‘Most Americans ignore the signs we are in real trouble’

AdvancingTime/Bruce Wilds/10-7-2021

graphic image of two tickets to board the Titanic“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.

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Notable Quotable

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“We live in a technological golden age but in a monetary and fiscal dark age. While physicists discover the so-called God particle, governments print and borrow by the trillions. Science and technology may hurtle forward, but money and banking race backward.”

James Grant
Grant’s Interest Rate Observer

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India reserve gold acquisitions reduce sovereign credit risk, according to Gold Policy Center study

The Economic Times/Staff

Repost from 10-6-2021

Map of India colored appropriately - gold“RBI’s addition of gold reserves from 2018 will help the sovereign rating of India, a research by Indian Institute of Management-Ahmedabad released on Friday said. The study of 48 countries by the premier institute’s ‘India Gold Policy Centre’ for two decades ending 2020 said high levels of central bank gold reserves have a strong impact in reducing the sovereign credit risk of that country in international markets.”

USAGOLD note: In other words …… Diversification matters.

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China’s population could halve within the next 45 years, new study warns

South China Morning Post/Stephen Chen

Repost from 10-6-2021

photo of statues of many gold soldiers

“The projection was based on the official birth rate of 1.3 children per woman last year – well below the figure of 2 needed to keep the number stable – and forecast a much more dramatic decline than previous estimates.”

USAGOLD note: Logic tells us the reduction will not happen all at once 45 years from now, but gradually between now and then, so we are not talking about a distant concern. Many will remember the era of the “population bomb” and the projected dystopian impact it was going to have on the economy and environment. Now, with this report, we see a big dent put in that scenario. The obvious question beyond the impact on China itself is: What would such a reduction in China’s population, even if occurring gradually, have on the global economy? This development was completely unexpected and many will be surprised by the headline above.

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Posted in Today's top gold news and opinion |

BofA sees rising risk of a large ‘fragility’ shock heading into the fall

MarketWatch/Vivien Lou Chen

Repost from 8-26-2021

cartoon image of a complacent reader contentedly smoking his pipe reading the newspaper“New highs in equities this week ‘will merely encourage more of the investor behavior that historically precedes larger fragility shocks,’ according to a BofA Global Research note released Tuesday.”

USAGOLD note: Bank of America elaborates on one of many possible black swan scenarios as we move into the autumn investment season. Its advice is likely to be ignored, and investors, by and large, are likely to remain in a state of satisfied contentment.

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Posted in Today's top gold news and opinion |

Happy fiftieth anniversary, gold

Gold Eagle/Michael Pento

Repost from 8-27-2021

photo of 100-ounce gold bars arranged in a herringbone pattern

“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.

 

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Posted in Gold and Silver Price Predictions from Prominent Players, Today's top gold news and opinion |

Gold an attractive insurance policy

SeekingAlpha/Frank Holmes

Repost from 8-25-2021

graphic image of black swan on yellow gold medalliion“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

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Posted in Gold and Silver Price Predictions from Prominent Players, Today's top gold news and opinion |

Short and Sweet

Worry about the return ‘of’ your money, not just the return ‘on’ it

photograph of a bag of gold coins
There is an old saying among veteran investors to worry not just about the return on your money, but the return of your money. In the wealth game, emphasize defense when you need to, offense when it makes sense. At all times, remain diversified. And by that, we mean real diversification in the form of physical gold and silver coins and/or bullion outside the current fiat money system – not just an assortment of stocks and bonds denominated in the domestic currency. Keep in mind – if the currency erodes in value, the underlying value of those assets erodes along with it. A proper, genuine diversification addresses that problem now and in the future.


Are you ready to deploy genuine diversification in your portfolio?
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ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

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Evergrande and the end of China’s ‘build, build, build’ model

Financial Times/James Kynge and Sun Yu

Repost from 9-24-2021

Graphic image of a gold king chess piece surrounded by downed pawns

“Evergrande, for all of the high drama of its meltdown, is merely the symptom of a much bigger problem.”

USAGOLD note 1: The point of this editorial is that the Evergrande meltdown is not an isolated event. Instead, it is part of a broader collapse of the Chinese property market brought on by an over-extension of credit. As such, because building and real estate are such significant components of China’s domestic economy, the consequences extend to the global economy as a whole. “The risks that spring from the Evergrande saga,” says Financial Times, “encompass both financial contagion — especially in the offshore US dollar bond market — and the prospect that a flagging property sector will strike at some of the vital organs of the Chinese economy, potentially depressing GDP growth for years to come.”

USAGOLD note 2: The problems in China might be what’s behind the gold market’s malaise of late, given the obvious knock-on effect of flagging demand for commodities in general and the disinflationary impulses it is likely to generate. If so, investors could quickly switch from an inflation mindset to disinflationary, even deflationary thinking, given China’s position as an engine of growth for the world economy. Though it might force an adjustment in current market psychology, that prospect would likely elevate gold demand among investors concerned about systemic risks much as it did in the aftermath of the 2008 financial crisis – and not just in China.

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Posted in Today's top gold news and opinion |

Notable Quotable

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“I don’t believe life is going back to normal once we get to the end of the tunnel. There hasn’t been enough thought given on how behavior has been fundamentally altered from this past year of social distancing, travel restrictions and other curbs to movement, working from home.” (2/21/2021)

David Rosenberg
Rosenberg Research
themarketNZZ interview
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U.S. government bond market specialists warn of fragility in Fed pullout

Financial Times/Kate Duguid/10-6-2021

photo of Fed Seal on floor of Marriner Eccles Building Washington DC

“US government bond specialists are starting to fret over how the world’s most important market will cope when the Federal Reserve pulls back its pandemic-era support.”

USAGOLD note: If this level of concern is rattling around the bond market, it most certainly is echoing down the corridors of the Marriner Eccles building. It is difficult to believe that it won’t affect decision-making on some level. This article is an important read …

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Posted in Today's top gold news and opinion |

With prices at their lowest in over a year, silver’s ‘close to being a bargain’

MarketWatch/Myra Saefong/9-30-2021

photo of a stack of silver coins and bars“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.)

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Posted in Gold and Silver Price Predictions from Prominent Players, Today's top gold news and opinion |

The next ‘Lehman Moment’

Daily Reckoning/James Rickards

Repost from 10-6-2021

photo image of pagoda on reverse of the Panda gold coin“The happy talk out of Wall Street would have you believe that the Evergrande financial collapse in China is under control and that responsible parties have taken steps to avoid a ‘Lehman moment’ in Chinese capital markets. Almost everything about that narrative is factually wrong. It’s Wall Street happy talk at its finest …”

USAGOLD note: Rickards walks us down the darker corridors of China’s developing financial crisis and raises the prospect of a more dangerous world as a consequence. Accompanying China’s recent travails is rapidly rising demand for physical gold as a safe haven and store of value. In that respect, perhaps China is shining a light down that dark corridor ……

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Posted in Today's top gold news and opinion |

Trade gap widens to record high in August

Trading Economics/Staff

Repost from 10-5-2021

“The trade deficit in the US widened to a record high of $73.3 billion in August of 2021, higher than market forecasts of $70.5 billion. Exports edged up 0.5% to $213.7 billion, the highest since May of 2019, boosted by sales of nonmonetary gold and natural gas while shipments fell for autos and parts, civilian aircraft, corn and travel. Imports were up 1.4% to a new all-time high of $287 billion, namely pharmaceutical preparations, toys, games, organic chemicals, transport and travel. The deficit with China increased $3.1 billion to $28.1 billion. The deficit with Canada increased $1.4 billion to $5.1 billion while the deficit with Mexico decreased $1.9 billion to $6.6 billion.”

bar chart showing the trade balance record high August 2021

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Posted in Today's top gold news and opinion |

Mobius says hold 10% in gold as currencies will be devalued

Bloomberg/Abhishek Vishnoi and Ranjeetha Pakiam

Repost from 8-31-2021

photo of gold bars atop a $100 billUSAGOLD 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.

 

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Posted in Gold and Silver Price Predictions from Prominent Players, Today's top gold news and opinion |

Gold as a risk mitigator

Investment Innovation Institute/Wouter Klijn

Repost from 8-23-2021

Ed Stein cartoon 'In case of emergency break glass', gold bar inside

“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.

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German inflation hits 29-year high of 4.1%

Financial Times/Martin Arnold

Repost from 10-5-2021

photograph of German notgeld Stammbach 1921

“German inflation hit 4.1 percent in September, its highest level for 29 years, prompting some economists to question whether central bankers are right to assume the surge in prices is only temporary and will disappear next year.”

USAGOLD note: Many might pass over the headline above as typical of the trends at work in economies around the world including the United States. In Germany, however, where inflation has been generally unknown over the past several decades and gold demand is already running at very high levels, the effect will be profound.


Image: Stammbach notgeld, Germany, 1921

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Short and Sweet

What does bitcoin have in common with the ancient stone money of Yap?

“That does not render bitcoin invalid or the blockchain useless,” writes Gillian Tett in a recent Financial Times editorial. “After all, the mainstream currencies on which our lives depend rely on sometimes tenuous social norms as well. One way to frame the contest between bitcoin and fiat currency is thus as a battle of norms — and of distributed versus hierarchical trust.” Tett, perhaps inadvertently, makes a point a good many gold enthusiasts will embrace. Bitcoin is more readily comparable to fiat currencies than gold – as its value rests completely in the faith that it will not be printed without restriction.

Therein lies bitcoin’s ultimate weakness as a store of value. Who’s to say that any number of copycat cryptocurrencies won’t invade the space and undermine bitcoin’s value? (In fact, a good many already have with varying degrees of success.) Who’s to say that some enterprising software geek doesn’t find a way into the blockchain and begins producing bitcoin willy-nilly? (Which is what happened, by the way, to yap stone money. [More]) Tett ends her essay with some advice for Elon Musk – a new and ardent supporter of bitcoin: “Perhaps Musk’s next trip should be to Micronesia, where those now-useless stone circles still litter the landscape as a sign of what happens when norms and patterns of trust change.” To get to the heart of what Tett – an anthropologist as well as a first-rate journalist – means by that statement, you will need to read her essay in its entirety at the link above. In Musk’s defense, he also expressed an interest in Tesla building its gold reserves.


Are you worried about your savings going the way of the stone money of Yap?
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The supply-chain crisis is rattling Americans as shipping delays hit historic highs

BusinessInsider/Grace Kay

Repost from 10-5-2021

graphic image of inflation genie out of the bottle“The survey of over 1,000 US consumers found that 82% of Americans are concerned about how the disruptions in the global supply chain will impact their life plans, including birthdays, holidays, and the ability to purchase necessary supplies.”

USAGOLD note: The supply chain disruptions, of course, are the rationale the Fed uses to justify its position that inflation is transitory. At the same time, over half of Americans, according to this article, believe that “the supply chain crisis will never end.”

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Posted in Today's top gold news and opinion |

Gold remains stubbornly confined within its recent range
Misery Index rises sharply reflecting possible stagflationary economy

(USAGOLD – 10/11/2021) – Gold remained stubbornly confined within its recent range this morning as the dollar strengthened and Treasury yields pushed higher. It is level at $1758.50. Silver is down 5¢ at $22.69. Wall Street analysts are split on where the Fed goes from here. Some believe it will be forced to taper, as signaled, in the face of increased price inflation. Others believe if it does, it could destabilize a bond market perilously dependent on central bank largesse. As a result, if it does withdraw support it is likely to be tempered. Still others point to a data mix possibly reflecting the early stages of a 1970s-style stagflation – a volatile mix of high inflation and unemployment globally that might be beyond the Fed’s reach. (Please see our Chart of the Day) While the financial market sorts out the possibilities, gold seems content to sit in a range, waiting for something more definitive to develop.

Bloomberg posted an encouraging review of gold’s prospects late last week under the headline Gold’s Lackluster Year May Get a Boost as Stagflation Risks Grow. The article quotes MKS Switzerland’s Nicki Shiels as saying, “there’s certainly some decent gold upside if the narrative changes to one of persistent inflation and slower growth. Stagflation would force a macro rotation out of typical reflation assets or commodities like oil and copper, and into the precious sector.” Commtrendz Risk Management’s Gnanasekar Thiagarajan says that for inflation it’s not a question of if but when. Under those circumstances, he reasons, “investing in gold and silver is the most ideal thing because gold is an inflationary hedge and silver tends to appreciate much more when gold starts rallying.”

Chart of the Day

Misery Index
Inflation + Unemployment

(2015-present)
barchart showing the misery index 2016-10/2021
Sources: St. Louis Federal Reserve [FRED], Bureau of Labor Statistics

Chart note: The misery index was first developed in the 1980s to reflect the effects of stagflation – economic stagnation and inflation. It is simply the unemployment rate added to the inflation rate.  As you can see, it has risen sharply since the onslaught of the pandemic and remains high now.

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