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 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 |