Featuring top analysts. Updated regularly.
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!
Ready to become a member of the ruling class?
“The ‘militarization of currency reserves’ has deprived the world’s reserve currency, the US dollar, of its neutrality, a neutrality that is indispensable for a universal currency. The euro and other Western countries who are potential competitors for the US dollar’s position have taken themselves out of the game immediately. … Therefore, 50 years after the closing of the gold window, the chances are that gold may play a role again in the inevitable reshaping of the world monetary order. Gold is politically neutral, it does not belong to any state, political party or institution. This neutrality could serve as a bridge of trust between the geopolitical power blocs that currently seem to be emerging.”
USAGOLD note: In order for gold to play a meaningful role in the reorganization of the international monetary system, the price will have to be adjusted upwards, according to Stoferle – perhaps radically upward. We recommend the full analysis at the link. It offers considerable food for thought. We will add that gold serves the same purposes in the private investment portfolio that it does in the reserve holdings of nation-states and their central banks.
“This volatility has not only helped fuel levels of inflation not seen in 40 years —market observers are warning that it could put the stability of the global economy at risk unless regulators and central banks wake up to the threats posed.”
USAGOLD note: There are so many fires lit in the financial markets these days, that it will be difficult for the Fed to determine which one it should put out first. Some are worried about a speculative crisis suddenly enveloping the commodities space. “… [I]nstead of enacting position limits that work, which would bring prices more in line with supply and demand,” warns one analyst, “we have large banks advising clients to shift more of their portfolios into commodities as a so-called inflation hedge.”
“People are interested in gold because they are worried about future purchasing power. The market is still considering whether the US Federal Reserve (Fed) will be able to raise interest rates as much as seven times this year and whether or not inflation will materially weaken. In my view, this is why gold hasn’t broken out properly yet — the market is focused on relatively hawkish observations.”
USAGOLD note: Naylor-Leyland lays out why investors and central banks own gold. It is not simply because it shines and is beautiful to look at. We referenced this report in Tuesday’s Daily Market Report and repost it here for those who may have missed it. Many of our readers will be surprised by the graph below. The U.S. dollar has lost 8% of its purchasing power over the past year.
“Where we are now is a bit different. We’re in a universe of equities and bonds going down together. There’s a lot of instability. That instability is disconcerting. If they’re both going down, I need to find things that don’t behave like bonds and equities, which means commodities.” – Peter van Dooijeweert, Managing Director, Man Group
USAGOLD note: During a time of secular currency debasement, both stocks and bonds lose value simply on a purchasing-power basis if they do not keep up with or better inflation. Bonds, at present, are in particularly dire straits losing both principal and purchasing power at the same time. In a separate study posted last June, Man Group lists gold and silver as two assets to which investors fled during past episodes of inflation and were rewarded with double-digit returns. The firm also suggest acting sooner rather than later. Man Group is the world’s second largest hedge fund behind Bridgewater Associates. Bridgewater also holds a large position in commodities.
“So Basel III gives gold – especially allocated gold – a much sounder footing in the international monetary system. It aims to keep banks from simply saying they have gold on the balance sheet. And it will avoid them having more than one owner for their gold. This means that it will incentivize banks to buy actual physical bullion.”
USAGOLD note: There has been considerable discussion on the impact of the new Basel III accords on the gold market over the past couple of years. It all takes on renewed importance, though, with inflation now part of the equation. Nomi Prins offers a solid overview of how commercial banks might perceive gold once the accords take effect in January of next year. Worth the review………at the link. She says one of the simplest ways to take advantage of what she sees as a positive outcome for the yellow metal is to own gold bullion coins like the American eagle or Canadian Maple Leaf.
Here’s the playbook if the rest of the world breaks free from the U.S. dollar, says Credit Suisse’s monetary plumbing guru
“Without price stability, there is no exorbitant privilege or dollar supremacy, says Pozsar.”
USAGOLD note: And the currency markets, we would guess, turn into some version of a monetary wild west where anything goes in the pursuit of commodities. He says to short the dollar, among a handful of trading options. The standard approach for accomplishing that objective is to buy precious metals, as Pozcar himself has indicated from time to time.
“Out of this, I think this ‘Bretton Woods III’ that I started to kind of develop and run with, is a world where we are, again, going to go back to commodity-backed money — where gold, once again, is going to play a big role. And not just gold, but I think all forms of commodities.” – Zoltan Pozsar, Credit Suisse
USAGOLD note: Briefly, Pozsar sees a new world monetary order evolving on its own out of the war in Ukraine – what he calls Bretton Woods III. He says BlackRock’s Larry Fink is right when he says that globalization is probably over. We highly recommend the link above……
“Depending on the length of the recession and the factors affecting the gold price, including inflation, currency value, demand and supply, there can be some fluctuations within the recessionary period but, in general, in recent history, the price of gold has maintained its value or outperformed other asset classes during times of economic instability …”
USAGOLD note: We live in a time when even money market accounts can become destabilized as a result of a credit market breakdown. In the early months of a recession investors seek gold as a safe-haven and hedge against systemic risk and financial market weakness. Thereafter, the demand can accelerate, as it did in 2009, if and when the Fed steps in with more quantitative easing (i.e, money printing) to turn the recessionary tide, or better put, to save the financial system.
“Useful monies are those of open economies with liquid financial markets, monetary stability and the rule of law. Yet the weaponisation of those currencies and of the financial systems that handle them undermines those properties for any holder who fears being targeted.”
USAGOLD note: For attuned investors and nation-states alike, “a new world of currency disorder” translates to gold ownership. Under the new rules of the game, those who manage national reserves would be considered imprudent if they neglected the potential for their economy to be so targeted. And, yes, we do think that the demand for physical gold in the official sector will be a likely result. Wolf mentions gold as one of “four replacements to today’s globalized national securities,” the others being private currencies like bitcoin, a global fiat currency, or another national currency, “most obviously China’s.” An important read at the link ……
“The stars are aligning for gold. A combination of geopolitical tumult, supply chain problems and inflation all point to much higher gold prices. … If you believe that the war in Ukraine will end soon, that global supply chains will heal quickly and that inflation is transitory, then you’re probably in for a rude awakening. In fact, none of those things is likely. Even if the shooting stops in Ukraine soon, something that is not at all assured, the geopolitical consequences will dominate events for years or decades.”
USAGOLD note: We referenced Rickards’ latest on gold in yesterday’s Daily Market Report and repost the link here today for those who may have missed it. Rickards, to put it in a nutshell, is not as optimistic as some on Wall Street or in the press. “It’s important to buy gold now,” he says, “because this process is just beginning.”
“The decision by the US and allies to freeze Russia’s foreign reserves has unleashed an intense debate about the future of the international monetary system.”
USAGOLD note: The dollar has gone from 70% of reserves in 2002 to 59% today, the result of a deliberate move on the part of central banks to diversify away from the U.S. currency. Eichengreen believes we are moving toward a multi-polar reserve system. He does not mention gold, but it is difficult to think about central banks moving away from the dollar in a serious manner without considering gold the prime substitute – the one currency that cannot be printed into existence.
“Rising inflation and safe-haven demand resulted in extraordinary demand for physical gold in March, capping off the best start to the year in more than two decades. In its latest sales data, the U.S. mint reported that it sold 155,500 ounces of various denominations of its American Eagle Gold bullion coins, up 73% from last month. The U.S. Mint saw its best March performance since 1999.”
USAGOLD note: “Physical as well as investment demand remains solid for the simple reason investors (retail and professional) see inflation everywhere.” says Saxo Bank’s Ole Hansen. And few see that input changing anytime soon.
“Much more interesting was Zavalny’s main point, even though it has been mostly overlooked. If other countries want to buy oil, gas, other resources or anything else from Russia, he said, ‘let them pay either in hard currency, and this is gold for us, or pay as it is convenient for us, this is the national currency.’”
USAGOLD note: The implication, according to Arends, is that Russia would convert those hard currencies to gold. He goes on to say that he is “gold agnostic” but that there should be “at least some gold in a long term investment portfolio. “Gold is gold,” he says, “and someone will always take it.”
“So long as the market price for physical silver remains consistently higher than the paper commodity contract price, the U.S. Mint is going to continue experiencing difficulty in obtaining sufficient silver.”
USAGOLD note: Heller puts his finger on the real reason the Mint is having problems securing silver for coin production. It’s always been a case of the paper market tail wagging the physical dog in precious metals pricing. When demand booms, shortages occur and premiums rise – precisely what is occurring in the silver market as this note is written.
“Whipsawing commodity prices and eye-watering margin calls are forcing traders to reduce their activity, driving liquidity out of markets and exacerbating price swings, according to some of the world’s biggest trading houses.”
USAGOLD note: This report sheds light on a situation that previously was developing under the radar. These are the sorts of problems the Fed has stepped in to defray in the past with quick liquidity. The worry here is the potential contagion effect as margin calls beget margin calls. The potential for a major crisis looms……Beware the black swan.
“Do not trust the paper price being quoted for commodities. Evidence of resource scarcities is pervasive and can be seen on a chart of nearly any commodity. The commodity indexes I pay most attention to are spot indexes that report on actual prices paid by end-users. These are a better guide to what is going on than paper and future prices, which are subject to speculation and even manipulation.”
USAGOLD note: Leeb ends by saying that the best thing you can do for yourself right now is to buy protection and that means investing in gold and silver.
Gold and the CRB Index
Chart courtesy of TradingEconomics.com
“The Fed’s…[increase in the interest rate on Wednesday] virtually guarantees a recession or depression. The beginning of the end of the bull market in stocks and real estate has begun, and the dawn has come for the pending bubble in precious metals.”
USAGOLD note: Wilson goes on to say that the World Economic Forum is calling for an asset bubble burst sometime between 2023 and 2025. “This,” he says, “means that the sky is the limit for gold and silver” with the risk that we head lower first. We recommend the link at the top for the full rationale.
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.”
“Investors are pumping more money into commodity funds than at any time in the last decade, enticed by red-hot inflation and a futures market offering big profits.”
USAGOLD note: We referenced this important article in yesterday’s Daily Market Report and repost it here for those who may have missed it. Silver can serve as a viable proxy for those who would like to participate in the potential commodities boom in a simplified way. The chart below shows that it has a history of trading in concert with the commodities complex – though not with unerring exactness. In addition to the commodities market exposure, you get the added benefit of owning what many now view as a safe haven and store of value alternative to gold. Too, you can buy and take delivery of the metal itself – something you could not do with most commodities unless you happened to own a very large warehouse. We can help you set up an allocated safe storage account enabling you to buy and sell the metal with a phone call.
Silver and the S&P Goldman Sachs Commodity Index
Chart courtesy of TradingEconomics.com
Where we are in the big cycle of money, credit, debt and economic activity and the changing value of money
“Most people worry about whether their assets are going up or down; they rarely pay much attention to the value of their currency. Think about it. How worried are you about your currency declining? And how worried are you about how your stocks or your other assets are doing? If you are like most people, you are not nearly as aware of your currency risk as you need to be.”
USAGOLD note: Dalio goes on to recommend gold as one of the ways to preserve wealth when the currency is deteriorating.
“Gold-futures speculators’ most-feared hobgoblin is Fed-rate-hike cycles. These super-leveraged traders wielding outsized influence on gold prices flee in terror when rate hikes loom. The resulting heavy selling hammers gold sharply lower, damaging sentiment. But these myopic speculators apparently have no history books, as gold actually thrives during Fed-rate-hike cycles! They’ve proven very bullish for this asset.”
USAGOLD note: Hamilton states the thesis per the above, then lays out the proof in full detail. “Investors flock back to gold during Fed-rate-hike cycles,” he concludes, “because they are bearish for stock markets and threaten or trigger economic recessions. Gold is remembered and bought since it tends to power higher on balance as stock markets weaken. Gold’s upside potential in this next hiking cycle is way bigger than normal due to the raging inflation the Fed’s extreme money printing unleashed, driving bubble-valued stocks.”
“The price of gold in Japan rose to its highest level ever on Monday, driven by what analysts say is a combination of geopolitical risk and worries over a weakening yen.”
USAGOLD note: Stagflation is a global concern. One analyst is quoted as saying that even young people are buying gold “out of concern about being able to maintain purchasing power into retirement.” Keep in mind that Japan has been mired in a near deflationary economy for decades. Is gold’s record-breaking performance in terms of yen a sign of things to come for other currencies?
Gold price in Japanese yen
Chart courtesy of TradingView.com
“Gold has made a positive start to the year, outperforming bonds and equities as skittish investors scour the market for safe places to park cash.”
USAGOLD note: Over the past week, a narrative has developed around gold that it could become a primary beneficiary whatever policy direction the Fed takes. That, some say, is the reason for gold’s strong showing thus far this year. If the Fed fails to tighten sufficiently, inflation rages, and gold goes on a tear as a currency hedge. If it tightens too much, the prospect of credit failures and black swan events moves front and center, and gold goes on a tear as a safe-haven alternative. Hume’s article emphasizes the latter, citing strong inflows at gold ETFs comparable to previous times “when recession fears were at the front of investors’ minds.”
USAGOLD note: Fred Hickey offers a thought on the limits of central banking worth filing for future reference. It’s not just the Ukraine crisis we need to worry about. The limitations apply across the boards.
“If the Fed foolishly raised rates as reflected in the payrolls as not being fully recovered, you are going to have a sharp downturn, a double-dip depression here. At the same time, you are still going to have inflation. You are going to end up with an inflationary depression or a hyperinflationary Great Depression.”
USAGOLD note: Though we see a hyperinflationary depression as an outlier, we do think runaway stagflation is a legitimate concern. Williams says you can address the possibility of a hyperinflationary depression by “personally holding gold and silver.” The same worked well as a hedge during stagflationary1970s – a lesser version of Williams’ worst-case scenario.
Frank Giustra – “I have always loved real, tangible assets such as gold, commodities and real estate.”
“A crystal ball would come in handy at this moment in time. With equity markets just beginning a long overdue correction (the NASDAQ is heading toward bear market territory), true inflation soaring and geopolitical tensions rising, people are beginning to turn their full attention to their money and investments.”
USAGOLD note: We like to keep up with what Canadian billionaire Frank Giustra is thinking, so this King World News article was a welcome sight. Giustra runs through the gamut of investment possibilities and comes down solidly on the side of hard assets.
“Investors should proceed with caution, according to BofA Securities’ Savita Subramanian. Even though February kicked off on a strong note, she warned on CNBC’s ‘Fast Money’ a messy sideways market is ahead.”
USAGOLD note: Bank of America raises the warning flag …… A “sideways” market and a little volatility is probably tolerable in the collective mindset, but a declining market and much volatility would likely be a much more explosive mix.
“The unstoppable rise in global inflation, ongoing uncertainty in the financial markets and tensions across the world have caused a massive spike in demand for gold globally, the World Gold Council (WGC) has said in its latest report.”
USAGOLD note: The rate of growth in international gold demand is overtaking the rate of growth in global mine reserves. Sooner or later, it will likely impact the price unless other sources of supply are found. With major producers like China and Russia keeping their production within their borders, industry experts expect this trend to continue for the foreseeable future. Historically, central banks – another source of supply – have filled the gap between mine supply and demand, but all that has changed over the past several years. Central banks are now a major force on the demand side of the equation.
“It’s a smart move. Gold has historically performed well in times of not only higher inflation but also rising rates, according to the World Gold Council (WGC). If we look at the past four Fed tightening cycles, between February 1994 and December 2015, the yellow metal underperformed in the months leading up to the Fed’s first rate hike but then outperformed U.S. stocks and the dollar six months and one year following liftoff.”
USAGOLD note: As Holmes explains, the data does not support the widely held notion that gold will be hurt by rising rates. He says that now – before the hiking cycle begins – may be the best time to buy gold.
“Global holdings of gold ETFs fell by 173t in 2021 in sharp contrast to 2020’s record 874t increase. Q4 outflows of just 18t were a fraction of the much larger outflows seen in Q4 2020. Bar and coin investment maintained its momentum, jumping 31% to an eight-year high of 1,180t. Q4 2021 demand of 318t, meanwhile, was the highest for a fourth quarter since 2016. Central banks accumulated 463t of gold in 2021, 82% higher than the 2020 total and lifting global reserves to a near 30-year high. The pace of buying slowed in the second half, with a 22% y-o-y decline in Q4.”
USAGOLD note: Though the price of gold declined 4% in 2021, demand was strong across all categories except gold ETFs.
“Spot gold is again bobbing along near $1,800 an ounce, as it has been since mid-2020. The stickiness of that level, particularly as fundamentals turned more bearish, suggests there’s a big buyer somewhere in these waters.”
USAGOLD note: Let the speculation begin as to whom that whale might be …… After a process of elimination, van der Walt says that the buyer is probably a sovereign nation mentioning China as the likely source. We would not be surprised if that turned out to be true, but Russia also comes to mind given the current circumstances. Highly recommended read…….
“The problem gold has, as I am forever saying, is that it is the ultimate analogue asset in a world where all the value is digital. With this incredible boom in tech we have seen over the last decade, this has been especially apparent. But I have also been forever saying that it’s time will come, and perhaps that time is 2022. In my predictions piece at the beginning of the year I said that gold would go above $2,000 an ounce. Yesterday’s action brought that magic number ever closer. Gold, along with all the other precious metals, had a good day.”
USAGOLD note: The conflicted Mr. Frisby writes entertainingly about the metal he hates to love…… His quest to find the real reasons why he owns so much of the metal continues.
“Speaking to the Investing News Network, [BMG Groups Nick Barisheff] pointed out that if inflation was calculated the way it was in 1980, it would be at 15 percent. He also noted that inflation is happening at a time when gross domestic product is declining. ‘(With) the two of them combined we get stagflation,’ said Barisheff, adding, ‘That’s the worst possible combination.’ In his opinion, that makes it more important than ever to hold gold.”
USAGOLD note: The last time big inflation combined with big unemployment was during the stagflationary 1970s. The Misery Index posted some very big numbers, and gold, as Barisheff points out, tracked it higher throughout the decade.
Sources: St. Louis Federal Reserve, Bureau of Labor Statistics, ICE Benchmark Administration • • • Click to enlarge
“For those who think gold missed the inflation train, there are several reasons to reconsider. There have only been two other inflationary periods in the last 50 years. The first was in the seventies, the second from 2003 to 2008. In each of these inflationary periods, gold underperformed commodities in the first half and outperformed in the second half. It seems that markets don’t take inflation (or gold) seriously until it proves to be intractable. There are many reasons to believe 2022 will see the beginning of a wage/price spiral.”
USAGOLD note: Van Eck explains the things that held gold down in 2021 and what might cause it to break out in 2022.
“Silver’s move to US$28.55 wasn’t the only milestone the white metal registered in 2021. Demand for silver exchange-traded products touched an all-time high during Q1, when holdings topped 1.2 billion ounces. Healthy purchases from the investment and industrial segments helped silver demand surpass 1 billion ounces for the first time since 2015.”
USAGOLD note: That buildup at the ETFs – significant as it is – passed without garnering much attention in financial media. Occurring in year one of the pandemic, the very strong 2020 increase in silver ETF stockpiles indicated significant fund and institutional interest in the metal for safe haven purposes.
Chart courtesy of GoldChartsRUs.com
“How much should someone allocate to this wealth insurance? There is no one-size-fits-all answer. Factors such as age, the state of one’s current finances, and tolerance for risk affect such decisions. A number of years ago, I considered owning 3-10 percent of one’s investment portfolio or net worth in bullion-priced physical gold and silver coins and bars to be adequate for most people. Now, I have greater fears for the future of other assets, so have increased this suggested range to 10-25-33 percent of one’s investment portfolio or net worth.”
USAGOLD note: If you are visiting here today as part of your research program on gold and silver investing, this article offers the essential overview and rationale.
“…[P]eople have embraced stocks and real estate as “the perfect store of value,” because these assets have continued to go up and pay a dividend or rent. Previously, I have written why I think these asset markets are in a bubble (here and here). Although, bubbles can last longer than you think, when they eventually pop, investors will be looking for an alternative store of value. Where to go when stocks crash and government bonds can’t offer a positive real return? Historically, gold has usually functioned as the asset of last resort.”
USAGOLD note: In this second installment on gold pricing mechanics, Nieuwenhuijs dissects the relationship between real yields and the price of gold. Here is the link to the first installment.
“Napier has been in the deflation camp for years and has been right. That is why it is all the more interesting that he switched sides in 2020. It was not the vast stimulus packages that caused the change of heart, but the explosion in bank lending.”
USAGOLD note: Based on his own analysis and Napier’s observations, UK’s Charlie Morris says “It is time to be bullish on gold.”
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