“The six-month, or 26-week, momentum signal could be struck anytime now. All gold needs to do is touch $1,270, which is a few dollars away, or stay at current levels while that six-month high keeps on dropping. Either way, the bears will have their shorts pulled down.”
USAGOLD note: Morris goes through a well-conceived checklist – his first advisory in over a year – why we might be on the verge of a new bull market in gold. “$1776 anyone?” he asks.
Repost from 12/20/2018
“Ballooning Treasury auctions have placed a heavy burden on the financial system, forcing the Fed’s hand.”
USAGOLD note: As of a few days ago, the addition to the national debt for fiscal year 2019 went over the $1 trillion mark. “[T]he amount of U.S. Treasury securities outstanding,” says Chapatta, “has roughly tripled since the financial crisis.” That’s a large load to carry and its weight is making itself known in the overnight repo market where banks scramble for liquidity.
Repost from 9-27-2019
Stocks on track for worst start to a quarter since 2008 financial crisis as recession fears accelerate
“Already considered an unusually volatile period for the stock market, which has logged historically ugly October declines in 1929, 1987 and 2008, worries about geopolitics and growing signs of domestic and international economic weakness have fueled bearish bets and sent stock-market optimists, at least momentarily, scurrying for cover in assets perceived as safe.”
USAGOLD note: For the stock market, October can be the cruellest month. The Dow Jones Industrial Average dropped over 900 points in the first two days of the month.
Repost from 10-2-2019
Seeking Alpha/Ivan Martchev
“The past year has been somewhat surreal in the gold market, as we have the rare occurrence of the U.S. dollar rising in somewhat slow fashion, while gold bullion has appreciated about $300 per ounce to trade near $1,500. Historically, a rising dollar and rising gold bullion haven’t gone together, but the distortions that have come with global QE policies are to blame for the breakdown in this inverse relationship.”
USAGOLD note: In the end, though, gold is the more perfect hedge because it is also a hedge against erosion in the value of the dollar.
Repost from 10-2-2019
“JPMorgan Chase & Co has become so big that some rival banks and analysts say changes to its $2.7 trillion balance sheet were a factor in a spike last month in the U.S. ‘repo’ market, which is crucial to many borrowers.”
USAGOLD note: Much conjecture has surrounded the Fed repo market cash injections as to who or what might have been the cause of the sudden drought. None of that speculation mentioned J.P. Morgan. Now we learn, through this Reuters article, that a shift in strategy at JPM was responsible “for about a third of the drop in all banking reserves at the Fed during the period.” That said, JPM’s involvement might still be just another piece in a multi-dimensional puzzle yet to be completed.
Repost from 10-2-2019
(USAGOLD – 10/8/2019) – Gold is trading higher this morning after once again finding support below the $1500 mark. It is trading at $1506 – up $14 on the day, a gain roughly matching yesterday’s decline. Silver is up 33¢ at $17.75. In this month’s edition of News & Views, we identify five contributing factors that make this gold market different from all others. Those five factors go a long way in describing the forces at work in the gold market including consistent support in recent weeks on price dips. The newsletter’s release is scheduled for today. If you would like to receive publication notice for future issues by email, please subscribe below. We offer News & Views as a service to current and would-be clientele. Your interest is welcome!
Quote of the Day
“The ‘threat’ is best seen through the emergence of exchange-traded funds (ETFs), which allow investors to get a proxy physical gold exposure through an investment via their stockbroker. In truth, these products are, in many cases, more expensive than trading and storing physical gold (especially for larger investors with a long-term investment time frame), have less trading flexibility, and are less secure than owning real physical gold.” – Jordan Eliseo, ABC Bullion/Australia
Chart of the Day
Chart note: The spike you see at the farthest right of the long-term chart of gold has elevated optimism in some quarters that the long side-ways, see-saw market has come to an end. Since the late May bottom at $1277, gold is up over 15.25%.
“COMEX net longs fell sharply last week from 1,113t to 938t. Notably the money manager net longs fell nearly 20% from 908 to 731, a sign of a pullback in what was very optimistic positioning by money managers. This could be a function of profit taking or concerns with the most recent price sell-off.”
Chart courtesy of the World Gold Council-Gold Hub
Bloomberg/Ruth Carson and Adam Haigh
“The debate on how low bond yields can go is hotting up as the relentless rally in global fixed-income markets shows no signs of slowing amid increased concern about an economic downturn. That’s sparked a conundrum for macro funds hunting for yield and returns. Enter gold, which has risen 18% this year — well ahead of fellow havens such as the yen, Swiss franc and Treasuries.”
USAGOLD note: Gold – The once and future king of the safe havens. . . . . .
Repost from 8-15-2019
Image courtesy of VisualCapitalist
“Since no one really wants it, having the reserve currency is best viewed as a ‘curse’ not an ‘exorbitant privilege’.”
USAGOLD note: Mish walks readers through the perils and perhaps inescapable gravity of being the world’s reserve currency. “A currency crisis awaits,” he says, “I suggest holding at least some gold.”
Repost from 10-1-2019
The threat to limit capital flows to China and pending impeachment conflict: Next logical steps in a classic dangerous journey?
“To implement MP3-type monetary policy will require very large fiscal spending and large budget deficits that will have to be funded by a) substantially increased taxes on companies and the rich, and b) the printing of money by central banks and the buying of the debts that are coming from the deficits. Typically, this has led to capital flight as investors seek to escape these things, which has quite often led to capital controls that are intended to keep capital in the country and the currency so that it can more easily be taxed and/or devalued.”
USAGOLD note: Ray Dalio, who heads up the world’s largest hedge fund, returns to his earlier thesis that we live in times comparable to the period just before World War II. As those who frequent this site already know, he is an advocate of gold ownership.
Repost from 10-2-2019
The U.S. Treasury is about to flood the market with debt to fund a $1 trillion deficit. Here’s why that is a worry
“The coming deluge of Treasury issuance has stoked worries on Wall Street about whether there is enough liquidity in the system in the short term to meet the supply without pushing up short-term borrowing costs and inverting the yield curve even further.”
USAGOLD note: Significant annual addtions to the national debt have been a continuous feature of the American political and economic landscape since 1971. The United States departed the gold standard that year and laid the groundwork for deficit spending as means to financing federal expenditures. At the time President Richard Nixon declared: “We are all Keynsians now.” We are Keynsians still and perhaps in a way that not even John Maynard Keynes would have approved.
Repost from 8-16-2019
Image: A youthful John Maynard Keynes
“Now it says the price for the yellow metal could reach as high as $1,730 a troy ounce next year, up $50 from an August forecast, a recent UBS report states. The note last month pointed to the possibility of $1,680 over the same timeframe.”
USAGOLD note: As Simon Constable points out at the link above, at $1730 it would be a pretty solid return over current prices – especially after yesterday’s correction to the $1470 level.
Repost from 10-4-2019
Two legendary central bankers embrace gold
All is not well with the economy. Growth rates continue to remain stubbornly low in the United States and at recessionary levels in much of the rest of the world. A recent Gallup Poll found that “Americans’ outlook for the economy has soured in the past two months, with 48% now saying economic conditions are worsening – up from 45% in December and 36% in November.”
In The End of Alchemy (2017), Mervyn King, the former governor of the Bank of England, writes of central banks’ frustration in dealing with the persistently stagnant global economy. “Central banks,” he says, “have thrown everything at their economies, and yet the results have been disappointing, Whatever can be said about the world recovery since the crisis, it has been neither strong, nor sustainable, nor balanced. . . [W]ithout reform of the financial system, another crisis is certain – sooner rather than later.”
“Our problem,” Alan Greenspan once said, “is not recession which is a short-term economic problem. I think you have a very profound long-term problem of economic growth at the time when the Western world, there is a very large migration from being a worker into being a recipient of social benefits as it is called. And this is legally mandated in all of our countries.” The western world, he concludes, is headed to “a state of disaster.”
It is interesting to note that both Greenspan and King, two of the most respected central bankers in modern times, have embraced gold since leaving their respective posts. The former Fed chairman has consistently suggested that gold is “a good place to put money these days given the policies of governments.” The former governor of the Bank of England says that he is “very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. . .[W]hen unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.”
“For their part, strategists at some of Wall Street’s biggest banks — including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. — warn against expecting any truce in the upcoming round of U.S.-China trade talks.”
USAGOLD note: Three of Wall Street’s largest banks offer a warning on the trade talk optimism bracing financial markets at present. The insights offered are worth the visit to the link above.
Repost from 10-1-2019
(USAGOLD – 10/7/2019) – Gold drifted lower and back below the $1500 level to start the week after a featureless overnight session. It is trading at $1499 – down $6 on the day. Silver is down 4¢ at $17.52. Though the downside that some technicals analysts expected has not materialized, the metals seem to be in a state of suspended animation in and around the $1500 mark for gold and the $17.50 level for silver. Though much seems to be in the air politically and economically, none of it has been enough to move the precious metals convincingly in one direction or the other.
Commodities analyst Andy Hecht sees the current price quandary as a buying opportunity. “Gold is a currency, and while central banks can print legal tender to their heart’s content, they cannot create more gold,” he writes in his column at Investing.com. “Central banks continue to hold gold, and that is the reason why the yellow metal should continue to appreciate and take silver along for the bullish ride,” he maintains. “I view the recent correction in the gold and silver markets as another buying opportunity. Both markets can be volatile and could fall to even lower levels before turning higher again. However, any further selling would only make the value proposition for both metals more attractive.”
Quote of the Day
“Bull markets can be classified as either secular (long term) or cyclical (bull phases within an overall bear market). Before its $1,400 per ounce breakout in June, gold appeared to be tracking, on a technical basis, similar to its 36-month cyclical bull market from 1993 to 1996. However, its current $1,500 price level hints at a potentially longer, sustained rally—perhaps more similar to the secular gold bull market of 2001 to 2008.” – Joe Foster, Van Eck Securities
Chart of the Day
Chart note: For those exploring the virtues of gold ownership, today’s Chart of the Day is illustrative. Gold has provided a positive return in 15 of the last 19 years. It is up 14.8% thus far in 2019 (through September 30).
“Cresset Capital’s Jack Ablin believes investors with an appetite for big risks could get burned.”
USAGOLD note: A 15% drop would equate to 4000 points. Seems a bit on the light side. . . . .
“A group of former senior European central bankers has published a memo attacking the loose monetary policy of the European Central Bank, which they argued was “based on the wrong diagnosis” and risks eroding its independence.
USAGOLD note: By and large, central bankers from southern EU countries like what Draghi and the ECB have done, the north does not.
“Chinese officials suggest a broad pact is off the table. U.S. president still suggests any deal has to be ‘100% for us.'”
USAGOLD note: Negotiations are scheduled to begin this week. The president of the United States faces impeachment. China’s premier faces the chaos of Hong Kong. Neither side appears to be in a conciliatory mood.
“The ancient Egyptians believed their gods had shimmering skin made from gold. While the Aztec word for gold, teocuitlatl, literally translates as ‘excrement of the gods’. From ancient Rome to the California gold rush, this dense shimmering metal has been immutably connected with divine quality and the sense of opportunity. The reason for this is simple: gold is the most special element of them all.”
USAGOLD note: A cleverly written piece on the origins of gold and how the ancients might have had it right after all. . . . . .
Repost from 6-13-2019
“‘ knew they would cave in.’ That was the cutting remark from an old Wall Street hand to one of my first forecasts that none of the economic indicators justified an imminent interest rate cut by the U.S. Federal Reserve.”
USAGOLD note: Ivanovitch, formerly an economist with the OECD and the New York Fed, takes a seat alongside a number of analysts (most associated with the central banks) who think that federal governments need to deter disinflationary, even deflationary, forces in the global economy through government spending programs. The Fed and ECB, he argues, cannot do it alone. A turbo-charged ‘fiscal solution’ is so far from reality in the European Union and the United States that few consider it part of the on-the-ground analysis.
Repost from 9-30-2019
“Billionaire investor and Oaktree Capital Management Co-Chairman Howard Marks is worried to hear investors say ‘this time it’s different’ or openly wonder if the historic bull market and economic success ‘can only get better forever.’ In a 12-page letter sent to Oaktree clients on Wednesday, Marks questioned nine financial theories he’s heard in recent meetings, including the notion that central bank policy can lead to evergreen market success and that economic recessions can be consistently delayed.”
USAGOLD note: When it comes to markets, linear thinking is rarely rewarded over the longer run. As Richard Russell, the famed newsletter writer, often said: “Trees do not grow to the sky.”
Repost from 6-13-2019
“Good as gold? When it comes to havens, the U.S. dollar might be better. That’s what some analysts said as the dollar rallied versus major rivals over the past week, appearing to benefit from a desire for safe assets . . .”
USAGOLD note: Are we entering a time when the dollar and gold are both seen internationally as safe-havens? Since this past May, the two have risen together as investors seek shelter from depreciating local currencies and geopolitical uncertainty.
Chart courtesy of the St. Louis Federal Reserve [FRED]
Data source: Board of Governors, IBA
Repost from 9-30-2019
Britain’s Gold Sales ‘a Reckless Act’
(Sir Peter Tapsell’s speech before the House of Commons, June 16, 1999, on the partial sale of United Kingdom’s gold reserves)
We do not update our Gold Classics Library often, but when we do we try to choose items that have a timeless quality. This latest selection certainly meets that standard. It comes to us unexpectedly as a by-product of research for the recently published article, The Power of Gold Diversification, and with the kind permission of the United Kingdom Parliamentary Archives.
Many associate Britain’s sale of nearly 60% of its gold reserves in 1999 with the beginnings of gold’s secular bull market. The government’s rationale for the sale, as explained by then Economic Secretary to the Treasury Patricia Hewitt, was to “achieve a better balance” in its reserves by going to foreign currencies. Sir Peter Tapsell took the opposite tack. “The Chancellor [of the Exchequer] may think that he has discovered a new Labour version of the alchemist’s stone,” he argued, “but his dollars, yen and euros will not always glitter in a storm and they will never be mistaken for gold.”
History’s indisputable verdict is that Tapsell was correct and the British government wrong. The ensuing nearly two decades featured a global financial crisis, low-to-zero-percent interest rates, scrambling central banks, and the consistent depreciation of global currencies against gold. Currencies did not glitter in the storm, and they could not have been mistaken for gold which rose relentlessly from $287 per ounce at the time of his speech to the current price of over $1500 (at one point reaching almost $1900 per ounce in 2011). Though his speech before the House of Commons failed to stop the sales, it goes down as one of the most eloquent appeals ever made on the merits of gold ownership for nation states and individuals alike.
“According to his [AG Bisset’s Ulf Lindahl] calculations, which track currency movements from the early 1970s onwards, we began a new cycle in January 2017, and despite the dollar’s strength since April 2018, that cycle is still intact. If the thesis holds, the dollar is poised to fall against the euro and yen over the next few years, and by as much as 50 to 60 per cent.”
USAGOLD note: Another interesting opinion piece from FT’s Rana Foorahar . . . Needless to say, a 50% to 60% decline in the dollar would have major repercussions in all financial markets including gold and silver. “Some savvy investors,” she writes, “already see the writing on the wall and have moved into gold. I would expect other commodities to rise, too.”
(USAGOLD – 10/4/2019) – Gold pushed lower this morning in response to a favorable jobs report showing unemployment at a 50-year low. It is trading at $1501 – down $7 on the day. Silver is trading at $17.44 – down 20¢ on the day.
The World Gold Council is out with a report this morning saying that gold demand might ramp up in China for a totally unexpected reason – renewed inflation driven by the rising price of pork. “Gold is well known for its inflation hedging properties,” writes the Council’s Ray Jia. “During periods of higher inflation – higher than 3% – the gold price has risen in both the US and the UK, by an average of 15% and 12% respectively. And it’s the same story in China. During the past 17 years, the annual nominal return of Au9999 – the physical gold contract traded on the Shanghai Gold Exchange since 2002 – averaged 17% during years when inflation rose above 3%.”
Inflation is one problem the U.S. Federal Reserve would like to have. With unemployment running at 50-year lows, one would think there would some signs of it in the U.S. economy. . .but to the chagrin of the central bank, there is not even a whiff.
Quote of the Day
“Rather than let the market adjust itself, government typically starts the process all over again with a new and larger ‘stimulus package.’ The more often this happens, the more ingrained become the distortions in the way people consume and invest, and the nastier the eventual depression. This is why I predict the Greater Depression will be … well … greater. This is going to be one for the record books. Much different, much longer lasting, and much worse than the unpleasantness of 1929-1946.” – Doug Casey, International Man
Chart of the Day
Chart note: We faithfully reproduced this chart developed by UK’s Colin Seymour in 2001. Posted originally at the USAGOLD website, Seymour’s chart on the 1929 stock market crash and the annotations that went with it caused quite a stir on the internet at the turn of the century and the early stages of gold’s secular bull market. It is still widely referenced and linked on the world wide web. We recently reposted the study as part of a site-wide upgrade to current internet presentation standards. It is as relevant to investors today as it was in 2001. Here is the link to the original article titled Pompous Prognosticators.
“All is not lost, according to Ben Bernanke, who led the Fed through the aftermath of the Great Recession. During a panel discussion hosted by the Brookings Institution, he estimated the Fed’s so-called unconventional policies, if used wisely, are the equivalent of 3 percentage point of interest rate cuts.”
USAGOLD note: Wall Street can now sleep at night assuming it can block out the constant hum of the printing press running in the background. For details, please visit the link.
Repost from 10-3-2019
“Legendary investor Warren Buffett’s much-quoted dismissal of the investment merits of gold is simple: the metal is ‘neither of much use nor procreative.’ But the Oracle of Omaha has got this wrong. Gold is constantly offering useful insights, if you look closely enough.”
USAGOLD note: When Buffett first made the comments cited in the Financial Times piece linked above, we published the chart shown below. It shows the investment performances of gold and the stock market since 1971 – the time frame most applicable to investors since it encompasses the whole of the modern fiat money era. For the record, gold has appreciated over 3,570% since January 1971, while stocks have appreciated just over 3,100%.
USAGOLD note: Fascinating to watch. It takes about four minutes.