Short and Sweet

______________________________________________

Why the U.S. needs to encourage Americans to hold gold

Image of coin pile, American gold eagles, one ounce

We have always believed that citizen ownership of physical gold is in the national best interest, not just the best interest of its accumulators.  In the event of a worldwide economic breakdown or a realignment of the global monetary system, it would be good for the country to have a storehouse of gold held by the populace.  China encourages citizen gold ownership for precisely that reason.

“With a growing number of countries encouraging their central banks and citizens to acquire gold,” writes The Federalists Sean Fieler, “it is increasingly reasonable to assume that gold will be part of the world’s monetary future, not just its past. The U.S. Treasury should embrace policies that will attract more of the world’s gold to America and better position our citizens and our nation for whatever the monetary future may hold.”

______________________________________________

 

Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

––––––––––––––––––––––––––––––––––––––––––––––––––

Gold Annual Returns
2001-2019

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

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

Ready to move from education to action?
DISCOVER THE USAGOLD DIFFERENCE
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

ONLINE ORDER DESK-24/7

––––––––––––––––––––––––––––––––––––––––––––––––––

Posted in Short and Sweet | Tagged |

Short and Sweet

__________________________________________________

Only real intrinsic money survives the test of time

Here is a timeless observation from the now-deceased Richard Russell (Dow Theory Letter):

“Paper money is now being created wholesale throughout the world. Stated simply, all paper currency is now valued against each other. But more important, ultimately ALL paper is ultimately valued against the only true, intrinsic money – gold. In world history, no irredeemable paper currency has ever survived. Since all the world’s currency is now irredeemable (in gold), this means that in the end, the only form of money that will survive is real intrinsic money – gold. It’s not a question of whether gold will survive, it’s a question of when the world’s current paper money will deteriorate and finally die. I can tell you that irredeemable paper will not survive – but obviously I can’t tell you when it will die. The timing is the only uncertainty.”

The chart below from the World Gold Council speaks to Russell’s point. It shows the performance of various currencies – past and present – against gold over the long term.  When the end comes, as the chart illustrates, it can come abruptly and without warning. For those who stick to the proposition that gold is not really an inflation hedge, or that it is not really a safe-haven against currency debasement, the chart offers instruction. For those who already own gold as a safe-haven, it provides justification. For those who do not own gold, it serves as an incentive.  As the old saying goes:  All is well until it isn’t.

Chart showing gold outperforming all major currencies since 1900Chart courtesy of the World Gold Council

__________________________________________________

Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

Part 5 of 5 . . . . .

What makes this gold market rally
different from all others


Yields in economically important parts of the world are negative, not positive


Negative interest rates are a reality in both the European Union and Japan, and Alan Greenspan said recently that it is “only a matter of time” before they spread to the United States.  One of the arguments against gold over the years has been that it costs money to own it. Now it costs money to own euros and yen, and before too long it might cost money to own the dollar as well.  The advent of negative rates is perhaps one of the more profound differences between this gold rally and rallies of the past. It might also prove to be the most enduring.  “One of the reasons,” Greenspan added in that same CNBC interview, “the gold price is rising as fast as it is – you know, at $1500 a troy ounce . . . What that is telling us is that people are looking for resources they know are going to have a value 20 years from now, or 30 years from now, as they age and they want to make sure they have the resources to keep themselves in place.”

Overlay chart showing gold and negative yield debt rising in tandem

Chart courtesy of the World Gold Council

Part 1Part 2Part 3Part 4Part 5


Ready to move from education to action?
DISCOVER THE USAGOLD DIFFERENCE
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

ONLINE ORDER DESK-24/7


Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

________________________________________________

‘No one questions its value. . .’

Image courtesy of the British Museum Collection/Lydia, croesid, ca 550 BC“No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counter-party. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.” – Alan Greenspan, former chairman of the Federal Reserve


Image courtesy of the British Museum Collection/Lydia, croesid, ca 550 BC

________________________________________________

 

Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

_______________________________________________________

Yap stone money inflation

photo of yap stone money in various sizes
Monetarily speaking, everything progressed smoothly on the island of Yap where large stones weighing hundreds of pounds were transported around to serve as money. That is until something unforeseen happened to the value of the money. For centuries, the stones served in exchange because there wasn’t much of this type of rock on Yap itself. The depreciation of the stone money began when an enterprising Western businessman realized he could produce stone money cheaply and in copious quantities on a neighboring island and transport it to Yap, where it could be used to procure goods in demand elsewhere. In other words, this oceanic cousin of John Law printed Yap stone money to buy his wares at what might be called a “favorable” discount. By this process, the yap stone money was debased until it became worthless. Little did the citizens of Yap know that they were deprived of their wealth, and their money destroyed, by the process of monetary inflation.

_______________________________________________________

Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

Part 1 of 5. . . . . .

What makes this gold market rally
different from all others


It is led by institutions and funds, not private investors


Global quantitative easing created a huge and mobile pool of capital in constant need of a place to call home. As the need for a safe haven became apparent among the stewards of that capital, the demand for gold flourished. The consistent presence of funds and institutions as buyers in this rally, as represented by the growth in ETF stockpiles, is one of its hallmarks and represents one of the major differences between this gold rally and rallies of the past. Though private investors have been late to the game, the rapid development of the physical market for gold coins and bullion in the United Kingdom is testament to the fact that sentiment can change quickly.

Overlay chart of gold ETF holdings by region and the gold price - World Gold Council

Chart courtesy of the World Gold Council

Part 1Part 2Part 3Part 4Part 5


Ready to move from education to action?
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

ONLINE ORDER DESK-24/7


Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

––––––––––––––––––––––––––––––––––––––––––––––––––

Graphic image of Humpty Dumpty perched happily on a wall, antique

Is the dollar the Humpty Dumpty of the global monetary system?

The dollar at the moment is something of a Humpty Dumpty in the global monetary system – sitting on his wall oblivious and seemingly immune to all that goes on around him.  Whether or not there will someday be a Great Fall remains to be seen, but increasingly forces are lining up against it. Over the past few years, we have seen protracted movement among various central banks out of the dollar and into gold and other currencies. The World Gold Council recently reported central bank gold buying at its highest level in fifty years. Though dollar remains something of a Humpty Dumpty oblivious to all that goes on around him, a good many analysts believe it could begin a major, long-term decline in 2020. According to a recent Bloomberg report, Goldman Sachs advised their clients to diversify their bond holdings with an allocation to the yellow metal. “Gold,” it said, “cannot fully replace government bonds in a portfolio, but the case to reallocate a portion of normal bond exposure to gold is as strong as ever.”

graphic image showing table of World Official Gold Holding as of November 2019
Table and graphic image courtesy of the World Gold Council

––––––––––––––––––––––––––––––––––––––––––––––––––

Posted in Short and Sweet, Today's top gold news and opinion |

Short and Sweet

__________________________________________________

photo image of elephant - imposing full frontal
The ‘Don’t call it QE’ Elephant in the Room

Some call it ‘stealth QE.’ Others call it ‘QE Lite.’ The Fed itself will not admit to a new form of quantitative easing, but the numbers speak for themselves. Since September, according to a Bianco Research study, the Fed has injected nearly $324 billion into the monetary system in the form of overnight repo liquidity.  In addition, it is injecting another $60 billion per month in outright purchases of Treasury paper from commercial banks. Those purchases are scheduled to continue at least into the second quarter of 2020.  As for the national debt, it pushed over the $23 trillion mark in November with budget experts warning that we may be entering an extended period of deficits exceeding $1 trillion annually. All of which brings us back to the rhinoceros in the room, the central bank policies required to deal with it and their potential repercussions in financial markets.

Overlay chart showing growth in repo market resulting from Fed cash injections since September 2019
Chart courtesy of Bianco Research

_____________________________________________

Posted in Short and Sweet, Today's top gold news and opinion |

Short and Sweet

_______________________________________________________

– One for the history buffs –
730 years of a strong British pound ends in 1931
with gold standard exit

The St. Louis Federal Reserve recently released this interesting chart on consumer prices from 1209 to present. We added the price of gold to the chart to show the direct relationship between declining purchasing power in the British pound and the sterling price of gold after 1931, the year Britain departed the gold standard. Prior to 1931, there was an occasional minor bump higher in the price of gold, but for the most part, it followed along the same flat line as consumer prices. It was only after Britain separated the pound from gold in 1931 that the price began to move radically higher in terms of the currency. It gained significant momentum after 1971 when the Bretton Woods agreement was abolished. Currencies and gold were then allowed to move freely in international markets. Though interesting from a historical perspective, the real lesson in this chart is that when a nation-state goes from gold-backed to fiat money, gold coins and bullion become a logical and worthwhile alternative for citizen-investors – even after 730 years of relative price stability.

Line chart showing over 800 year inflation history in Britain with sudden spike in 1930s forward after it abandons gold standard

Sources: Bank of England, ICE Benchmark Administration Limited, St. Louis Federal Reserve [FRED]

_______________________________________________________

Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

Part 4 of 5 . . . . .

What makes this gold market rally
different from all others


Bullion banks are covering their shorts on price retreats, not piling-on


Declining global interest rates have put a damper on another traditional source of physical gold supply – bullion bank leasing programs. “We can conclude,” writes gold market analyst, Alasdair Macleod, in an insightful paper published at the GoldMoney website, “that the basis for highly geared interest rate arbitrage by borrowing gold is running into a brick wall. Not only is there no incentive for lessors but also there is also a diminishing appetite for lessees because the opportunities are vanishing. Synthetic gold liabilities are being gradually reduced, not only by ceasing the creation of new obligations, but by buying bullion to cover existing ones. This will have been particularly the case when the USD yield curve began to invert in recent months (itself a backwardation of time preference), and was the surface reason, therefore, that the gold price moved rapidly from under $1200 to over $1500.” This change in direction for bullion banks represents another fundamental difference between this rally in the gold price and rallies of the past.  What’s more, given the entrenched low-rate environment, it looks like it might remain a factor for some time to come.Graphic image of bull and bear, pencil drawing

Part 1Part 2Part 3Part 4Part 5


Ready to move from education to action?
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

ONLINE ORDER DESK-24/7


Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

For gold . . .
‘It is not a question of if, but when’

The lesson is one as old as the gold market itself:  The best time to buy is when the market is quiet – a strategy that requires both discipline and conviction.  As an old friend and client used to say (he passed away years ago):  “It is not a question of if, but when.” He accumulated a large hoard of the metal in the 1990s and early 2000s between $300 and $600 per ounce and lived to see his prediction come true.  His estate though was the ultimate beneficiary of his wisdom. He was not one to sell gold once he had acquired it.  We chatted regularly on the phone back then and I told him that I had used the story just told in one of my newsletters.  He was in his late 80s at the time. “Tell them,” he said resolutely, “that I bought my first ounce of gold at $35.”

photo of pile of $20 St. Gaudens gold pieces

The possession of gold has ruined fewer men than the lack of it.”
– Thomas Bailey Aldrich –


QUESTIONS?
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

ORDER GOLD & SILVER ONLINE 24-7

 

Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

_________________________________________________

The Exter Inverted Pyramid of Global Liquidity

Exter's inverted debt pyramid with derivatives at top and gold on the bottom

“[Exter’s Inverted] Pyramid stands upon its apex of gold, which has no counter-party risk nor credit risk and is very liquid.  As you work higher into the pyramid, the assets get progressively less creditworthy and less liquid. . .[In a financial crisis] this bloated structure pancakes back down upon itself in a flight to safety.  The riskier, upper parts of the inverted pyramid become less liquid (harder to sell), and – if they can be sold at all – change hands at markedly lower prices as the once continuous flow of credit that had levitated those prices dries up.” – Lewis Johnson, Capital Wealth Advisor’s Lewis Johnson

In short, what Lewis Johnson outlines is the bottom-line rationale for diversifying one’s portfolio with gold. For a more detailed analysis of Exter’s Inverted Pyramid, we invite you to visit the May edition of News & Views, our monthly newsletter.


Our New Year edition of News & Views is slated for early January!
We invite you to sign-up for our publication alert at no cost or obligation.
Prospective clients welcome!

FREE SUBSCRIPTION!
____________________________________________________
Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

Part 2 of 5 . . . . .

What makes this gold market rally
different from all others


Day-to-day price reversals often originate
in Asia and Europe, not just the United States


For decades, the U.S. commodity markets set the tone for gold pricing and the rest of the world was content to follow. Even the old London price fix tended to follow along with trends established in the United States.  That all changed when the Shanghai gold market began offering its own pricing mechanism and the effects of Brexit began to have a profound impact on both sides of the English Channel. Now, price reversals often begin in Asian or European markets overnight and carry over to the open in New York rather than the other way around.  All of this is a reflection of ramped up global investor interest in gold and a leveling of the playing field in terms of who and what influences the price on a daily basis.  As such, it comprises our second important difference between the current gold price rally and rallies in the past.

World Map of gold trading centers - London, New York, Chicago, Tokyo, Shanghai, Dubai, Zurich

Part 1Part 2Part 3Part 4Part 5


Ready to move from education to action?
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

ONLINE ORDER DESK-24/7


Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

___________________________________________________

Gold in the age of high-speed electronic trading

graphic image of tower transferering high speed data represented by beam of light

“The best thing you can do is know how to have a balanced portfolio.”
Ray Dalio, Bridgewater Associates

In an article headlined Robots conquered stock markets/Now they’re coming for bonds and currencies, Bloomberg finance reporter Lananh Nguyen tells us: “In the most liquid equity markets, more than 90 percent of trades are executed electronically, according to estimates from Greenwich Associates. That compares with 79 percent in global foreign exchange, 44 percent in U.S. Treasuries and 26 percent in U.S. corporate bonds, with the most room for growth in the latter two markets, according to [Kevin] McPartland at Greenwich.” [Link] Just this year, Morgan Stanley and Goldman Sachs requested counterparties forgive rogue, machine-driven trades that caused a $41 billion flash crash in a matter of seconds. Though concentrated in a single stock, such anomalous events serve as a cautionary tale on how a full-out, machine-driven panic might evolve on a larger scale.

Because gold does not rely on the performance of another party, it is detached from the matrix of interlocking counter-party risk and occupies a unique place on the financial balance sheet as an asset of last resort and the final arbiter of value.  That is why nation-states and central banks hold large amounts of it on their own balance sheets and why funds and institutions are more and more moving to it as an offset against other trading strategies. Investors have always viewed gold as a reliable hedge against inflation and deflation. In the years to come, they might very well come to know it as an effective hedge against computer-generated financial mayhem as well.

___________________________________________________

Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

Part 3 of 5 . . . . .

What makes this gold market rally
different from all others


Central banks are buyers of physical gold, not sellers.


In 2011 something unusual happened in the gold market.  Central banks flipped from being net sellers of the precious metal to net buyers reversing a 40-year trend.  Since then, the official sector has added 4,563 metric tonnes to their coffers (through the first half of 2019) – a 15% gain in stockpiles to 34,407 metric tonnes.  The gold that central banks take off the market, though, is only part of the story. The rest has to do with how domestic production in two key producing countries – China and Russia (the world’s number one and three producers) – is treated.  Both countries channel their mined metal into national reserves rather than selling it in the global marketplace. Many analysts see this new and evolving approach to gold reserves as the key difference between the present gold rally and rallies of the past.

Bar chart showing central banks switching from gold sellers to gold buyers begnning in 2011

Part 1Part 2Part 3Part 4Part 5


Ready to move from education to action?
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

ONLINE ORDER DESK-24/7


Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

––––––––––––––––––––––––––––––––––––––––––––––––

A very old yet very new thought
from Mr. Charles Dickens

Image of 18th century man holding his head in disbelief“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.” – Charles Dickens, A Tale of Two Cities (1859)

Things change little.  Things change a great deal.  The opening passage to A Tale of Two Cities – a very old yet very new thought.

––––––––––––––––––––––––––––––––––––––––––––––––

Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Short and Sweet

––––––––––––––––––––––––––––––––––––––––––––––––––

Gold coins, hoofs found in 2,000 year old Chinese tomb

Image of Confucius, old, black and white“Chinese archaeologists. . . discovered 75 gold coins and hoof-shaped ingots in an aristocrat’s tomb that dates back to the Western Han Dynasty (206 BC – 24 AD). The gold objects — 25 gold hoofs and 50 very large gold coins — are the largest single batch of gold items ever found in a Han Dynasty tomb. They were unearthed from the tomb of the first ‘Haihunhou’ (Marquis of Haihun) in east China’s Jiangxi Province. The coins weigh about 250 grams each, while the hoofs’ weights vary from 40 to 250 grams, said Yang Jun, who leads the excavation team.” – Xinhuanet/11-17-2015

USAGOLD note: These gold artifacts were found along with a portrait of Confucius, perhaps the oldest known. Wisdom and gold make easy company. Confucius once said something that has current applicability:  “In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.”  Or at the very least, well-hedged . . . . . . . .

––––––––––––––––––––––––––––––––––––––––––––––––––

 

Posted in Short and Sweet, Today's top gold news and opinion | Tagged , , |

Short and Sweet

–––––––––––––––––––––––––––––––––––––––––––

Will 2019 be the year of the big breakout for gold?

“In each of the last three years, gold has gotten off to a strong start only to fizzle as the year moved along.  Will 2019 be the year gold finally breaks the pattern? A good many investors, fund managers and analysts think that 2019 might very well be the year when gold breaks the restraints and pushes to higher ground.  One of those is Carter Worth of Cornerstone Macro in New York who CNBC’s Melissa Lee refers to as “the chart master.”  In a recent interview with Lee, Worth referred to a rendition of the long-term chart below saying that there is “a well-defined set-up and a lot of tension.” He says that combination is going to resolve to the upside – “a breakout to all-time highs.” With respect to gold’s relationship to the dollar, Worth says “Gold’s got its own momentum now. . .It is all setting-up for higher gold prices and trouble for equities, trouble for the economy.”

Chart showing gold price convergence indicating possible move to upside

Repost from 6-5-2019 (!)

–––––––––––––––––––––––––––––––––––––––––––

Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

The world is getting increasingly dumber, study says

ZeroHedge/Tyler Durden

Cartoon of Alfred E Neuman standing in front of black board with 2+2=5“However, a 2018 study of Norway has punctured these theories by showing that IQs are dropping not just across societies but within families. In other words, the issue is not that educated Norwegians are increasingly outnumbered by lower-IQ immigrants or the children of less-educated citizens. Even children born to high-IQ parents are slipping down the IQ ladder.”

USAGOLD note:  Don’t worry.  Be happy.


Re-post from 5-24-2019

Posted in Short and Sweet, Today's top gold news and opinion |