Gold joins rest of financial markets in negative initial reaction to last night’s debate, billionaire investor Kaplan calls gold ‘the generational trade’

(USAGOLD –10/2/2020) – Gold and silver joined the rest of the financial markets in posting a negative reaction to last night’s rather bizarre presidential debate. The much-anticipated event came off to this observer as a singular reflection of the times – a metaphor for the chaos and confusion that inhabits everyday life for the bulk of Americans. The yellow metal is down $15 at $1886 as we start the day. Silver is down 50¢ at $23.76. It could turn out to be an interesting day as investors globally digest the ramifications of last night’s gloves-off, political brawl.

Stansbury Research recently posted a powerful Daniella Carbone interview of investor Thomas Kaplan. Though Kaplan made his fortune in the mining business, he is also an Oxford-trained historian who puts gold’s bull market in the context of a longer-term cycle that has yet to reach maturity. He reiterates his prediction made some time ago that gold will reach $3000 to $5000 in the years ahead. “The difference is this,” says Kaplan. “The market is now ready for the next leg of the gold bull market. The first leg was the one that took us up 12 consecutive years in a row regardless of whether there were inflation fears, deflation fears, whether there was a glut of oil or a shortage of oil, political stability or political instability, dollar weakness, dollar strength.  It didn’t matter. Every year for 12 years gold went up … The next move is going to be a third wave, a long wave that lasts for a decade or fifteen years, maybe more … I think that you really are looking at a complete paradigm shift that will make gold the generational trade.”

Chart of the Day

overlay chart showing the relationship over the long term between growth in the national debt and the rising gold priceSources: ICE Benchmark Administration,  U.S. Treasury, St. Louis Federal Reserve [FRED]
[Please note  that the chart reflects the price of gold and the aggregate national debt through Q2-2020]

Chart note:  As we have mentioned in previous post notes, the problem with monetary stimulus – the kind of help the Fed is capable of delivering – is that it requires takers, i.e., people and businesses willing to borrow and spend. Private borrowers, though, are not as prolific and/or aggressive as the Fed or federal government would like. The federal government, on the other hand, is a ready borrower and a big one. The Manhattan Institute’s Brien Riedl recently pointed out in a National Review article, the Fed has already financed roughly half of government spending to combat the economic hit from COVID-19. How does all of this translate to a tailwind for gold?  The chart above tells the story at a glance.

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

Gold drifts marginally higher, Commerzbank thinks the correction may have run its course

(USAGOLD –9/29/2020) – Gold drifted marginally higher after a quiet night overseas and a strong reversal yesterday in the downtrend that prevailed over the past few trading sessions. At one point in overnight trading, gold was up nearly $40 from the lows registered yesterday. Gold is up $3 this morning at $1886. Silver is up 14¢ at $23.89. Commerzbank thinks gold’s correction may have run its course. “The significant losses were triggered by the rising U.S. dollar, which apparently prompted speculative financial investors to cover net long positions they had previously entered,” writes the firm’s commodity analyst Carsten Fritsch in a report reviewed by Kitco News’ Anna Golubova. “Now that speculators have withdrawn from the market for the most part,” writes Fritsch, “prices should recover again – after all, the environment for precious metals remains positive.”

Chart[s] of the Day

Gold, silver and the DJIA – Year to Date

overlay chart showing gold silver djia performances in percent year to date 9-28-2020

Chart courtesy of TradingView.com • • • Click to enlarge.

Gold, silver and the DJIA – One Year

overlay chart showing performances year to date for gold silver djia in percent as of 9-28-2020

Chart courtesy of TradingView.com • • • Click to enlarge.

Chart note:  Even after gold’s correction which began back in early August, the precious metals have posted some hefty percentage gains year to date and over the past 12 months. As of yesterday (9/28/2020), gold is up 27.86% over the past 12 months even with the recent correction taken into account. Silver – now consistently outperforming gold on a 12-month basis – is up 39.33% and the Dow Jones Industrial Average is up 2.48%.  Year to date, gold is up 23.07%. Silver is up 31.42% and the DJIA is down 4.45%. 

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

Gold rallies to begin the week; investors look nervously toward the start of October

(USAGOLD – 9-28-2020) – Gold rallied to begin the week as the dollar weakened and investors looked nervously toward the start of October – a month not regarded as particularly friendly to financial markets. It is up $11 at $1875. Silver is up 36¢ at $23.34. The markets are keeping a wary eye on Congress to see if it can meet Fed Chairman Powell’s appeal for a fiscal package to augment the central bank’s massive stimulus over the past several months. There has been talk about a prolonged stall on the economy as Washington turns its attention to the nomination of a new Supreme Court justice. Stocks, though, are up this morning – an indication that those concerns may have cooled, at least in the early going today.

Chart of the Day

overlay chart showing the relationship between the yield on 10-year Treasuries and the gold price through 9-18-20Chart courtesy of the St. Louis Federal Reserve [FRED] • • • Click to enlarge
Sources: Federal Reserve Board of Governors, International Benchmark Administration [IBA]

Chart note: “A ‘perfect storm’ of surging government debt levels, plunging real bond yields, rising coronavirus cases and deteriorating economic forecasts pushed the price of gold to an eight-year high [in late June], and some analysts now project the metal to top its all-time high within the next 12 months,” says analyst Frank Holmes of US Global Investors. Holmes finds himself in the company of a large number of analysts who have predicted the metal would reach all-time highs. He says gold is trading inversely to falling bond yields as shown in the chart.

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

Precious metals bring rough week to a close

(USAGOLD –9/25/2020) – After a failed attempt to regain its footing yesterday, gold is back to the downside again this morning as technical trading and profit-taking appear to outweigh all else. Gold is down $10 on the day at $1860. Silver is down another 44¢ at $22.79. On the week gold and silver look headed for their worst performances in over a month – down 4.75% and 16% respectively. Much of the downside is driven by concerns about Congress meeting Fed Chairman Powell’s appeal for some fiscal help to go along with the monetary stimulus already applied. There are rumblings from various analysts that the economy is sliding back into a ditch – yesterday’s woeful jobs number being the primary indicator.

Chart of the Day

Chart note:  The gravitational pull of disinflation was a constant in the economy even before the coronavirus. Now it is fully asserting itself – at least in the short term. Debt becomes an enormous weight under such conditions with threats to the stability of the financial system multiplying accordingly. The last crisis was essentially a disinflationary breakdown. Gold, as you can see by the chart,  rose to the occasion.

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

Gold, silver continue their descent; an interesting take on the level of commitment to precious metals in a well-balanced portfolio

(USAGOLD – 9/24/2020) – Gold continued its descent but the rate of decline seemed to be slowing this morning. It is down $10 at $1856 (after yesterday’s $40 decline). Silver’s descent, however, continues at a more virulent pace. It is down 82¢ at $22.03 – a roughly 3.5% decline from yesterday (and a nearly 25% decline from its peak of $29 in early August.) We note a pick-up in the number of orders at our online purchasing portal the past two days for both gold and silver – a reminder that there are always safe-haven investors with a longer-term profile who see corrections as buying opportunities.

Investors often ask about the percentage commitment one should make to precious metals in a well-balanced investment portfolio. Analyst Michael Fitzsimmons offered an interesting take on that subject in a recent Seeking Alpha editorial, “Assuming a well-diversified portfolio (which does include cash for emergencies),” he says, “my belief is that middle-class investors (net worth under $1 million), should own at least 5-10% in gold. I also believe that as an American investor’s net worth climbs, the higher that percentage should be because, in my opinion, he or she simply has more to lose by a falling US$. For instance, an investor with a net worth of $2-5 million might have a 15-20% exposure to gold; $10 million, perhaps a 30-40% exposure.” (More on Fitzsimmons thinking in the “Chart note” below.)

Chart of the Day

Aggregate National Debt
(United States)

bar chart [utting growth of national debt into long term perspective astronomical growh this year

Chart courtesy of TradingEconomics.com • • • Click to enlarge

Chart note:  “The basic thesis of the interview* is that America has not been a good steward of the benefits of capitalism,” writes analyst Michael Fitzsimmons at Seeking Alpha (quoted and linked above), “which has increasingly gone to fewer and fewer people even as the U.S. has created a mountain of debt. That leads to a loss of productivity and reduced opportunity for the country’s citizens. And, as Dalio puts it, ‘Wealth cannot be created by creating debt and money.’ The result, Dalio believes, is that the world is likely to change in ‘shocking ways’ over the next five years, including a loss of faith in the U.S. dollar: ‘Within the next five years you could see a situation in which foreigners who have been lending money to the United States won’t want to.’”

*Ray Dalio interview at MarketWatch (9/18/2020)

 

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

Gold breaks below $1900, investors fear a prolonged stall on stimulus package

(USAGOLD 9-23-2020) – Gold broke below the $1900 mark for the first time since July in overnight trading. At the open for US markets, the yellow metal is down $17 at $1885. Silver’s move to the downside has been even more pronounced. It is down $1.03 this morning at $23.43. Investors seem to be concerned about Fed Chairman Powell’s putting the onus on Congress yesterday to augment the central bank’s stimulus package, and Congress’ ability, in turn, to actually come up with the legislation required to get the job done. There is talk about a prolonged stall on the economy as Washington turns its attention to the nomination of a new Supreme Court justice.

We are beginning to get warnings from major institutional players that we could be in for a steeper near term slide in the gold market. Citibank came out yesterday with an advisory saying that it continued to be bullish “tactically and structurally,” but stating that a close below the 55-day moving average of $1920 would be a “warning of a deeper correction.” Credit Suisse is calling for “further consolidation” with $1765 cited as a possibility if the current short term downtrend “continues for longer than expected.”

Chart of the Day

bar chart showing month over month previous year returns gold investment

Chart courtesy of the St. Louis Federal Reserve [FRED] Source:  ICE Benchmark Administration
Click to enlarge

USAGOLD note:  Gold has delivered some impressive returns in 2020 when shown as the percent change from the same month one year ago with several months in the 25% to 30%+ range.

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

Gold continues down, Commerzbank says dollar-euro currency war has already begun

(USAGOLD – 9/22/2020) – Gold took an abrupt turn to the south early yesterday following remarks from European Central Bank President Christine Lagarde widely viewed as talking down the euro. Her remarks, in turn, were inspired by an unexpected early surge of virus infections in Europe. By day’s end, the precious metal finished down $38 at $1914 falling briefly at one point below the $1900 mark. This morning, the precious metal is down another $3 at $1912. Silver is down 42¢ at $24.39.

Germany’s Commerzbank believes a currency war has erupted between the dollar and the euro, according to an analysis reviewed by Kitco yesterday. “Gold should emerge victorious in this environment,” says the bank, “because it cannot be reproduced at the push of a button as the USD, EUR or other fiat currencies can. After all, given the corona pandemic’s negative impact on the economy and inflation, hardly any central bank wants to see an overly strong currency at present.” As a result, says the bank, investors should look beyond the near term noise and focus on gold’s longer-term trend.

On this side of the big pond, Fed Chairman Powell answered Lagarde with a volley of his own yesterday afternoon saying “[w]e remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.” Commerzbank believes Powell will lean heavily on Congress during testimony later today to do its part in stimulating the economy. Whether or not Congress can muster an effective fiscal rescue in an election year remains to be seen.

Chart of the Day

Chart showing drop in corporate insider stock trades 9-18-20Chart courtesy of SentimenTrader.com–JasonGoepfert • • • Click to enlarge

Chart note:  Smart money is stepping away from the stock market, says SentimenTrader’s Jason Goepfert. “One of the supporting legs of the rally beginning in the spring and lasting through June had been buying pressure from corporate insiders and other “smart money” investors. That began to moderate in August, especially among technology shares. Lately, buying interest has dropped off significantly among members of the S&P 500. While there are still a large number of buyers over the past 6 months thanks to heavy interest in the spring, it’s dropping quickly.” Goepfert goes on to say that the negative velocity is a concern but a minor one based on the still high overall Buy/Sell ratio. Things can change quickly, though, particularly in over-bought, frothy markets supported by weak-handed buyers. We are likely to find out soon enough if smart money is running ahead of the crowd.

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

Gold turns south on resurgent virus concerns in Europe

(USAGOLD – 9/21/2020) – Gold took a turn to the south to start the week as virus infections unexpectedly mounted in Europe and the dollar rose accordingly. The yellow metal is down $27 at $1926 and silver is down 61¢ at $26.24. In a break with trends in the recent past, European stocks led global markets lower posting 3% losses or more across most markets – weakness that has spread to U.S. stock markets in early trading. The Dow Jones Industrial Average is down 580 points as we post this report.

“It seems counter-intuitive to think of equities as safe,” writes John Plender in a recent Financial Times article on the Fed’s shift to an inflationary bias, “but equally, it is hard to believe that government bonds yielding little or nothing are not a hostage to fortune when central banks are working overtime to generate higher inflation. For long-term investors, this boils down to choosing between governmental paper promises and real assets such as property, commodities and gold. It is, in the time-honoured phrase, a no-brainer.”

Chart[s] of the Day

bar chart illustrating the real rate of return on gold since 2000

chart showing the real rate of return on the dollar 2000 to present

Sources:  Bureau of Labor Statistics, ICE Benchmark Administration, Board of Governors Federal Reserve, St. Louis Federal Reserve [FRED]

Chart note:  Analysts often cite the real rate of return on yield instruments as one of the inducements for gold ownership. Gold has provided a real rate of return in 13 of the past 20 years.  The dollar, using the rate of return on one-year Treasuries as a benchmark, has provided a real rate of return in only six of the past 20 years. With the Fed promising to hold rates near zero until 2023, gold prospects have been significantly elevated among money managers and private investors alike.

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

Gold continues to bounce around looking for direction, gold demand springs to life in China and India

(USAGOLD –9/18/2020) –  Gold continues to bounce around looking for direction as we close the week. The markets remain in a wait and see mode after the Fed’s non-committal policy response on Wednesday and before Congress decides on the next bail-out package. The metal is up $7.50 at $1954.  Silver is level at $27.12. The upside for gold, as we pointed out last week, has been capped by diminished interest above the $2000 level and supported with buying under the $1950 level. It is not at all surprising that gold would encounter heavy resistance at the $2000 level. Resistance has come at nearly every big number – $1400, $1500, $1600, etc. – all the way up and since the launch of this uptrend in 2019.  Why should $2000 – the biggest number of them all so far – be any different?

We find ourselves in the camp that sees price corrections and consolidation as signs of a healthy market. A stodgy price environment also provides an opportunity for those looking to shore up their portfolios against whatever uncertainties might lie ahead. Along these lines, ForexLive’s Giles Coghlin reports this morning that Swiss exports of gold to China sprang to life in August after a five-month break. India’s gold imports were up 171% in August. Gold buyers in both countries like to take advantage of price weakness. The uptick in demand also signals that the two largest markets for gold might be emerging from the debilitating virus lockdowns earlier this year.

Chart of the Day

overlay chart showing gold and the purchasing power of the dollar 1971 to Sept 2020

Sources:  ICE Benchmark Administration, Bureau of Labor Statistics, St. Louis Federal Reserve [FRED]
Click to enlarge

Chart note:   A  ten-dollar bill stuck under the mattress in 1971 would have the purchasing power of roughly $1.60 today. The equivalent of $10 in gold (.286 troy ounces) put under the mattress in 1971 would have the purchasing power of almost $565 today (at $1975 per ounce).  Over the long term, cash is cold comfort to the saver …… if its comfort at all.  That is why Ray Dalio, manager of the largest hedge fund in the world, recently said ‘cash is trash’ and recommended a long term holding in the yellow metal instead. It is not difficult to understand, at the same time, why someone might want to keep a fairly substantial emergency stash of the green stuff nearby under current circumstances.

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

Gold turns moderately south, Fed content to let the tincture of time do its work

(USAGOLD –9/17/2020) – Gold took a moderate turn to the south in the aftermath of an uneventful Fed meeting and press conference. The markets, it seems, were hoping for a pleasant surprise but got more of the same instead. Gold is down $17 at $1945.  Silver is down 37¢ at $26.88. In the end, what matters most is the trend in Fed policy and how it is manifesting itself in the numbers. Today’s Charts of the Day are instructive in that regard [Please see below.]. The Federal Reserve Open Market Committee, Chairman Powell tells us, remains fully committed to staying the course on interest rates and its bond market purchases. We have begun to see some direct inflationary results from that policy. Consumer prices, we should remember, are up 1.6% over the last three months. After all is said and done, the FOMC appears content, at least for now, to let the tincture of time do its work.

It is with those policies in mind that Bloomberg commodity strategist Mike McGlone sees gold as stronger now than at the outset of the 2001-2011 leg in the bull market. He sees the yellow metal as gathering itself for a “rhyming rally” in the years ahead that could “nudge gold to $4,000 an ounce in 2023.” In a recent post at his Twitter account, he goes even further saying gold is “set for $7000 per ounce by 2025 if trends stay friendly.” He concludes that “rising gold prices despite declining managed-money net-longs and an advancing dollar, are a sign of the strengthening foundation under the metal. Less speculation vs. more organic demand forces are at play for the store of value, which indicates a healthy bull market.”

Chart[s] of the Day          

bar chart showing excess reserves for depository institutions as of Aug 2020Source:  Federal Reserve Bank of St. Louis

line chart showing growth in money supply mzm as of Aug 2020Source:  Federal Reserve Bank of St. Louisoverlay line chart showing growth in money supply and gold price increase Aug 2020Source:  Federal Reserve Bank of St. Louis, ICE Benchmark Administration (IBA)

Chart note:  During the financial crisis that began in 2008, the Fed sterilized its money creation by routing money back to its coffers in the form of commercial bank excess reserves – a strategy that kept the inflation rate from running out of control. As you can see in the first chart, the current level of sterilization, at least in the short term, is greater than what occurred in the 2008-2014 period. At the same time, as you can see in the second chart, the rapid growth in the money supply this time around goes beyond anything that occurred during the prior crisis. Whether or not the growth in the money supply will translate to price inflation down the road remains to be seen – though we have begun to see some signs as noted above that it might be taking root. (Please also take note that the growth in the money supply began roughly a year ago – well before the onslaught of the coronavirus pandemic.) As you can see in our third chart, gold has tracked MZM higher since early 2019.

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

Gold pushes higher ahead of Fed meeting; CNBC survey reveals high Wall Street expectations for stimulus measures

(USAGOLD –9/15/2020) – Gold continued to push higher in the wake of Treasury Secretary Mnuchin’s cautioning of the Fed and Congress that “now is not the time to worry about shrinking the deficit and the Federal Reserve’s balance sheet.” Mnuchin’s unusual appeal comes ahead of the Fed’s meeting and press conference tomorrow and amidst the ongoing wrangle in Congress over a fiscal spending package. Wall Street, for its part, expects trillions more in stimulus from the Fed and Congress, according to a CNBC survey released this morning. Those expectations look like they might be spilling over to the precious metals markets. Gold is up $11 in today’s early going at $1971. Silver is up 38¢ at $27.60.

“What we are witnessing,” writes economist and fund manager Daniel Lacalle in an essay at the Mises Institute website, “is a generalized fiat currency debasement through extreme monetary policy. That is the reason why gold and silver continue to rise despite hopes of an economic recovery that seems to be stalling. The US Dollar will likely remain the most demanded fiat currency, but the excessive monetary stimulus will ultimately damage the confidence in most fiat currencies.”

Chart of the Day

bar chart showing additions to the national debt with Q2 being off the chart

Chart note:  The addition to the national debt through the first two quarters of this year is a record-breaker – over $3.2 trillion – the result of plummeting revenue and soaring expenditures.

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

Gold begins week on solid note; gets boost from Mnuchin comments

(USAGOLD – 9/14/2020) – Gold began the week on a solid note continuing to take its cue from the weaker dollar and some hoped-for support and encouragement from the Fed at midweek. Treasury Secretary Mnuchin gave the metals an additional boost this morning by telling CNBC that “now is not the time to worry about shrinking the deficit and the Federal Reserve’s balance sheet.” Gold is up $17 at $1960.  Silver is up 33¢ at $27.16.

In an interview posted at the TheMarketNZZ website, financial historian Edward Chancellor says we could be nearing a period of “quite substantial inflation” the result of central bank policies and warns that there is almost nowhere to hide. “Financial assets,” he goes on “do not respond so much to the level of inflation but to the change in inflation rates. When inflation is taking off, gold tends to do quite well. I try to keep at least 80% of my wealth in real assets rather than in paper assets. I don’t own any long-dated government bonds. I can’t think of constructing a portfolio that would protect you under all circumstances. I actually don’t think prudent investing is possible these days.” [Emphasis added.]

Chart[s] of the Day

Gold, silver and the DJIA – Year to Date

Overlay chart showing comparison of gold silver dow jones year to date 2020

Chart courtesy of TradingView.com • • • Click to enlarge.

Gold, silver and the DJIA – One Year

overlay chart showing gold silver dow jones performance past twelve months through 9-11-2020

Chart courtesy of TradingView.com • • • Click to enlarge.

Chart note:  As of last Friday (9/11/2020), gold is up 29.53% over the past 12 months. Silver – now outperforming gold on a 12-month basis – is up 47.52% and the Dow Jones Industrial Average is up 1.95%.  Year to date, gold is up 26.85%. Silver is up 48.43% and the DJIA is down 4.17%. 

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

Gold closing out lackluster week on quiet note, resistance has come at big numbers all the way up

(USAGOLD – 9/11/2020) – Gold looks to be closing out a lackluster week on a quiet note. It is down $1 at $1947.  Silver is down 9¢ at $26.86. Gold has been digesting gains from the strong surge since the beginning of the year for several weeks now. The upside has been capped by diminished interest above the $2000 level and supported with buying under the $1950 level.

It is not at all surprising that gold would encounter resistance at the $2000 level. Resistance has come at nearly every big number – $1400, $1500, $1600, etc. – all the way up, since the launch of this uptrend in 2019.  Why should $2000 – the biggest of them all so far – be any different?  We find ourselves in the camp that sees price corrections and consolidation as signs of a healthy market. They also provide an opportunity for those looking to shore up their portfolios against whatever financial and economic dangers might lie ahead. As we go to post today’s report, the Bureau of Labor Statistics reports a .4% gain in consumer prices for August – another sharp increase following .6% gains for both June and July.

Chart of the Day

line chart showing euro/dollar year to date as of 9-1-20Chart courtesy of TradingView.com • • • Click to enlarge

Chart note: “The chief investment officer of currency manager A.G. Bisset,” reports Reuters recently, believes the U.S. currency will plunge 36% against the euro over the next year or so, taking it to levels it has not seen in more than a decade. The greenback’s recent weakness ‘is the beginning of a very large move’ that could hurt the droves of investors exposed to it through their holdings in U.S. stocks and bonds, [Ulf]Lindahl said.”  When you consider this assessment against the consensus view that the Fed will hold interest rates near zero for years to come, Lindahl’s 36% decline against the euro begins to make some sense.

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

Gold stages surprise rally, pushes higher in concert with stronger euro

(USAGOLD – 9/10/2020) – Gold pushed higher during European trading hours on dollar weakness and concerns that a vaccine might be further down the road than previously thought. It is also drawing strength from the ECB’s decision overnight to leave rates unchanged and purchase another €1.35 trillion in government and private debt. ECB President Christine Lagarde also noted that there is “no reason to overreact to the [euro’s] recent rise,” according to a Bloomberg report. This morning’s upside is a continuation of yesterday’s surprise rally off lows near $1910 per ounce. Gold is now trading at $1959 – up $10 on the day. Silver is up another 37¢ at $27.43.

Credit Suisse is out with its latest forecast for the yellow metal which calls for a period of consolidation followed by more advances to the upside. “Gold continues its expected consolidation following the move to our base case objective of $2075/80,” it says in a report summarized at FXStreet. “Whilst we continue to see the long-term trend higher, reinforced by falling US Real Yields and a falling USD, our immediate bias remains for further consolidation above a cluster of supports at $1887/37, which includes the 23.6% retracement of the rally from the 2018 low. Should weakness extend, we would see scope for a deeper setback to $1765, potentially $1726. … We look for an eventual move above $2075 with resistance seen next at $2175, then $2300. Whilst we would look for a fresh consolidation at this latter level, a direct break can see potential trend resistance at $2417, with scope seen for $2700/20 over the longer-term.” [Emphasis added]

Chart of the Day

line chart showing the change from previous year in billions of dollars 2020

Chart courtesy of St. Louis Federal Reserve • • • Source: Board of Governors of the Federal Reserve

Chart note: “[H]alf of investment-grade corporate debt, or $3.6 trillion, resides within the borderline BBB credit-ratings category, only a few notches away from speculative-grade, or ‘junk,’ territory,” reports MarketWatch in a recent article.  “A longtime worry among investors has been that an economic downturn or a sustained cycle of BBB downgrades by credit-rating firms could swamp the junk-bond market, which BofA pegs as roughly 250% smaller than the BBB segment.”  The abiding hope, we hasten to add, is that the Fed can keep the corporate debt market from imploding with continuing injections of liquidity, and that the rating agencies will refrain from dropping the guillotine on the weakest elements.

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

Gold trading quietly so far this morning, Bloomberg analyst sees possibility of $2583 in 2021

(USAGOLD – 9/9/2020) – Gold spent a quiet night overseas and opened slightly stronger in the United States with little in the way of news to push it convincingly in one direction or the other. It is trading early at $1938 – up $4 on the day. Silver is up 10¢ at $26.84. The past few trading session have had more the feel of the annual summer doldrums than the seasonally strong Septembers we have often had in the past. Bloomberg Intelligence’s Eily Ong offers a longer-term perspective on gold’s prospects in the most recent issue of Crucible magazine – a publication of the Singapore Bullion Marketing Association.

“Gold consumers’ adjustment to a higher price for the metal, along with greater investment demand, is a recipe for the precious metal’s potential price acceleration in 2021,” she writes. “Market sentiment for gold is likely to strengthen on dollar wobbles amid rising geopolitical risks in a lower-for-longer interest rate environment. Central banks and investors may absorb the market surplus as they seek gold for portfolio diversification and possibly as a hedge if inflationary pressures return on the substantial stimulus measures injected amid the global health crisis. … Our scenario analysis of the asset’s annual average price expectation for 2021 indicates a potential metal-price range between $1,306-$2,583/oz.”

Chart of the Day

overlay chart showing US federal revenue and spending 2018 to present

Chart courtesy of Pew Research • • • Click to enlarge

Chart note: “Among the collateral damage from the coronavirus pandemic has been the U.S. economy and the federal budget,” says Pew Research Center. “The pandemic has caused massive economic disruption, and the government’s response has pushed the federal budget further out of balance than it’s been in nearly eight decades. But Americans appear to be slightly less concerned about the deficit than they have been in recent years.” While the general public might be less concerned about deficits than it has been in the past, veteran market observers still consider government red ink a serious problem, as do most gold investors. In 2018, 55% said the budget deficit is a “very big problem.”  Now, 47% fall in that category. Note, too, that spending is nearly double revenue.

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

Gold off to wobbly start this morning, markets reading disinflation in cards – at least for now

(USAGOLD – 9/8/2020) – Gold is off to a wobbly start this morning coincident with a more than 3% drop in the tech-driven NASDAQ and a stronger dollar. It is down $14 at $1918.  Silver is down 35¢ at $26.61. With oil also down almost 6% this morning, the markets appear to be reading disinflation, even deflation, in the cards and reacting accordingly – at least for now. “Precedent for deflationary forces for about a decade, broad commodities are being buoyed by the rising stock market and are at elevated risk to an ebbing tide, in our view,” writes Bloomberg’s commodity strategist Mike McGlone in a recent advisory.

“For commodities to transition toward price-appreciation leadership,” he continues, “sustained dollar weakness is a typical prerequisite, in addition to demand-pull factors — notably in energy. The greenback may have peaked, but key supportive forces since 2011 — the U.S. stock market outperforming the world and relatively high Treasury yields — are intact. Our focus for the highest potential sustained commodity appreciation remains the metals sector, especially gold. Rapidly advancing technology is a tailwind for equities and metals, but pressures energy and agriculture. The enduring nature of quantitative easing should keep gold a performance leader, in our view.”

Chart of the Day

bar chart showinggold's annual returns 2000 through August 28 2020Click to enlarge

Chart note: Through August, gold has logged a 28.63% price increase – its third-best performance since 2000 with four months left to go in the year.

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

Gold meanders at lower end of trading range in featureless market

(USAGOLD – 9/3/2020) – Gold meandered at the lower end of its trading range in overnight markets. The featureless market of the past few days has coincided with a firmer dollar generally and improved, though still tenuous, sentiment on the direction of the economy. The downside for both metals is also a continuation of the profit-taking and technical selling that has gained momentum in the background over the past couple of weeks. Gold is down $8 at $1937. Silver is down 39¢ at $27.13. For a wider, somewhat offbeat perspective on the current gold market, we turn to analyst Louis-Vincent Gave and remarks posted at the Evergreen Gavekal website.

“For millennia,” he says gold has been valued for its beauty, which may explain why it becomes more attractive as its price rises. The new thing – certainly in 2001-11 – was most new wealth being created in emerging markets, where investors have a strong cultural affinity for gold. In contrast, the past decade saw most of the world’s wealth created around technology campuses on the US west coast by people with scant interest in the ‘barbarous relic’. This is interesting, as gold has ripped higher in the past two years in spite of a market consensus that global wealth creation in the coming years will match that of the last decade. In short, gold is showing strong momentum despite emerging markets having broadly been dogs with fleas for a decade. Imagine if the dollar is now done rising and EMs, led by Asia, again thrive. What a tailwind that would be for gold.”

Chart of the Day

Overlay chart showing FANG stocks versus Dow 30 K-shaped market

Chart courtesy of TradingView.com  • • • Click to enlarge

Chart note: “When extreme inequity,” says Financial Insyghts’ Peter Atwater who originated the K-shaped stock market chart reference, “is this obvious and this widely applicable, we’ve reached the point where the arm and the leg of the K are more like alligator jaws, primed to snap closed. Talk about the perfect accompaniment to an extraordinary financial market peak. Even inequity has been taken to extreme excess.” Some analysts see the FANG stocks showing a strong gain year to date versus the Dow Jones Industrial Average showing a minor loss as possibly indicative of a stock market rally built on a weak foundation.  Bloomberg’s John Authers reprises the K-shaped stock market recovery in this opinion piece headlined Those K-Shaped Fangs May Snap Shut on Investors.”

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

Gold turns marginally south, a bullish forecast for silver from Germany’s Heraeus

(USAGOLD – 9/2/2020) –  Gold turned marginally south this morning as the dollar reversed its recent downtrend and hope for improvement in the economy gained the upper hand – at least in early trading. Gold is down $5 on the day at $1967.  Silver is down 31¢ at $27.89. We spend most of our time and space here at the DMR talking about gold. This morning we turn our attention to silver with a bullish forecast from the German precious metals refiner Heraeus.

The jump in price in July,” it says, “reflected renewed interest by retail investors potentially priced out of gold. July represented one of the best months on record for silver, recording its largest monthly price gain since 1979. Inflows to silver ETFs have been very strong, with global holdings reaching a record 1,036 moz in August. … Silver has outperformed gold for many weeks now, which has seen the gold:silver ratio fall back to 71. Industrial demand is recovering but investor demand must be sustained for this outperformance to continue. With the economic outlook still uncertain, further stimulus measures by governments or central banks could keep investors interested in silver. The price is anticipated to trade within a range of $22.5/oz and $35/oz for the remainder of the year.” 

Chart of the Day

Line chart showing the gold silver ratiio as of 8-24-2020Chart courtesy of TradingView.com • • • Click to enlarge

Chart note:  When the ratio is radically askew, as it was over the past few years, something has to give. Either gold has to come down relative to silver or silver has to go up relative to gold.  This time around silver has gone up relative to gold and brought the ratio back in line. CPM Group – the New York City based precious metals consultancy – says that at the current nearly 73:1, it still might have a ways to go and that, in its opinion, the “upward move could still be quite explosive.” [Full article here]

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

Precious metals start September with show of strength, Eurozone slides into deflation

(USAGOLD – 9/1/2020) –  Precious metals started the month – usually, one of their strongest seasonally – with a show of strength as the dollar fell for the sixth straight day and the European Union reported a slide into deflation. Gold is up $20 at $1990. Silver is up 63¢ at $28.82. Analysts see gold’s stubborn positioning just below the $2000 mark as a response to Fed policies aimed at weakening the dollar and pushing up the inflation rate under deeply entrenched disinflationary circumstances. In that regard, the Eurozone’s brush with deflation serves as a warning shot across the Fed’s bow. CNBC is out with a report this morning predicting five years of zero percent rates at the minimum.

“In the past few months,” sums up Rothko Research in a recent report posted at Seeking Alpha, “the threat of a potential deflationary depression caused by the global supply and demand shock due to COVID-19 forced governments and central banks to massively and constantly intervene in the market. As a result, one of the most important charts in the current environment has been the annual growth in central banks’ assets, which reversed from -1.5tr USD in March 2019 to nearly 5tr USD in July 2020 and generated a tremendous rally in gold. Figure 1 (below) shows that the annual change in assets in the major 5 central banks (Fed, ECB, BoJ, PBoC, BoE) has co-moved significantly with the change in gold prices. With gold up over 25 percent year-to-date, investors have been questioning if the recent consolidation was announcing a temporary pause.”

Editor’s note: In turn, the ratcheting up of central bank balance sheets around the world has simultaneously prompted an extended run for gold in the world’s largest economies as illustrated in our Chart of the Day.

overlay chart showing G5 central bank assets and gold year over over 2012-2020Sources: Eikon Reuters, RR calculations
Courtesy of Seeking Alpha/Rothco Research

Chart of the Day

Gold in six major currencies as of 8-28-2020Chart courtesy of TradingView.com • • • Click to enlarge

Chart note:  Over the past five years, gold has risen sharply in six of the world’s top currencies – Indian rupee (+92.19%); Chinese yuan (+87.0%); U.S. dollar (+74.05%); British pound (+100.77%); European euro (+63.5%), and Japanese yen (+50.52%).  The rising tide in those currencies represents concern among the citizenry of each country about further debasement of the national currency and attendant systemic risks. (All as of 8/28/2020)

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

Gold settles down after hectic last week, silver continues to lead way higher

(USAGOLD – 8/31/2020) –  Gold looks to be settling down some this morning after last week’s hectic, back and forth trading. Silver, though, continues to lead the way higher – up 42¢ this morning at $28 even. Gold is trading at $1968 up $2 on the day. The biggest news over the weekend was the Ohio Police and Fire Pension Fund’s decision to allocate 5% of its nearly $16 billion in assets to gold [LINK]. Negative real yields, inflation-deflation concerns, and extraordinary monetary and fiscal stimulus top a growing list of concerns among money managers and private investors who, in turn, have stepped-up precious metals allocations for asset preservation purposes. “The bottom line,” says Brien Lundin in the latest edition of Gold Newsletter, “is that there have never been so many powerful factors arguing for much higher gold and silver prices, and for so many years into the future.”

 Chart[s] of the Day

Gold, silver and the DJIA – Year to Date

overlay chart showing gold siver Dow Jones price performance year to date through 8-28-20

Chart courtesy of TradingView.com • • • Click to enlarge.

Gold, silver and the DJIA – One Year

overlay chart showing gold silver Dow Jones performance over past 12 months through 8-28-20

Chart courtesy of TradingView.com • • • Click to enlarge.

Chart note:  As of last Friday (8/28/2020), gold is up 27.6% over the past 12 months. Silver now outperforming gold on a 12-month basis is up 49.88% and the Dow Jones Industrial Average is up 10.05%.  Year to date, gold is up 28.49%. Silver is up 52.68% and the DJIA is down .74%. 

 

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