Gold finds some signs of support just below the $1800 level, Lundin sees silver market clamor as a cloud with a silver lining

(USAGOLD – 2/5/2021) – Gold found some signs of support at just below the $1800 level in overnight trading as the dollar weakened marginally and commodities in general firmed. The jobs report came in below the consensus expectation giving the metals an additional boost. Gold is up $11 at $!807. Silver is up 30¢ at $26.73. If this pricing holds, gold will have finished a tumultuous week down 2.25% after all is said and done, and silver down 1.3%. Gold Newsletter‘s Brien Lundin sees the silver market clamor of the past week – please excuse the expression – as a cloud with a silver lining. “All along,” he says, “I expressed worries that an exogenous buying event that caused a spike in gold and silver, followed by the inevitable correction, could derail the longer-term bull run that I’m expecting. As it turned out, the event lasted only two trading sessions (so far), and seems to have done little damage to the long-term prospects for the metals. If anything, it’s been a net positive as it has exposed untold new investors to the powerfully bullish story for gold and silver.”

Chart of the Day

Overlay chart showing the decline in purchasing power of the dollar since 1970 and the price of gold

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

Chart note: Since 1971 and global departure from the gold standard, the U.S. dollar’s decline has gone unchecked. The 1971 dollar is worth just 15¢ today, or put another way, what might have cost $1,000 in 1971 costs $6,670 today. Since the founding of the Federal Reserve in 1913, the dollar has been in constant decline with the exception of the 1930s depression years. It is now worth 5¢ when the rise in consumer prices is taken into account. The price of gold, as you can see, has responded accordingly living up to its reputation as the ultimate long-term store of value.

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

Precious metals break lower, resume downtrend in place before Reddit clamor

(USAGOLD – 2/4/2021) – [UPDATED] Precious metals broke lower this morning, pretty much as a resumption of the weakened state in which they found themselves just before the Reddit clamor of late last week. Gold is off $48 at $1788. Silver is down 79¢ at $26.19. Technical selling, once gold broke through the $1800 mark, looks to be accelerating the downtrend. Rising bond yields (with the 10-year now at 1.15%) and a reversal of the dollar’s downtrend (with the Dollar Index now approaching 92) are key factors in this morning’s sell-off. Too, confusion about just what the Biden administration will be looking into with respect to the Reddit–RobinHood mayhem, as announced by Treasury Secretary Janet Yellen yesterday, may have spilled over to the precious metals market. Lost in the shuffle are reports of the Biden administration fast-tracking the $1.9 trillion stimulus legislation. We will update if any news of interest surfaces at the Top Gold News and Opinion page.

Chart of the Day

bar chart showing the additions to US corporate debt levels thru Q3 20

Sources: St. Louis Federal Reserve [[FRED], Board of Governors Federal Reserve System
Click to enlarge.

Chart note:  Bloomberg recently reported that some of America’s top corporate giants – Boeing, Delta Airlines, Carnival Corporation, and Exxon Mobil are not earning enough profit to cover their interest expenses – “a key criterion, as most market experts define it, for zombie status.”

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Precious metals attempt to regain their footing, Bloomberg’s McGlone says ‘gold appears as a resting bull’

(USAGOLD – 2/3/2021) – Precious metals are attempting to regain their footing in early trading after yesterday’s steep sell-off. Gold is up $1 at $1841. Silver is up 38¢ at $27;18. The U.S. Mint told Reuters yesterday that it was unable to meet surging demand for gold and silver bullion coins – strong investor buying that was already in motion well before the Reddit Rebellion clamor became headline news. Bloomberg is out with its February Commodity Outlook, and its chief commodity analyst Mike McGlone sees a steady bull market for gold in 2021.

“‘If you can’t beat ’em, join ’em’ is applicable to further gold-price appreciation, in our view,” he writes in the report released yesterday. “A bottom-line consideration for investors may be the need to outperform the store of value. The fact that gains for most assets trailed gold’s 25% in 2020 increases the benchmark metal’s credibility. …The unlikelihood of a reversal in rising global debt-to-GDP and quantitative easing (QE) levels adds to the potential for gold to sustain above $2,000 an ounce, we believe. The metal has had a correction in its uptrend, which puts it on sounder footings for resumption. Our graphic [not shown] depicts the initial cage in 2021 of about $1,800-$2,000. Gold appears as a resting bull. More of what has fueled the metal’s appreciation since 2001 may be all it takes to resume the rally. Risks appear tilted toward accelerating trends in rising debt and QE.”

Chart of the Day

Additions to the U.S. National Debt
(Quarterly through Q3-2020, in millions of dollars)

bar chart showing additions to the national debt thru Q3 2020

Sources: St. Louis Federal Reserve [FRED], U.S. Department of Treasury, Fiscal Service
Click to enlarge

Chart note: In getting our minds around the enormous scope of debt the United States has already taken on to rescue the economy (with more to come), it is critical to remember that the debt – however large – will need to be repaid (with interest), inflated away, or repudiated. One of those options is unlikely. The other two suggest a practical need for portfolio diversification.

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Gold, silver give back lion’s share of yesterday’s advances. Hathaway sees possibility of ‘double or triple rise in gold prices’

(USAGOLD – 2/2/2021) – Gold and silver gave back the lion’s share of recent advances as the Reddit gambit appeared to lose momentum, the dollar staged a minor rally, and bond yields continued to track higher. CME Group added impetus to silver’s retreat by raising contract margin requirements. Gold is off $28 at $1835. Silver is down $1.62 at $27.74. Though the Reddit Rebellion’s interest in silver dominated market thinking over the past several days, we should not lose sight of the more fundamental influences underpinning demand for the precious metals – in particular, the bond market’s eroding status as a safe-haven alternative to a manic stock market.

“Even if fiscal and monetary policy succeeds over the near term to keep the financial asset bubble inflated longer than we expect,” writes veteran analyst John Hathaway in a recently released Sprott report titled One of the Greatest Bubbles in History – The Case for Gold, “a strong case can be made for further advances in the gold price simply because, at near-zero interest rates, bonds can no longer counterbalance possible equity risks. If only 1% of the $100 trillion of managed investment assets were to migrate into gold to fill the bond vacuum created by low interest rates, it would equate to demand for the entire amount of global mine production of gold for the next six years. Persistent low bond yields could lead to a double or triple rise in gold prices even in the absence of a financial market meltdown.” [Emphasis added.]

Chart of the Day

Western gold coin and bullion investment markets climb higher in 2020

bar chart showing gold demand by country 2019 to 2020

Chart courtesy of World Gold Council • • • Click to enlarge

Chart note:  While demand for gold coins and bullion dropped in Asia in 2020, it grew in the West with Germany and the United States leading the way.  “[W]hile growth was widespread across Europe,” reports the World Gold Council in its Full Year Gold Demand Trends, “there was a clear outperformer: Germany re-established its position as a global heavyweight, leapfrogging India to become the second-largest gold retail investment market for 2020 with record annual demand of 163.4 [metric tonnes].”

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Silver pushes sharply higher as Reddit raiders pile into market

(USAGOLD – 2/1/2021) – Silver pushed sharply higher in overnight trading pulling gold along with it as the Reddit Rebellion made good on its threat to pile into the IShares Silver Trust (SLV). Strong gains in SLV’s inventory stockpile on Friday – some 34 million ounces – foreshadowed the overnight price advance. The out-of-the-box gain was the highest by far over the past 12 months and the largest stockpile gain overall since 2013. Silver is up $2.48 in early U.S. trading at $29.65 – posting a near 10% gain over Friday’s close. Gold is up $18.50 at $1868.50. Overnight, Chinese investors, according to reports, joined the frenzy as did speculators globally covering short positions. (For more, please scroll below or visit our Top Gold News and Opinion page.)

Bloomberg quotes Howie Lee, an economist at Overseas-Chinese Banking Group, as saying “Last week’s events have shown it to be unwise to doubt the purchasing power of retail investors, and this has been sufficiently demonstrated again on the silver market. They may find it a bit harder to squeeze the silver market than they did with GameStop — the former is much bigger and more liquid — but the momentum looks like it rests with them at the moment.”

Chart of the Day

bar chart showing the decline of the dollar in purchasing power terms 1971 to present

Sources: St. Louis Federal Reserve [FRED], U.S. Bureau of Labor Statistics • • • Click to enlarge.

Chart note: Based on the consumer price index, the dollar has lost 85% of its purchasing power since 1971 when the Nixon administration severed the link between the dollar and gold and launched the fiat money era. Surprisingly, it has lost 52% of its purchasing power since 1990 during a period economists generally describe as disinflationary. Respected economist Stephen Roach believes that the dollar’s crash is only just beginning. He is predicting a 35% decline by the end of the year.

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Gold, silver turn to the upside; bullion coin premiums once again on the rise as supply tightens

(USAGOLD – 1/29/2021) – Gold looked to be tracking toward breaking even on the month in early trading. It is up $25 at $1870. Silver is up a robust 90¢ at $27.48 – a level that if sustained would put it up around 4.5% for January. Though gold has struggled to regain the momentum in terms of pricing in international markets to start the year, demand for physical metal at retail dealers is firmly on the rise. On the other hand, silver has posted a strong January both in terms of physical demand and pricing in international markets.

“The lesson here,” writes Brien Lundin in this month’s Gold Newsletter, “is that we’ll see times when gold is buffeted by rogue waves in the flow of economic data. And when those days come, we need to remember that the tide is actually flowing powerfully in gold’s favor. In truth, it’s the interplay between the bond market’s reaction to potential inflation and the actual inflation data that will create the wiggles in gold’s uptrend. Rather than get shaken out by these market fluctuations, we need to hold steady…or even look at these as buying opportunities. Because if anything, the fundamentals for gold have only turned more positive in recent days.”

Important client note: Gold and silver bullion coin premiums are once again on the rise. Increased demand throughout January is being exacerbated by tightening supplies and delayed releases of new coinage from sovereign mints. The Royal Canadian Mint is still reporting a several week delay on shipping any of its 2021 product – with no concrete availability date yet announced – and the U.S. Mint has returned to allocation, reducing and limiting the number of coins being released to the dealer network on a weekly basis. The imbalance between supply and demand has already pushed wholesale premiums roughly .75% higher on gold bullion coins and approximately +2.5% on silver bullion coins since the start of the year. At this juncture, the consensus in the industry is if gold prices remain at the lower end of their range against a backdrop of continued fiscal and monetary support from both the government and Federal Reserve, demand is likely to continue at high levels, and premium pressure unlikely to abate anytime soon.

Chart of the Day

Euro Area Central Bank Balance Sheetbar chart showing the euro areas central bank balance sheet

Japan Central Bank Balance Sheetbar chart showing Japan's central bank balance sheet growth 2000-2020

United States Central Bank Balance Sheetbar chart showing growth in the United States central bank balance sheet 2000 to 2020

China Central Bank Balance Sheetbar chart showing growth in China's central bank balance sheet 2000 to 2020

Source: tradingeconomics.com

Chart note:  For the record, the charts on quantitative easing in various economies from 2000 to 2020. The most notable feature for Europe, Japan, and the United States is the pandemic-related surge in 2020. China is lagging on a relative basis, which might be one reason why the Chinese yuan has been in an upswing over the past several months.

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No DMR today (1/28/2021)


Gold pushes lower in advance of today’s Fed meeting

(USAGOLD – 1/27/2021) – Gold pushed lower in advance of today’s Fed meeting wrap-up and press conference. It is down $11 at $1842. Silver is down 32¢ at $26.23. Wall Street generally anticipates the Fed will remain steadfastly dovish. Anything less could easily unleash primal market forces it would rather keep in check. Investors are already on a knife’s edge if physical precious metals demand is an indicator. “Nobody doubts that the gold rush is a side effect of an unprecedented healthcare crisis, forcing governments to throw the financial manual away,” reports Alex Katsomitros in World Finance magazine. “Gold is the world’s oldest safe asset, always thriving in times of uncertainty. Historically, investors have reverted to it as a hedge against political and economic tumult, with its price jumping during wars, contested elections, and economic crises. During the Great Recession, gold’s price trebled from early 2007 to 2011. The same scenario is now repeating itself.”

Chart of the Day

line chart showing two monetary eras 1915-1971 and 1971-2020

Chart note: We have had quite a few new visitors over the past several weeks looking into gold for the first time. 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 the dollar, the fiat money era began. We are still in that era today. This chart shows gold’s performance 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.

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Gold tracks sideways in advance of Fed; Paul Singer worries that current policy is the ‘road to perdition’

(USAGOLD – 1/26/2021) – Gold tracked sideways in advance of the upcoming FOMC meeting even as investors registered growing concern about stock market stability and price inflation moved back to the front-burner. It is up $3 in early trading at $1861.50. Silver is up 20¢ at $25.63. Elliott Management’s Paul Singer – an investor with considerable influence on Wall Street – is one of those investors worried about inflation. In a recent interview with Grant Williams (of Things That Make You Go Hmmm fame) and Bill Fleckenstein, he offered a pointed reminder of its unpredictable behavior in the past.

“If you look at the inflation of the 1960s and 70s,” he remarked, “inflation came in the mid to late 1960s, from basically very low levels, they didn’t see it coming. They, meaning the policymakers, the central bankers, and when it came, they thought it was temporary and one-off, and one thing leads to another. So we know about the oil embargo of 1973, which took oil prices up three or four times. So wages, prices, guns and butter, the Great Society, the Vietnam War, and increases in the money supply, all combined. But once inflation lifted off, it just kept on going.”

Singer worries that current central bank policies are “the road to perdition.” Destruction would follow, he says, “if inflation really lit up.” Though he only mentions gold passingly – and then in comparison to bitcoin (an instrument he sees existentially as “nothing”) – the scenario Singer envisions has been one under which gold has proven to be a useful holding in the past. We highly recommend the full interview for a down to earth assessment of where we stand and where we might be headed.

Chart of the Day

overaly line chart showing fold and silver price peaks and lag in current chart

Chart courtesy of Seeking Alpha and Macrotrends.net • • • Click to enlarge

Chart note: In a post at Seeking Alpha, analyst Peter Krauth offers a useful reminder of silver’s undervaluation when compared to gold, as shown above. “In my view,” he says, “as far as investment assets go, silver still remains amongst the most undervalued. But that’s unlikely to last. Let’s look at it from a few perspectives.…Notice that in both 1980 and 2011, silver’s percentage gains were markedly higher than gold’s, easily outpacing the yellow metal. And if you peer over to the right end of the chart, we can see that silver still has clearly a lot of catching up to do. On an inflation-adjusted basis, silver also looks dirt cheap.”

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Gold begins week on a positive note ahead of all-important Fed policy meeting

(USAGOLD – 1/25/2021) – Gold began the week on a positive note as Congress got down to the nuts and bolts of the Biden administration’s $1.9 trillion stimulus package and investors braced for the Fed’s all-important policy meeting and press conference at midweek. It is up $12 at $1870 in early U.S. trading. Silver is up 22¢ at $25.81. On the week ending Friday, gold looked like it might have turned a corner posting a nearly 2% gain. Silver posted a more than 3% gain after all was said and done. TF Metals Report’s Craig Hemke has some interesting things to say about the Fed’s upcoming meeting and what it might mean for the price of gold in the weeks ahead.

“[Y]ou and I know that all of the bullet points are extraordinarily bullish for precious metal ownership,” he writes in a report published at Seeking Alpha over the weekend. “However, The Machines that determine price have no concept of this. So, what we’ll await in 2021 is the moment when The Machine ‘fundamentals’ switch again to our favor. And what will be the driving factor? When The Fed begins to implement Yield Curve Control. This change in Fed policy, however, will come in stages. The first will be a mention of buying longer-term maturities within their existing QE program. If that doesn’t work, they’ll next actually start buying those 7-, 10-, 20-, and 30-year maturities. And if that doesn’t serve to cap rates below a certain level, they’ll codify this desire into a formal written policy change.”

 Chart of the Day

Overlay line chart showing gold, silver, stocks performance 2000 to 2020 in percent

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

Chart note: Since the beginning of gold’s secular bull market in the early 2000s, we have recommended an unambiguous course of action: Own the physical metal – fully paid for and stored nearby – then sit back and watch the show. Those two courses of action have paid handsome dividends over the years, both in terms of peace of mind and a healthier balance sheet. In fact, for some, that prescription has created significant wealth. Since the turn of the century, gold is up 562%; silver, for its part, is right at 402%. By way of comparison, the Dow Jones Industrial Average is up a meager 178% over the 20-year period.

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Gold gives up much of this week’s gains as recession thinking regains upper hand

(USAGOLD – 1/22/2021) – Gold gave up much of its gains over the past week this morning as commodities in general sold off and recession thinking regained the upper hand in financial markets. The yellow metal is down $31 at $1841. Silver is down 80¢ at $25.21. Matterhorn Asset Management’s Matthew Piepenburg sees opportunity in the precious metals’ market sell-off of the past few weeks.

“Although it’s normal to expect a correction phase within a larger bull market for both silver and gold,” he explains in an article posted at King World News, “the price retracements of late signal a buy opportunity for precious metal investors, not grounds for a bearish panic—unless you’re a gold trader blind to technical buy/sell signals. The broader bull market in gold today is much different than the bull markets of 1971 to 1978, or 2010, which saw very little interest/demand from western buyers. Demand going forward will in fact be driven more by western than eastern buyers, though current investors can’t ignore declining demand from China, Russia or India going forward. That said, the gold-silver dance described above will be very different going forward as both assets rally in synch rather than two steps up, one step back.”

Chart of the Day

bar chart showing gold's average annual prices 1971-2020

Sources:  St. Louis Federal Reserve [FRED], ICE Benchmark Administrtation [IBA]

USAGOLD note:  Most of our readers know that gold had a very good year in 2020 but few know that it posted its highest average annual price ever – $1770 per ounce.

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Gold, silver take a breather after yesterday’s solid gains, poised for a run at key levels

(USAGOLD – 1/21/2021) – Gold looks to be taking a breather after yesterday’s solid gains. It is down $4 at $1869. Silver is down 4¢ at $25.89. Both look to be poised for a run at key levels – $1900 for gold and $26 for silver. Van Eck’s Joe Foster sees the same set of drivers that pushed gold higher in 2020 remaining in force for 2021 – market distortions (the mania), the huge debt load shouldered by both governments and corporations, worries over the Biden-effect, a possible vaccination-induced reenactment of the Roaring 20s (inflation), and persistent dollar weakness.

“Gold,” he says in a report released by the firm yesterday, “has been in a bull market since December 2015. The chart pattern of this market looks similar to the first five years of the 2001 to 2011 bull market. It will be interesting to see if the chart similarities continue. After 2006, the former bull market found catalysts in the 2008 Global Financial Crisis and the European Debt Crisis in 2010. The current bull market will certainly need further catalysts to realize similar gains. The risks we have outlined along with the dollar’s trend could provide such catalysts.”

Chart of the Day

Silver Price
Percent increase or decrease over prior year
2000-2020

bar chart showing annual average gains in silver 2000 to 2020

Data source: macrotrends.net• • • Chart by USAGOLD.com • • • Click to enlarge

Chart note: In 2020, silver recorded its best percentage gain in a decade – 46.3% – and posted its third largest gain over the 20 year period. It has posted gains – sometimes significant – in twelve of the last twenty years.
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Gold pushes higher as Wall Street mulls over the massive Biden borrow and spend economic program

(USAGOLD – 1/20/2021) – Gold pushed higher in early U.S. trading as Wall Street mulled over how the big-spending, debt-driven Biden economic program will play in financial markets. It is up $16 at $1858.50. Silver is up 24¢ at $25.53. Degussa’s Thorsten Polleit has some clear ideas where all of this will lead us in general and what the impact will be on one market in particular – precious metals.

“Global debt,” he writes in the firm’s January market report headlined The Great Gold and Silver Bull Market Is On, “has reached a level where it is no longer likely that central banks will allow interest rates to rise for the foreseeable future, and central banks will continue to finance government spending sprees willingly. Taken together, it does not take much to realise that the purchasing power of the US- dollar, euro, and other currencies will be further debased in what lays ahead. It is against this backdrop that we remain bullish on precious metals. We believe (and of course acknowledge the uncertainty that surrounds such a statement) that the price of gold could reach 2,450 USD/oz towards the end of 2021 (based on current prices, a 32% gain); the silver price could go up to 47 USD/oz (+87%) …” 

Chart of the Day

chart showing cycle of emotions from optimism to euphora to despondence and back eventually to optimism again

Chart note: “A speculative frenzy is sweeping Wall Street and world markets,” Bloomberg reported at the end of December. Cedric Ozazman, chief investment officer at Reyl & Cie in Geneva, commented at the time that “sentiment indicators are moving to euphoria.” Things have gotten even more frenetic since. In that same article, Bloomberg pointed out that global stocks are now worth $100 trillion and that “some $3 trillion of corporate bonds are trading with negative yields.”

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Gold drifts higher; MKS Pamp sees the metal at $2300 in 2021

(USAGOLD – 1/19/2021) – Gold seesawed around the $1840 level in quiet overseas trading with little in the way of news to nudge it more convincingly in one direction or the other. Incoming Treasury Secretary Janet Yellen will testify before Congress today as part of her confirmation process, but not much is expected in the way of surprises. As it is, the dollar, one of the subjects she is expected to address, is trading lower, bond yields are rising, and gold is drifting slightly higher – up $1.50 in early trading at $1841. Silver is up 16¢ at $25.20. In MKS Pamp Group’s just-released Precious Metals Forecast 2021, Frederic Panizzutti, who manages the refiner’s Dubai office, forecasts a strong recovery for gold in 2021.

We expect 2021 to be another bullish year,” he writes. “While the global economic recovery shows some positive signs, we will continue to face uncertainties especially in the first half of the year. In the context of low global real interest rates, a slow recovery in growth, higher market volatility and a weakening USD, gold shall remain an asset of choice in investors’ portfolios as a safe haven and insurance against disruptions. More inflows into ETFs and increased physical demand, especially towards the second half of the year, shall comfort the upside trend. We expect gold to hit a new all-time high at 2300.00 USD/Ounce.”

Chart of the Day

U.S. Dollar Index
(One year)

Line chart showing the performance of the US Dollar Index over the past 12 months in percent

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

Chart note: A flight from safe havens drove gold’s selloff over the past two weeks – that departure, principally from the bond market, added high octane to the speculative stock market frenzy. Many analysts believe that the most dangerous outcome from current Federal Reserve policy will be a sharp decline in the dollar. Over the past twelve months, the U.S. Dollar Index is down 7% and 11.5% from highs this past March.

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Gold gets back on the plus side in quiet holiday trading

(USAGOLD – 1/18/2021) – Gold got back on the plus side this morning in quiet holiday trading. It is up $7 at $1836.50. Silver is up 12¢ at $24.98. Analysts, generally speaking, are giving commodities positive reviews for the upcoming year. As shown in our Chart of the Day, though, the sector underperformed other key assets in 2020. A number of top forecasters, including Goldman Sachs, believe all that will change in 2021 as the neglected asset class garners renewed investor attention. Jeff Currie, the firm’s chief commodity analyst, went so far as to say the commodities “ship has sailed. If you look at all the classic telltale signs of a structural bull market, you have the weak dollar, grain prices…a client called corn ‘bitcorn’ recently — and then you have what’s going on in the metals markets.”

Corny references aside, gold – generally considered top dog in the commodity realm – outperformed all the stock indices in 2020 save the NASDAQ, according to the World Gold Council survey released last week. (The study leaves out silver, however, which outperformed both gold and the NASDAQ.) “Led by gold,” says Bloomberg commodity analyst Mike McGlone in a tweet late last week, “we expect broad commodities to continue advancing in 2021 and view energy as the most vulnerable sector.” Gold, continues McGlone, “four ounces of which has been roughly of equal value to an acre of Iowa farmland since 1973, or the S&P 500 Total Return Index since 1997 – may be on the rise, notably vs. the stock market.”

Chart of the Day

bar chart showing gold's performance against other major asset classes

Chart note:  This chart shows gold’s strong performance versus other major asset classes in 2020 outdone only by the high-flying NASDAQ. Not shown? Silver, the year’s overall  top performer –  up 46%.

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Gold holds line at $1850. JP Morgan increases weighting in commodities and Metals Focus sees high $30s for silver by year end

(USAGOLD – 1/15/2021) – Gold continued to hold the line at the $1850 mark this morning, ignoring the massive Biden stimulus program and the ongoing political turmoil in the national capital. It is up $3 on the day at $1851. Silver is down 18¢ at $25.40. JP Morgan lightened up on its bond portfolio and raised its exposure in the commodities market, according to Bloomberg’s morning e-mail. “Commodities,” says the news service, “will benefit from strong economic growth and fading risks from issues like the trade war, pandemic, and Brexit.” If that be the case, silver, which enjoys status both as a commodity and a monetary metal, could be among the beneficiaries. Gaining 46% last year, the top performer in the commodities sector also outpaced all major investments, including the much-publicized NASDAQ index.

Nikos Kavalis, a founding partner in London-based research firm, Metals Focus, tells why he thinks the coming year could be a good one for silver. “Although the crisis did weigh on silver demand,” he says in an overview for 2021 published by the Singapore Bullion Marketing Association, it was less pronounced than for gold. This reflects silver’s lower reliance on price elastic and discretionary demand segments, being a largely industrial metal and with some offset from rising bar and coin demand in the West…Looking ahead, we have little doubt that the drivers of gold demand will also boost silver’s appeal to investors. In addition, owing to its typically more volatile nature, we would expect silver to outperform gold overall in 2021, peaking in the high $30s before year-end.”

Chart of the Day

Gold and Silver
(Full year, 2020)
overlay chart showing the percentage gains in gold and silver for 2020

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

Chart note: For the record, here is the chart showing gold and silver’s percentage gains for 2020. Gold was up 24.21% and silver was up 46.3% – the top-performing major asset for 2020.

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Gold rangebound despite upcoming Biden administration stimulus announcement

(USAGOLD –1/14/2021) – Gold remained range-bound despite reports circulating that the incoming Biden administration is preparing to unveil a $2 trillion stimulus program – one that is likely to sail through the new Democrat-controlled Congress. Some might think that odd since it was thoughts of stimulus dancing through Wall Street’s mind that sent both gold and stocks soaring at the end of last year. A quick look at the 10-year bond yield – now at 1.1% – explains why things might be different at this juncture. (Please see “The bubble either inflates or bursts…”(1/12/2021) As it stands, gold is down $5 at $1843. Silver is up 13¢ at $25.42. Stocks, now up marginally on the day, seem equally uninspired. It might take a while, as it did early last year, for reality to impose itself on the markets with full force, but Crescat Capital’s Kevin Smith and Tavi Costa see it as inevitable – albeit for different reasons.

“The problem,” they write in a recently released report, “is that money printing married with fiscal spending is crashing head-on with an emerging commodity supply problem that will likely stir up rising inflation which is bearish for both equities and fixed income. Get ready for a volatile 2021, the year of reckoning for twin asset bubbles as the world attempts to emerge from the Covid-19 pandemic. Global central banks added a total of $9.1 trillion of assets to their balance sheets in 2020. To compare, this year’s monetary stimulus was about three times their response to the Global Financial Crisis in 2008. We also saw at least $25 trillion of newly issued debt worldwide while the aggregate value of all negative yielding bonds reached close to $18 trillion in 2020. With this macro backdrop, it is staggering to see a monetary metal like silver still trading sub $30/oz.”

Chart of the Day

bar chart showing central bank net gold sales and purchases 2002-2020

 Click to enlarge

Chart note:  Central banks remained net buyers of gold in 2020, though the pace slowed somewhat. “There are good reasons,” says the World Gold Council in a report issued yesterday, “why central banks continue to favor gold as part of their foreign reserves which, combined with the low interest rate environment, continue to make gold attractive.” The Council expects 2021 to be “not much different” from the year just ended.

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

Gold drifts higher in quiet mid-week trading

(USAGOLD –1/13/2021) – Gold drifted higher in quiet mid-week trading, with the $1850 looking like the support level – at least for now. It is up $3 at $1860. Silver is down 12¢ at $25.52. Generally speaking, the markets are in the quiet mode this morning, with nothing standing out save the latest chapter in the unfolding saga in Washington. Of late, the financial world has had its eye on rising longer-term bond yields. “[I]nvestors searching for an explanation [for gold’s recent plunge],” writes Gold Newsletter‘s Brien Lundin in a client advisory e-mailed yesterday, “need to remember one basic fact: The bond market drives everything.” Rising yields and weakness in the gold market have created something of a deja vu harkening back to last March’s “Great Liquidity Crisis.” (Please see “The bubble either inflates or bursts…”(1/12/2021) Gold sold off early in that crisis then surged as concern about the widespread systemic risks and the effect on the dollar became apparent. On the other hand, the dollar went into a steep retreat, as shown in this morning’s Chart of the Day. As you can see, the two took separate paths beginning early in 2020 – a process that accelerated as the year progressed.

Chart of the Day

overlay chart showing the US Dollar Index and gold divergence in 2020

Sources:  St. Louis Federal Reserve [FRED], Federal Reserve Board of Governors, ICE Benchmark Administration
Click to enlarge

 

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

Gold reverses course in overnight market, gives most of it back in early U.S. trading

(USAGOLD –1/12/2021) – Gold reversed course in the overnight market after finding support near the $1850 level, then gave back most of those gains early in the U.S. trading session after being up almost $18. The yellow metal is now up $2.50 on the day at $1848.  Silver is up 34¢ at $25.33. After all is said and done, gold is down about 5% year to date. Silver, the more volatile of the primary precious metals, is down just over 7% so far this year. We invite you to read the post immediately below for a more detailed view of the latest correction.

Sovereign Man’s Simon Black sees trouble ahead for the dollar once the spending and monetary policies envisioned under the new Biden administration are fully deployed, and that could resonate in the gold market. “[T]here will likely be plenty of cooperation between the Fed and Treasury to print absurd quantities of money this year,” he writes in his outlook for 2021. “Certainly, there will be some bondholders who extend their securities. But most likely the Fed will need to print another $3+ trillion, pushing its balance sheet beyond the $10 trillion mark. And if they really go down this destructive path– $30 trillion national debt, a $10 trillion Fed balance sheet– then 2021 may be the year that the world finally loses confidence in the US dollar. On another note… We think gold could DOUBLE and silver could increase by up to 5 TIMES in the next few years.”

Chart of the Day

bar chart showing US Mint sales of silver bullion coins through 2020

Chart courtesy of GoldChartsRUs • • • Click to enlarge

Chart note:  U.S. Mint silver bullion coin sales surged in 2020, posting their best year since 2016, and the new year is off to a strong start if activity at USAGOLD is any indicator.

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

Gold continues retreat; ‘everyone knows they need a safe haven’ – Merryn Somerset Webb in weekend FT

(USAGOLD –1/11/2021) – Gold continued its retreat as a follow-up to Friday’s plunge. The yellow metal is down another $14 at $1838. Silver is down 66¢ at $24.86. The metals’ drop coincides with an across-the-board slide in commodities prices this morning. The dollar is up marginally and U.S. Treasuries, gold’s safe-haven competitor, seem to have stabilized – at least for the moment. For a more detailed assessment of the current market mix, we invite you to scroll further down the page for this past Friday’s Afternoon Update.

MoneyWeek’s Merryn Somerset Webb posted a reminder of gold’s baseline portfolio role in the Financial Times’ over the weekend. “Think of the reasons to hold gold,” she writes. “If inflation is coming (and it probably is) you want to hold a real asset that can hedge against it — one that can’t be inflated away by relentless money creation and currency debasement. That’s particularly the case in an era of very low interest rates. If governments work to keep interest rates lower than inflation in order to reduce the real value of their horrible debt burdens, everyone knows they need a safe haven, but everyone also knows the traditional ones (government bonds) no longer offer that safe haven. That turns us to gold, the one asset that has a 3,000-year record of protecting purchasing power. No wonder the gold price is up around 40 per cent since 2018. I hold a lot of gold for all these reasons.”

Chart of the Day

bar chart showing US Mint sales of gold bullion coins in ounces through 2020Chart courtesy of GoldChartsRUs • • • Click to enlarge

Chart note:  U.S. Mint sales of gold bullion coins posted their best year since 2016 at 1.078 million ounces and the sixth-best year since 2000

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

No DMR today ……

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