Thinking about buying gold and silver?
Gold in six easy lessons
1. Don’t buy it because you need to make money; buy it to protect the money you already have.
2. Don’t look at price as a barrier; look at it as an incentive.
3. Don’t buy the paper pretenders; buy the real thing in the form of coins and bullion.
4. Don’t fall prey to glitzy TV ads; do your due diligence instead.
5. Don’t allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.
6. Don’t forget the golden rule: Those who own the gold make the rules!
Looking to prepare your portfolio for whatever uncertainty lies ahead?
DISCOVER THE USAGOLD DIFFERENCE
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com
Gold to hit $2,400 in six months, Weiss Ratings senior analyst projects
Finbold/Jistinas Baltrusaitis/11-1-2021
“I think that that is likely to be eclipse next year. I don’t think it’s going to be a runaway where you’re talking about $4,000 gold, but you know, $2,200, $2,300 or $2,400, somewhere in that range, I think in sort of a corresponding moving silver, I think it is likely on the table. And again, it’s going to come from the release of that fed fear, pressure valve, whatever that’s been keeping people from, getting involved.” – Mike Larson, Weiss Ratings
USAGOLD note: Slowly but surely the gold bulls are beginning to resurface after several months of being out to pasture …… We cited Mr. Larson’s opinion in Tuesday’s DMR and repost it here for those who may have missed it.
Is silver a good investment for 2022?
Gold Avenue/The Spotlight/10-26-2021
“Investing in silver can sometimes come with some turbulence as the silver price is usually much more volatile than that of gold. That’s why silver is sometimes jokingly referred to as “gold on steroids” or, as Ole Hansen, Saxo Bank’s head of commodity strategy, calls it, ‘gold with a little bit of a rocket attached,’ as it tends to rally “higher and faster” than its more expensive peer.”
USAGOLD note: This article quotes MKS Pamp Group Nicki Shiles as putting the base case for silver in 2022 at roughly $28 per ounce; the bullish case at around $35 per ounce, and the bearish case at $15. She rates the bearish case at only 30% probability, and the bullish case at 70% – all in all, a favorable outlook for next year.
A base case for silver
Seeking Alpha/Craig Hemke/10-20-2021
“Many of the base/industrial metals have been surging of late, and copper appears to be next. What impact, if any, can we eventually expect this to have on the price of COMEX silver? Let’s start by recognizing that the ongoing bull market in commodities is a real thing. With the rapid acceleration of fiat currency debasement since the onset of the Covid Crisis, hard assets have surged as shortages have developed.”
USAGOLD note: Hemke believes copper may be about to follow the base metals and energy higher and that silver may go along for the ride. “So go forth and prepare accordingly,” he writes. “Keep a close eye on ole ‘Dr. C’ and watch for new all-time highs. Once that occurs, don’t be surprised by what happens next.”
Commerzbank sees silver going to $26
OPINION
“Above the market is the $24.95 recent high, but resistance extends up to tougher resistance offered by the 200-day ma at $25.56 and $26.07, the August high. The market will need to regain this area to regenerate bullish impetus. Please note that the 55-week ma also lies at $25.30. We favour the topside but it may take several attempts to clear this band.”
USAGOLD note: Commerzbank also sees 22.85 as initial support on the downside “underpinned” by strong support at $21.87. T”hese are considered to be a major band of support,” says the bank, “and we expect them to act as a floor for the market.”
Gold’s inflation-haven appeal means ‘violent’ run-up may be ahead
Bloomberg/James Atwood/10-22-2021
“That’s the view of two of the biggest names in Canadian mining — the former chiefs of Goldcorp Inc., David Garofalo and Rob McEwen — who predict investors will catch on soon that global inflationary pressures are less transitory and more intense than central bankers and consumers price indexes suggest.”
USAGOLD note: Bloomberg goes on to say that it isn’t surprised two gold mining executives would be bullish on gold. What did get journalist Atwood’s attention was the two predicting “such a steep gain in so short a time.” Garofalo says gold will hit $3000 in “months not years.”
Kiyosaki hoarding bitcoin, gold, and silver – plans to scoop up bargains once the market crashes
Repost from 9-9-2021
“‘Rich Dad Poor Dad’ author Robert Kiyosaki is hoarding gold, silver, and bitcoin in anticipation of a brutal market downturn – and preaching patience to investors as he expects a bargain bonanza after the crash.”
USAGOLD note: A strategy not too distant from the one being deployed by many among our clientele sans the bitcoin positions (in most instances). Bitcoin’s volatility, as Mark Mobius reminds in another MarketsInsider article, undermines its store of value potential.
Silver to the stratosphere
Singapore Bullion Market Association/Emil Kalinowsky/Fall 2021
Repost from 10-20-2021
“I’m ‘crazy’ about silver’s bullish outlook for the rest of this decade, and I explain why in this article (i.e., green energy, inflation). I could have styled this article in a matter-of-fact way, but I’ve been reading too much science fiction while pining for international travel to resume once again. And so I wondered, What would it be like sitting next to someone? And what if they wouldn’t stop talking? On an interstellar trip? What would I say? Hopefully the content is educational and entertaining. See you at the spaceport.”
USAGOLD note: An entertaining review of silver’s longer-term fundamentals for those looking to check that box on their investment To-Do List.
The Fourth Turning: How bad will it get, how long will it last and what comes next?
Wealthion/Neil Howe interview with Adam Taggart/10-15-2021
“The whole problem every time you go into a fourth turning is that by the time you’re entering a new fourth turning every generation who has had any adult experience handling a crisis is too old to serve.”
USAGOLD note: It has become our custom to annually post an update of Neil Howe’s thinking in advance of the new year. Howe, as many of you already know, is the co-author (along with William Strauss, now deceased) of The Fourth Turning – the prescient analysis of long-term, generational cycles that first hit the bookstores in 1997. In this interview posted at the Wealthion website, he tells Adam Taggart that “the weight of history strongly suggests we are headed into a decade-plus period of economic and social disruption that will transform our political, economic, financial and social systems. Volatility will reign. Crushing inflation looks likely. We may see a stock market crash and widespread job losses. Perhaps even war.” For those unfamiliar with Howe’s theories, this is a full immersion that will likely change the way you see the march of history and what might lie ahead – from the master theorist himself.
“The next Fourth Turning is due to begin shortly after the new millennium, midway through the Oh-Oh decade. Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation, and empire.” – Neil Howe and William Strauss, The Fourth Turning (1997)
What’s up with gold and silver?
USAGOLD UPDATE
10/22/2021 AM
In the absence of any other discernible factors, we are going to attribute gold and silver’s sharp climb this morning to short-covering that began during the early hours of the US trading session. (Note volume increase in the daily chart below.) Trading was relatively subdued overnight though both metals showed minor strength. We will update if any other news of significance surfaces. As to what may have prompted the short-covering, the factors listed in this morning’s DMR (immediately below) might be a good place to start.
Chart courtesy of TradingView.com
Will silver finally realise its potential? I’ve no idea – but I’ve just bought a load
Repost from 10-15-2021
“I did something I haven’t done in what feels like a long time yesterday: I bought silver. Quite a lot of it. You know my views on silver: it might have bucket loads of potential – almost more than any other metal – but it never delivers.”
USAGOLD note: Welcome to the logically illogical world of Dominic Frisby ……
Resources are in corrective mode, what will it take for the gold price to move
Repost from 10-14-2021
“The big question on gold investors’ minds, for good reason, is why gold is not higher given the unprecedented money printing and rising inflation. The second question is when will it change? To some extent, gold has simply been in a long consolidation after the extraordinary move early last year, when gold jumped over 30% from its end-March low to early-August high. That kind of move – in four months – is extraordinary for an asset that is intended as a hedge and an insurance. Gold is not supposed to do that. Bitcoin…Tesla…perhaps, but not gold!”
USAGOLD note: As of yesterday, we finally got some movement in the gold price in response to the increasing inflation rate. There is a growing sense that inflation might be more persistent than previously believed. “The longer gold meanders in its current trading range,” says long-time market analyst Adrian Day, “the faster and stronger the eventual move will be.”
Get rich with crypto, stay rich with gold
Repost from 9-3-2021
“I can’t help but think the next decade will belong to gold. After all, the S&P 500 trades at a lofty valuation by historic standards, while gold doesn’t. The main reason I have confidence that gold will win the 2020s is that this almighty asset bubble all around us will implode, and the crowded trades will disappoint the most. Gold is far from being crowded.”
USAGOLD note: Though Charlie Morris’ thought processes are held in high regard, we continue to counsel caution when it comes to cryptocurrencies. Many harbor a lingering suspicion that crypto has as much chance of rapid decline as rapid advance. In the end, though, we all need to find our own way on the matter. As for the second half of Morris’ mantra (as expressed in the title), there is a great deal of merit and historical support for preserving one’s gains, wherever they might occur, through conversion to gold. For those who have made significant profits in the crypto arena, perhaps preserving some of those gains is an option worth considering. After all, the crypto space has tracked the S&P more closely than it has gold. Morris’ latest is well worth the time spent no matter where you come down on the crypto controversy.
Swiss stock up on gold – OpEd
Repost from 9-3-2021
“Over the last couple of months, it has become clear from conversations with friends and partners from the gold industry that there is a marked increase in retail demand for physical gold from Swiss investors. The most interesting thing about this development is that the bulk of new orders is coming from smaller accounts, showing that it’s ordinary savers and citizens that are driving this trend, rather than professionals, speculators or larger investors.”
USAGOLD note: The United States is experiencing a similar surge in demand from private investors who tend to gravitate towards coin and bullion acquisitions. The big institutions and funds favor gold ETF acquisitions for ease of holding and liquidating very large positions. “It is essential,” says Grass, “to think for oneself and to plan for the future, regardless of what the majority may think at the time or what any centralized authority might promise.”
Contagion
Credit Bubble Bulletin/Doug Noland
Repost from 10-12-2021
“Beijing waited much too long to begin reining in its Bubble. Pandemic stimulus stoked already perilous excess. Now Chinese officials face a terrible predicament and onerous decisions. At this point, large liquidity injections could further stoke inflationary pressures, while risking a disorderly decline in the Renminbi. The Fed waited much too long to begin reducing historic monetary stimulus. Pandemic stimulus stoked already perilous excess. Federal Reserve officials could soon face quite a predicament and difficult decisions.”
“Was the jobs report good enough for a November taper? That just doesn’t seem the crucial question today. What does the world look like a month from now? Has China’s unfolding crisis by then enveloped the ‘Core’? How powerful are de-risking/deleveraging dynamics in November, globally and in U.S. markets? My thoughts harken back to the March 2020 dislocation in bond (and equities) ETFs. Since then, Fed pandemic measures have spurred additional gargantuan bond fund inflows (at historically low bond yields), while simultaneously unleashing powerful inflationary dynamics. Quite a combustible mix. Clearly, the Fed is not about to ‘slam on the brakes.’ Might the bond market?”
USAGOLD note: In this lengthy piece, Noland chronicles the unfolding debt crisis starting with China and Evergrande and working his way in careful detail to the contagion, as he now labels it, beginning to “wash up on our shores.” Noland conveys a sense that things could spin out of control, launching a crisis that could once again catch the bulk of investors by surprise. Secretary of State Blinken directed comments to China last week that serve as a wake-up call for western financial markets as well. He said that China should act “responsibly and deal with the challenges” imposed by the ongoing meltdown in its real estate and credit markets. What the country does economically, he said, “is going to have profound ramifications, profound effects, on literally the entire world because all of our economies are so intertwined.” In short, Blinken, too, is raising the specter of a contagion.
Billionaire Paulson says crypto ‘worthless’ bubble, gold poised to surge
Repost from 9-1-2021
“Ever since John Paulson bet against the U.S. housing market more than a decade ago, people keep asking him about his next big trade.”
USAGOLD note: Paulson believes that because of inflation people will try to get out of cash and fixed income. The amount of cash that becomes available, he says, “dwarfs the amount of investable gold.” The yellow metal, he says, is “primed for its moment.”
It’s time for gold to steal the show
Repost from 10-8-2021
“The data may suggest that the FED will restrain from their idea of increasing interest rates early next year, however taper uncertainty puts the USD in a weaker position. The market is tired of the sea-saw imposed by the FED. And when this kind of sentiment fills the market, the edge goes to safe-haven assets, mainly Gold.”
USAGOLD note: An interesting and unusual take on what is currently at play in the gold market …… He sees the current correction as laying the groundwork for the possibility of $2200 gold.
Can market sustain above $80 crude, below $1,700 gold? Unlikely
Bloomberg Intelligence/Mike McGlone
Repost from 10-7-2021
“China pushing back on free-market capitalism and July’s required reserve ratio cut are challenges. Reversion risks in the hot U.S. stock market vs. cold dollar add to commodities’ potential for pullback. We see probabilities tilted against crude oil and toward gold in 4Q.”
USAGOLD note: McGlone sees a pullback in commodities and overlooks the current weakness in gold to predict it will revisit the peak attained in 2020.
‘Most Americans ignore the signs we are in real trouble’
AdvancingTime/Bruce Wilds/10-7-2021
“It is said the dance band on the Titanic played on as the ship went down. This was all done as a grand effort to reassure the passengers and ease the panic in their hearts.Consider the possibility that behind all the noise we hear today a similar effort is being made to comfort us and take your attention off the hopeless feeling that comes when things sink away beneath your feet. For the last several months I have come to feel a similar story is playing out here. The Biden-Yellen-Powell economy is less than inspiring.”
USAGOLD note: Essayist Bruce Wilds raises concerns many of us have entertained in recent months. If you are thinking about a precious metals diversification and you have yet to pull the trigger, perhaps you are doing yourself a disservice, i.e., not giving your instincts the proper credit.
Happy fiftieth anniversary, gold
Repost from 8-27-2021
“But what all this proves is that Wall Street is not only biased against gold but hopelessly ignorant as to the real function of the precious metal. It is crucial to understand that gold isn’t really an investment, like stocks or bonds. It doesn’t grow its earnings, or pay dividends, or even offer any interest like fixed income. Gold mining stocks are investments, but the metal itself is not. Gold is a competing currency that must be measured against the return on cash. It offers a viable replacement for dollars that exist in a completely liquid savings or checking account or short-term Treasuries. In other words, the performance of gold is most accurately measured when compared with the returns on holding cash or cash equivalents. Gold should not be compared with stocks or long-duration bonds. However, gold can still very favorably compete with those investments, especially during times of stagflation.”
USAGOLD note: Readers will appreciate the direct manner in which Pento makes his point. This article offers solid perspective on gold’s place in the investment universe since the United States ended dollar convertibility in 1971.
Gold an attractive insurance policy
Repost from 8-25-2021
“Risk is precisely the reason why Palantir Technologies decided to make an investment in gold. The data analytics firm, founded in part by billionaire Peter Thiel, announced last week that it had stockpiled as much as $50 million worth of gold bars in preparation for “a future with more black swan events.” What’s more, Palantir—named for the all-seeing crystal balls in Lord of the Rings—is also allowing customers to pay for its software in gold.”
USAGOLD note: We referenced this report in yesterday’s DMR and repost the link here for those who may have missed it. Like Holmes, we have long seen gold as portfolio insurance against a range of economic maladies. Inflation and stagflation are the main concerns at present, but gold also protects against the other three of the big five concerns: deflation, disinflation, and hyperinflation.
Related: Please see Black Swans Yellow Gold – How gold performs during periods of deflation, disinflation, stagflation and hyperinflation
With prices at their lowest in over a year, silver’s ‘close to being a bargain’
MarketWatch/Myra Saefong/9-30-2021
“After silver’s climb earlier this year to the highest prices since 2013, the metal since has significantly underperformed sister metal gold. With silver’s value dropping to its lowest in 14 months, some investors may see an opening to buy.”
USAGOLD note: Saefong does an excellent job of outlining the current mood among silver market analysts which appears to be, at this juncture, as mercurial as the metal itself. We missed this piece when it was first published, but ran into it late last week (If you are wondering about the September date.)
Mobius says hold 10% in gold as currencies will be devalued
Bloomberg/Abhishek Vishnoi and Ranjeetha Pakiam
Repost from 8-31-2021
USAGOLD note: Mobius adds a somewhat cryptic remark about a possible government gold confiscation in this article. We referenced Mobius’ comments in yesterday’s DMR and repost the link here for those who may have missed it.
Gold as a risk mitigator
Investment Innovation Institute/Wouter Klijn
Repost from 8-23-2021
“These changes in correlation make gold a particularly attractive asset for the purpose of portfolio risk management. And with bond yields at record lows, reducing their defensive qualities, investors have started to take notice of gold as a risk mitigator and source of diversification and liquidity.”
USAGOLD note: In recent times, as gold ETF demand goes, so does the price of gold. At the moment, institutional gold demand is low, and the price has remained rangebound. However, many believe that once funds and institutions regain their interest, the price will begin moving to the upside again. This article goes on to cite a World Gold Council survey showing that among the funds that do not own gold presently, 40% said they planned to add it over the next three years. Changes in sentiment, we will add, can occur quickly among funds and institutions, and when it does, ETF demand can rise or fall dramatically.
The mechanics of the global gold market
The Gold Observer/Jan Nieuwenhuijs/10-7-2021
“The price of physical gold is set by supply and demand for physical gold. The global physical market can be divided into exchange trading and bilateral trading. In addition to the physical market there are multiple gold derivate markets that influence the physical market. To understand the entire machine, we will examine the workings of gold exchanges, bilateral trading (networks), and derivate markets separately, and finally how all derivatives are tied to the physical market. Derivatives are traded on exchanges and on a bilateral basis as well, but for the sake of clarity we will discuss them independently.”
USAGOLD note: One of the gold market’s fascinations is its complexity – something Nieuwenhuijs tackles in this big-picture overview.
Rainy day investment
“In an economy buffeted by the ups and downs of farming and fishing, the people [of India] are used to buying gold after bumper harvests or fishing seasons and selling it after lean ones.” –– Vivek Kaul, Live Mint
Dr. MoneyWise says: “It’s all very simple. Own gold for a rainy day. Use it if and when that day arrives.”
Ready to make that rainy day investment?
DISCOVER THE USAGOLD DIFFERENCE
ORDER DESK:1-800-869-5115 x100/orderdesk@usagold.com
New fundamentals for gold and silver
Kelsey’s Gold Facts/Kelsey Williams
Repost from 10-1-2021
“Gold is not just real money. It is original money. Gold was money before the US dollar. Its value is constant and unchanging. It is the ultimate store of value.”
USAGOLD note: As such, it appreciates when paper money depreciates. “The rising price of gold in dollars,” says Williams, “does not mean that gold’s value is increasing; rather, it signifies a correlative loss in the purchasing power of the US dollar.” Williams offers a unique argument at the link……
Legendary investor Jeremy Grantham says US stocks are in a crazier bubble than in 1929
MarketsInsider/Harry Robertson
Repost from 10-1-2021
“Yet Grantham told CNBC on Tuesday that the end of a stock-market bubble is ‘like killing off a vampire.’ He said markets were so confident that they just shrug off any bad news. However, Grantham said that can’t last forever and he expects sharp falls in the coming months.”
USAGOLD note: As this article and Grantham himself point out, the market just shrugs off any bad news and keeps going higher – up 40% since Grantham first warned of a crash in June 2020. While the music is playing, investors dance. Stop the music, and the mad dash for the exits begins. We remind, again, that following the crash of 1929, the stock market did not revisit its highs of that year until 1955 – 26 years later.
Chart courtesy of Macrotrends.net
Big banks making a solid case for gold
Repost from 9-30-2021
“Want big returns and have some time on your hands? Pay attention to gold. The yellow precious metal isn’t dubbed the hottest investment in town these days, but it looks attractive. The case for higher gold prices continues to get stronger. Patient long-term investors could be rewarded very well. Currently, gold trades just below $1,800 per ounce, down by about six percent in 2021 so far. This decline could be a blessing in disguise.”
USAGOLD note: Zulfiqar goes on to list the big-name banks touting gold saying it is worth paying attention to their findings because they have “massive research teams” and “massive influence over institutional investors.” That influence could turn out to be a defining factor. At moment, judging from ETF flows, institutions are out of the market, but that could change in a heartbeat.
Precious metals bull market not over yet, analyst says
Repost from 9-29-2021
“Precious metals investors shouldn’t despair. The long-term outlook remains positive. The recent drop in prices since August 2020 is just the calm before another leg up in a continuing bull market, a veteran analyst says.”
USAGOLD note: The veteran analyst cited is CPM Group’s Jeffrey Christian who sees gold and silver returning to record highs by 2023-2025. We see him as being somewhat conservative on the time frame. Constable says, “Anyone wanting to benefit from the likely forthcoming rally should consider accumulating gold and silver bullion on price dips.”
Supply chain woes from Covid and energy may spark ’70s-style inflation, economist Stephen Roach warns
“The former Morgan Stanley Asia chairman is worried that the impact of energy price spikes on China’s struggling supply chain will be the tipping point.”
USAGOLD note: Even the Fed has conceded that “transitory” inflation might be with us for awhile. What Roach is expecting, though, is something far more deleterious. We are one supply glitch, he says, away from stagflation. More at the link……
Central banks stockpiling gold
Repost from 8-16-2021
The Reserve Bank of India purchases a record amount of gold
InsightsSuccess/Staff/8-16-2021
Brazil almost doubles its gold reserves in 3 months
MarketResearchTelecast/Staff/8-15-2021
USAGOLD note: The Reserve Bank of India purchased a record 29 tonnes of gold in June and almost 150 tonnes over the past year. The Central Bank of Brazil purchased 62.3 tonnes between May and July. The World Gold Council reports central banks buying 333 metric tonnes of gold in the first half of the year. “Central banks,” it says, “are likely to continue buying gold on a net basis in 2021 at a similar or higher rate than in 2020, driven by a continued focus on diversification and risk management.”
Palantir buys gold as hedge against ‘black swan event’
Bloomberg/Lizette Chapman/8-17-2021
“The gold purchase was buried in a securities filing last week for its quarterly financial results and reported earlier this week by Barron’s. Palantir shares were up about 5% in intraday trading Wednesday.”
USAGOLD note: Palantir Technologies, the Denver-based company founded by Peter Thiel and Alex Karp (that began life in the Silicon Valley), has a reputation for out-of-the-box thinking. Since it specializes in software used by governments, one wonders if they know something the rest of us don’t – particularly when it goes to the trouble of mentioning their gold stockpile as a hedge against some future black swan event. The $50.7 million in 100-troy ounce gold bars represents about 28,000 troy ounces.
The odds of a 20% correction in stocks are rising as the market transitions to the next stage of its cycle, Morgan Stanley warns
Repost from 9-22-2021
“Analysts – led by Michael Wilson – called this scenario ‘Ice,’ which would happen if earnings revisions and higher-frequency macro datapoints slow down.”
USAGOLD note: The bears are beginning to emerge from the woods …… Morgan Stanley is one of a number of Wall Street bears predicting a sharp stock market correction.
Investor frustrations about gold
Myrmikan Capital/Daniel Oliver
Repost from 9-22-2021
“[I]nvestors are understandably frustrated that gold is not already much, much higher. There seem but two likely possibilities: gold is simply digesting its recent run from $1,500/oz only eighteen months ago and will soon launch higher, or gold is telegraphing a looming dollar liquidity crisis.… The third possibility is that Myrmikan’s thesis is simply incorrect: the government can run rising deficits without limit, the stock market can accelerate higher forever, wealth concentration can continue with no societal or political effects, the U.S. empire can decline with no material consequences for Americans or our markets.”
USAGOLD note: Myrmikan reflects on why gold can’t seem to get out of its own way. How could it remain stuck in a range while the Biden administration’s anything-goes, free-wheeling economic policies progress without any check whatsoever? Ultimately, it says, it will become unstuck and trade for “multi-thousands per ounce” as investors launch what Ludwig von Mises called “the flight into real values.”
Why is gold not rising?
Gold Switzerland/Matthew Piepenburg/9-24-2021
“But we track the movement of physical gold every day, and can say with blunt clarity that the paper trade in gold has zero to do with those otherwise ‘barbarous’ forces of the actual supply and demand of this precious metal. Zero. In short, the paper price of gold has become a fiction accepted as reality, which is not surprising in a financial landscape (i.e., historically over-valued stocks, negative yielding bonds and central bankers allergic to transparency) which defies every measure of honest price discovery or basic capitalism.”
USAGOLD note: Piepenberg asks the question on the minds of most gold investors and market commentators and concludes that “today’s gold price is not nearly as relevant an issue as gold’s role in protecting far-sighted investors from what’s ahead.” In short, Piepenburg believes gold to be more a form of financial insurance than speculation for short-term gains. We at USAGOLD can attest to the strong demand instigated by rangebound pricing – in both gold and silver.
Gold as an inflation hedge: What the past 50 years teaches us
Wall Street Journal/Mark Hulbert
Repost from 8-9-2021
USAGOLD note: Whenever inflation looms on the horizon, research inevitably surfaces arguing that gold is not a reliable inflation hedge. This Wall Street Journal article published over the weekend is another example. It draws on the research of Duke University professor Campbell Harvey and Claude Erb, a former commodities portfolio manager at TCW Group. “They found that it’s only when measured over very long periods – a century or more,” writes columnist Mark Hulbert, “that gold has done a relatively good job maintaining its purchasing power. Over shorter periods its real, or inflation-adjusted, the price fluctuates no less than that of any other asset.” Though that might be the case, It is difficult, in fact, impossible, to argue against gold’s performance as an inflation hedge during the 1970s – the last time we had a close encounter with runaway inflation. Certainly, investors holding gold at the time did not question its reputation as a hedge while inflation was raging through the economy. Quite the opposite, they were happy they had the foresight to buy it before it became a major issue.
If you blend the data, though, over a longer period to include disinflationary economies (like the 1980s when the dollar provided a real rate of return), its performance levels out, and that is what Harvey and Erb’s do in their study. Inflation continued in the period between 1980 and 2000, but it was greatly subdued, and the Federal Reserve went to great lengths to secure a real rate of return on Treasury paper. That policy effectively boosted the dollar and brought down the gold price. Now, we have a different story. In fact, a good many believe that what Paul Volcker was to inflation in the 1980s, Jerome Powell is to disinflation in the 2020s. The inflation rate has migrated well above the rate of return on the 10-year Treasury note, and though gold has yet to respond, we are early in the game. A good many still buy into the Fed’s argument that the current inflation rate is transitory.
‘The end of the gold standard unleashed the most inflationary period ever’ – DB’s Jim Reid
Repost from 9-17-2021
“Sure enough, with the link to gold broken, Reid then goes on to note that ‘over the last half-century, we’ve seen the most inflationary period ever in the data series we have going back to the 13th century. So even though inflation has been tamer over the last decade, don’t be fooled that fiat money is anything other than inflationary through history.'”
USAGOLD note: Reid’s conclusions echo our own arrived at over the years. Our remedy is to put oneself on the gold standard through the ownership of coins and bullion to compensate for the deficiencies of the fiat money standard. The following chart supports Reid’s thesis. For regular readers it is a redundancy, but for those new to the idea of gold ownership, it might come as a revelation.
Chart courtesy of the St. Louis Federal Reserve [FRED], Bureau of Labor Statistics, the ICE Benchmark Administration
Ray Dalio says if bitcoin is really successful, regulators will ‘kill it’
Repost from 9-17-2021
USAGOLD note: Dalio has his doubts that the cryptocurrency of today will be the cryptocurrency of tomorrow, as the authorities move to put it in the same drawer with other securities (and therefore open to regulation). He goes on to say that bitcoin “could be tulips in Holland” and that he owns a smaller percentage of it compared with what he has invested in gold.
Not your mother’s inflation: Why this is the time to invest in precious metals
Streetwise Reports/Kevin Smith and Tavi Costa
Repost from 8-2-2021
“Interestingly, both of those regimes, along with today’s, share one thing in common: negative real interest rates. The 1940s was the most financially repressive environment yet in that respect. The Fed at least allowed interest rates to rise in the 1970s while inflation rose faster. From a market perspective, there was one important lesson from both periods: At times when investable assets yield less than inflation, owning tangible assets becomes imperative. Commodities were far-and-away the best performing asset class in both of those decades.”
USAGOLD note: In the 1940s, gold and silver were the money so there wasn’t any need to hedge the inflation by purchasing precious metals privately. The 1970s were a different story. Prices went vertical. Smith and Costa do a deep dive into both the 1940s and 1970s – the two eras analysts most frequently cite as eras comparable to our own. They warn that today’s environment is “far more extreme” than those two eras.