Daily Gold Market Report
Gold pushes marginally this morning as debt ceiling concerns fade
WGC survey of central bankers reveals healthy future interest in gold as a reserve asset
(USAGOLD – 6/1/2023) – Gold pushed marginally higher this morning as debt ceiling concerns faded and investors took to the sidelines ahead of Friday’s jobs numbers. It is up $5 at $1970. Silver is up 1¢ at $23.58. The World Gold Council released its annual survey of central bankers earlier this week, providing insights on the sector’s future interest in the metal as a reserve asset.
As most of you already know, demand from that quarter has been running at record levels, and according to the survey, that interest is likely to continue. Most notably, 62% say that gold will garner a greater share of reserves in the future up from 46% last year, while 24% expressed their intention to increase gold reserves over the next 12 months. In addition, says WGC, “central banks’ views towards the future role of the US dollar were more pessimistic than in previous surveys.”
Chart courtesy of World Gold Council • • • Click to enlarge
Notable Quotable
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“Ask anyone in Germany what they associate with gold and, more often than not, they will say that it is synonymous with enduring value and economic prosperity. Ask us at the Bundesbank what our gold holdings mean for us and we will tell you that, first and foremost, they make up a very large share of Germany’s reserve assets … [and they] are a major anchor underpinning confidence in the intrinsic value of the Bundesbank’s balance sheet. The Bundesbank produced this publication to give a detailed account, the first of its kind, of how gold has grown in importance over the course of history, first as medium of payment, later as the bedrock of stability for the international monetary system.”
Jens Wiedmann
Former President, Bundesbank
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Cut stocks, buy gold, hold your cash, JPMorgan’s Kolanovic says
Boomberg/Alexandra Semenova/5-23-2023
“A team of JPMorgan strategists led by [Marko] Kolanovic trimmed its allocation to stocks and corporate bonds while boosting its stake in cash by 2%. Within the commodities portfolio, the firm also rotated out of energy and into gold on haven demand and as a debt-ceiling hedge — another move intended to strengthen the JPMorgan’s defensive posture.”
USAGOLD note: At one time, Kolanovic was considered Wall Street’s most vocal bull.
The US Treasury may have to break the law to keep the world’s richest nation from default
Yahoo!Finance/Nate DeiCamillo/ 5-23-2023
“If the Treasury paid some debts and not others, Yellen would run the risk of neglecting her duties, said [Bipartisan Policy Center’s Shai] Akabas. This could make both Yellen and her department targets for lawsuits from affected parties. Already, a union of government employees has filed a suit against Yellen and Biden, arguing that they have a legal obligation to ignore the debt ceiling.”
USAGOLD note: A bizarre twist to the already bizarre debt ceiling soap opera ……
Three reasons to buy gold now
UBS/Chief Investment Office/5-18-2023
“The direction of a weakening dollar is clear, with the US Fed having signaled a pause in its current tightening cycle after 500 basis points of rate hikes over the past 14 months. Other major central banks, meanwhile, remain on track to do more to fight inflation.”
USAGOLD note: UBS sees gold at $2100 by year end and $2200 by March 2024.
Short & Sweet
The Exter Inverted Pyramid of Global Liquidity
“[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
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Gold: Older than the solar system itself
Deutsche Goldmesse/Dominic Frisby/5-6-2023
“Gold was present in the dust which formed the solar system billions and billions of years ago and gradually that dust accreted to form the planets.”
USAGOLD note: In this video, Frisby makes an engaging presentation on the yellow metal saying “We have a primal instinct for gold.”
Daily Gold Market Report
Gold level ahead of Friday’s jobs numbers, today’s debt package vote
Saxo Bank’s Hansen says gold downside fueled by long reduction, not short selling
(USAGOLD – 6/1/2023) – Gold is level this morning ahead of Friday’s jobs numbers and a vote in the House of Representatives later today on the debt package. It is down $1 at $1960. Silver is up 8¢ at $23.34. “Hedge funds were net sellers of gold for a second week,” reports Saxo Bank’s Ole Hansen in a recent client advisory, “but interestingly the reduction was driven by long liquidation with no appetite for short selling despite the recent technical breakdown. Equally in silver the selling appetite was also muted while the copper net short was reduced by 27%, the first reduction following five weeks of constant selling that saw the net drop from a 20k net long to a 22.6k net short.”
Notable Quotable
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“If you look at the history of currency, gold has a unique role and I don’t think it’s accidental. 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.”
Ken Rogoff
Harvard University
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Buffett: Debt standoff an idiotic waste of time……
Markets Insider/Theron Mohammed/5-27-2023
“Warren Buffett has dismissed concerns that Congress won’t raise the debt ceiling and the federal government will be forced to default on its loans. He went even further during a previous standoff, describing the clash as an idiotic waste of time, and calling for the borrowing limit to be removed entirely.”
USAGOLD note: Hard to disagree with Buffett’s assessment. Putting Wall Street and the rest of the country through this periodic ritual comes off as a childish desire to get attention – political gamesmanship at its worse.
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The gold cases resurface
The New York Sun/Editorial Staff/5-22-2023
“While Perry affirmed the federal government’s burden to repay its debts, the case isn’t as ringing a vindication of the 14th as the Sun, back then, had hoped. The thing to remember about the 14th is that those who enacted it intended it to be about gold — meaning, honest money defined in law and certain contracts in terms of gold. Its authors meant to protect the right of such debt holders to be repaid in gold, or the equivalent in paper money.”
USAGOLD note: We note with interest that President Ulysses S. Grant (photo insert) declared at the time that the US should pay its debts in gold as a matter of national honor. If that were to occur today, it would wipe out the US gold reserve of 8133 metric tonnes. The Sun delves into what the Fourteenth Amendment is really all about.
Fed rate path hinges on trade off between stable banks or prices
Bloomberg/Craig Torres/5-23-2023
“Federal Reserve policymakers are increasingly grappling with a critical question: How much should they weigh the adverse impact of their interest-rate hikes on banks against the goal of containing the fastest price increases in decades?”
USAGOLD note: Stark choice…… And, in our view, it’s not just the banks that the Fed needs to be worried about.
A US debt default is the wake-up call the world needs
Yahoo!Finance-The Telegraph/Matthew Lynn/5-21-2023
“Even so, despite the potential for a financial meltdown, an American debt default might be precisely the kind of jolt that the global economy needs. It would be a powerful reminder that total borrowing can’t simply keep on rising forever without any consequences.”
USAGOLD note: An unusual, and some would say dangerous, take on the prospect of a US debt default, but not one without merit. The global tower of debt was $210 trillion in 2010. It is $300 trillion now and projected to be $400 trillion by the end of the decade.
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
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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The financial system is slipping into state control
YahooFinance/The Economist/5-18-2023
“In America, Britain and Europe, officials are debating if they should offer more generous protection for bank deposits. Such moves are just the latest evidence of the diminution of banks’ power and the increase in that of the state. Over the past few months, in areas from deposit insurance to emergency lending to regulation of asset quality, Leviathan has grown ever more dominant.”
USAGOLD note: Banks are becoming wards of the state, says The Economist. The publication puts special emphasis on the fact that the Fed will buy bank-held securities at par even though the market value has been heavily discounted. “The bigger the backstop,” it says, “the more reason government has to dictate what risks banks may take” – a notion antithetical to tenets of capitalism.
Daily Gold Market Report
Gold gains ground as debt drama moves to the halls of Congress
Bridgewater sees subtle shift as central banks, investors turn to gold as a store of value
(USAGOLD – 5/30/2023) – Gold gained ground this morning as the still unresolved debt drama moved to the halls of Congress. It is up $16 at $1962. Silver is up 7¢ at $25.32. After all is said and done, Bloomberg points out in its morning advisory, the deal barely dents the $20 trillion in combined budget deficits projected over the next decade.
Bridgewater Associates, the world’s largest hedge fund, writes Financial Times’ Gillion Tett, believes that “the past 15 years of quantitative easing and recent high inflation have left central banks and retail investors alike reaching for gold as a store of value.” Moreover, investors have subtly shifted from “evaluating gold as an alternative to other dollar-denominated savings to increasingly evaluating gold as an alternative to the dollar.” She concludes that “gold is now a good barometer not just of global instability, but of US dysfunction too” and that America’s economic problems will not end with a debt ceiling deal. [Source: Financial Times]
Cartoon courtesy of MichaelPRamireiz.com
Notable Quotable
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“Perhaps what gives us the highest conviction on commodities as an asset class is not the similarities to historical bull markets but the differences. In particular we continue to believe that the global focus on climate mitigation strategies and decarbonisation is limiting the supply response to higher prices to an extent that is unprecedented. That breakage of the link between higher prices and a supply response is likely to significantly extend the commodities bull market. When we combine these factors to our belief that we are entering a fundamentally more inflationary age, the case for an enlarged commodities allocation remains compelling.” – Schroders, client advisory
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Favorite web pages
What you need to know before you invest in gold
Initial guidelines for first-time investors from one of America’s top gold experts
New to the idea of including gold in your investment portfolio?
If so, this is the page for you.
If you are new to the idea of gold ownership, you might be looking for a little guidance. We, at USAGOLD, have been in the gold business for a good many years, and the one thing that stands out to us in working with so many over the years is how often investors, for one reason or another, get off to a bad start.
That is why we developed a question and answer page many years ago that delves into the subject of GETTING OFF TO THE RIGHT START. We update it regularly as things can change rapidly in the gold and silver markets. The page is linked above, and we recommend that newcomers spend the few minutes it takes to get through it.…
This page receives considerably high-ranking from Google on a number of important searches, and we like to think it’s because of the cause it serves – providing some positive direction to investors trying to get off to a solid start in their pursuit of gold ownership.