“Purchasing gold is said to be one of the key instruments for the Asian country’s central bank to increase its official foreign exchange reserves.”
USAGOLD note: Mongolia has been adding to its gold reserves steadily over the past few years.
Chart courtesy of TradingEconomics.com
“Investors clamoured on Monday to secure financing over the end of the year, snapping up $25bn of short-term loans offered by the US Federal Reserve in an attempt to insulate themselves from a potential spike in borrowing costs.”
USAGOLD note: While attention is focused on trade clashes, there is another problem lurking in the background – cash liquidity in the repo market.
“Gold is all that nationalist leaders in Europe’s east can talk about these days.”
USAGOLD note: Though East European countries are featured in this update, Germany (2013), Austria (2015) and the Netherlands (2014) have also repatriated gold from London and New York. So it isn’t just Eastern European nationalists interested in keeping their national gold reserves within their own borders.
“Have you ever wondered why gold – although it is generally negatively correlated with the greenback and real rates – sometimes moves in tandem with the dollar and yields? Or, why some rounds of quantitative easing were positive, while others were harmful for the gold price? The answer lies in narratives.”
USAGOLD note: An insightful ‘narrative’ on the ‘gold narrative’ from Mr. Sieron. . . . . .
“But careful what you wish for. What looks like a step forward may actually be a step back. The prospect of a so-called phase one deal, even if it sticks through next year’s tumultuous presidential election campaign, may make a broader phase two agreement even harder.”
USAGOLD note: Smart explores the longer-term ramifications of a phase one trade deal saying it might make a broader agreement difficult to achieve in 2020.
Not a day goes by, that one gold ETF or another is reporting on the gains to its stockpile. Most of those gains come from financial institutions and hedge funds boosting their portfolio positions. We do not in any way denigrate the importance of this Wall Street move to gold. In fact, their presence in the gold market has been one of the market mainstays over the past few years and a welcome addition to the ranks of gold owners.
At the same time, for the Main Street safe-haven investor ownership through an ETF might not be the best approach. Gold ETFs, says Simon Black of the SovereignMan website, are “purely a financial product that defeats the entire purpose of owning gold to begin with. Why turn one of the best, longest-standing physical assets in the history of the world into a paper asset? With this type of debt instrument, you don’t actually own the gold yourself. You become a creditor with nothing more than a claim on someone else’s gold.” At USAGOLD, we have an answer for that . . .
The Precious Metals Safe Storage Advantage
It only takes a few minutes to complete a Precious Metals Safe Storage account opening form, but it could mean all the difference for the investor seeking a superior alternative to gold and silver ETFs. We use the word “superior” because depository storage accounts come with an option not readily available in most ETF accounts – You can take delivery of the metal in your account, or any portion of it, whenever you wish.
At the same time, given the exclusive preferred referral storage rate you receive by opening your storage account through USAGOLD, the annual cost to maintain your holdings is comparable (and often lower) to what most ETF vendors charge in annual fees. All the while, your metal is stored safely and fully insured at one of America’s oldest, largest and respected independent depositories – a firm with which we personally have done business for decades. To get started, we invite you to go to the link immediately below and fill out the application.
Account Form – Precious Metals Storage Account
“In today’s market the majority of investors are simply chasing performance. However, why would you NOT expect this to be the case when financial advisers, the mainstream media, and WallStreet continually press the idea that investors “must beat” some random benchmark index from one year to the next. But, is this “speculation” or “investing?”
USAGOLD note: Roberts draws on the expertise of ten legendary money managers in this informative article.
Repost from 11-27-2019
“On the face of things, the USA with 8,133.6 tonnes of gold in its reserves possesses around four times as much gold as China in its reserves as reported to the IMF, but is that really the case? Does China, in reality, hold rather more gold than it reports? We think it almost certainly does, but how much more is very much open to speculation. Indeed different analysts have vastly differing theories ranging from as much as 30,000 tonnes down to the just under 2,000 tonnes it reports.”
USAGOLD note: Some important detail on what might be happening to all that gold China imports annually. . . .
Repost from 11-26-2019
“Major gold companies are running out of reserves and every year it costs more to mine. That is causing an “existential crisis” for the gold mining industry, as executives at gold producers like Barrick, Newmont Goldcorp, Randgold, AngloGold Ashanti, Newcrest and Kinross, puzzle over how to replace their depleted reserves, where new gold will come from, and how they will deal with the rising costs of extraction.”
USAGOLD note: In-ground reserves are down 26% from their peak in 2012 due to “a dearth of new big deposits” being discovered. . . .
Repost from 10-26-2019
Gold in the age of high-speed electronic trading
“The best thing you can do is know how to have a balanced portfolio.”
Ray Dalio, Bridgewater Associates
In an article headlined Robots conquered stock markets/Now they’re coming for bonds and currencies, Bloomberg finance reporter Lananh Nguyen tells us: “In the most liquid equity markets, more than 90 percent of trades are executed electronically, according to estimates from Greenwich Associates. That compares with 79 percent in global foreign exchange, 44 percent in U.S. Treasuries and 26 percent in U.S. corporate bonds, with the most room for growth in the latter two markets, according to [Kevin] McPartland at Greenwich.” [Link] Just this year, Morgan Stanley and Goldman Sachs requested counterparties forgive rogue, machine-driven trades that caused a $41 billion flash crash in a matter of seconds. Though concentrated in a single stock, such anomalous events serve as a cautionary tale on how a full-out, machine-driven panic might evolve on a larger scale.
Because gold does not rely on the performance of another party, it is detached from the matrix of interlocking counter-party risk and occupies a unique place on the financial balance sheet as an asset of last resort and the final arbiter of value. That is why nation-states and central banks hold large amounts of it on their own balance sheets and why funds and institutions are more and more moving to it as an offset against other trading strategies. Investors have always viewed gold as a reliable hedge against inflation and deflation. In the years to come, they might very well come to know it as an effective hedge against computer-generated financial mayhem as well.
“Goldman maintained its bullish target of $1,600 per ounce for gold, reasoning that factors including heightened political uncertainty and an only modest acceleration in growth supported investment demand.”
USAGOLD note: This article also discusses Goldman’s outlook for the commodity index, oil and industrial metals – all bullish.
Repost from 11-26-2019
“Gold’s ongoing consolidation between the 100- and 50-day moving averages is healthy, as it will ease some of the persistent concerns on positioning and create room for further gains, according to UBS analysts.”
USAGOLD note: UBS is on the $1600 gold bandwagon. In fact, the Swiss banking concern thinks it could happen over the next three months.
Repost from 11-26-2019
(USAGOLD – 12/3/2019) – Gold pushed higher in overnight trading as the Trump administration threatened and/or escalated trade clashes on several fronts. The yellow metal is up $12 on the day at $1475. Silver is up 10¢ at $17.03. Most notably, the president said he “would be willing to wait for another year before striking a trade deal with China,” according to a Bloomberg report this morning. Adding to financial markets’ angst over trade, the Trump administration also threatened France with sanctions and imposed new tariffs on steel and aluminum imports from Brazil and Argentina.
Today’s price advance comes in the face of a generally bearish bias among tech analysts for the near term. Over the longer haul, though, Agnico Eagle’s CEO Sean Boyd has a more bullish scenario in mind. “We’re still in that bull market that started in 2015. This is just the initial phase,” he recently told Kitco News. “We think in this cycle gold will hit a new high in U.S. dollars. Ultimately, we’ll get to $2,000, may take two or three years.”
Chart of the Day
Chart note: Please note that two of the top five gold producing countries – China (#1) and Russia (#3) keep most of their production at home as additions to their national reserves.
“‘The deposits that are being found now … are found in parts of the world which lack infrastructure, are in parts of the world which countries may not want you there,’ [Agnico Eagles’ CEO Sean] Boyd said. ‘That’s why it’s also getting more challenging to find deposits.’”
USAGOLD note: Boyd is not the first CEO of a gold mining company to complain about the difficulty of getting gold from the discovery stage to the marketplace. Gold mine production is up over 25% since 2010, but up only 3% over the last three years (through 2018). When you superimpose that picture over one of increased physical demand driven by central banks, the combination bodes well for private holders of the physical metal over the longer run.
“While gold may continue to languish for a few weeks, the intermediate-term (3-6 month) prospects are still favorable for higher prices down the road. There are simply too many geopolitical uncertainties right now that will prevent investors – retail and institutional alike – from completely liquidating their safe-haven holdings in the metal. Gold’s chief characteristic is as a portfolio anchor against economic or financial market turbulence. A quick perusal of the latest news headlines will easily prove that there’s still plenty of uncertainty around to float gold’s intermediate-term rising trend.”
USAGOLD note: The latest from Clif Droke . . . . . He goes on to say that the yellow metal is on track this year for its strongest annual gain in almost a decade.
Image courtesy of Visual Capitalist
USAGOLD note: It is good to see Jan Nieuwenhuijs researching and writing again after a long absence. We have always appreciated his thorough approach to gold market analysis and reproduced several of his articles in our newsletter and at the USAGOLD website. In this article, he explores the renaissance in central bank thinking with respect to gold.
Image courtesy of BullionStar
“What’s really interesting is if you look at the year-to-date returns on currencies and precious metals, the top four vis-à-vis the US dollar are palladium, gold, silver and platinum. Non-yielding physical assets are outperforming the paper fiat currencies, which are essentially IOUs.”
USAGOLD note: Indosuez Wealth Management’s Davis Hall offers some interesting commentary on where the global economy could be headed and why the firm has been “very, very positive on gold.”
Repost from 11-24-2019
– One for the history buffs –
730 years of a strong British pound ends in 1931
with gold standard exit
The St. Louis Federal Reserve recently released this interesting chart on consumer prices from 1209 to present. We added the price of gold to the chart to show the direct relationship between declining purchasing power in the British pound and the sterling price of gold after 1931, the year Britain departed the gold standard. Prior to 1931, there was an occasional minor bump higher in the price of gold, but for the most part, it followed along the same flat line as consumer prices. It was only after Britain separated the pound from gold in 1931 that the price began to move radically higher in terms of the currency. It gained significant momentum after 1971 when the Bretton Woods agreement was abolished. Currencies and gold were then allowed to move freely in international markets. Though interesting from a historical perspective, the real lesson in this chart is that when a nation-state goes from gold-backed to fiat money, gold coins and bullion become a logical and worthwhile alternative for citizen-investors – even after 730 years of relative price stability.
Sources: Bank of England, ICE Benchmark Administration Limited, St. Louis Federal Reserve [FRED]
“Initially, ultra-low market interest rates can be a boost to economic activity, encouraging consumption and investment spending. However, over time, an artificially lowered market interest rate causes over-consumption and malinvestment . . .”
USAGOLD note: Degussa’s Dr. Polleit delves into the distortions in asset values created by artificially negative rates and why it makes sense “to take some risk off the table by adding portfolio insurance in the form of gold.” His concise analysis and supporting charts are worth a visit. . . .
Repost from 11-24-2019