suffering from a shortage of dollars, already own all the excess dollar liquidity created since the Lehman crisis. This seems certain to lead to the dollar’s downfall. Therefore, the dollar is rising only on short-term considerations, driven by nothing more substantial than speculative flows.

Once these abate, the longer-term prospects for the dollar will reassert themselves, including the escalating budget and trade deficits, record levels of foreign ownership of the dollar, and rising prices fueled by a combination of earlier monetary expansion and the extra taxes of trade tariffs. And if that’s not enough, the erosion of its hegemony coupled with China’s future demands for infrastructure capital seem bound to lead to a fundamental reallocation of capital to the detriment of the dollar. No wonder China and Russia decided to corner the market for physical gold.” – Alasdair Macleod, Mises Institute

Chart[s] of the Day

Charts note: The last time we featured these two charts, it was to illustrate the relationship between gold and the yua