Three reasons to go for gold

Aberdeen Standard Investments/Steve Dunn/November 2021

photo stack of modern gold bullion coins

“Gold is, in our view, a distinct asset class and a core risk management tool. An allocation to gold shouldn’t reflect a tactical reaction to market volatility spikes. We view gold as a strategic, long-term hold. We believe its unique investment properties may make gold a critical component of a well-balanced investment portfolio, in high times and low.”

USAGOLD note: Aberdeen offers a quick read on why gold makes sense as a strategic diversification rather than something one reaches for at a moment’s notice when the trigger is fear – a way of thinking which we have advocated for decades.

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Legendary investor Jeremy Grantham issues investor warning

MarketsInsider/Theron Mohamed/11-14-2021

grpahic image of Dr MoneyWise pointing to a chart of the 1929 stock market crash with comment

“The legendary investor and chief strategist of Grantham, Mayo & van Otterloo also sounded the inflation alarm, blasted the Federal Reserve for pumping up asset prices, and reiterated his warning that the worst market crash in US history is coming.”

USAGOLD note: Grantham criticized the mentality that stock prices never decline and “all you have to do is buy.” Investors, he says, are more “blindly optimistic” than they were before the Crash of 1929 or the tech and housing bubbles.

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Silver Insitute’s interim silver market review

TheSilverInstitute/Staff/11-17-2021

Photo stacks of silver bullion coins“Physical investment in 2021 is on course to increase by 32%, or 64 Moz, year-on-year to a six-year high of 263 Moz. The strength will be driven by the US and India. Building on solid gains last year, US coin and bar demand is expected to surpass 100 Moz for the first time since 2015. Growth began with the social media buying frenzy before spreading to more traditional silver investors. Indian demand reflects improved sentiment towards the silver price and a recovering economy. Overall, physical investment in India is forecast to surge almost three-fold this year, having collapsed in 2020.”

USAGOLD note: Yesterday the Silver Institute released its interim overview of the global silver market – a quick and important read for our clientele who own silver or are contemplating it. The report includes a comprehensive supply-demand table and bullet commentary on each of the categories.

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Investors lulled into ‘dreamland’ by central banks, warns Bill Gross

Financial Times/Robin Wigglesworth/11-15-2021

Advertisement for the 1960s television serial The Twilight Zone“‘It’s dangerous,’ Gross warned of accommodative central bank policy. “It’s all dreamland that’s been supported by interest rates that aren’t where they should be.'”

USAGOLD  note: Gross joins the ranks of prominent investment managers and commentators warning of twilight zone markets saturated with financial euphoria. He points out that the Fed is captive to the markets and cannot do much about it.

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Short and Sweet

‘No one questions its value. . .’

image of a Croesus Lydia stater“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


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Let’s dance: Buy the credentials – Forget reality, baitballs and financial ergot!

Blain’s Morning Porridge/Bill Blain/11-15-2021

cartoon showing a chorus line corodinatedkick

“Oh dear. When market pricing is determined primarily by the fashion sense of flash-mobs it’s probably time to hang up my hat and go with them… but, of course… I won’t. My spidey-senses are all-a-tingle. I sense a madness in the air, a contagion on the loose. Is it just a disease? Something wicked this way comes… and we all know what it is….”

USAGOLD note: Thoughts on the current financial irrationality …… “Crank up the volume,” he advises, “keep dancing and keep buying! Yay!”

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Gold stabilizes in a range below $1800 to start a busy week for financial markets
Incrementum’s Stoferle puts gold’s 2021 rangebound pricing into perspective

(USAGOLD – 11/26/2021) – Gold looks to be stabilizing in a range below the $1800 mark this morning as news filters through financial markets to start the week that the latest variant might not be as problematic as first thought. It is level at $1793. Silver is up 3¢ at $23.23. With several Fed luminaries delivering speeches, Chairman Powell testifying before Congress, Treasury Secretary Yellen weighing in with a speech tomorrow, and a steady stream of data releases culminating with Friday’s payroll report, Wall Street may get more than its fair share of stimulation this week. Incrementum’s Ronald Stoferle added some much-needed perspective over the weekend on gold’s stubborn, rangebound behavior thus far in 2021.

“Confidence comes from repeatedly fulfilled expectations,” he says in a speech titled The Tipping Point and the New Normality, “That’s why gold is many things, but certainly not dead. A 25% price rise in 2020 and its role as a hedge in the Covid Crash speaks for itself. And now gold is down 3.5%. But what is this 3.5% against the 25%, is this really so bad? No, and many other events speak in favour of gold. One of these is the gold purchases by central banks around the world. As Palantir’s interest shows, this is not limited to central banks. Comex gold delivery is also higher than it has been for a long time. And what do we see in technical analysis? The mother of all ‘cup and handle’ formations. A breakout from this formation could mean a price of $2800.”

Chart of the Day

Personal Consumption Expenditure Index
(% change year over year, 2016 to present)
line chart showing the personal consumption expenditure index less food and energy October 2021
Sources: St. Louis Federal Reserve [FRED], U.S. Bureau of Economic Analysis

USAGOLD note: The PCE price index posted its largest gain since 1990 last week at 4.4%, excluding food and energy. With food and energy, the index posted a 5% gain – another solid indication that inflation is anything but transitory.

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Motherlode

Hussman Funds/John P. Hussman/11-21-2021

photo of pouch with gold coins spilling out into foreground“Across four decades of work in the financial markets, and over a century of historical data, I’ve never observed as many historical indications of a market peak occurring simultaneously..…Emphatically – and this is important – my intent here is not to “call the top” of this bubble. Yes, this is a bubble in my view. Yes, I believe it will end in tears. Yes, the price investors pay for a given stream of future cash flows is inseparable from the long-term returns they can expect. Yes, if this bubble is ever to actually have a top, this would be a perfectly reasonable moment to expect one. Still, my present intent is simply to share what we’re observing.”

USAGOLD note: Hussman ends by saying, “Meanwhile, even if an investor sells at these extremes, the only thing that will change is who holds the bag.” Switching some of your assets to a bag of gold coins at this juncture, might not be a bad idea. Hussman’s latest is highly recommended – at the link.

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Wait the value of gasoline is plunging

New York Sun/Seth Lipsky/11-18-2021

Image of newspaper headline featuring 'Gold, dollar'“The thing to keep in mind, though, is that the value of gasoline has been falling. That is, the amount of gasoline that one can purchase for an ounce of gold has been rising — dramatically, if one looks at the long haul and in terms of the kind of money that the Federal Reserve can’t just print or conjure on a computer keypad. We checked and came up with startling results, beginning with the decade that ended in 1966.”

USAGOLD note: In Lipsky’s inverse way of thinking, it’s not the value of gasoline that is plunging but the value of the dollar. We would venture that in this era of the digital money printing press, it will be a long while until the value of gasoline skyrockets. In fact, the Seth Lipsky’s of the world would likely argue that it is unlikely to happen until the value of the dollar is once again linked to gold.  All of which, of course, is a back door endorsement of personal gold ownership.

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Notable Quotable

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“If we are lucky, the next Fed-caused downturn will cause only a resurgence of 1970s-style stagflation. The more likely scenario is the type of widespread economic chaos not seen in America since the Great Depression. The growth of cultural Marxism, the widespread entitlement mentality, and the willingness of partisans of various sides to use force against their political opponents suggests that this economic crisis will result in civil unrest that will be used to justify new crackdowns on individual liberty. Those who understand the causes of, and cures for, our current predicament have two responsibilities. First, prepare a plan to protect your family when the crisis occurs. Second, do all you can to spread the truth in hopes the liberty movement reaches critical mass so it can force Congress to make the changes necessary to avert disaster. Since the crisis will result in a rejection of the dollar’s world reserve currency status, individuals should consider alternatives such as gold and other precious metals.”

Dr. Ron Paul
Former Texas Congressman and candidate for president
Ron Paul Institute for Peace and Prosperity
Septermber 2018

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The King Canute theory of inflation

BloombergOpinion/Mervyn King/11-23-2021

engraving from mid-19th century of Canute ordering waves to recede

“This is the King Canute theory of inflation. A thousand years ago, according to legend, King Canute of England set his throne on the shore and commanded the incoming tide to halt. The tide paid no attention. It continued to rise and dashed over his feet and legs, driven by the laws of nature. A satisfactory theory of inflation cannot take the form, ‘Inflation will remain low just because we say it will.'”

USAGOLD note: Mervyn King formerly headed up the Bank of England. He says that the old Friemanite notion that inflation is simply “too much money chasing too few goods” is the correct one and that basing policy on expectations, which is what the Federal Reserve is now doing, does not work.

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Graphic to link the calendar of reports and events for the week ahead

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When in Rome. . .

photograph of Roman coin hoard

“The coins’ excellent condition indicated that the owner systematically stashed them away shortly after they were made, the archaeologists said. For some reason that person had buried them shortly after 294 and never retrieved them. Some of the coins, made mainly of bronze but with a 5% silver content were buried in small leather pouches. The archaeologists said it was impossible to determine the original value of the money due to rampant inflation at the time, but said they would have been worth at least a year or two of wages.” –  The Guardian (11-19-2015) on a find of 4000 Roman silver coins buried in a Swiss orchard

“Salvian tells us, and I don’t think he’s exaggerating, that one of the reasons why the Roman state collapsed in the 5th century was that the Roman people, the mass of the population, had but one wish after being captured by the barbarians: to never again fall under the rule of the Roman bureaucracy. In other words, the Roman state was the enemy; the barbarians were the liberators. And this undoubtedly was due to the inflation of the 3rd century.” – Joseph Peden, Inflation and the Fall of the Roman Empire

“Now one interesting thing with all this inflation should be a great comfort to us: historians of prices in the Roman Empire have come to the conclusion that despite all of this inflation — or perhaps we should say, because of all of this inflation — the price of gold, in terms of its purchasing power, remained stable from the first through the fourth century. In other words, gold remained, in terms of its purchasing power, a stable value whereas all this other coinage just became increasingly worthless.” – Joseph Peden, Inflation and the Fall of the Roman Empire

cartoon image of Dr Moneywise pointing to a chart of Roman silver coin values

Dr. MoneyWise says. . . .”In the wealth game, emphasize defense when you need to and offense when it makes sense.  At all times, though, no matter how tempting the prospects for speculative gain, remain fully and judiciously diversified.”

Chart image courtesy of Nicolas Perrault III [CC0], from Wikimedia Commons

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Favorite web pages

World Gold Production by Country

Top ten producers, in metric tonnes
2004 – 2020
Source: U.S. Geological Survey
photo of two gold miners' bars
In the seventeen years of this survey, China more than doubled its gold mine production and rose to the top slot, while South Africa cut its production in half and fell from first to tenth. The United States and Australia held steady in and around the two and three slots for much of the period until 2014 when the United States slipped to the number four slot. Russia climbed from number seven in 2006 to number three in 2014 and has held that ranking ever since. 
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wishing all a Happy Thanksgiviing 2021 pumpkins in a row

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Gold to see a recovery to last week’s high at $1877 as $1750 holds – Commerzbank

FXStreet/Staff/11-24-2021

OPINION

“Gold has sold off aggressively following a key day reversal. The sell-off is viewed as corrective and the market should remain well supported on dips back to the $1,750 region. Assuming that the $1,750 area holds the downside, we should see a recovery to last week’s high at $1,877. Above here lies $1,917/22, the May 2021 peak and 61.8% retracement and the 2011 high. This will act as the break-up point to the $1,965 November 2020 peak and the 78.6% retracement at $1,989. This is the last defence for the August 2020 peak at $2,072.”

USAGOLD note: Commerzbank technicians undeterred……Make a gutsy call.

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This is Jerome Powell’s shot at a Volcker moment – in reverse

Bloomberg Businessweek/Joe Wiesenthal/11-18-2021

photograph of a row of doves

“But what would pulling a Volcker actually look like in 2021? Perhaps it would be the exact opposite of what people imagine. Because despite elevated inflation, the Fed is nowhere close to maximum employment, which it’s mandated to promote alongside stable prices.”

USAGOLD note: In our view, the Biden administration would not have chosen to nominate Powell had he failed to deliver some assurances on this score when interviewed for the job. We should keep in mind, too, that the Board of Governors, once Biden is through with his appointments, will tilt decidedly to the dovish side of the monetary ledger.

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On inflation and wealth

Linked-in/Ray Dalio/11-11-2021

graphic showing cash as trash“Yesterday’s inflation report showed inflation raging so you are now seeing inflation erode your wealth. That is no surprise. At this time 1) the government is printing a lot more money, 2) people are getting a lot more money, and 3) that is producing a lot more buying that is producing a lot more inflation. Some people make the mistake of thinking that they are getting richer because they are seeing their assets go up in price without seeing how their buying power is being eroded. The ones most hurt are those who have their money in cash.”

USAGOLD note: The latest from Ray Dalio …… He has not deviated much from the “cash is trash” theme that garnered considerable attention last year. Now with inflation digging in, he is adamant as ever. One of the investments Dalio recommends in lieu of cash is gold, and he has been advocating it for many years.

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