Gold edges higher in early trading. Silver leads gold short-term, but lags over the long run.

gold-edges-higher-in-early-trading-silver-leads-gold-short-term-but-lags-over-the-longer-term

(USAGOLD – 4/20/2021) – Gold edged higher in overnight trading as yields steadied and the dollar dropped marginally. It is up $4 at $1776. Silver is up 15¢ at $26.05 and continues to lead gold on turns to the upside. Over the past fifteen months of pandemic-induced monetary disarray, silver is up 43% to gold’s 16%. “Silver,” says Equity Management Academy in an article posted at Seeking Alpha, “is an excellent opportunity to hedge against the US dollar and to take advantage of what could be one of the most explosive moves in the silver market in history. Silver is real money. It is also an industrial metal, which will be in greater demand as the economy recovers. But, as real money, silver will greatly benefit from the devaluation of the US dollar.”

Chart of the Day

Gold, silver, stocks
(Percent gain, 1971 to present)

overlay line chart showing percentage gains in gold, silver and stocks 1971 to present

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

Chart note: Analysts with an agenda tend to hand-pick the time sequence which best suits their argument. We have always maintained that the most logical starting point for judging the performance of investments over the long-haul is 1971 – the year the world went off the gold standard and entered the fiat money era. With that in mind, it is interesting to note that silver has been the laggard when compared to gold and stocks. Since 1971, silver is up 1507%, while stocks and gold are up 3813% and 4519% respectively. At the same time, over the 15 months of the pandemic-induced monetary disarray, silver is up 43% while gold and stocks are up 16% and 18% respectively. In short, silver looks to be playing catch up, and if that continues to be the case, the chart implies that there still might be considerable ground left to be covered.

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Why the future money is gold and silver

why-the-future-money-is-gold-and-silver

Seeking Alpha/Alasdair Macleod/4-16-2021

photo image of stacks of gold and silver coins

“It is almost certain that like the majority of gold and silver bulls hodlers expect to sell bitcoin for profit measured in their governments’ currencies, creating for themselves relative wealth in dollars, euros, yen — whatever their governments impose on their citizens as money. But it is an investor’s, or speculator’s approach, which is accompanied by feverish examination of charts, confirmation bias from ‘experts’ and only a half-understood concept of what is driving the price. So sudden and wonderful has been the unbanked wealth creation in leading cryptocurrencies,that investors commonly proclaim that gold and silver are yesterday’s story and that we oldies should move with the times.

These investors claim that five thousand years of empirical evidence is about to be overturned. But they are investors. All bulls and no bears. Other than banking fabulous profits in fiat at a future date, this has nothing to do with money per see. The point about sound money is you acquire it by spending fiat, so that when fiat goes you will have it to spend. It is not an investment decision, but more like an insurance policy taken out for which a risk assessment has to be made.”

USAGOLD note: A realistic, thoughtful discourse on the differences between precious metals and bitcoin, the piece linked above may be seen someday as the final word on the subject. Macleod covers all the bases…… Though we doubt that gold and silver will ever be used again as transactional money in this digital age, we do believe, as does Macleod, that it will serve investors well as an insurance policy against the debasement of national currencies.

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When the government bails out a bank for doing something stupid

when-the-government-bails-out-a-bank-for-doing-something-stupid

RampCapital/4-18-2021

graphic image of moral hazard spelled out in scrabble letters

USAGOLD note: We felt compelled to pass along the link above this morning – moral hazard defined.

 

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Notable Quotable

notable-quotable-19

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“One of the most important warnings offered by firefighters is simple: get out early. In the face of wildfires, some homeowners get the idea of staying in their homes and riding it out. As one firefighter warned, ‘The point is to go.’ But if you don’t, it’s better to stay than to panic and run in the midst of a firestorm of smoke and embers. It’s not the fire that gets you. It’s the heat. Even before the flames reach the house, it can be fatal to stand outside trying to protect what you have (h/t John Galvin). Similarly, our ‘Exit Rule for Bubbles’ is straightforward: You only get out if you panic before everyone else does. You have to decide whether to look like an idiot before the crash, or look like an idiot after it.”

John Hussman
Hussman Funds

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Why more inflation is right around the corner

why-more-inflation-is-right-around-the-corner

National Review/Steve H. Hanke/4-14-2021

chalboard showing inflation pattern as chart with symbols for various currencies“Over a 6–18-month period after a monetary injection occurs, economic activity will pick up. Ultimately, the prices of goods and services will increase. That usually takes between 12 and 24 months after the original monetary injection. Given this sequence, it’s as clear as the nose on your face that we’re going to see more — perhaps much more — inflation entering the system in the coming months.”

USAGOLD note: Hanke, an economics professor at Johns Hopkins University, is well-known for his analysis of the effects of currency debasement on economies. He says the recent CPI increase of 2.6% annualized (.6% month over month) is “simply a harbinger” of things to come.

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Market Overview

market-overview2

Landscape mode is recommended for mobile phone viewing.

Market Data by TradingView
Delayed data except FOREX

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Gold bars and coins found stashed in old French village house

french-officials-perplexed-by-gold-bars-and-coins-found-stashed-in-old-house

The Guardian/Angelique Chrisafis/4-16-2021

“The surprise discovery of three jam jars filled with gold bars and hundreds of gold coins in an old building marked for renovation has left a mountain community in eastern France perplexed and celebrating.”

USAGOLD note: The article goes on to value the find at about $720,000 (€600,000) consisting mostly of small-denomination European gold coins put away by “several generations who didn’t throw anything away, kept everything and lived really frugally.” The coins were found in jars on a dusty shelf and in an old safe behind a wardrobe. France has a history of currency debasement going back centuries – a history to this day that many among the French citizenry have never forgotten. Obviously, the family had an understanding of the role of gold during periods of extreme inflation. Consider, for a moment, the value of the find if the family had stashed French franc notes instead.


Image: French Napoleon 40 franc gold coins (unrelated to this discovery)

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Keep 10-15% of assets in physical gold, avoid Bitcoin: Mark Mobius

keep-10-15-of-assets-in-physical-gold-avoid-bitcoin-mark-mobius

The Economic Times/Staff/4-16-2021

graphic image of group of green flags“However, gold at this level sounds like a good investment. In fact, I have added some gold to my own portfolio because I think it has reached a sort of turning point where we are going to see a recovery in gold prices. But even if you are not following gold on a day-to-day basis, from a long-term point of view, you are better off with 10% or 15% of assets in physical gold.”

USAGOLD note: The highly respected Mr. Mobius weighs in on the gold-bitcoin debate…… He turned bullish on gold a couple of years ago recommending it as a holding during numerous media interviews. Needless to say, those following his advice thus far have been greatly rewarded.

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the-usagold-website-a-guiding-light-for-current-and-would-be-clientele-since-1997

The USAGOLD Website
A guiding light for current and would-be clientele since 1997

graphic image of light house beaming
Welcome newcomers!

When the USAGOLD website was established in 1997, there was no Google, no Facebook, no I-Tunes, no Amazon. Instead there was just a handful of scattered websites trying to figure what this new technology was all about and how it could be used to some advantage.  We were among that group.  Our idea of innovation in those early days was two spinning globes on either side of the USAGOLD logo.  We marveled at it; considered it state of the art.

But being among the first on the internet to have spinning globes was not our only achievement. We were also among the first to sponsor a Daily Market Report (1996), a Discussion Group (1997), Live Prices and Charts (2007) and a Mobile Website (2011) – to mention just a few of our ground-breaking internet ventures.  We await the next wave of innovation so that we can offer even more value to our regular visitors.

Through our 23-year presence on the world wide web, the philosophy underlying our website has always been a simple one – to act as a guiding light for our current and prospective clientele by providing a state of the art information portal coupled with a reliable and competitive brokerage service.  We had and still have no aspirations beyond that, and that pinpoint focus has paid dividends beyond anything we would have imagined in 1996.

From a humble beginning, we have grown to almost 800,000 visitors per month currently and there have been times when that count has been significantly higher. USAGOLD today remains one of the most highly referenced and visited web portals in the gold business. We once had a client tell us of visiting the Gold Souk in Dubai and being surprised that so many merchant stalls had USAGOLD on their computer screens. 

If you would like to gain a better understanding of what USAGOLD has to offer to you as a current or prospective client, the menu at the top of the page is a good place to start. 


Interested in gold but struggling to find the right firm?
DISCOVER THE USAGOLD DIFFERENCE
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

ONLINE ORDER DESK-24/7

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The gold investment thesis revisited

the-gold-investment-thesis-revisited

SprottInsights/John Hathaway

Repost from 4-12-2021

image of black swan head“Missing, in our opinion, are the yet unseen consequences from extreme financial asset valuations supported by the rapid expansion of new public and private sector debt. Economic nirvana, founded on path-dependent monetary and fiscal policy, is impossible. The punchbowl cannot be taken away without wrecking the economy and the markets. Public servants are unwilling and incapable of doing so. Intoxicants will most likely disappear for unforeseen reasons. Gold will sense adverse outcomes long before they have been articulated.”

USAGOLD note:  Hathaway concludes that “either inflation or deflation seems possible at this moment.” And then there is the outlier – the possibility of something completely unforeseen. Perhaps the level of physical demand now working its way through the gold and silver markets is an indicator that investors already are preparing for “outcomes long before they have been articulated” – some black swan event yet to be identified.

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Precious metals are and always have been the ultimate insurance

precious-metals-are-and-always-have-been-the-ultimate-insurance

Gold Eagle/Claudio Grass interview of Pro Aurum’s Robert Hartmann

Repost from 4-13-2021

“Precious metals are and always have been the ultimate insurance. They provide protection both against state failures and against mistakes in the monetary policy of the central banks. Every investor who looks into the history books sees that both have happened over and over again in the past centuries. From that perspective, investing in physical gold and silver is a common-sense precaution and a necessary part of any wealth preservation plan. Investors and ordinary savers ignore this at their peril and the failure to include precious metals in one’s portfolio is pure negligence.”

USAGOLD note: There are essentially two broad schools of thought alive and well in the gold market. The first holds that crisis is around the corner and, as a result, precious metals should be owned to profit from the event. The second holds that crisis is a permanent fixture in the market dynamic and that the portfolio should always include precious metals as the ultimate safe haven. The first buyer sees gold as an investment product, i.e., buy it now and sell it later when the time is right. The second sees gold, like Hartmann, as an insurance product to be held for the long run. Some combine the two, allocating one part of their precious metals portfolio for trading purposes and another as a permanent, or semi-permanent, store of value. It is important for the novice gold owner to determine where he or she stands on this distinction because it dictates, in turn, which products to include in the portfolio and to what degree – strategies with which we have helped a good many investors over the years. We invite you to call our Order Desk for further information.

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‘History will not be kind.’

history-will-not-be-kind

Credit Bubble Bulletin/Doug Noland

Repost from 1-26-2021

antique print of wolf at door from Little Red riding Hood“Yellen: ‘The smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs.’ I hate being this pessimistic. But in no way do the long-term benefits of massive deficit spending today outweigh the cost. Current market and economic structures ensure resources are poorly utilized. The securities markets are today a powerful mechanism for resource misallocation and wealth-destruction. And I see Trillions of deficit spending generating limited sustainable economic benefit. Meanwhile, ‘acting big’ will further fuel ‘Terminal Phase’ excess, with terrible long-term consequences…

My biggest fear is materializing. When this historic Bubble bursts, a major crisis will unfold with our nation’s finances in complete shambles. The Fed’s ‘money printing’ operation has gone parabolic as it desperately attempts to sustain an unsustainable Bubble. Treasury debt growth has gone parabolic as Washington tries to sustain an unsustainable economic structure. The system is on a trajectory that ensures a crisis of confidence – and I don’t see this as some long-term concern. This is an issue of short-term sustainability.”

USAGOLD note:  Yellen says “the world has changed.” Noland says “History will not be kind.” By that, we are not certain if he means history will be a harsh judge, or that it will deliver an inevitable comeuppance. Either way, the wolf, it would seem, is at the door.

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The wealthy are investing like a market bubble is here, or at least near

the-wealthy-are-investing-like-a-market-bubble-is-here-or-at-least-near

CNBC/Eric Rosenbaum

Repost from 1-20-2021

cartoon of two happy travelers driving over cliff in car“A majority of investors with $1 million or more in a brokerage account believe the stock market is in a bubble or close to being in one, according to an E-Trade Financial survey.”

USAGOLD note: As we have said repeatedly through this latest expansion in the stock market bubble, “play it but make sure you also hedge it.” We see this latest correction in the gold price as convenient for the many judicious investors looking to accomplish that goal.

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Don’t tell the Fed, but the smart money expects inflation

dont-tell-the-fed-but-the-smart-money-expects-inflation

Money & Markets/Michael Carr

Repost from 4-12-2021

Photo stacks of silver bullion coins“Last week I wrote about how smart money is buying gold. This is based on data from the futures market, where large traders are required to report their positions every week. But it’s not just gold. Smart money is buying other commodities.”

USAGOLD note: Silver likely ranks high on that list of “other commodities” judging from our volumes at USAGOLD. Institutional investors are moving on commodities and that has to do with several top firms, including Goldman Sachs, touting the sector as in the beginning stages of a secular bull market.

 

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276678

The naughty boy who blurts out unpleasant truths

“In the first place, the ‘classic’ writers, without neglecting other cases, reasoned primarily in terms of an unfettered international gold standard. There were several reasons for this but one of them merits our attention in particular. An unfettered international gold standard will keep (normally) foreign-exchange rates within specie points and impose an ‘automatic’ link between national price levels and interest rates. The modern mind dislikes this automatism, as much for political as for economic reasons: it dislikes the fetters this automatism clasps on government management of the economic process – dislikes gold, the naughty boy who blurts out unpleasant truths. But most ofthe economists of the period under survey liked it for precisely the cartoon of Dr Moneywise makes a pointsame reasons. Though they compromised in practice as in theory and though they admitted central-bank management, the automatism – a phrase beloved by Lord Overstone [Samuel Jones Loyd, 1st Baron Overstone] – was for them, who are neither nationalists nor etatistes, a moral as well as an economic ideal.” –– Joseph Schumpeter, History of Economic Analysis (1954) Published posthumously

Dr. MoneyWise says. . . .And to Dr. Schumpeter’s well-considered discourse on the practical merits of the gold standard, I will add a simple thought of my own: Absent the gold standard, the prudent investor who stores gold benefits in concert with the blurting of those unpleasant truths.

Emphasis added.

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How the Fed took control of the economy

how-the-fed-took-control-of-the-economy

Axios/Dion Rabouin

Repost from 4-9-2021

graphic illustration of a money printing machine
“To brace the U.S. economy and stave off another Great Depression, the Federal Reserve has taken control of it through unprecedented intervention — manipulating market prices, controlling rates and propping up companies on a previously unimaginable scale. The U.S. is a market-run, capitalist economy. But the market is ostensibly now governed by an unelected and largely independent group of technocrats that directs it by creating ridiculous sums of money to buy assets.”

USAGOLD note: A strong, some would say even bold, take on the Fed policy from Axios’ Dion Rabouin. Several analysts pointing to the same set of circumstances have cautioned, “this cannot end well.”

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Gold level to start the week. Grant Williams puts gold ownership into its proper perspective.

gold-level-to-start-the-week

(USAGOLD – 4/19/2021) – Gold is level to start the week at $1778.50 on a mixed bag of rising yields and a sharp drop in the dollar. Silver is down 4¢ at $26.01. With the metals taking a breather so far this morning, it might be a good time to consider the sea change in investor psychology emerging in financial markets, i.e., the switch to rising inflation expectations and what it might suggest in the way of portfolio adjustments. Market commentator Grant Willilams, who has gained a large and loyal readership over the years through his Things That Make You Go Hmmm newsletter, recently put the gold question in that regard into its proper perspective. His comments also serve as a solid introduction to this morning’s Chart of the Day.

“The last thing I care about is the price,” he said in a video interview with The Margin’s Michael Epolito, “I know that no matter where the gold price is trading over time relative to other assets, it’s going to preserve my purchasing power, and that’s really all I care about. I just don’t want my money being worth less because of inflation, because of governments, because of all the things that they are required to do to keep the system together. You know, when a government tells you they are going to target 2% inflation, they are telling you our aim is to reduce your purchasing power by 2% a year, and that compounds very, very quickly. … I never think about the price level where I would sell my gold, I think about a point in time where I might decide that the gold I have in that safe deposit box, I would prefer to own that piece of land with it.”

Chart of the Day

Gold and the Purchasing Power of the U.S. Dollar
(Since 1970)

overlay chart showing the declining purchasing power of the dollar and the rising price of gold since 1971

Sources: St. Louis Federal Reserve, Bureau of Labor Statistics, ICE Benchmark Administration • • • Click to enlarge

Chart note: With inflation and the future purchasing power of the dollar front and center over the past few weeks, we thought it might be good to re-run the long-term chart on the purchasing power of the dollar and the price of gold – one of the most enduring correlations in the world of high finance. One look at the chart tells you long-time market veterans like Grant Williams value it as the most effective portfolio diversifier.  It is difficult to argue with its history since 1971 when the world went to the fiat money system.

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China renews appetite for gold with $8.5 billion set to arrive as central bank relaxes quotas

china-renews-appetite-for-gold-with-8-5-billion-set-to-arrive-as-central-banks-relax-quotas

South China Morning Post/Reuters/4-16-2021

Ed Stein Cartoon of dragon atop gold hoard captioned Dragon's Hoard“With China’s economy rebounding strongly since the second half of last year, its appetite for gold jewellery, bars and coins has also recovered, and since January domestic prices have been higher than global benchmark rates, making it profitable to import bullion. The People’s Bank of China (PBOC), the nation’s central bank, controls how much gold enters China through a system of quotas given to commercial banks. It usually allows enough metal in to satisfy local demand but sometimes restricts the flow.”

USAGOLD note:  We might add that China’s commercial banks are where many gold market analysts believe the nation’s quietly accumulated and unreported national reserves reside. Credible expert estimates run as high as 4,000 to 10,000 tonnes resting collectively on commercial banks’ balance sheets, as opposed to the roughly 1800 tonnes in national reserves reported by the World Gold Council. When it comes to gold, China is a price taker not a price maker as so many thought would be the case when it opened gold trading in Shanghai in 2019. For the time being, it is content to accumulate, and allow its citizenry to accumulate at current prices.

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Inflation will rise. Don’t panic.

inflation-will-rise-dont-panic

AXIOS/Felix Salmon/4-16-2021

Antique image of Alfred E Neumann asking 'Me Worry?"“It’s been 40 years since America last saw a damaging level of inflation. Yet despite that — or perhaps because of it — inflation fears are widespread, and could even become self-fulfilling.”

USAGOLD note: For those who have prepared for inflation through a judicious purchase of physical gold and silver, panic is not on the agenda, nor is the question of whether or not the Fed has it right on inflation, i.e., it isn’t worried about inflation.

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Notable Quotable

notable-quotable-57

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“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.”

Ernest Hemingway
 Notes on the Next War: A Serious Topical Letter 
Esquire magazine
September 1935

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