Global oil demand set to reach record high as China reopens, IEA says

Financial Times/Tom Wilson/1-18-2023

artist rendering of oil platform in black and white“Global oil demand is set to rise to an all-time high in 2023 as China relaxes its Covid-19 restrictions in a move that may push crude prices higher in the second half of the year, according to the International Energy Agency.”

USAGOLD note: Should oil prices start higher, as some predict, it could bode well for the rest of the commodity complex, including precious metals, but undermine hoped-for restraint on monetary policy.

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Gold retreats after bumping against $1950 level in overnight trading
Dalio says dollar-dominated world order and globalized economy are ‘fading away’

(USAGOLD – 1/26/2023) – Gold retreated after bumping against the $1950 level in overnight trading. It is down $11 this morning at $1938. Silver is down 21¢ at $23.80. A key factor in gold’s pricing of late has been the return of hedge fund interest. “Hedge funds meanwhile have been near constant buyers since early November,” writes Saxo Bank’s Ole Hansen in a report issued earlier this week, “and during this time the net long has jumped from a 3.9 million ounce net short to a 9.3 million ounce net long, a nine-month high.” With greater hedge fund involvement in play, we should not be surprised at increased volatility and technical trading at key chart numbers.

Ray Dalio, who founded the world’s largest hedge fund, says the world order is shaping up in ways similar to the pre-World War II era, with “each country’s populism and nationalism growing in preparation for greater conflicts.” In the process, he says in an article on the Modern Diplomacy website, “the era of a ‘dollar-dominated world order and a globalized economy was ‘fading away.’ We are now going to have the major powers and their allies form economic, currency, and military blocs.” Mature economies, he says, “have run up very large debts and have developed a dependence on their central banks to print money to buy the government debts,” he said. The increase in debt monetization “will mean that holders of debt assets will get bad inflation-adjusted returns.” Dalio is a long-time advocate of gold ownership.

Gold and silver prices
(October 2022 to present)
overlay line chart showing gold and silver's performance from Nov 22 to present
Chart courtesy of TradingView.com

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Inflation complacency

Credit Bubble Bulletin/Doug Noland/1-20-2023

Artist rendering of two doves, Asian motif“Despite all the talk, previous and ongoing, this Federal Reserve is soft on inflation. Not as eager as Wall Street to declare mission accomplished, Fed officials are nonetheless signaling that their work is near completion”…It was important that central bankers pushed back against the view that QE liquidity backstops would be restarted as necessary to quash incipient market instability. Powell was hawkish during his November 1st post-meeting press conference. But Fed hawkish resolve soon dissipated. Now, messaging has become so frayed that markets don’t take hawkish resolve seriously. The paramount message that the Fed would push back against looser market conditions is MIA.”

USAGOLD note: We agree with Noland’s assessment. After all is said and done, the Fed at its core is dovish.

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Notable Quotable

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“For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs — a pastime in which he is victor who says Snap neither too soon nor too late, who passed the Old Maid to his neighbour before the game is over, who secures a chair for himself when the music stops. These games can be played with zest and enjoyment, though all the players know that it is the Old Maid which is circulating, or that when the music stops some of the players will find themselves unseated.”

John Maynard Keynes

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What’s behind fall in US yields? Fed hope, growth fear

Bloomberg/Martin Ademmer and Bjorn Van Roye/1-24-2023

“For the US central bank, the burden of controlling elevated inflation falls increasingly on hopes for favorable supply shocks.”

USAGOLD note: And that could go either way. A one-paragraph, no-nonsense summary of the Fed’s latest policy conundrum……

line chart showing the drop in 10-year Treasury yields over past month
Chart courtesy of TradingEconomics.com

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‘The Fed-fueled fantasy bubble has popped.’ Stock investors are detached from reality — but they’re about to get a big dose.

MarketWatch/Michael Sincere/1-23-2023

graphic image-icon of bear stepping through round portal‘If it looks like a duck, walks like a duck, and quacks like a duck, it’s a duck! Most stocks are far below their 200-day moving averages. Also, even when good news comes out, most stocks can’t get any traction. Finally, during the last few months, money has been flowing out of stocks and into bonds. All of these clues suggest a bear market.” – Jeffrey Bierman

USAGOLD note: Bierman sees a 20% drop in the S&P to 3200 as in the cards…… “You can’t be 100% in stocks,” he says.

 

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Sentiment speaks: $2428 target for gold

Seeking Alpha/Avi Gilbert/1-17-2023

USAGOLD note: Elliot Wave analyst Gilbert reprises a long history of successful gold calls to give extra credibility to his bullish $2428 target ……

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Thinking about buying gold and silver?


Gold in six easy lessons

1. Don’t buy it because you need to make money; buy it to protect the money you already have.

2. Don’t look at price as a barrier; look at it as an incentive.

3. Don’t buy the paper pretenders; buy the real thing in the form of coins and bullion.

4. Don’t fall prey to glitzy TV ads; do your due diligence instead.

5. Don’t allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.

6. Don’t forget the golden rule: Those who own the gold make the rules!


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James Grant: ‘I’m somewhat of a broken record on gold’

themarketNZZ/Christopher Gisiger interview of James Grant/1-17-2023

graphic image of a book and reading glasses A Good Weekend Read“Inflation in such a system resembles one of these inextinguishable long-burning underground coal mine fires. I’m not sure if you have them in Switzerland, but in Pennsylvania for example there has been such a fire that’s been going on for around fifty years. You don’t always see it, but it flares to the surface from time to time. It’s always there, it’s always latent, leaking smoke, warming the soles of your shoes. To me, that is a good analogy for inflation in a free spending and paper currency issuing social democracy.”

USAGOLD note: If you’ve never exposed yourself to James Grant’s unique brand of deep thinking on the economy and financial markets, you might find opportunity in this interview with Christopher Gisiger. Grant has always been an advocate of gold ownership, and nothing has changed on that score. “Allow me to suggest that I’m somewhat of a broken record on gold,” he confesses. “I’m going to continue with this broken record and observe that people have not yet come to terms with the essential inherent weaknesses of the monetary system that has been in place since 1971.” A point well taken as illustrated by the chart below.

Grant’s Interest Rate Observer

Gold and the purchasing power of the US dollar
(USD as measured by the consumer price index)
overlay line chart showing the purchasing power of the dollar and gold 1971-2022
Chart courtesy of TradingView.com

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Investors are holding near-record levels of cash and may be poised to snap up stocks

CNBC/Patti Domm/1-18-2023

cartoon image of gold piggy bank by Ed Stein“strategists say investors may hold back from putting more money into stocks, since sentiment is sour and money markets are now generating more return than they have been in years.”

USAGOLD note: It’s been so long since investors have received a decent return on their money that they are mesmerized by its sudden materialization. Persistent inflation, though, will undermine those returns. Then some might find further diversification to be in their best interest.

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Saudi Arabia says its open to settling trade in other currencies

Bloomberg/Abeer Abu Omar and Manus Cranny/1-17-2023

Graphic image of George Washington as he appears on the one dollar bill“The world’s largest oil exporter, which has maintained a currency peg to the dollar for decades, is seeking to strengthen its relations with crucial trade partners including China. The kingdom is a pillar a petrodollar system established in the 1970s that relies on pricing crude exports in the US currency.”

USAGOLD note: Saudi Arabia’s gesture follows important talks between Saudi Arabia and China on the issue of oil invoicing. Many will deem it important that Finance minister Mohammed Al-Jadaan delivered his comments at the Davos conference – the annual gathering of the world’s business and political elite. It obviously wanted to deliver a message.

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Short and Sweet
Inflation is a process not an event
But history, as we are learning now, shows runaway inflation can come suddenly and without warning

graphic image showing decline of the denarius over 200 y ears

Image courtesy of Visual Capitalist • • • Click to enlarge

We sometimes forget that inflation is a process rather than an event. One of the better-known examples of that axiom is the nearly two centuries-long debasement of Rome’s silver denarius. The Roman citizen who had the wisdom to hedge that process by going to gold at nearly any point along the way ended up preserving some portion, if not all, of his or her wealth. Those who did not suffered its debilitating effects. In the inflationary process, the line between cause and effect is not always a straight one, and its timing difficult to discern. History teaches us, though, that when runaway inflation does arrive, it comes suddenly, without notice, and with a vengeance. That is why it pays to view gold as a permanent and constantly maintained aspect of the investment portfolio. “A change of fortune,” Ben Franklin tells us, “hurts a wise Man no more than a change of the Moon.”
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(Related please see:  News & Views Special Report / March 2020 / Hedging the decline and fall of a currency – The baseline case for gold hasn’t changed much in 1700 years)

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BoA warns hot inflation could run rampant for another 10 years

Yahoo!Finance/Jing Pan/1-12-2023

graphic representation of a bulletin board note reminder that the 1970s equal the 2020s“Will inflation go back to normal anytime soon? Bank of America doesn’t believe so. ‘Historically, it takes an average of 10 years for a developed economy to return to 2% inflation [once] the 5% threshold is breached,’ the bank says in a recent note.”

USAGOLD note: Bank of America’s assessment is in keeping with the 1970s scenario……. The big investment bank is on a bearish roll (see below).

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Gold turns to the downside in featureless trading
Gold posts record high in Japan, Switzerland exports 524 tonnes to China in 2022

(USAGOLD – 1/25/2023) – Gold turned to the downside this morning in featureless trading ahead of next week’s Fed meeting. It is down $12 at $1928. Silver is down 21¢ at $23.53. Jerry Grantham returned to the fray this morning to predict a bleak future for the stock market – a further 17% decline in 2023.

A few gold notes to start your day…… Australia’s Perth Mint, which enjoys a strong market for its wares in East Asia, reports record bullion product sales in 2022. Switzerland, where the world’s primary precious metals refineries are located, exported 524 tonnes of gold to China last year, the highest level since 2018. Gold prices posted a record high in Japan yesterday amidst inflation and recession concerns. Goldman Sachs says China’s reopening is a gamechanger for gold and oil…and the US dollar. Last, the US national debt is now six times larger than it was at the start of the century and is expected to grow at a rate of $1.3 trillion per year for the next decade. And that is a conservative estimate…

ramirez cartoon illustrating the enormous US national debtCartoon courtesy of MichaelPRamirez.com

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No one wins with a world split into two rival political-economic blocs

South China Morning Post/Anthony Rowley/1-22-2023

“Russia and China could choose to declare financial war on the major Western powers in Bloc 1 by selling US dollar assets and investing the proceeds not only in gold but in other precious metals and industrial commodities, forcing the dollar and other key currencies down further.”

USAGOLD note: Rowley considers a new alignment of nations as the world splits into two camps – one led by the United States, the other by China. “Beijing is in a relatively strong position to consolidate and strengthen its position while the US and its allies struggle with long-standing economic problems,” he says. We are not sure how much of that assessment is grounded in reality. The economic problems on both sides are profound.

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Notable Quotable

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“Why does the cycle move as it does? What causes these periodic alternations, this ebb and this flow, in the national priorities? If it is a genuine cycle, the explanation must be primarily internal. Each phase must flow out of the conditions – and contradictions – of the phase before and then itself prepare the way for the next recurrence. A true cycle is self-generating. It cannot be determined, short of catastrophe, by external events. Wars, depressions, inflations may heighten or complicate moods, but the cycle itself rolls on, self-contained, self-sufficient and autonomous. . .The roots of cyclical self sufficiency lies deep in the natural life of humanity. There is a cyclical pattern in organic nature — in the tides, in the seasons, in night and day, in the systole and diastole of the human heart.”

Arthur M. Schlesinger, Jr.
The Cycles of American History

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Yellen dismisses minting $1 trillion coin to avoid federal default

MarketWatch/Andrew Duehren/1-22-2023

“Treasury Secretary Janet Yellen said the Federal Reserve likely wouldn’t accept a $1 trillion platinum coin if the Biden administration tried to mint one to avoid breaching the debt limit, dismissing an idea that has been floated to circumvent Congress on the issue.”

USAGOLD note: Why do some choose to believe that outrageous solutions do not come with equally outrageous consequences? The best solution is to abolish the debt ceiling. It serves no practical purpose.

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The USAGOLD Website
A guiding light for our 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 (1997), 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 26-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. 

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US debt default ‘likely’ in second half of 2023: Bank of America

Yahoo!Finance/Dan Weil/1/14-2023

“’We think it is likely that by late summer or early fall, the federal government will temporarily be forced to default on a portion of its daily obligations for a time ranging between a couple of days to a few weeks,’ he wrote in a commentary.”

USAGOLD note: So says Bank of America’srates strategist Ralph Axel. Usually these disputes resolve themselves before any permanent damage is done, but this time around it is being given more gravity, given the agreements supposedly made between the new speaker of the House and the rebel faction of the Republican party.

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The chimera of post pandemic, postwar return to monetary normal

MisesInstitute/Brendan Brown/1-12-2023

photograph of $100 bills and an hour glass“Readers of Mises Wire doubtless count among their New Year resolutions a determination to resist propaganda, and in the monetary sphere this means a readiness to assess in sober-rational mood a full range of scenarios, albeit focusing on what is most likely. We should retain our skepticism about the popular narrative of a return to a monetary normal which never existed under this regime and is unlikely to dawn anytime soon. But we should not exclude altogether way-out possibilities. After all, 2023 is the one-hundredth anniversary of two extreme monetary episodes, one of dark despair and one of great hope—the one hundredth of the German hyperinflation and the fiftieth of the launch (via a free float) of the hard deutsche mark in defiance of dollar monetary inflation.”

USAGOLD note: An alternative view on where we are headed monetarily from a leading economist on the international monetary system and senior fellow at the Hudson Institute…… “Normal for this regime,” he says, “is virulent monetary inflation” – despite what is being said.

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