“You will not hear about this in the mainstream financial press: there’s a gold rush happening at the moment, and it’s getting bigger. It makes a strong case for much higher gold prices. Understand that gold prices move based on demand and supply. If demand is increasing, price tends to move higher.”
USAGOLD note: We referenced this newsletter in yesterday’s DMR and repost it now for those who may have missed it.
Repost from 11-4-2020
“We want you on board the gold train as it pulls out of the station. It’s also important to understand why you’re on board. Gold is — and always has been — the world’s favorite safe haven. That is, during times of uncertainty, insecurity, economic or political upset, war, devaluations and more, gold has always come out as #1. And this impressive track record goes back more than 5,000 years.”
USAGOLD note: This overview from the Aden Sisters – the widely followed chart analysts – is an excellent primer for those new to the gold market, i.e., why it has always made portfolio sense and why it makes sense now and for the future – “the best investment in the world today.”
Repost from 8-16-2020
“They move around prices in the short run, but long-term they will not affect where gold & silver are heading (decidedly higher). And when they drive prices too low, that provides opportunity. When they’re instrumental in pushing gold to overbought – that’s an opportunity tooCan be frustrating to see gold (& silver) rally all night, only to be bashed down $20+ as soon as NY futures trading opens. These levered traders/computers push price around on correlations (today it’s rising bond yields). But remember, it cuts both ways. They also push prices up.”
USAGOLD note: What goes around, comes around ……
Repost from 1-15-2021
‘No one questions its value. . .’
“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
“‘Know what you are investing in’ is a steadfast, uncontroversial investing adage. Unfortunately, when it comes to bitcoin, this advice is being dangerously overlooked by both novice and seasoned investors. In this article, I seek to set the record straight on what bitcoin was and has become, and what I believe is the biggest risk associated with bitcoin today.”
USAGOLD note: Revelations from someone who has been involved with bitcoin from its early years – what it really is and where its true value really lies. “It is not a vehicle for investment,” says Pickard, “not a store of value, and not an inflation hedge. BTC is not a capital asset: it does not generate cash flows derived from economic returns on capital. Its extreme volatility invalidates claims of a reliable store of value and calls into question any inflation-hedging properties.”
Repost from 1-15-2021
(USAGOLD – 1/21/2021) – Gold looks to be taking a breather after yesterday’s solid gains. It is down $4 at $1869. Silver is down 4¢ at $25.89. Both look to be poised for a run at key levels – $1900 for gold and $26 for silver. Van Eck’s Joe Foster sees the same set of drivers that pushed gold higher in 2020 remaining in force for 2021 – market distortions (the mania), the huge debt load shouldered by both governments and corporations, worries over the Biden-effect, a possible vaccination-induced reenactment of the Roaring 20s (inflation), and persistent dollar weakness.
“Gold,” he says in a report released by the firm yesterday, “has been in a bull market since December 2015. The chart pattern of this market looks similar to the first five years of the 2001 to 2011 bull market. It will be interesting to see if the chart similarities continue. After 2006, the former bull market found catalysts in the 2008 Global Financial Crisis and the European Debt Crisis in 2010. The current bull market will certainly need further catalysts to realize similar gains. The risks we have outlined along with the dollar’s trend could provide such catalysts.”
Chart of the Day
Percent increase or decrease over prior year
“Should precious metals investors diversify into other market sectors, like stocks, bonds, and real estate …Holding a mix of (seemingly) non-correlated assets (ETFs or stocks) in real estate, energy, fixed income, and general commodities may be helpful, but it’s best to build any portfolio in baby steps.”
USAGOLD note: Thomson offers a tongue in cheek assessment of modern portfolio design…
Graphic illustration courtesy of VisualCapitalist.com
“Specifically we see ongoing US dollar weakness, deeper negative real rates in the treasury markets and a significant rise in unproductive debt as the Democrats open the spigots with fiscal stimulus as supporting factors. With the economy still contracting in Q1, we expect a bounce in H2 as the vaccine frees up the economy. With the recovery comes demand-pull as well as cost-push inflation further fuelled by the higher velocity of money, leading to expectations of much higher inflation, notwithstanding the weak labour markets.”
USAGOLD note: Ross Norman has finished high or won the annual LBMA price forecasting contest (including last year’s) that one is forced to pay attention. He sees $2025 as the average price, $1810 as the low, and $2285 as the high. Norman says physical demand for silver coins and bars will show “impressive gains,” reflecting ‘strong demand for safe havens in these troubled times.” He sees $36 as the high for gold’s traveling companion.
“Rome fell because the dictators ruined the Roman economy and the institutions that had made it prosperous. Rome was falling apart before the barbarian invasions. How did the Caesars do that? They were profligate spenders. As emperors with absolute power usually do, they thought big: infrastructure (roads, temples, palaces), a huge bureaucracy, and, as the key to maintaining their power they had a very large, loyal, and well-paid army. As a consequence, massive government spending far outstripped revenue. They had what today we call a deficit problem.”
“President-elect Joe Biden’s $1.9 trillion stimulus proposal has economists and bullish market analysts revising their U.S. growth expectations higher, predicting a reflation of the economy in 2021 and possibly more booming returns for risk assets. Yes, but: Others are warning that what’s expected to be reflation could actually show up as inflation, a much less welcome phenomenon.”
USAGOLD note: Former Fed economist DiMartino Booth is quoted as saying that the Fed might be careful saying it wants inflation. “Once the genie gets let out of the bottle,” she says, “the Fed’s not going to have a say in where inflation goes and I don’t think policymakers understand that.”
Landscape mode is recommended for mobile phone viewing.
Market Data by TradingView
Delayed data except FOREX
“Over Christmas sales of gold bars surged as Brits fed up with terrible savings rates opted to put their money into something shiny instead ……”
USAGOLD note: Whodathunk?……
“However, there was a fundamental difference between what happened during the financial crisis and what is happening now. The money created by the Fed during the last financial crisis found its way into excess reserves in the banking system. Little of it was lent out to the private sector.”
USAGOLD note: The thing that interested me about Siegel’s heads-up on inflation is identifying the bond market as its chief victim. He also explains why inflation did not develop during the money printing binge to address the 2008 crisis and why it could develop now. Siegel says this time around money printed, as the chart below shows, is finding its way into the money supply. Last year’s surge in the money supply “was the largest in 150 years.”
Sources: St. Louis Federal Reserve [FRED], Board of Governors of the Federal Reserve System
Cartoon courtesy of MichaelPRamirez.com
“Biden is going to attempt to chart an economic policy that’s visibly to the left of Bill Clinton and Barack Obama. If he succeeds, it’s going to show up not only in taxes and spending, but also in regulation.”
USAGOLD note: And, there is little doubt, it will show up in the value of the already stressed dollar. The Ramirez cartoon brings to mind the old joke: “That light at the end of the tunnel?…… It’s a train.”
Repost from 1-15-2021
“Low rates and yields are typically positive for gold, as they minimise the opportunity cost of holding the zero-yielding metal. Moreover, given exceptionally low yields (or, in other words, high bond prices), the effectiveness of bonds as a hedge against market turmoil, and in particular equity market corrections, is hampered as it becomes harder to see yields fall much more. This forces investors towards other portfolio diversifiers, something that should continue to benefit gold.”
USAGOLD note: London-based Metals Focus forecasts that gold will push toward the $2000 mark once again over the next few months then “reaching all time highs later in the year. It also give a thumbs up to silver saying it will peak “in the high $30s before year end.”
Repost from 1-14-2021
“Over the past 12 years saving gold and/or silver has been an 8x – yes, 8 times! – more effective strategy to grow one’s wealth than banking money and I believe it will continue to be so for the foreseeable future for 4 reasons.”
USAGOLD note: Lorimer Wilson, the editor of munKNEE, goes on to post some interesting statistics including gold providing an annual return of 13.4% since 2013, and silver 12.7%. He concludes that “a disciplined cost-averaging program remains a sound strategy to provide for an uncertain future.”
If you haven’t visited our Online Order Desk, may we suggest your taking a look?
A good many find it a useful addition to their investing arsenal.
Order from a wide range of products anytime day or night.
Repost from 11-30-2020
“More than 2,600 people died from Covid on Friday after more than 2,800 fatalities were reported on Thursday, a single-day record of the pandemic. More than 2,000 people have died everyday from the virus since the month began.”
USAGOLD note: The Ramirez cartoon gives the grim statistics perspective ……
Cartoon courtesy of MichaelPRamirez.com
Repost from 12/7/2020
“In this way, the government doesn’t actually have to pay anyone back; they just keep refinancing and kicking the can down the road farther out into the future. And the Treasury Department is praying that bondholders will continue this practice forever. Unfortunately that’s probably not going to happen. For starters, foreign governments like China and Japan (which are among of the biggest owners of US government debt) have already started reducing their holdings.”
USAGOLD note: I referenced this Simon Black article in a recent Daily Market Report and repost it now for those who may have missed it. In essence, the Secretary of the Treasury has become in recent history the government’s chief bond salesman whose job it is to place the trillions in US sovereign debt with global buyers. That which isn’t sold either domestically or internationally is sold to the Federal Reserve as part of its quantitative easing program.
Sources: St. Louis Federal Reserve [FRED], U.S. Bureau of Economic Analysis
Repost from 1-14-2021
The crisis ready investment portfolio
In a recent essay published at Project Syndicate, Harvard economics professor Kenneth Rogoff sets an ominous tone. Humanity, he says “is facing something akin to alien invasion” – an apt analogy, we thought. “With each passing day,” he goes on, “the 2008 global financial crisis increasingly looks like a mere dry run for today’s economic catastrophe. The short-term collapse in global output now underway already seems likely to rival or exceed that of any recession in the last 150 years.”
At the moment, as shown in the chart below, the level of stress in financial markets is at its highest point since the credit crisis of 2008. Keep in mind the current high reading is without the impetus of any financial institution or fund of consequence reporting serious difficulties and/or requesting a bailout. Note with that in mind the acceleration in the index after the Bear Stearns and Lehman failures in 2008.
Below we have reconstructed the same chart only with the price of gold superimposed. As you can see, gold responds directly to stresses indicated in financial markets and that the effect can persist even after the initial threat dissipates. Gold ownership, in short, is a way to make one’s portfolio crisis ready on a permanent basis – a means to batten down the hatches against recurring financial storms and, for the minority who own it, an effective and ever-ready defense.
Sources: St. Louis Federal Reserve, Lewis; Mertens; Stock; ICE Benchmark Administration
Click to enlarge
“If you look at the history of currency, gold has a unique role and I don’t think it’s accidental,” writes Rogoff in his latest book, The Curse of the Crash which predates the coronavirus crisis. “Some people say that if gold hadn’t been selected as a currency thousands of years ago, it would not have a role today. I don’t agree. Gold has a lot of useful properties and unique features so I don’t think its status is in any way accidental. It’s a monetary asset and I think if you replayed history another way, you would come out with gold again.”
Please see Mapping the COVID-19 Recession by Kenneth Rogoff, Project Syndicate