Gold, silver drift sideways; Boele, Mobius see solid future for the yellow metal

(USAGOLD – 11-15-2019) –  Gold drifted sideways this morning as the trade war pendulum, at least for now, seems to have swung back to the positive (after swinging to the negative yesterday). Gold is down $2 at $1467.  Silver is down 8¢ at $16.91.  On the week, gold managed to eke out a .5% gain.  Silver is up .8%.

ABN Amro’s Georgette Boele is circumspect about gold’s near term prospects but sees good things farther out as 2020 unfolds, according to a report from Kitco’s Anna Golubova. “ABN Amro’s 2020 gold forecast,” she writes, “sees gold starting next year at $1,450, then heading to $1,500 in Q2, followed by a rise to $1,550 by the end of Q3, and then $1,600 by the end of Q4.”  Boele says that the bank is “optimistic for gold prices” in 2020, but waiting for a correction to jump in.

Taking a longer-term view, Mark Mobius (Mobius Capital Partners) says gold will double over the next ten years, according to a report posted at Newsmax. “I am bullish on gold,”  says the widely-followed investment analyst. “I am not saying that gold is not going to go down because it is going to fluctuate, but people should have at least 10 percent of their portfolio in physical gold.”


Quote of the Day
“An ounce of gold cost $271 in 2001. Ten years later it reached $1,896—an increase of almost 700 percent. On the way, it passed through some of the stormiest periods of recent history, when banks collapsed and currencies shivered. The gold price fed on these calamities. In a way, it came to stand for them: it was the re-discovered idol at a time when other gods were falling in a heap of subprime mortgages and credit default swaps and derivative products too complicated to even understand. Against these, gold shone with the placid certainty of received tradition. Honored through the ages, the standard of wealth, the original money, the safe haven. The value of gold was axiomatic. This view depends on a concept of gold as unchanging and unchanged—nature’s hard asset.” – Matthew Hart, Vanity Fair

Chart of the Day

Chart of monetary eras - gold standard and fiat money

Chart note: We have had quite a few new visitors over the past few weeks who are looking into gold for the first time, and this chart more than any other, we feel, is central to understanding why gold continues to make sense as a long-term portfolio holding. 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 downs 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 up tentatively this morning on trade talk stall and China, Germany slowdown

(USAGOLD – 11/14/2019) – Gold continued to recover from recent lows in overseas trading as progress in the trade talks stalled, according to reports, and signs of deepening global slowdown emerged in China and Germany.  Those tentative gains carried over to the COMEX open where the yellow metal is now trading at $1468 – up $4 on the day.  Silver is level on the day at $16.96.

Lombardi Letter’s Moe Zulfiqar writes that there are two large gold buyers in the gold market “worth paying attention to” – central banks and gold ETFs. He reminds us that central banks are on a pace in 2019 to surpass 2018’s record purchases, the largest in fifty years. “In the third quarter of 2019,” he says, “central banks purchased 156 tonnes of gold for their reserves. Year-to-date in 2019, central banks have purchased 547.5 tonnes of gold. This is 12% higher than in the same period of 2018.* How significant is this? According to the U.S. Geological Survey, global mine production in 2018 was 3,260 tonnes.** So, in the first three quarters of 2019, central banks purchased nearly 17% of the total global gold mine production.”

* (Source: “Gold Demand Trends Q3 2019,” World Gold Council, November 5, 2019.)
** (Source: “Gold,” U.S. Geological Survey, last accessed November 12, 2019.)

Quote of the Day

“Argentinians unfortunately are accustomed to this drama, having seen years of high inflation, hyperinflation in 1989-1990, a severe economic crisis in 2001-2002, and many instances of rapid loss of value and confidence in their currency, the peso. For example, during the hyperinflationary period in 1989, prices in Argentina rose by an annualized 5000%. During the 2001-2002 crisis, the peso lost three-quarters of its value at the same time that bank accounts across Argentina (in both US dollars and pesos) were more or less frozen. With the local population accustomed to rapidly escalating prices, evaporating savings and a plummeting peso, Argentinians have on a number of occasions done what everyone across the world eventually does when confronted with this same problem: they buy hard currencies and gold.” – Ronan Manly, Bullion Star

Chart of the Day

Bar chart showing the change in Fed's balance sheet, now growing again

Chart courtesy of the St. Louis Federal Reserve [FRED]
Source:  Board of Governors Federal Reserve System [US]

Chart note: This chart of U.S. Treasury securities held by the Federal Reserve shows an abrupt reversal of the quantitative tightening program begun in early 2018. Current repo rescue operations, or QE Lite as it has been dubbed, is likely to further boost the Fed’s stockpile of U.S. Treasuries.
Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold in recovery mode – up $16 from yesterday’s lows

(USAGOLD – 11-13-2019) – Gold is in recovery mode after hitting a low of $1446 yesterday morning and the trade negotiations pendulum swung back again to the negative.  Now trading at $1462, the precious metal is up $16 from yesterday’s lows and $3.50 on the day.  Silver is up 6¢ at $16.88.  Gold rose immediately after President Trump delivered a warning before the New York Economic Club that the administration would raise tariffs on China “substantially” in the absence of a deal. For a good measure, he threw out a warning of substantial tariffs to other countries as well.  Yesterday’s market action serves as a further reminder of how rapidly psychology and price direction can change in today’s tightly wound market environment.

Quote of the Day
“We should hold our gold. Gold still represents the ultimate form of payment in the world. Germany in 1944 could buy materials during the war only with gold. Fiat money in extremis is accepted by nobody. Gold is always accepted.” – Alan Greenspan, in testimony to the House Banking Committee (1999)

Chart of the Day

Chart showing top ten central bank purchasers - Russia, Turkey, Poland lead packChart courtesy of the World Gold Council

Chart note: “On a net basis, reported year-to-date purchases – of a tonne or more – now total over 450t,” writes the World Gold Council’s Krishan Gopaul. “Of this, a total of 14 central banks have increased their gold reserves so far in 2019, compared to only two that have decreased their gold reserves. Should central banks remain net purchasers this year – which is looking like a racing certainty – it’ll also mark a decade since they switched from being net sellers.”

 

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

Gold drops again at the COMEX open, 3.3 million ounces dumped in paper gold yesterday

(USAGOLD – 11-12-2019) – After another attempt at a rally overnight ran out of gas, gold dropped again on the COMEX open.  It is down $5 on the day at $1450.50.  Silver is down 9¢ at $16.75. As reported yesterday, JP Morgan and Citibank led this bout of selling with their liquidation of gold futures’ positions late last week. Since then, BNN Bloomberg reports that an additional roughly 33,000 contracts, or 3.3 million ounces, were dumped in a 30 minute period yesterday morning. Those sales drove the price down another $10 and below the $1450 mark. The selling seems to have carried over to this morning’s open.  With the rapid drop in the price – almost $65 over the past week and $100 from its highs in early September – longer-term investors in the physical metal who like to buy the dips might be encouraged to test the waters at these levels.

Quote of the Day
“[L]arge government deficits exist and will almost certainly increase substantially, which will require huge amounts of more debt to be sold by governments—amounts that cannot naturally be absorbed without driving up interest rates at a time when an interest rate rise would be devastating for markets and economies because the world is so leveraged long. Where will the money come from to buy these bonds and fund these deficits? It will almost certainly come from central banks, which will buy the debt that is produced with freshly printed money.”Ray Dalio, Bridgewater Associates, Linked-In article

Chart of the DayMap of the world showing the difference in size between the Mercator map and reality

Map courtesy of Visual Capitalist

Chart note:  This map shows the difference between Mercator’s representation of country sizes and reality. “Mercator’s map,” says Visual Capitalist, “inadvertently also pumps up the sizes of Europe and North America. Visually speaking, Canada and Russia appear to take up approximately 25% of the Earth’s surface, when in reality they occupy a mere 5%.

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

Gold gives up marginal overseas gains, trying to get some traction

(USAGOLD – 11-11-2019) – Gold gave up marginal gains achieved in the overnight market early in the U.S.-based COMEX session.  The highpoint came at $1,466 and it is trading at $1461 now – up about $2 on the day and trying to get some traction. Silver is up 6¢ at $16.84. JP Morgan and Citigroup, according to a Bloomberg report, sold off gold positions last week contributing to the downside, but that selling according to reports was largely based on an improving geopolitical environment (including trade negotiations) – a position some will question. It might be, too, that, despite the lengthy public statements, the two trading desks simply wanted to book some short-term paper profits. Bloomberg quotes Invesco’s chief global market strategist, Kristina Hooper, as saying, “It’s been sentiment around the U.S.-China trade relationship that’s mostly driven the price of gold. That sentiment has improved, so there hasn’t been as much of a need for gold in recent weeks. But as we know that can change on a dime.”

Quote of the Day
“My time horizon is that I usually measure moves like these in terms of decades,” he said at the time (gold was trading just below $1300 per ounce). “So let’s look at it like this: The first move, the first leg, in gold took it from $250 per ounce to $1900. . .We’ve now been in a correction that has taken gold from $1900 back to where we are today. You could easily see gold fall a couple of hundred dollars before you see it go up a couple of thousand dollars, but each move has been a decade or more which means that when gold embarks upon its next move, I believe that you will see that long wave will take gold relatively quickly to the $3000 to $5000 target that I believe is fundamentally justified based on the facts we have today.” – Thomas Kaplan, Electrum Group Bloomberg interview (Late May 2019, just before gold began its climb from the $1280 level)

Chart of the Day

Bar chart showing annual returns on gold since 1997. 14.45% thru 11-7-2019

Chart note: For those exploring the virtues of gold ownership, today’s Chart of the Day is illustrative. Gold has provided a positive return in 15 of the last 19 years (since 2000). It is up 14.45% thus far in 2019 (through November 7).

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

Gold sell off continues – off $52 or 3.5% for the week

(USAGOLD – 11/8/2019) – Gold’s sell-off gained momentum during the European trading session shedding another $16 before finding tentative support below the $1460 mark.  It is now trading at $1460 – down $8.50 on the day. Silver’s downside was even more pronounced – tumbling another 26¢ to $16.86. Indications of progress on US-China talks triggered the drop initially but once the metals broke through support levels, technical selling added to the downside. As of this morning’s pricing, gold is down $52 or 3.5% on the week.  Silver is down $1.28 or 6.6%.

Technical analyst Clif Droke thinks current gold market weakness at its core is the result of decreased demand in China and India – the two mainstays in the physical market. He believes though that the effects of the sell-off might be limited. “[D]emand for the yellow metal as a safety hedge against geopolitical certainty was, and still is to some extent, a major driver for gold this year,” he says in a Seeking Alpha editorial,. . . “[W]hile investors and institutions may be inclined to liquidate some of their safe-haven holdings of the yellow metal in the wake of the latest progress to ending U.S.-China trade dispute, there are still enough geopolitical worries to warrant them maintaining some gold exposure in their portfolios as a hedge against future volatility.”

Recent reports of Swiss refinery exports shifting to London from Asian destinations support Droke’s observations. Those bullion exports are ending up in ETF stockpiles held by global investors – mostly among institutions and funds hedging economic uncertainty.

Closing note: We should keep in mind, too, that the status of trade talks has been a swinging pendulum. Today’s positive scenario could quickly switch to negative tomorrow. Late yesterday afternoon Reuters reported ‘fierce opposition’ at the White House to a rollback in tariffs.

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

Chart of the Day

HowMuch graphic of gold reserves by country in map formImage 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, silver slide on reports of trade talk progress

(USAGOLD – 11/7/2019) – Gold’s attempt at a recovery yesterday afternoon gave way to further selling in European markets overnight as China announced some positive results in the trade talks.  Gold is now trading at $1484 – down $6 on the day.  Silver is off 8¢ at $17.55. The markets are likely to await the details and confirmation from the US side before fully factoring in the latest announcement.

We are moving into the time of year seasonally when gold gathers momentum as shown in the chart immediately below. “The first thing to notice on the chart is that gold tends to go up quite strongly and with relatively little choppiness in the first two months of the year,” says analyst Mike Acra at FXStreet. “This fits in quite well with the ‘January story’ but if you take a look at the end of the year, you will notice that the move up actually starts in December, not January, so it might be beneficial to consider a ‘December-February story.’”

Line chart gold's seasonal trend – five year average

Quote of the Day
“I think these are unlikely to be good real returning investments and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold.” – Ray Dalio, Bridgewater Associates (Linked In post)

Chart of the Day

Overlay chart showing gold outperforming all major currencies since 1900Chart 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 rebounds modestly after yesterday’s sharp sell-off

(USAGOLD – 11/6/2019) – Gold is rebounding modestly this morning from yesterday’s sharp sell-off.  It is up $5 on the day at $1489. Silver is up 2¢ at $17.60.  “Traders seem a little tentative in the financial markets today,” says James Hyerczyk in a report at FXEmpire. “The trade deal is still an uncertainty with little revealed about its progress since late last Friday. On Tuesday, the U.S. Dollar soared against a basket of currencies on rising hopes for a U.S.-China trade deal and a string of solid U.S. economic data. The strong greenback drove down demand for dollar-denominated gold.” 

Quote of the Day
“When President Nixon closed the gold window at the U.S. Treasury on August 15, 1971, he told several whoppers. He said it was to ‘defend the dollar against the speculators.’ He also said the action would, ‘suspend temporarily, the convertibility of the dollar into gold.’ Furthermore, he told Americans that, ‘your dollar will be worth just as much tomorrow as it is today.’ Nixon’s actions came on the heels of 60-years of gradual steps to remove gold’s backing of the dollar. In effect, $1 today has the same buying power that $0.16 had when Nixon took these ‘temporary’ actions. Over this same period, the U.S. national debt has run up from about $398 billion to over $21 trillion, and the economy has been utterly warped.”  – M.N. Gordon, Economic Prism

Chart of the Day

Overlay ong-term chart of rising gold and falling purchasing power of dollar since 1970

Chart courtesy of the St. Louis Federal Reserve [FRED] / Source:  ICE Benchmark Administration Limited (IBA)

Chart note: Cause and effect in one simple, straightforward chart – purchasing power of the dollar and the price of gold.

 

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

Gold drops on rising trade optimism

(USAGOLD – 11/5/2019) – Gold dropped back below the $1500 mark this morning on rising optimism that the U.S. and China will reach an interim accord on trade.  Priced now at $1495, it is down $12 on the day.  Silver is down 17¢ at $17.85.

The World Gold Council is out with its quarterly report on gold demand this morning. It shows global investment demand, led by funds and institutions, more than doubling from the same quarter last year (Q3). Gold ETF stockpiles grew to an all-time high of 2855 metric tonnes – the equivalent of 35% of the U.S. gold reserve. The Council also reports year-to-date central bank gold purchases running 12% higher than over the same period last year. A 16% drop in jewelry purchases and a 50% drop in coin and bullion acquisitions tempered the strong demand from financial institutions and the official sector. Overall, across all categories, demand was 3% higher than the third quarter last year.

Quote of the Day
“The first thing to notice on the chart is that gold tends to go up quite strongly and with relatively little choppiness in the first two months of the year. This fits in quite well with the ‘January story’ but if you take a look at the end of the year, you will notice that the move up actually starts in December, not January, so it might be beneficial to consider a ‘December-February story.’”Mike Acra, FXStreet

Chart of the Day

Overlay chart of gold and silver One year thru 10/31/2019Chart note:  The past year has been a good one for the precious metals.  Gold is up 22.8% since November 1, 2018.  Silver is up 24.9% over the same period.  For the month of October, gold posted a 2.7% gain and silver a 6.4% gain.  Silver has been playing catch up over the past few months.

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

Gold drifts lower, silver higher in quiet start to week

(USAGOLD – 11/4/2019) – Gold drifted lower and silver higher to start the week as the US and China seemed to be moving closer to a “phase one” trade agreement.  Gold is down $4 at $1510 and silver is up 6¢ at $18.15.  Of late, silver has been the stronger of the two metals sometimes signaling upside breaks – even though those breaks have been minor. All in all, the precious metals market is off to a quiet start this morning.

Citing the optimistic outlook for gold among a number of big banks like Goldman Sachs and UBS Group AG, the Lombardi Letter says “Gold prices seem cheap now. If you are not looking at the yellow precious metal, you could be making a big mistake.” It goes on to cite Goldman’s call for $1600 per ounce in 2020 and UBS’ even more optimistic $1730 per ounce next year. “Big banks,” says the newsletter, “have a lot of influence over institutional investors. If they are turning bullish, it’s possible that deep-pocketed investors will allocate some money to gold. And this could be great for gold prices.”

Quote of the Day
“[W]hen I hear this thing in the financial media that the dollar is the best house in a bad neighborhood, I think to myself, this is ridiculous, because the neighborhood is going down the tubes. And so maybe the dollar is the tallest midget, all these stupid analogies. But at some point, capital will seek out safety, which is what gold represents. And I have to point out that gold has outperformed every stock market since 2000. I mean, most people don’t even think about that.” – John Hathaway, Tocqueville, Value Walk interview

Chart of the Day

Chart of Big Money sentiment surpassing lowest ever reading in 2002

Chart note:  “For the first time in 20 years,” says SentimenTrader’s Jason Goepfert, “the big money is betting against stocks. The latest semi-annual survey of big money managers by Barron’s showed a Bull Ratio below 50% for the first time ever, far surpassing the previous all-time pessimistic reading in October 2002.”

 

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

Gold up 2.7% in October, silver up 6.4%

(USAGOLD – 11/1/2019) – Gold is retracing some of yesterday’s big gains following the Fed policy announcement and press conference – now at $1509 and down $3.50 on the day.  Silver is down 7¢ at $18.03.  For the month of October gold was up $40 or 2.7%.  Silver, though, out-performed the yellow metal by a wide margin – up $1.09 or 6.4% for the month.

The World Gold Council released an excellent new report recently on the role of gold in central bank and institutional portfolios.  “Our research suggests,” says the Council, “that lower expected bond returns favor additional gold exposure in well-diversified portfolios. As bond yields fall, diversifiers with higher potential returns, like hedge funds, real estate and private equity, carry heavier weights in optimized portfolios. Our analysis also suggests that the historically higher volatility that accompanies these alternative investments, versus other assets such as stocks and bonds, warrants increasing allocations of gold to serve as a ballast in the event of a stock market pullback.”

That logic is well-taken and applies just as readily to private investor portfolios. Please see our Chart of the Day for more from that report.

Quote of the Day
“Bull markets can be classified as either secular (long term) or cyclical (bull phases within an overall bear market). Before its $1,400 per ounce breakout in June, gold appeared to be tracking, on a technical basis, similar to its 36-month cyclical bull market from 1993 to 1996. However, its current $1,500 price level hints at a potentially longer, sustained rally—perhaps more similar to the secular gold bull market of 2001 to 2008.” – Joe Foster, Van Eck Securities

Chart of the Day

Overlay chart of gold and global negative yielding debt – a direct correlationChart courtesy of the World Gold Council

Chart note:  “Gold prices,” says the World Gold Council in a report (It may be time to replace bonds with gold), “have responded to the surge in negative real-yielding debt, as evidence by the strong positive correlation between the amount of debt and price of gold over the past four years. To some degree, this illustrates the erosion of confidence in fiat currencies related to monetary intervention.”

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

Gold registers positive response to yesterday’s Fed meeting, back over $1500

(USAGOLD – 10/31/2019) – Gold began its rise about mid-way through Fed chairman Jerome Powell’s press conference yesterday and never looked back.  It is up $13 on the day and back over the $1500 mark at $1510.  Silver is up 25¢ and back over the $18 mark at $18.10. Gold’s initial response to the Fed’s policy stance was to sell-off. Then at the press conference Fed chairman Powell made the comment that “we would need to see a really significant move up in inflation that’s persistent before we even consider raising rates to address inflation concerns.” That gave gold the green light. It immediately reversed its downtrend and shot higher, and, at this posting, is up nearly $25 from the bottom it touched yesterday at $1485. The precious metals, in short, read more stimulus in the results of yesterday’s meeting and the Fed chairman’s comments.

Quote of the Day
“While many of the remaining ‘gold bears’ and those who claim that ‘gold’s rise is basically behind us’, they are mostly the same folks who said the same at $1,200 and who also claimed that gold was going under a $1,000 too. Words like ‘relic’ were common in their description of gold, and many of them even claimed that bitcoin and cryptocurrencies were the ‘new gold’. How’s that working out for them?” – Peter Grandich, Peter Grandich and Company

Chart of the Day

Graphic of Pew Research study - When the public looks to the future

Published with permission of Pew Research Center

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

Gold reverses course, moves higher ahead of FOMC results

(USAGOLD – 10/30/2019) – Gold reversed course during European trading hours and held that upside at the COMEX open.  It is trading at $1493 – up $5.50 on the day.  Silver is up 4¢ at $17.86. Though the upcoming election in the UK, in which Brexit will be the centerpiece, seems to have added some impetus to the price this morning, the greater influence is probably some cautious betting that the FOMC will present a future policy stance favoring more stimulus. The FOMC is scheduled to release the results of its meeting at 2 pm ET.  Chairman Jerome Powell’s press conference is scheduled for 2:30 pm ET.

Consensus opinion has it that the Fed will lower rates by a quarter-point to the 1.5% to 1.75% range. If there is going to be any real drama resulting from this meeting, it will likely come during the post-meeting press conference. The Fed chairman is likely to be pressed on any future cuts and what is behind the surprise repo liquidity operations that began in September. J.P. Morgan’s fixed income analyst Joshua Younger recently warned that “[w]ith year-end coming up, this [repo liquidity problem] is all likely to get much worse, in our view, before it gets better.”

Quote of the Day:
“As we have forecasted, due to growing recession risks, central banks are about to conduct a big ‘monetary U-turn.’ Expect more QE, lower rates and MMT-style policies like ‘QE for the people.’ The erosion of trust in many areas plays into gold’s hands. An end to these crises of trust is not in sight. The steady buying of gold and the repatriation of central bank gold indicates rising mutual distrust among central banks.” – Ronald-Peter Stoeferle Mark J. Valek, Incrementum Chart Book

Chart of the Day

Map showing rate cut trend globallyChart note:   Alistair Hewitt, Head of Market Intelligence at the World Gold Council, offers this bottom-line assessment not often raised these days in gold-market analysis: “. . .[O]pportunity cost has been the most important factor driving the gold price up in 2019. As shown above, interest rates have been lowered and the stock of negative-yielding bonds has grown rapidly, lowering the opportunity cost for holding gold. Falling rates and negative returns have made government debt less attractive and have increased the possibility of higher inflation and currencies depreciation in the future.” [Link to full analysis]

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

Gold continues to push south in advance of Fed meeting

(USAGOLD – 10/30/2019) – Gold continued to push in southerly direction on day two of Fed Week as markets fretted over what the Fed might or might not do at its meeting beginning today and what its chairman might or might not say tomorrow in the aftermath.  The metal is down $3 at $1489. Silver is down 12¢ at $17.71.

Saxo Bank ‘s Ole Hansen neatly summed up the gold market’s stubborn dynamics at this juncture in a report released yesterday. “Gold’s rangebound trading behaviour around $1500/oz,” he writes, “extended into an 11th week with the market in need of a spark to kick it back to life. Trading up by 17% year-to-date and with the GDX ETF tracking major miners up by 30% it is only natural to see some caution emerging ahead of year-end. Gone for now is the roaring bond engine, which back in June and August helped the yellow metal break above $1380/oz and outside of its multi-year range. But despite seeing bond yields stabilize following their rapid descent, U.S. stocks near a record high and the outline of a trade deal emerging, gold has managed to avoid a major correction as the underlying demand remains.”

Quote of the Day
“Following a strong first eight months of the year, the precious-metals complex may be in the process of offering investors one final chance to enter on attractive terms before lurking systemic risks erupt into breakaway price action.” – John Hathaway, Tocqueville

Chart of the Day

Chart showing the real rate of return on the dollarChart note:  The chart above illustrates the real rate of return of the dollar since 2000. “Geopolitics, monetary policy and a slowing economy,” says Sam Bourghi at CCN Markets, “have all been cited as primary factors behind gold’s bullish breakout in 2019. While these catalysts cannot be discounted, the real reason gold is surging and why it will continue to do so is the trend in real interest rates relative to inflation.”

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

Gold stumbles at the gate for Fed week. Standard Chartered looks to retail investors for boost in 2020 gold demand.

(USAGOLD – 10/28/2019) – Gold stumbled out of the gate as we move into Fed week – posting a $5 decline and falling again just below $1500 mark.  Silver is 5¢ lower at $17.97. Most analysts think the central bank will cut rates another .25%, but time convey at the same time a non-committal stance on the future. Trade, recession and geopolitical worries still bedevil the financial markets and fuel uncertainty among investors – a situation likely to influence both the Fed and demand for the precious metals as we move into their seasonally strong months. [Please see our Chart of the Day below.}

“Although we’ve seen ETF holdings and tactical investment hitting elevated levels, like peak highs, we think retail demand is really going to be what drives the next leg higher,” Standard Chartered’s Suki Cooper said in a NewsMax/Bloomberg article. “Retail investors almost want confirmation of further rate cuts, some weakness in the equity markets before they move into gold. The next leg higher in 2020 is going to be led by the retail side.” Cooper sees gold as trading at the $1570 level by the fourth quarter of next year.

Quote of the Day
“But Jason Zweig, Warren Buffett and other notable gold critics who complain about the metal ‘just sitting there’ fail to understand the flaw in their basic assertion. What they believe to be a potent argument against gold is, itself, one of its great attributes. An asset which can ‘just sit there’ forever, largely impervious to outside political and economic forces, is extraordinary.” – Clint Siegner, Gold Eagle

Chart of the Day

Chart note:  Gold’s seasonality chart (5-year) points to the possibility of rising prices from December through May.

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

Gold gains momentum, silver shines – up 2.7% on the day.

(USAGOLD – 10-25-2019) – Gold gained momentum in overnight markets after breaking through the $1500 barrier yesterday.  It is now trading at $1513 – up $10 on the day.  Silver, though, has been the star performer once again this morning – up 48¢ at $18.30, a 2.7% gain. At the moment there does not seem to be anything definitive enough in the news to explain this morning’s upside other than a prevailing sense that the economy simply is not performing all that well.

“As [gold] volatility declines and the price trades in an ever-narrower range,” writes Brien Lundin in Gold Newsletter, “it presages a breakout in one direction or the other. Given the renewed evidence of an economic slowdown in the U.S. economy and the likelihood of a Fed rate cut next week, I think the odds favor a break to the upside. If gold can power through that upper line at around $1510, that achievement could also bring in more technical buying and add fuel to the uptrend.”  This morning, as mentioned at the top, we went through Lundin’s $1510 barrier.

Quote of the Day
“Bloomberg terminals, the financial software system used by countless analysts and traders around the world, has a problem: its system cannot price callable bonds using negative interest rates. Programmers never considered such a scenario, and thus failed to code the system accordingly. So users get an error message when they attempt to force negative bond yields into their machines. . .“Under what scenario would anyone lend $1,000 to receive $900 in return at some point in the future?” ” – Jeff Diest, Mises Institute (Negative Interest Rates are the Price We Pay for De-Civilization)

Chart of the Day

Chart showing negative yields on 25% of global debt

Chart courtesy of Visual Capitalist

Chart note:  “Historically,” says CNBC’s Maggie Fitzgerald in a recent article, “people give the government their money, instead of spending it, with the promise of being paid back over time, with interest. Now, governments are essentially getting paid to borrow money, as people become increasingly desperate for a safe haven for their wealth.”  About 25%, or $15 trillion, of the global debt draws a negative rate of interest.

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

Gold attempts foothold above $1490, big jump in Fed repo facility largely ignored

(USAGOLD – 10/24/2019) – Gold continued its effort to gain a foothold above the $1490 mark this morning  – inching $3 higher at $1495.  Silver is up a strong 18¢ at $17.74.  Most of the global events influencing gold’s pricing are on hold at the moment – Brexit, the trade talks, etc.  At the same time, the Fed’s ratcheting up of its liquidity facility for overnight repo to $120 billion has gone largely ignored – not just in the gold market but seemingly in most financial markets.  We may, however, get a delayed reaction once analysts have had a chance to sort out the implications. Incrementum released its 2019 ChartBook this morning and it includes an interesting insight along these lines from ERIC’s Russell Napier. “The time is coming,” he says, “(when) global financial markets stop focusing on how much more medicine they will get (QEs) and instead focus on the fact that it does not work.”

Quote of the Day
“[Financial Times’ Gillian] Tett’s article pinpoints the ‘belly of the beast.’ The GSEs, securitizations, sophisticated mortgage derivatives, and ‘repo’ finance created the nucleus of the risk intermediation and leverage fueling precarious mortgage finance Bubble excess. I am convinced the mushrooming of government bonds, the proliferation of global ‘repo’ markets and off-shore securities lending operations, along with unmatched global derivatives excess and leveraged speculation, are at the epicenter of the runaway ‘global government finance Bubble.’”Doug Noland, Credit Bubble Bulletin

Chart of the Day

Chart showing gold returns month over same month previous year, rising trend in 2019

Chart note:  On the annual returns chart (year over year for the same month) gold is showing numbers not seen since 2006-2011 price explosion.  For October 2019 thus far, the return is 22% over October 2018. 

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

Gold gets a modest lift but remains range bound around the $1490 mark

(USAGOLD – 10/23/2019) – Gold got a modest lift overnight when the British parliament voted to block Downing Street’s plan for an October 31st Brexit, but, at the same time, registered approval for the prime minister’s withdrawal plan overall. The mixed message pushed the metal $4.50 higher in early trading to stand at $1493.50.  Silver is trading at $17.57 – up 2¢ thus far today. Northman Trader’s Sven Henrich had this to say yesterday about gold’s rangebound behavior over the past several weeks. “Many of the questions I received are centered around why gold is not moving higher, is the bull phase for gold over? To which I say: Patience everybody. Gold is not a dot com stock. The move from 1277 to 1566 was a massive 22% ripper. In process gold became overbought and put in a negative divergence. A retrace not only made technical sense, it’s also necessary to prepare for the next bull phase if there is to be one.”

Quote of the Day
“As yet the equity market seems totally unaffected, with volatile and risky stocks still making the running. Although the brontosaurus has been bitten on the tail, the message has not yet reached its tiny brain, but is proceeding up the long backbone, one vertebra at a time.” – Jeremy Grantham, June 2007

Chart of the Day

Chart showing strong surge in money supply and gold in 2019

Chart note:  We posted this chart last week and thought worth a rerun today. It shows a correlation we have not brought to the attention of our readers in years – gold and the money supply. The upward trajectory in MZM, a broad money supply measure, began in May and has been relentless ever since.  To what we owe this unexpected phenomenon remains to be determined, but our guess is that it has to do with both declining rates and commercial banks’ deployment of excess reserves.  Whether or not it will result in price inflation down the road (the Fed’s fervent wish) remains an open question, but at the very least we can say that money growth has become a reality.

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

Gold up marginally in subdued market

(USAGOLD – 10/22/2019) – Gold is up marginally this morning as markets await a vote on Brexit today and details with respect to the ongoing U.S.-China trade talks.  It is trading now at $1486.50 – up $2 on the day.  Silver is down 2¢ after yesterday’s roller-coaster ride at $17.56.  In a recent Reuters article, AxiTrader’s market strategist Stephen Innes summed up the recent subdued market action as follows: “The markets are quite long and people are worried about the trade war. Investors are waiting for pullbacks in gold to step in again. What has been supportive for gold are recessionary fears, and provided that remains in the headlines, it is a significant reason to stay long gold. Right now, there is no major catalyst to drive it any direction.”

Quote of the Day
“Gold provides stable insurance against a weaponised US dollar. By hedging their portfolios with gold, Russia and China – especially China, given current events – can manoeuvre with wider geopolitical freedom. As the ‘de-dollarisation’ continues, expect more purchases by central banks, especially considering that gold consists of only 2.5 per cent of China’s foreign reserves, but over 75 per cent of US foreign reserves. How the currency war, in conjunction with the trade war, will unfold remains unclear. What is clear is that gold bullion – physical gold – is back in fashion among many central banks as a suitable substitute for fiat currencies that wield too much geopolitical muscle.” – Joshua Rotbart, managing director of Hong Kong’s J. Rotbart & Co. (as quoted in South China Morning Post)

Chart of the Day

Bar chart showing steady growth in China's gold reserves since 2000

Chart note:  China has been the global poster child when it comes to gold reserves having gone from roughly 400 metric tonnes in 2000 to 1925 metric tonnes now.  It has added consistently to that total over the past several months. Many gold market analysts that the true level of China’s gold reserves is much higher than what it has reported with some estimating the real number to be as high as 4000 tonnes.

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

Gold clings stubbornly to gains above the $1490 level, silver jumps almost 1.8%

(USAGOLD – 10/21/2019) – Gold continued to cling stubbornly to territory gained over the $1490 mark to begin the week. At $1494, though, it is up a modest $3 on the day.  Silver, on the other hand, is taking a more aggressive approach. It is up 32¢ – or almost 1.8% – at $17.86. If the metals seem in a quandary of late, it might have to do with the unresolved status of the issues at hand – the trade talks, Brexit, recession concerns and the repo liquidity problem – coupled with the Fed’s struggle to shape a meaningful policy response.

“In less than 12 months,” writes John Mauldin at GoldSeek, “we have seen the Fed raise rates, cut rates, shrink its balance sheet, expand its balance sheet, inject liquidity, withdraw liquidity, and do who knows what else behind the scenes. Either Fed officials are confused or we are at some kind of economic turning point. Or possibly both—there is no playbook. At a minimum, I think we are at a turning point and the Fed is having to improvise policy as events dictate.”

The markets perhaps sense the lack of a game plan and see improvisation as a poor substitute. And that may be why gold – at a time when many analysts expected it to take an aggressive turn to the south – has traded doggedly instead in a $20 range either side of the $1500 mark.

Quote of the Day
“Today, gold is more relevant than ever for institutional investors. While central banks in developed markets are moving to normalise monetary policies – leading to higher interest rates – we believe that investors may still feel the effects of quantitative easing and the prolonged period of low interest rates for years to come. These policies may have fundamentally altered what it means to manage portfolio risk and could extend the time needed to meet investment objectives. In response, institutional investors have embraced alternatives to traditional assets such as stocks and bonds. The share of non-traditional assets among global pension funds has increased from 15% in 2007 to 25% in 2017. And in the US this figure is close to 30%.” – World Gold Council

Note:  In this context, gold is considered a “non-traditional” asset yet it might be the most traditional asset of them all.

Chart of the Day

HowMuch visualization of most expensive U.S. wars in history – Revolutionary War through War in Afghanistan

Chart courtesy of HowMuch.net

Chart note:  “World War II is by far the most expensive in American history,” says HowMuch, “totaling 4.69T, more than every other war combined. The War in Afghanistan is only the third most expensive, however it is by far the longest at 18 years and counting. The total cumulative cost of the Civil War for both the North and the South is surprisingly small. Warfare is getting more expensive over time thanks to pricier weapons and far-off conflict zones.”

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