Gold advances incrementally on Lagarde pivot
Commerzbank says selling pressure on gold in the futures market seems to have abated

(USAGOLD – 5/24/2022) – Gold advanced incrementally again this morning as the dollar weakened further against its rivals and global stock markets continued to respond to inflation’s ill effects. “The US dollar might just have peaked,” writes Bloomberg’s John Authers in his regular column overnight, “and if it has then a blog post by Christine Lagarde has a lot to do with it.” With the euro playing such an outsized role in the US dollar index, the ECB president’s seeming pivot to a more hawkish stance makes a significant difference. Gold is up $6 at $1862. Silver is up 15¢ at $22.03. As a matter of perspective, gold is up $60 over the past ten days; silver is up almost $1.50.

Germany’s Commerzbank reports that the selling pressure on gold seems to have waned and that it is “apparently finding favor among ETF investors again.” According to the CFTC’s statistics,” it says in an update released overnight, “speculative financial investors had withdrawn further in the week to 17 May, reducing their net long positions to their lowest level since last September. In our view, however, this should now have adjusted the market, meaning that the selling pressure generated by this group of investors should have abated significantly.” (For more, please see Hickey sees managed money report as ‘extremely bullish’ for gold.)

Euro/dollar
(Five day)
line chart showing euro gains against dollar past five days

Chart courtesy of TradingView.com

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 Gold pushes higher overnight on stiff dollar sell-off
Analyst Noland is on guard for a “consequential shift in dollar sentiment”

(USAGOLD – 5/23/2022) – Gold pushed higher in overnight trading, mostly in response to a stiff sell-off in the dollar. It is up $15 at $1864. Silver is up 38¢ at $22.21. The dollar tracked lower on the perception that Europe and the United Kingdom will be forced to act aggressively on rates to keep a lid on prices – the opposite of the market read a week ago. Too, currency traders are attempting to get a fix on how the switch to rouble payments for European oil and gas imports will impact the dollar. (Germany and Italy approved payments in roubles last week, according to a recent Reuters report.) Before the switch, about 40% of oil and gas imports from Russia were settled in the greenback.

“I have held that the Fed’s ability to sustain US securities market price inflation has for decades provided key unappreciated support to our currency,” writes analyst Doug Noland in the latest issue of Credit Bubble Bulletin, “offsetting unending massive current account deficits and general monetary inflation (currency debasement). From this perspective, I’m increasingly on guard for a consequential shift in dollar sentiment that would catch a vulnerable market by surprise. And a weakening dollar would support precious metals and commodities prices, in the process solidifying the secular transition of Hard Asset outperformance relative to financial assets.”

Gold and the US Dollar Index
(Six months)
overlay line chart showing gold and the U.S. dollar index six months
Chart courtesy of TradingEconomics.com

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Gold, silver setting up to finish the week on a positive note
Firming prices have yet to rattle recently established shorts, says Saxo Bank’s Hansen

(USAGOLD –5/20/2022) – Gold stayed on the positive side of the ledger this morning with nascent stagflation, wobbly stocks, and a hawkish Fed playing on market psychology. It is up $3 at $1846. Silver is up 2¢ at $22.03. Gold is setting up to close the week with a roughly 1.7% gain; silver, 3.7%. Saxo Bank’s Ole Hansen says gold has found some support from the recent stock market rout but it has yet to “rattle some of the recent established tactical short positions.” For that to happen, he says,”the metal needs a runaway upside day or a period of consolidation back above the 200-day moving average, currently at $1839/oz.” (See chart below.)

“What has changed during the past 48 hours,” he adds in an update posted overnight, “has been dismal earnings news from large US retailers raising the risk of a deeper than expected economic slump. Most recently Target Corp which yesterday plunged the most since 1987’s Black Monday crash. In his comments, the CEO sited persistent cost pressures and bloating inventories amid a change in consumer spending as reasons.These developments helped deepen the global stock market rout, and today the weakness has continued, thereby supporting short-covering and fresh haven buying of US bonds while the dollar has softened. All developments that has supported the mentioned bid in gold.”

Gold price and the 200-day moving average
(One year)
Gold and 200 day moving average to present
Chart courtesy of TradingView.com • • • Click to enlarge

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Gold jumps as stagflation, cratering stocks, and a hawkish Fed prey on sentiment
Wisdom Tree thinks gold is about to return from its ‘alternate universe’

(USAGOLD – 5/19/2022) – Gold jumped sharply higher in early trading as the prospect of stagflation, cratering stock markets, and a hawkish Fed preyed on investor sentiment. It is up $23 at 1842. Silver is up 34¢ at $21.85. Bloomberg estimates yesterday’s stock market damage at $1.5 trillion while warning of more downside to come. Though the price of gold has tracked lower since early March, led by speculative selling in the futures market, physical demand itself has held up well. ETF stockpiles show only a minor decline, indicating that funds and institutions are holding on (See chart below). Global mints report steady sales of bullion coins primarily to private investors. Wisdom Tree, the Ireland-based investment house, says its internal forecasting model indicates gold should be trading at the $2150 level when the soaring inflation rate is taken into account.

“It’s as if gold has been living in an alternate universe,” it says in a recently released report. Judging from its forecast, Wisdom Tree believes gold will soon be returning from that alternate universe. Its consensus forecast has gold at $2315 by the first quarter of 2023. Its bullish scenario, based on sticky near double-digit inflation and a sharp correction in the dollar index, puts it at $2680. Its bearish forecast, which would result from the Fed successfully taming inflation, puts it at $1790 by the first quarter of 2023. “We believe that gold has reached a turning point,” it concludes, “after being relatively subdued in the second half of 2021. The metal has been catalysed by rising geopolitical risks and it will become increasingly difficult for the metal to keep ignoring the elevated inflation environment we live in.”

bar chart showing demand for ETF gold February to presentChart courtesy of GoldChartsRUs

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Gold drifts sideways, balancing hawkish Fed with inflation-recession concerns
‘One of the world’s oldest forms of investment’ offers a solid, two-decade track record

(USAGOLD – 5/18/2022) – Gold drifted sideways this morning, attempting to strike a balance between the latest hawkish remarks from Fed Chairman Powell and lingering concern over the dual prospect of inflation and recession. It is level at $1817.50. Silver is up 2¢ at $21.71. Looking back at the longer-term record, Forbes’ Jo Groves sees “one of the world’s oldest forms of investment” as adding “stability and diversification to an investment portfolio – especially in times of economic turbulence.”

“During a period of high inflation,” says the former investment banker in an overview on gold investing, “such as the one currently being experienced by economies around the world, investors may revert to gold as a real physical asset that holds its value. The argument is that gold is a good hedge against inflation as, in theory, increased demand for gold in inflationary periods can result in a rise in gold prices. Over the last 20 years, annual inflation has averaged 3% in the UK, according to the Office for National Statistics. Over the same period, the price of gold has increased by an average of 10% per year (according to the World Gold Council). Adjusting for the inflation rate of 3%, the ‘real’ value of gold has therefore increased by an average of 7% per year.”

Bar chart showing annual gain or loss in the price of gold 2000 to present

Chart note: Year to date, gold is up about 1% even after the recent decline is taken into account.

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Gold advances for second running after yesterday’s solid bounce off $1800 mark
Bank of England’s Bailey admits policymakers are ‘helpless’ in face of inflation

(USAGOLD – 5/17/2022) – Gold advanced for the second day running in what looks like some cautious bottom fishing and short-covering encouraged by yesterday’s solid bounce off the $1800 mark. It is up another $10 this morning at $1837. Silver is up 22¢ at $21.90. Andrew Baily, the Governor of the Bank of England, made the unsettling admission yesterday that central bank policymakers are “helpless” in the face of surging inflation. “It’s a very, very difficult place for us to be in,” he said in an appearance before Parliament reported in The Daily Telegraph.

Bailey’s discomfiture brings to mind a recent analysis from former Thatcher government economic advisor Tim Congdon who also sees inflation as a juggernaut with room to run. “Many observers expect the peak in annual US consumer inflation to come quite soon (say, with the publication of the May numbers in June) at a little less than 10%,” he wrote. “However…the peak in US inflation is still some months away – and may even be recorded in 2023.”

Congdon takes to task those who say the jump in consumer prices results from external forces like shortages, supply bottlenecks, etc. which he sees as “a symptom of inflation, not a cause.” Instead, he puts the blame on money creation and the inflation of asset prices (with long and variable lags) for consumer price inflation. “It is plainly daft,” he continues, “to attribute the remarkable increase in the price of houses – many of which were built a few decades ago – to energy prices, price movements in second-hand cars and lumber, the international shipping market and so on in 2020 and 2021.” In keeping with Congdon’s analysis, we recall a World Gold Council report some time back recommending the money supply as a more reliable indicator of gold’s future price potential than the inflation rate itself.

overlay line chart showing gold and M1 money supply drawn in log scale 1970 to present
Sources: The St. Louis Federal Reserve [FRED], ICE Benchmark Administration • • • Click to enlarge

 

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Gold down marginally under familiar dollar-related circumstances
Shedlock says “US dollar moves irrelevant to price of gold over any meaningful time frame”

(USAGOLD – 5/16/2022) – Gold is down marginally in early trading under familiar circumstances – a firm US dollar, or more precisely, a weakened yen, yuan, and euro. It is down $6 at $1808. Silver is up 7¢ at $21.24. Japan, China, and Europe are loosening monetary policy in the face of a global economic slowdown while the United States is tightening. Consensus has it that the dollar, as a result, is running with the wind, and gold against it. Market analyst Mish Shedlock, who has never been one to shy away from controversy, sees the consensus as guilty of short-term thinking and looking in the wrong place for clues as to gold’s future direction.

“Repeat after me,” he says in a recent blog post, “US dollar moves are irrelevant to the price of gold over any meaningful time frame. I drew a horizontal line with the US dollar index at 87.5 to get enough data points for comparison. If you prefer another level, be my guest and try it.” With the dollar index at 87.5, he shows, that gold has traded at $500, $800, $1200, and $1350. “People believe easily refuted nonsense,” he concludes “because the talking heads repeat it every time the dollar strengthens and gold drops.…Rather, gold is largely a function of faith in central banks, especially the central bank of the major reserve currency country.”

Ramirez cartoon showing a consumer applying for a bank loan to fill his gas tankCartoon courtesy of MichaelPRamirez.com

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Gold continues its slide as global economy stalls
Hemke says gold will regain safe-haven bid as stocks fall – $2100 by year-end

(USAGOLD – 5/13/2022) – Gold continued its slide this morning as investors weighed the effects of Fed policy, the lockdowns in China and a stalled global economy. It is down $7.50 at $1820. Silver is up 5¢ at $20.81. On the year thus far, silver is down 9.4%, falling in line with a sharp drop in industrial metals across the boards. Gold is down just under 1%. Those declines, though, are not nearly as steep as what has occurred in the stock and bond markets – down 17% and 18.5% respectively so far this year. TF Metals Report’s Craig Hemke sees gold as simply giving up unexpected, war-related gains and still on track for a strong showing in 2022.

“No one could have fully predicted the Russian war on Ukraine and the international reaction,” he writes in a report posted at Sprott Money earlier this week. “The events of February and March led to a price spike in COMEX gold that reached all the way to $2060, but now the price is fully $200 lower and back to where we figured it would be through the first third of the year. What happens next? COMEX gold will soon make another ‘higher low’.…From there, it will begin to benefit from a ‘safe haven bid’ as the S&P falls. It will also begin to anticipate the inevitable Powell Pivot II, and all of this will play out over the summer. And then, just as written in January, it will challenge that $2100 level again in the final third of the year.” 

(Editor’s note: The chart below shows the results of the first Powell Pivot in 2019.)

QE/QT/QE cycle 2016-2022
overlay line chart showing gold and the Fed balance sheet growth 2016 to present
Chart courtesy of Trading View.com/Annotations by USAGOLD/Click to enlarge

 

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Gold sells off despite signs of renewed safe-haven interest
Morris says gold is setting up for prolonged outperformance as equity bear market begins

(USAGOLD – 5/12/2022) – Gold sold off in early trading despite early signs, as evidenced by this morning’s sharp drop in bond yields, of renewed investor interest in safe-havens. It is down $9 at $1845. Silver is down 64¢ at $21.00. Later this morning, the Labor Department will release its producer price index, expected to come in at double-digit levels. UK-based market analyst Charlie Morris says the equity bear market has begun and that gold is “setting up for a prolonged period of outperformance.”

In the May issue of his newsletter, he says that the yellow metal “is doing what it does best, which is to protect investors during times of crisis. Many don’t get that and criticize gold for not paying a yield. Alternative assets are not supposed to be yield generating, for if they were, they wouldn’t be alternative. Paying a yield would make gold a financial asset. Besides, the only yield I would want would be paid in gold.” He concludes with what has become a recurring theme among analysts: “Above all, there will be increased demand for alternative assets as investors realize that the 60/40 equity/bond portfolio has come to the end of the road.”

Gold, DJIA, and NASDAQ
(%, year to date)
overlay line chart showing year to date performances of gold DJIA and NASDAQ in percent
Chart courtesy of TradingView.com • • • Click to enlarge

 

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Gold goes positive ahead of this morning’s inflation reading
Historically unusual times call for a fully diversified portfolio approach, says Alden

(USAGOLD – 5/11/2022) – Gold went positive in overnight trading ahead of this morning’s all-important U.S. inflation reading. It is up $14 at $1855. Silver posted a sharp turn higher – up 50¢ at $21.85. The consensus has consumer prices rising 8.1% in April – below March’s 8.5% but still at worrisome levels. Anything above the consensus could trigger more volatility in already tenuous financial markets. Market analyst Lynn Alden Schwartzer believes that the Fed is tightening into a decelerating economy, and that, she says, is when things tend to get messy.

“The past few years have been historically unusual,” she says in a detailed outlook posted at Seeking Alpha, “and I suspect the next few years will be historically unusual as well, with all sorts of unique exceptions and unintuitive outcomes. The easiest way to navigate an uncertain environment for the long run is through diversification and rebalancing. A combination of stocks, real estate, cash/bonds, commodities, and hard monies can navigate through multiple types of economic environments better than a 60/40 stock and bond portfolio, because each element of that more diversified portfolio benefits from either inflation, deflation, growth, or stagflation.” (Editor’s note: Yesterday’s DMR chart inclusion is worth a second look in this context.)

Gold, S&P 500, IShares 20+ Treasury Bond ETF (TLT)
(%, year to date)
overlay chart showing relative performances of gold stocks and bonds in percent year to date
Chart courtesy of TradingView.com • • • Click to enlarge

 

 

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Gold inches higher in quiet pre-consumer price trading
Year to date, it has outperformed stocks and bonds by a wide margin

(USAGOLD – 5/10/2022) – Gold inched higher in quiet early trading as markets took pause ahead of tomorrow’s consumer price report. It is up $7 at $1863.50. Silver is up 10¢ at $25.96. Though gold has been in a Fed-inspired retreat since early March when it hit $2050 per ounce, it is still up on the year, albeit marginally (about 3%). In a relative sense, it has been something of a saving grace for its owners thus far this year – holding its own while the stock and bond markets tumbled alarmingly. Some will find the comparative performances, as shown in the chart below, surprising.

“Gold remains at the mercy of a continued rise in US Treasury yields and the stronger dollar with inflation data this week from the U.S. and elsewhere potentially driving additional volatility across market,” writes Saxo Bank’s Ole Hansen in a market update posted yesterday. “Overall, however, compared with stocks and bonds, gold’s relative strength continues. As of last Friday, an investor based in dollars holding gold was +16% ahead relative to the S&P 500 and more than 26% versus TLT an ETF that tracks the performance of long-dated US government bonds. In Europe, an investor based in euros has seen an XAUEUR position outperform the pan-European Stoxx50 index by more than 25% and 20% versus an ETF tracking European government bonds.”

Gold, S&P 500, IShares 20+ Treasury Bond ETF
(%, year to date as of 5/5/2022)
overlay chart showing relative performances of gold stocks and bonds in percent year to date
Chart courtesy of TradingView.com • • • Click to enlarge

 

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Gold drops sharply in early trading as financial assets weaken across the boards
Wells Fargo’s LaForge confident ‘this whole unloved gold thing will turn around’

(USAGOLD – 5/9/2022) – Gold dropped sharply in early trading as financial assets and commodities weakened across the boards in response to Fed tightening measures, the lockdowns in China, and recession concerns. It is down $22 at $1864. Silver is down 53¢ at $21.90. The U.S. dollar rose above the wreckage to post a new 20-year high against other currencies. Despite its current difficulties, Wells Fargo market strategist John LaForge still believes gold will hit $2100 by year-end saying it is the “most confusing of all commodities” given all that’s going on around it.

“It doesn’t seem to want to react to anything outside the U.S. dollar and that’s been going on for a solid year and a half,” he says in a recent interview at Kitco News. “The bad news is bad news and the good news is bad news. It doesn’t seem to matter. Gold reached a point where people just don’t love it no matter what the fundamentals are.…Gold had been slowly outperforming most other commodities from 2005 all the way up to 2020. And it’s given all that relative strength back in two years. And it’s a head-scratcher because it shouldn’t do it that fast. The value is there. We’re in the middle of a supercycle. I think this whole unloved gold thing will turn around.…It could be one of those times where gold just does its own thing because it doesn’t really care about what’s going on.”

Gold and the U.S. Dollar Index
(%, one year)
overlay chart showing gold and the U.S. Dollar Index over theh past 12 months in percent
Chart courtesy of TradingView.com •  •  • Click to enlarge

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Gold posts modest gain in early trading after yesterday’s roller-coaster ride
World Gold Council says bullion gold coins sales on pace for best year since 1999

(USAGOLD – 5/6/2022) – Gold posted a modest gain in early trading after yesterday’s roller-coaster ride – up sharply on Fed dovishness and then down just as sharply when the dollar suddenly shot higher. It is up $6.50 at $1886. Silver is down 10¢ at $22.50. After all is said and done, inflation remains the fundamental problem overhanging the U.S. economy. Though the dollar might gain ground against other currencies, it continues to lose ground in terms of purchasing power, and that ultimately is what drives long-term investor interest in precious metals.

The World Gold Council is out with a market update this morning in which it blames the stronger dollar for the gold’s rangebound price behavior in recent weeks. At the same time, it finds April’s minor decline under that circumstance (less than 1%) “compelling.” The report includes a section on U.S. Mint gold bullion coins projecting the strongest year for sales since 1999 (See chart below), despite a slowdown in April. “Should this strong demand continue,” it says, “we could see the highest year on record in terms of notional sales. This performance clearly shows that last year’s strong retail interest in physical gold investment products has continued in 2022.” We will add that demand for silver bullion coins and bars is also running at very strong levels.

bar chart showing gold coin sales since 1986 with projection for 2022
Chart courtesy of World Gold Council • • • Click to enlarge


‘[G]old is volatile. I should say that the gold market is volatile. That’s because most of it is paper gold, with only a small amount of physical gold to support it. Think of the gold market as an inverted pyramid, with a small amount of gold at the bottom, holding up a huge amount of paper gold. The paper market could be 100 times the size of the physical market. That means there are 100 paper claims upon each ounce of physical gold. Imagine a coat check at a restaurant issuing 100 claims for one actual jacket. Well, there’s only one coat so 99 claimants are out of luck. It’s the same in the gold market. It’s the paper market that creates the volatility. Gold itself is remarkably stable. It only appears unstable because its price is quoted in dollars, which fluctuates. When gold goes down, it’s really because the dollar is going up. When gold goes up, it’s really because the dollar is going down.” – James Rickards, Daily Reckoning (5/3/2022)

 

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Gold pushes higher as markets digest FOMC results, Powell press conference
Gold is up $45 from the meeting’s conclusion, silver $1.

(USAGOLD – 5/5/2022) – Gold pushed higher in early trading as markets digested yesterday’s FOMC meeting results and Fed chairman Powell’s revealing press conference – with the latter having the greater impact. It is up $26 at $1910. Silver is up 18¢ at $23.24. Since the meeting’s conclusion, gold is up $45 and silver is up $1. The markets appear to be interpreting the Powell message as dovish, centered mostly around the FOMC taking any future .75% hikes off the table. That line in the sand, though, was only part of the Powell message having a dovish effect. The other, and perhaps even more important, was his unexpected admission that the Fed is limited as to what it can do about inflation driven by supply-side issues. The first confirmed long-standing suspicions of an overall dovish tilt within the FOMC. The second brought front and center long-standing concerns about the Fed’s ability to contain the inflation rate.

Gold price
(One day)
line chart showing gold price since conclusion of Fed meeting yesterday
Chart courtesy of TradingEconomics.com

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Gold greets Fed Day with minor downside adjustment
Commerzbank says it all comes down to what Powell has to say at today’s press conference

(USAGOLD – 5/4/2022) – Gold greeted Fed Day with a minor adjustment to the downside as markets awaited this afternoon’s policy announcement and press conference. It is down $3 at $1866. Silver is down 20¢ at $22.44. Oil pushed higher by about 4% on a European Commission proposal to phase out EU imports from Russia within six months but gold did not follow. Commerzbank reduced the potential Fed-driven market reaction to a straightforward formulation.

“A rate hike of 50 basis points,” it says in an analysis reviewed at FXStreet, “is generally expected and is fully priced in according to the Fed Fund Futures. It will therefore be almost more interesting to hear what Fed Chair Powell has to say about the bank’s future monetary policy. If he sounds very hawkish and indicates that other major rate hikes will be made at the following Fed meetings, this could push the US dollar and bond yields further up, which would presumably depress XAUUSD. If Powell were to sound more cautious, the gold price would probably profit and could recoup some of the losses it has suffered in the past few days.” No doubt the Fed chair will be walking a tightrope today. We will know more by this afternoon.

(Editor’s note: The accompanying chart shows the year-to-date erosion in longer duration Treasuries as represented in the IShares 20+Year Treasury Bond ETF – down 18.25% on the year.)

IShares 20+year Treasury Bond ETF
(% decline, year to date)
line chart showing bond value performance as measured by the IShares 20+Year Treasury bond ETF
Chart courtesy of TradingView.com • • • Click to enlarge

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Gold hits the pause button ahead of the Fed
Bear Trap’s MacDonald says its “all a show,” predicts “another leg up for hard assets”

(USAGOLD – 5/3/2022) –  Gold hit the pause button in early trading as markets collectively held their breath in anticipation of tomorrow’s Fed meeting results. It is level at $1865.50. Silver is up 7¢ at $22.79. Bloomberg’s John Authers summed up the essential backdrop to the Fed’s upcoming deliberations: “In important ways, the Fed’s tightening campaign is already well underway; markets are priced for a sharp rise in interest rates, and this has already tightened financial conditions. How much will it matter that the Fed’s balance sheet will start to shrink, and what effect will it have on inflation? What has until now been an abstruse technical debate is about to get very tangible.” And, we will add, there are likely to be unintended consequences. (Authers’ full analysis is highly recommended: Bond landmarks hint at revenge of the monetarists)

In that same column, Authers quotes Bear Traps Report’s “irrepressible” Larry McDonald, who is convinced the Fed will be forced to abandon its quantitative tightening plans. “Hilarious,” he says, “The Fed went to $50 billion a month in September of 2018 and had to stop five minutes later in December – this was after promising Wall St. economists they were on Auto-pilot all the way up to a $2 trillion reduction. Now, they are going to give it a try at $90 billion a month in May with back-to-back 50bp hikes? Who are they kidding? It´s the worst start to a year for stocks in decades, consumer savings is down to the bone, GDP prints negative, and the Fed is going to kick-off a record tightening cycle? It´s all a show. With conviction – we see a near-term top in the U.S. dollar and another leg up for hard assets, value vs. growth and emerging markets.”

QE/QT/QE cycle 2016-2022
overlay line chart showing gold and the Fed balance sheet growth 2016 to present
Chart courtesy of Trading View.com/Annotations by USAGOLD/Click to enlarge

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Gold takes a sharp turn to the south ahead of Fed policy meeting
The dollar rules the currency world, but the New York Sun says it wears ‘a tin pot crown’

(USAGOLD – 5/2/2022)  – Gold took a sharp turn to the south this morning ahead of this week’s two-day FOMC policy meeting that winds up Wednesday afternoon with a press conference. It is down $17 at $1872. Silver is down 7¢ at $22.79. It is not unusual for gold to get a case of nerves at the outset of Fed Week. Consensus has it that the FOMC will come in with a 0.5% hike and a generally hawkish tone. However, with last week’s negative GDP reading, it might choose to be judicious on the latter. If so, we could see some surprise reactions in financial markets. As it is, the dollar is up again today; the bond market is trading cautiously to the upside, and stocks are sideways.

The most significant influence on gold at the moment is the very strong dollar, now at a 20-year high, but according to the New York Sun, that preoccupation is flawed. “We keep marking this point because measuring the value of our money compared to various other fiat currencies is a fool’s errand,” it says in an editorial posted late last week. “It’s not that purchasing power parity is a useless concept, but it is not going to lead to price stability in and of itself. …So the dollar might be ‘king,’ but only in the relative sense. Its anemic value today reminds that the reform has never been more timely. Even as headlines appear in the press touting the ostensible strength of the dollar, Congress cannot dodge the broader question of what constitutes value. The dollar might well be king of today’s debased global currencies, but it wears a tin pot for a crown.”

Ramirez cartoon showing President Biden piloting the BidanicChart courtesy of MichaelP.Ramirez.com

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Gold rallies on weaker dollar, yesterday’s negative GDP number
Crescat sees ‘probable step-function devaluation of fiat currency systems’ against gold

(USAGOLD – 4/29/2022) – Gold rallied this morning on firmer Asian currencies and a somewhat delayed response to yesterday’s negative GDP print. It is up $21 at $1918. Silver is up 22¢ at $23.45. Gold looks like it will finish April down about 1%. Always more volatile, silver is setting up to finish the month down 6%. The World Gold Council released its Gold Demand Trends report for the first quarter yesterday, and it shows overall demand up 34% over last year’s first quarter, with soaring investment demand (up 203%) leading the way. That uptick, in turn, was led by increased ETF demand as funds and institutions returned to the market. In a recent detailed analysis posted at Seeking Alpha, Crescat Capital suggests that we are entering a new era for the global monetary system but that it might not be what is popularly envisioned.

“Contrary to much gold conspiracy thought, it does not mean that we are facing the demise of the Western banking system nor the rise of authoritarian economies and their fiat currencies. It doesn’t necessarily mean the rise of non-government backed intangible currencies either. Governments will maintain legal authority and power over currency systems. Individuals and businesses will use those currencies. The strongest fiat currencies are likely to continue to be those in advanced economies where the principles of liberty, justice, democracy, entrepreneurship, and free markets reign. The macro setup today portends a deleveraging of the global economy through inflation, including a probable step-function devaluation of all fiat currency systems relative to gold, a persistent phenomenon throughout world history.”

(Editor’s note: The accompanying chart supports Crescat’s argument. Over the past five years, gold is up 50.5% against the dollar; 44% against the Chinese yuan; 55.5% against the British pound; 55.8% against the euro; 75.7% against the Japanese yen; and 79% against the Indian rupee, with a notable acceleration in those trends since the beginning of 2022.)

Gold in major national currencies
(%, five-year)
overlay chart showing gold appreciation over the last five years in major national currencies
Chart courtesy of TradingView.com • • • Click to enlarge

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Gold level as sharp dollar advance continues
‘The last time this happened markets got very wobbly.’

(USAGOLD – 4/28/2022) – Gold is level this morning as the dollar advanced sharply against both the Japanese yen and Chinese yuan, and the markets awaited this morning’s GDP number expected to come in at an anemic 1.1% for the first quarter. It is trading at $1888 in the early going. Silver is down 30¢ at $23.08. Gold and the dollar generally advanced in tandem over the past year as investors positioned themselves defensively in response to weakening global bond markets. That all changed over the past month when the Japanese, Chinese, and European central banks advertised looser monetary policies while the Federal Reserve signaled the polar opposite. In response, the dollar index took a sharp turn to the upside (up 14% over the past year), while gold weakened from near all-time highs (though, as a matter of perspective, it is still up about 6% over the past year).

“China,” writes Money Week’s John Stepek in an analysis posted Tuesday, “is now on the wrong side of the central bank rate-raising cycle. (Ed. note: The same might be said for Japan and Europe.) China’s slowdown means it’s not going to raise interest rates – but the US is, and, all else being equal (it never is, but rates matter more than most things) higher rates will attract more money than lower rates. Anyway, last time this happened markets got very wobbly, which is one reason why central banks decided against raising rates. As you may well have noticed, markets are pretty wobbly right now as well. So a few questions arise from all this.” Stepek advises sticking with inflation bets. “I’d hold some gold (it’s handy to have in a panic),” he concludes, “and I’d make sure you allocate more to cash than usual simply to have it around in case you need it or want it to take advantage of any opportunities.”

Gold and the U.S. Dollar Index
(%, 12-months)
overlay line chart showing gold and the U.S. dollar index over the past year
Chart courtesy of TradingView.com

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

Gold continues to seesaw around $1900 as the dollar hits a two-year high
Deutsche Bank sees higher inflation as the “defining macro story of the decade”

(USAGOLD – 4/27/2022) – Gold continued to seesaw around the $1900 with a firmer dollar – now at two-year highs – the dominant feature in this morning’s trading. It is down $4 at $1904. Silver is up 15¢ at $23.71. As next week’s Fed meeting draws near, concern mounts over the prospect of global stagflation. In an analysis reviewed this morning at Zero Hedge, Deutsche Bank doubles down on its recent prediction that “higher inflation” will be the “defining macro story of the decade” and that sentiment is now “skewed heavily to the downside risk of a significant recession.” The prospect of an inflationary recession, though, simply tops a lengthy list of investor concerns that includes further escalation in the Ukraine war, the China lockdowns, a more hawkish Fed, supply disruptions – etc. According to a Reuters report yesterday, Swiss gold exports to the United States “rocketed” higher in March to their highest level since the early days of the pandemic in 2020 as investors “stocked up on bullion.”

 

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