Gold moves cautiously higher to close the week

(USAGOLD – 1/16/2020) – Gold moved cautiously to the upside this morning – trading $3 higher at $1555.  Silver is up 8¢ at $18.04.  Both metals look poised to close the week at levels pretty much where they were last Friday – an equilibrium some see as encouraging in a week of positive data releases and the signing of the trade accord between the United States and China.

“The implication of gold’s refusal to succumb to selling pressure,” says analyst Clif Droke in a report posted at Seeking Alpha, “is that the ‘fear trade’ which made gold one of last year’s top-performing assets is still very much alive. Gold, in other words, is the safety trade that refuses to die and there are compelling reasons for this. The most important reason for owning gold is arguably the simplest explanation behind gold’s consistent strength: there are too many uncertainties still clouding the global economic outlook.”

Droke goes on to point out that “informed investors and money managers still own gold and many believe in the case for a continued bull market.” One notable example of that attachment came yesterday from Bridgewater Associates’ David Jensen, its co-chief investment officer, in a Financial Times interview. Gold, he said, “could surge to a record high above $2,000 an ounce as central banks embrace higher inflation and political uncertainties increase.”  Bridgewater Associates is the world’s largest hedge fund.

Chart of the Day

Gold chart since 1970
Chart note:  The long-term gold chart is impressive in that it shows the uptrend that began in 1971 with the introduction of the fiat U.S. dollar and continues to this day.  The turn to the upside at the far right of the chart is impressive in its own right in that it hints at the potential for another upside breakout similar to what occurred during both the 1970s and the first decade of the 21st century.  Many analysts feel that the long side-ways, see-saw market has come to an end and a new leg to the long-term, secular bull market has begun.

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

Gold gives back portion of yesterday’s post-agreement gains

(USAGOLD – 1/16/2020) – Gold gave back a portion of its gains posted late yesterday in the wake of the US-China trade agreement signing at the White House.  It is down $2 at $1554.  Silver is level at $18. Gold Newsletter’s Brien Lundin had an interesting take on yesterday’s post-agreement upside. “. . . [F]or the vast majority of the time that the markets have been laboring under the uncertainty of the China trade tensions,” he wrote, “any good news was considered bearish for the monetary metals and bullish for the dollar. Instead, gold and silver are rising nicely on the closing of this first phase of the deal, and the dollar is lower. A 180-degree shift in sentiment like this is very telling to me. Over my decades in the markets, I’ve learned that a true bull market is one that interprets seemingly bearish news as bullish. That’s what’s happening right now.”

Chart of the Day

Overlay chart showing gold and oil rising in tandem over the past 12 months

Chart note:  This overlay chart shows gold and oil pretty much rising in tandem over the past year with gold playing catch-up in the second half of the year.

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

Gold, silver unchanged, await incentive to move in one direction or the other

(USAGOLD – 1/15/2020) – Gold and silver begin the day essentially unchanged at $1550 and $17.85 respectively with both awaiting an incentive to move in one direction or the other.  At the moment, trade seems to be the dominant issue with an agreement between the United States and China scheduled to be signed in the White House sometime today. The South China Morning Post in an article co-authored with Politico – the US-based news service – says that the agreement’s scale is large. By the end of the article, though, it becomes very apparent that everything depends upon China delivering on the hefty numbers.  In short, even with an agreement signed, much remains up in the air with the threat of a return to high tariffs hanging ominously over today’s proceedings. The market reaction might turn cautious as the realities sink in.

The World Gold Council is out with a report this morning on gold’s prospects for 2020. “Gold,” it says, “has historically performed well in the 12 to 24 month period following policy shifts from tightening to ‘on-hold’ or ‘easing’ – the environment in which we currently find ourselves. And, historically, when real rates have been negative, gold’s average monthly returns have been twice as high as the long-term average. Even slightly positive real interest rates may not push gold prices down. Effectively, our analysis shows that it has only been in periods with significantly higher real interest rates – an unlikely outcome given the current market conditions – that gold returns have been negative.”  With that positive outlook in mind, we refer you to our Chart of the Day immediately below and the accompanying note.

Chart of the Day

Bar chart showing gold's annual returns since 2000 including year end 2019

Chart note:  Gold has produced positive returns in 16 of the last 19 years.  Its average annual return compounded since 2001 is 9.38%.  In 2019, it rose 18.3% – its best annual gain since 2010. A $100,000 investment in gold in January 2001 would be worth over $350,000 today. At gold’s peak in 2011, it would have been worth about $475,000. Over the past two decades, gold has been a portfolio stalwart.

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

Gold drifts marginally lower; Scotia Bank calls 2019 summer rally a ‘statement breakout’

(USAGOLD – 1/14/2020) – Gold drifted marginally lower this morning awaiting details of the US-China phase one trade deal scheduled to be signed tomorrow. It is priced at $1544 – down $1 on the day.  Silver took a more decisive turn to the downside shedding 15¢ at $17.78.  With tensions easing between the United States and Iran, the metals at this stage have pretty much given up the geopolitical premium tacked onto prices last week. The very fact, though, that gold has begun to respond so forcefully to periods of market duress is a matter of interest to Scotia Bank, one of the principal traders of the precious metal in international markets.

“Gold,” it says in its 2020 outlook for precious metals published this morning, “made a statement breakout in the summer of 2019” and “has entered a new bull market and begun to internalize geopolitical, political, trade & growth risks, which is a constructive new development, compared to its responsiveness over the previous 6 year bear market.” Gold, the report concludes, “has shown to adapt to being both (1) a real asset hedge against equity inflation and (2) a safe haven / late-cycle hedge against the possibility of sustained equity volatility or weakness.” The precious metal, it says, will average $1600 in 2020 with $1700 the top of the range.

Chart of the Day

Line chart showing the oil gold ratio

Chart note: “The range of potential scenarios is very large,” says Goldman Sachs’ Global Head of Commodities Research  Jeffrey Currie, “spanning oil supply shocks or even oil demand destruction — which would be negative to oil prices. In contrast, history shows that under most outcomes gold will likely rally to well beyond current levels.”  Currie’s comments came as part of a report issued recently touting gold as a better hedge against geopolitical risks than crude oil implying a higher oil-gold ratio in the years to come.

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

Gold drains geopolitical premium, builds longer-term support on fundamental concerns

(USAGOLD – 1/13/2020) – Gold continued to drain the recent safe-haven premium from its pricing in overnight markets and early in New York. It is down $7 on the day at $1555.  Silver is down 8¢ at $18.04.  At this juncture, gold seems to be consolidating in and around the $1545-1555 range and silver around $18. Whether or not those levels will hold remains an open question.

Those disappointed in gold’s correction from the geopolitically inspired drive over the $1600 mark should not lose sight of the more fundamental concerns that have lifted prices since last May (at the $1275 level) – most notably the eroding real rate of return in dollar-based investments and the abundant, ongoing central bank stimulus at work in top global economies. Jeff Currie, Global Head of Commodities Research at Goldman Sachs reminded CNBC viewers on Friday that “Gold is a hedge against debasement and what we saw in 2011 was debasement, printing too many dollars and the real rate goes down, down, down, which then pushes up the price of gold. If you do see [substantial dollar weakness], the potential to push gold back up into that $1,800-$1,900 range becomes pretty realistic.”

Chart of the Day

Bar cjhart show gold's annual average price since 1970

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 reliable portfolio safe haven during times of rapidly changing economic circumstances.  The strong showing for 2019 is worth noting.

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

Gold ending eventful week within $5 of where it began, silver a dime.

(USAGOLD – 1/10/2020) – Gold traded in a narrow range to the downside in overseas markets last night appearing to catch its breath at the end of what has been an eventful week. It is down $2 at $1551 in early U.S. trading.  Silver is up 5¢ at $17.97. Miraculously, after all is said and done, gold at the moment is within $5 of its price last Friday. Silver is within a dime of where it began the week. It is as if nothing had happened over the past seven days.  Gold Newsletter’s Brien Lundin supports an argument we have made over the past few days in this report that there is much more levering precious metals prices higher than the geopolitical situation in the Persian Gulf. “[T]he gold rally,” he says, “began well before the missiles began to fly. Those gains came because investors were starting to appreciate the fact that the Fed has returned to QE, in a very big way.”

Chart of the Day

Bar chart showing gross purchases of gold by central banks in 2019

Chart courtesy of the World Gold Council

Chart note:  Central banks, according to a new World Gold Council published yesterday, continued 2018’s record pace through November 2019. “While November was the second lowest level of buying so far in 2019 (July was the lowest),” says the Council, “the scale of purchases year-to-date remains remarkable. Following the 50-year high in 2018, few (including us) expected the buying strength we have seen.”  This report, we believe, does not include Reserve Bank of India’s 15-tonne purchase announced yesterday.  India’s central bank called the purchase a “hedge against currency volatility.” Few expect the 2018-2019 pace in central bank purchases to slow down in 2020.

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

Gold retreats. Speculators head to sidelines. Money Week offers perspective.

(USAGOLD – 1/9-2020) – Gold retreated further in overnight markets as Iran and the United States cooled prospects for a direct military confrontation and speculators headed for the sidelines – at least for now.  The net result is recorded on the charts as a wild swing between a high achieved early yesterday of $1610 and $1540, the overnight low.  It is now trading at $1548 – down $10 on the day after all is said and done. Silver is down another 24¢ at $17.90. If, as the Day-Traders Manual reads, volatility is good, we have enjoyed plenty of it over the past few days.

John Stepek, the executive editor of Money Week, offers some much-needed perspective for gold owners this morning.  “Gold,” he says, “has had one of its more excitable runs since the start of the year. It surged so much in the wake of the Iran airstrikes that it even drew the attention of the broadsheet financial press. So naturally, the price was bound to tank shortly afterwards. Which is precisely what happened this morning. If you’re a gold investor, you might be fretting that gold’s high point for 2020 has already come and gone. I wouldn’t worry.”

To supplement Mr. Stepek’s remarks, we recycle some perspective of our own from yesterday’s DMR: “While the [recent] volatility is worth logging for future reference (we are far from being out of the woods in the Mideast), we should not lose sight of gold’s sustained move to the upside based on the more mundane underlying economic issues like the eroding real rate of return on dollar-based investments and the abundant, ongoing central bank stimulus at work in the top global economies.”

Back to basics. . . .

Chart of the Day

Chart showing China's growth since 1989 when compared to other nation states

Chart courtesy of HowMuch.net

 

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

Gold whipsaws in $35 range overnight, returns to yesterday’s price level

(USAGOLD – 1/8/2020) – Gold whipsawed in a $35 range overnight reacting erratically to Iran’s retaliation against U.S. military bases in Iraq.  A forceful initial reaction took the price rapidly to $1610 then reversed itself just as quickly when it began to look like Iran would opt for a measured military response rather than something more extreme. That seems to be the consensus reading – at least for now.  As the U.S. market opens for trading this morning, gold is priced at $1575 and back within a few dollars of where it started yesterday’s overnight session.  At $18.30 per ounce, silver also ended up pretty much where it began when Iran launched its strike. The stock market mimicked gold’s response in inverse fashion – down 400 points at one juncture only to levitate back to where it started.

While yesterday’s volatility is worth logging for future reference (we are far from being out of the woods in the Mideast), we should not lose sight of gold’s sustained move to the upside based on the more mundane underlying economic issues like the eroding real rate of return on dollar-based investments and the abundant, ongoing central bank stimulus at work in the top global economies (Please see our Chart of the Day below). “Gold,” reported Myra Saefong and Mark Decambre at MarketWatch yesterday prior to the attack, “stretched its streak of consecutive gains to 10 sessions, representing its longest period of gains since the 11 days of wins booked from December 2017 to January 2018, according to Dow Jones Market Data.”

Chart of the Day

Overlay chart showing global central bank asset growth in conjunction with rising gold price

Chart note: “The highly probable and downright inevitable unwind of today’s trifecta of financial asset bubbles: stocks, corporate credit, and Treasury bonds may soon morph into a brutal bear market,” writes Crescat Capital’s Kevin Smith and Tavi Costa in a recent in-depth report, “The end game is unstoppable in our view and approaching fast. The Fed is between a rock and a hard place. It has been printing money like it’s the depth of the Global Financial Crisis while stocks and corporate credit are flying high reflecting a dangerous combination.”  The report ends with a warning and a prediction that a wave of central bank money-printing is “likely to pull gold up with it.”

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

Gold back in positive territory after overnight profit-taking

(USAGOLD – 1/7/2020) – Gold moved back into positive territory in early trading after a retreat to the $1555 level during Asian trading hours. It is priced in New York this morning at $1568 – up $4 on the day and $13 from overnight lows. Silver is up 4¢ at $18.18.  Asked about the overnight gold market sell-off sell-off, ABN Amro’s Georgette Boele told CNBC “there is nothing fundamental going on here, it is just a reaction to yesterday’s price movement. Investors are looking at the other side of the coin and taking some profits.”

An uneasy calm hangs over financial markets in the aftermath of the Soleimani killing as politicians on both sides traded threats and recriminations. Market analyst Larry Berman touched on the high points of the prevailing gold market sentiment in a BNN Bloomberg piece yesterday, “The escalating geopolitical tensions in the Middle East,” he says, “add yet another reason to keep gold exposure in your portfolio in 2020. Furthermore, a gaggle of former central bankers now admit monetary policy is less effective and can’t do all the lifting, and so the specter of more central bank [gold] buying is present too.”

Chart of the Day

Chart showing the growth of the Fed's balance sheet since September 2019

Chart note:  Both the strength and velocity in the Fed’s balance sheet growth since September 2020 is notable.

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

Gold rockets higher overnight, levels out in early U.S. trading

(USAGOLD – 1/6/2020) – Gold rocketed higher on the Globex open Sunday, leveled out in overseas trading, and held onto those gains as trading opened in the United States. It is up $23 this morning at $1575.  Silver is up 34¢ at $18.37. Gold had already established a solid uptrend going into the new year on monetary concerns. The killing of Iranian general Qasem Saleimani last Friday added impetus to that rally. Gold is up over $60 since the start of the year and $77 since the start of its Santa Claus rally on December 24th – a more than 5% gain.  Silver is up almost 4% since December 24th. Both the United States and Iran have warned of further attacks and counter-attacks. The early response in U.S. financial markets, including gold, has been muted so far today with most keeping a wary eye on events in the Mideast.

Chart of the Day

Chart showing silver's seasonal trends based on five-year average pricingChart note:  Much of what we noted under Friday’s gold’s seasonal chart applies to silver as well. Traditionally, as you can see, silver begins a seasonal uptrend roughly in mid-December and continues through mid-summer.  Whether or not that will be the case in 2020 remains to be seen, but we are off to a strong start. Too, there is more than enough uncertainty on the global economy’s plate to elevate the possibility. 

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

Gold moves sharply higher following Soleimani drone attack

(USAGOLD – 1/3/2020) – Gold moved sharply to the upside in overnight trading after the Pentagon released a statement verifying that the U.S. military had killed top Iranian general Qassem Soleimani in a drone attack near Baghdad. The metal is up $17.50 at $1547 as U.S. trading opens. Silver is up 7¢ at $18.11. Helima Croft, head of global commodity strategy at RBC Markets, told CNBC via e-mail that “this brings us to the precipice of a full-blown shooting war with Iran – not a shadow war or a proxy war. It is almost impossible to overstate the implications of this event.” Oil, the dollar and U.S. Treasuries also jumped on the Pentagon announcement while global stock markets tumbled.  The escalating tensions in the Middle East added to the momentum already underway in the gold market since late December. The metal is up $70 (+4.7%) since December 20th.  Silver is up $1.00 (+5.6%) over the same period.

Chart of the Day

Line chart of gold's seasonal trends

Chart note:  We are moving into the part of the seasonal cycle when historically gold regains price momentum. Whether or not that will be the case in 2020 remains to be seen, but we are off to a strong start. Too, there is more than enough uncertainty on the global economy’s plate to elevate the possibility. “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.’”

Note:  Offered with the usual caveat that past performance is no guarantee of future results.

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

Gold, silver surge higher to start the year

(USAGOLD – 1/2/2020) – Gold and silver extended their surprise late-December rallies into the new year this morning. Gold surged another $9 in early trading and is now priced at $1528.  Silver is up another 16¢ at $18.05. For 2019, gold posted a 19% gain.  Silver was up 17% on the year. (Please see our Chart of the Day below.) Analysts cite a variety of factors contributing to the positive sentiment surrounding precious metals with negative real rates of return, dollar weakness, and uncertainty over trade relationships topping most lists.

Some, too, think that investors are beginning to question if the stock market can continue bumping along all-time highs. “Gold also had a late rally in the year as investors plowed into the yellow metal as a hedge against the overflowing risks on Wall Street where stocks had been hitting one record high after another,” reads a year-end report posted at Investing.com. “Bullion and gold futures have tacked on more than $65 an ounce over the past three weeks to reclaim the bullish $1,500 perch and progress from there, despite the Federal Reserve indicating in early December a halt to rate cuts reintroduced after a four-year hiatus.”

Chart of the Day

Overlay chart showing gold and silver price performance for 2019 in per cent

Chart note:  It was a very good year for gold and silver.  The yellow metal posted a nearly 19% gain and silver over 17%.  As you can see the move higher began in early summer defying the annual summer doldrums and added a year-end surprise with a strong, abrupt surge to the upside that took gold over the $1520 mark and pushed silver briefly over $18.

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

Precious metals drift sideways in quiet year-end trading

photo of red Christmas wreath hanging from aspen tree

This will be our last DMR for the year, though we will post updates at our live daily newsletter page if anything of interest develops. These reports will resume on January 2, 2020. Happy Holidays, everyone, and golden wishes for the New Year from all of us at USAGOLD.

(USAGOLD – 12/20/2019) – The precious metals are drifting sideways this morning in quiet year-end trading. Gold is level at $1478 and silver is up 3¢ at $17.08.  With ultimate outcome still up in the air on a number key issues for financial markets, gold is caught in a kind of limbo seesawing on either side of the $1475 mark and awaiting a clearer sign of where we might be headed next.

To end the week and the year, we return to a recent quote from Bloomberg Intelligence’s Mike McGlone this morning that sets a hopeful tone for our favorite precious metal as we close-out 2019 and move closer to 2020:

“It’s a new year and decade and gold is poised to follow the dollar and equities to new highs, in our view. When, should be the primary question, particularly when the stock market and greenback succumb to some normal mean reversion. Absent a new higher dollar and stock-price plateau, gold is set to join the all-time-highs club. Gold prices are on a sound footing for further advancement in the coming year and decade, in our view.”

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

Gold still caught in year end limbo seesawing either side of $1475

(USAGOLD – 12/19/2019) – Gold inched higher in quiet overnight and early US trading as financial markets continued their slow wind-down into the holiday break. The yellow metal is up $1 on the day at $1477. Silver is level at $17.01. Precious metals are on the back burner at the moment as hope for reconciliation between China and the United States on trade and the positive effects of the Fed’s money-pumping operations remain open questions. Gold, as a result, continues in a kind of price limbo at the moment seesawing on either side of the $1475 mark and awaiting a clearer sign of where we might be headed next.

The World Gold Council recently published a review of gold’s past year and a forecast for 2020 by its director of Investment research, Juan Carlos Artiga.  The World Gold Council focuses on the demand side of the fundamentals’ ledger. Artigas sees many of the trends that contributed to strong offtake this past year continuing into next – financial and geopolitical uncertainty, strong central bank demand and high price volatility. “Gold has historically performed well in the year following Fed policy shifts from tightening to ‘on-hold’ or ‘easing,'” says Artigas – “the environment in which we currently find ourselves. In addition, when real rates have been negative, gold has historically returned twice as much annually as the long-term average, or 15.3%.” [Emphasis added.]

Chart of the Day

Chart Pew Research interest payments on the national, as a percent of budgetChart courtesy of Pew Research Center

Chart note:  “Net interest payments on the debt,” says Pew Research Center, “are estimated to total $393.5 billion this fiscal year, or 8.7% of all federal outlays. (The government projects it will pay out a total of $593.1 billion in interest in fiscal 2019, which ends Sept. 30, but that includes interest credited to Social Security and other government trust funds.) By comparison, debt service was more than 15% of federal outlays in the mid-1990s. The share has fallen partly because lower rates have held down interest payments, but also because outlays have risen substantially, up about 29% over the past decade.”

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

Gold inches lower as markets begin to wind-down for holiday break

(USAGOLD – 12/18/2019) – Gold inched lower in quiet overnight and early US trading as financial markets began to wind-down for the holiday break. The yellow metal is down $2 on the day at $1474.  Silver is down 6¢ at $16.95. Precious metals are on the back burner at the moment as hope for reconciliation between China and the United States on trade and the positive effects of the Fed’s money-pumping operations now dominate investor thinking. At the same time, there is still a well-chronicled undercurrent of uncertainty building beneath the surface with respect to both of those market drivers. In short, with ultimate outcome still up in the air, gold is caught in a kind of limbo at the moment seesawing on either side of the $1475 mark and awaiting a clearer sign of where we might be headed next.

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, 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 struggles to gain footing in early US trading

(USAGOLD – 12/17/2019) – Gold struggled to gain footing in early U.S. trading after being up as much as $5 in overnight trading.  It is now level on the day at $1475.50.  Silver is down 2¢ at $17.03.  Generally, speaking the markets are still weighing a trio of unsettled (and unsettling) global issues – Brexit, the trade war between the US and China and Fed rescue operations in the repo market.

Charlie Morris, chief strategist at UK-based Atlantic House Fund Management, sees some fundamentally strong incentives for higher gold prices in the months and years to come – in fact much higher than current price levels. “[A gold] Bull Market,” writes Morris, chief strategist at Atlantic House Fund Management in a highly recommended client advisory, “has three conditions that I came up with more than a decade ago: 1. Easy money, defined as US cash real interest rates below 1.8%. TRUE.  2. The long-term gold trend in non-dollar terms must be positive. TRUE. 3. Gold must be beating the stock market. TRUE!”  He goes on to offer his opinion that the current bull market for gold “has legs” and that “a bullish target of $7166 that is logical and plausible” based on a return of inflation. “It’s high time,” he says about inflation – an assessment that serves as a well-timed introduction to this morning’s Chart of the Day.

Chart of the Day

Overlay chart of gold and MZM - broad money supply showing the two rising in tandem in recent months

Chart note:  We have monitored this chart over the past several weeks and thought it 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 supply growth is showing some signs of life.

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

Gold opens week on positive note, questions linger

(USAGOLD – 12/16/2019) – Gold opened the week on a positive note gaining $3 in early U.S. trading to stand at $1479.  Silver is showing a bit more strength – up 12¢ at $17.06.  The initial market reaction to both the UK election result and the interim US-China trade deal has been muted thus far with questions still lingering how the next chapter in both sagas will unfold. Investors are also wary of the Fed’s announced $500 billion rescue package for the stressed overnight repo market and its potential knock-on effects on asset values. As for gold’s possibilities between now and the end of the year, market analyst Mark Mead Baille passes long this optimistic view in a Gold Eagle column posted over the weekend:

“History doesn’t already repeat itself—and traders who blindly expect it to so do (i.e. sans subjective review) are oft flushed down the loo – but ’tis the season to be jolly. For in looking per the above Scoreboard at Gold‘s weekly price tracks for each of the past three completed years, from here to New Years ’tis been up through the [y]ears. And given Gold having settling out the week on Friday at 1480, our entitled query from two missives ago Shall Santa Gift Gold at 1500?suggests he’s primed to come through. Even our WestPalmBeacher friends can calculate that 1500 is a mere 20 points above this present 1480 level.”

Chart of the Day

World Gold Council graphic on why investors buy gold per 2019 survey

Visualization courtesy of the World Gold Council

Chart note: “Gold plays a number of roles,” says the World Gold Council, “from protecting wealth and driving long-term returns to short-term or speculative needs. . . It is a surprise, for instance, to find that 62% of global retail investors view gold ‘just like any other commodity, such as oil or steel’ despite its very different market structure and financial attributes. But, importantly, those who have a past interaction with gold are far more likely to want to buy it in the future.” In other words, once investors gain a full understanding of gold’s portfolio role, they are likely to continue adding to their holdings until the desired percentage diversification is achieved, a finding we at USAGOLD can confirm through our own interaction with first-time gold investors.

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

Gold holds it own as uncertainty remains over trade, Brexit, Fed rescue operations in repo market

(USAGOLD – 12/13/2019) – Gold held its own in overnight markets and early in U.S. trading as hoped-for resolution gave way to continued confusion on the trade issue, the results of the British election and most notably overnight repo market liquidity.  It is trading at $1469 – up $4 on the day after yesterday’s nearly $15 retreat.  Silver is up 2¢ at $16.90.  China has scheduled a news conference to begin shortly. A victorious Boris Johnson now with a solid majority promised Brexit by January 31, and the Fed announced a $500 billion rescue program for the stressed overnight repo money market.  It is that last event that might be the most consequential for financial markets in the short to medium term, though a weaker or stronger than expected trade agreement could also raise the temperature level on Wall Street.

Given the rising level of uncertainty on several fronts, we return to a quote from a Goldman Sach’s client advisory referenced here a couple of days ago.  Featured as a Yahoo Morning Brief under the headline (The world’s super-rich are hoarding gold), the advisory notes that “since the end of 2016 the implied build in non-transparent gold investment has been much larger than the build in visible gold ETFs.”  In other words, safe haven investors are hedging with actual coins and bullion over paper gold ETFs. “Finally,” says Goldman, “this build can also reflect hedges by global high net worth individuals against tail economic and political risk scenarios in which they do not want to have any financial entity intermediating their gold positions due to the counter-party credit risk involved.”

Chart of the Day

Map 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 market climbs higher on dovish Fed bias, unemployment claims, repo market concerns

(USAGOLD – 12/12/2019) – Gold began to climb in the immediate aftermath of the Fed’s meeting yesterday and continued to gain ground at today’s New York market open.  It is up $10 on the day at $1485 and up $20 from early yesterday afternoon.  Silver is up 19¢ on the day at $17.06 and up 40¢ since yesterday’s meeting announcement. A Labor Department report showing unemployment claims surging to a two-year high added to the momentum, as well as ongoing concerns about overnight repo market liquidity going into year-end.

In the wake of yesterday’s Fed meeting, Citibank said it was sticking with its forecast that gold could see $1600 in 2020, according to a BNN Bloomberg report this morning. “The policy rate is highly unlikely to move higher and the Fed is capping the rise in real medium-term yields, as well as nominal yields, at the belly of the U.S. Treasury curve, so you reduce the opportunity costs of holding gold,” says Aakash Doshi, the bank’s senior commodities research director. Citi sees the potential for gold to rally above its all-time record in 2021 or 2022 surpassing the $2000 mark, according to the report, “given broader official sector buying trends as well as the Fed eventually reverting to the zero lower bound.”

Chart of the Day
Overlay chart showing growth in repo market resulting from Fed cash injections since September 2019

Chart courtesy of Bianco Research

Chart note: ‘This is now far bigger than anyone thought this was going to be,’ [Bianco Research’s James] Bianco said in a MarketWatch article. ‘I think they’re hoping the market will magically fix itself. I don’t see why it would.’” On his twitter page, Bianco writes “Remember, it is Not QE!!!”

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

Gold awaits Fed results; QE4 by year end?

(USAGOLD – 12/11/2019) – Precious metals remained in a holding pattern this morning in advance of today’s Fed statement and press conference.  Gold is priced at $1467 – up $3 on the day.  Silver is level at $16.67. Financial markets also have an eye on the British election tomorrow and the China tariff decision due on Sunday.  CNBC says that the Fed will signal that it remains neutral on rates for now and “will do whatever is necessary to keep liquidity high and overnight lending rates steady at the end of the year.”

Financial markets are becoming increasingly nervous about the lack of liquidity in the overnight repo market. Credit Suisse’s Zoltan Pozsar, who is generally regarded as a top expert on that market (in fact one of its inventors), says in a report issued on Monday, that “If we’re right about funding stresses, the Fed will be doing ‘QE4’ by year-end.” He goes on to deliver a warning: “If carry makes the world go ‘round, and reserves make carry possible……the day we run out of reserves would be the day when the world would stop spinning. No, this is not an overstatement.” In reading Pozsar’s analysis, one cannot help but get the uneasy feeling that we might be right back where we were in 2008 – with the same options on the table.

Chart of the Day

Overlay chart of gold prices in various currencies in 2019
Chart courtesy of the World Gold Council

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