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Posted in ClientInsights, Today's top gold news and opinion | Tagged |

Will Yellen and Powell launch MMT in the United States?

BloombergOpinion/Brian Chappatta

graphic image of greenback-like artwork with the word helicopter featured“In other words, with Powell at the helm of the Fed, Yellen running the Treasury and now Democrats controlling the federal government’s purse strings, we might finally see something closely resembling MMT live and in action. I’m hardly the only one who thinks this is a possibility — Blackstone Group Inc.’s Byron Wien released his much-anticipated 10 surprises of 2021 list last week, and prediction No. 6 was that the Fed and Treasury will ‘openly embrace’ MMT.”

USAGOLD note:  In a certain sense, the Fed launched MMT lite to combat the pandemic-induced economic crisis of 2020.  Now, the way appears clear for an even stronger response. Though Chappatta applauds the possibility, safe haven investors will take note. As Merryn Somerset Webb points out “everyone knows they need a safe haven, but everyone also knows the traditional ones (government bonds) no longer offer that safe haven.”  (Please see this morning’s Daily Market Report.)  As Chappatta, a Bloomberg columnist, reminds us in this editorial Yellen herself warned back in 2019 that “this is the way you get hyperinflation.” Now, the thinks Yellen, Powell & Co. see “circumstances are much different.”


Repost from 1-11-2021

Posted in Today's top gold news and opinion |

Citibank says vaccine distribution could cause 20% dollar drop in 2021

Reuters/Staff

Image of newspaper headline featuring 'Gold, dollar'“’When viable, widely distributed vaccines hit the market, we believe that this will catalyze the next leg lower in the structural USD downtrend we expect,’ the U.S. bank said in a research note.”

USAGOLD note:  Accelerating a major drop in the value of the dollar is not one of the side-effects we would have anticipated the result of a vaccine. Citibank is one among a growing pool of analysts who think things could get dicey for the dollar in 2021.


Repost from 11-18-2020

Posted in Today's top gold news and opinion |

Cities and states are facing a $1 trillion budget mess. There will be more trouble ahead.

Barron’s-MarketWatch/Leslie P. Horton and Stephen Kleege

graphic image of street sign showing the corner of Wall Street and Main Street USAG“’It’s worse because the revenue shortfall is uncertain and horrific,’ says [Volcker Alliance’s Richard] Ravitch, now a director of the Volcker Alliance, a nonprofit group that advises on effective government. ‘There’s an enormous loss of revenue going on, and we don’t know how long it will last.’ … The question now: How many municipal bond issuers—cities, states, and others—won’t be able to repay investors?”

USAGOLD note:  Another silent crisis brewing at the corner of Wall Street and Main ……


Repost from 8-29-2020

Posted in Today's top gold news and opinion |

China’s rapid post-pandemic growth threatens dollar hegemony

Bloomberg/Susanne Barton

“The U.S.’s struggle to control the coronavirus and revive its economy contrasts sharply with the Asian nation, where growth has roared back. That divergence — which saw the greenback’s worst performance since 2017 as the yuan advanced — has bolstered China’s tilt at dollar hegemony, with investors flocking to onshore assets, trying out the renminbi for trade, and even giving it another look as a reserve currency.”

USAGOLD note:  The importance of recent trade agreements between China and Europe and the rest of Asia should not be underplayed as important factors in advancing China’s ambition to make the redback a worthy competitor to the greenback for reserve purposes.


Repost from 1-11-2021

Posted in Today's top gold news and opinion |

Short and Sweet

Yap stone money inflation

photo of yap stone money in various sizes
Monetarily speaking, everything progressed smoothly on the island of Yap where large stones weighing hundreds of pounds were transported around to serve as money. That is until something unforeseen happened to the value of the money. For centuries, the stones served in exchange because there wasn’t much of this type of rock on Yap itself.

The depreciation of the stone money began when an enterprising Western businessman realized he could produce stone money cheaply and in copious quantities on a neighboring island and transport it to Yap, where it could be used to procure goods in demand elsewhere. In other words, this oceanic cousin of John Law printed Yap stone money to buy his wares at what might be called a “favorable” discount. By this process, the yap stone money was debased until it became worthless. Little did the citizens of Yap know that they were deprived of their wealth, and their money destroyed, by the process of monetary inflation.


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Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Biden will face new depression

Daily Reckoning/James Ricards

photo of Biden speaking at podium“We cannot print our way out of a liquidity trap. We cannot spend our way out of a debt trap. Neither fiscal nor monetary policy will produce stimulus given current conditions of low velocity, high savings rates, high debt, high unemployment and new lockdowns. The Fed and the Congress may try to stimulate the economy, but they will fail.”

USAGOLD note: With that dire forecast in mind, Ricards says “the path for investors is clear,” and it includes a minimum 10% allocation to monetary metals and the companies that mine them.


Repost from 1-11-2021

Posted in Today's top gold news and opinion |

Gold rangebound despite upcoming Biden administration stimulus announcement

(USAGOLD –1/14/2021) – Gold remained range-bound despite reports circulating that the incoming Biden administration is preparing to unveil a $2 trillion stimulus program – one that is likely to sail through the new Democrat-controlled Congress. Some might think that odd since it was thoughts of stimulus dancing through Wall Street’s mind that sent both gold and stocks soaring at the end of last year. A quick look at the 10-year bond yield – now at 1.1% – explains why things might be different at this juncture. (Please see “The bubble either inflates or bursts…”(1/12/2021) As it stands, gold is down $5 at $1843. Silver is up 13¢ at $25.42. Stocks, now up marginally on the day, seem equally uninspired. It might take a while, as it did early last year, for reality to impose itself on the markets with full force, but Crescat Capital’s Kevin Smith and Tavi Costa see it as inevitable – albeit for different reasons.

“The problem,” they write in a recently released report, “is that money printing married with fiscal spending is crashing head-on with an emerging commodity supply problem that will likely stir up rising inflation which is bearish for both equities and fixed income. Get ready for a volatile 2021, the year of reckoning for twin asset bubbles as the world attempts to emerge from the Covid-19 pandemic. Global central banks added a total of $9.1 trillion of assets to their balance sheets in 2020. To compare, this year’s monetary stimulus was about three times their response to the Global Financial Crisis in 2008. We also saw at least $25 trillion of newly issued debt worldwide while the aggregate value of all negative yielding bonds reached close to $18 trillion in 2020. With this macro backdrop, it is staggering to see a monetary metal like silver still trading sub $30/oz.”

Chart of the Day

bar chart showing central bank net gold sales and purchases 2002-2020

 Click to enlarge

Chart note:  Central banks remained net buyers of gold in 2020, though the pace slowed somewhat. “There are good reasons,” says the World Gold Council in a report issued yesterday, “why central banks continue to favor gold as part of their foreign reserves which, combined with the low interest rate environment, continue to make gold attractive.” The Council expects 2021 to be “not much different” from the year just ended.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Notable Quotable

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“. . .[I]f you go down the line of currencies around the world, you don’t find many attractive opportunities. And that’s why I say if the world were to give up on dollars and give up on euros, they’d probably go back to the old standby, which is gold. And I don’t mean by gold, government run gold standard, like we had in the late 19th century. That’s politically impossible. Governments will never be willing to subordinate their policies to the constraints of a hard commodity ever again… So how could gold make a revival as a sort of international money? Well, we don’t actually need a government run gold standard anymore…since people have always had confidence in gold as a long-term store of value, there’s no reason why it couldn’t play that role.”

Benn Steil
Director of International Economics
Council on Foreign Relations

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Posted in Notable Quotable, Today's top gold news and opinion | Tagged , |

Favorite web pages

photgraph of scattered viking runes

Gold and silver price predictions from prominent players for 2021


This page catalogs price predictions on gold and silver prices from top pundits and prognosticators – a casting of the runes updated regularly throughout the year as new additions surface.


We encourage your bookmark.  We invite your return visits.

Posted in Announcements, Today's top gold news and opinion | Tagged |

‘Silver is the new oil’

FXStreet/Collin Plume

photo of three silver bars“A major component in the most sophisticated of these technologies producing renewable energy is silver. Silver is the best conductor of electricity. The beauty of silver is that technology has so far failed to replace it with an alternative. No known material matches silver for its energy output and conductivity per dollar. It is still relatively cheap too.”

USAGOLD note:  Plume will catch your attention with his assertion that “silver is the new oil.” Silver demand would get an assist from a Biden administration pushing oil alternative technologies.


Repost from 11-17-2020

Posted in Today's top gold news and opinion |

Five reasons why high yield investors need gold

Seeking Alpha/Samuel Smith-HighYieldInvestor

photo of Swiss Helvetia 20 franc pile of gold coins“At the same time as gold is facing demand tailwinds and supply headwinds, its primary safe-haven competitor – U.S. Dollars – are increasing in supply at a rapid rate with no end in sight thanks to massive and rapid multi-trillion dollar quantitative easing by the Fed and stimulus deficit spending from the U.S. government.

The Fed is taking this drastic action to try to prop up the economy by increasing liquidity and keeping interest rates low. It is also helping to fund the U.S. Government’s massive new debt issuance to fund the bailout packages Congress has been passing.

As a result, U.S. Treasuries are in a Fed-fueled bubble as interest rates are being kept low only by massive purchases by the Federal Reserve. In March – in order to smooth out chaotic trading patterns – the Fed was purchasing a whopping $75 billion of government bonds every day.”

USAGOLD note: This article caught my attention because gold’s biggest competitor among sophisticated investors is the bond market. The higher the net yield after inflation and taxes the stronger the competition. To have an advisor who specializes in high yield instruments proclaim a need for gold is something worthy of our attention. In the end, his argument boils down to gold as a safe-haven store of value. “[G]iven current macro forces and the prices offered in the marketplace,” he says, “gold is shining more brightly than ever, especially for high yield investors.”


Repost from 1-7-2021

Posted in Today's top gold news and opinion |

Blue sweep of Congress will add pressure to weak dollar, analysts say

Financial Times/Eva Szalay and Colby Smith/1-7-2021

“Victory for the Democratic party in this week’s Senate run-offs will add to the long-term pressure on the US dollar, which was already expected to continue its slide this year, analysts say.”

USAGOLD note:  Gold’s selloff last week was driven by a flight from safe havens – that departure, principally from the bond market, added high octane to the speculative stock market frenzy.  A number of analysts, though, believe that the most dangerous outcome will be a sharp decline in the dollar.  Over the past twelve months, the U.S. Dollar Index is down 12%.

U.S. Dollar Index
(one year)

line chart showing the U.S. Dollar Index over past 12 months

Courtesy of TradingView.com • • • Click to enlarge


Repost from 1-11-2021

Posted in Today's top gold news and opinion |

Foreign holdings of U.S. Treasuries fall again in September

NewsMaxFinance-Reuters

“Foreign investors held $7.071 trillion in U.S. Treasuries in September, down from $7.083 trillion the previous month, the Treasury Department report said. Japan and China’s Treasury holdings fell in September to $1.276 trillion and $1.061 trillion, respectively. Japan remains the largest holder of U.S. Treasuries.”

USAGOLD note:  That which cannot be sold abroad must be sold at home. That which cannot be sold at home must be monetized. Just because the level of debt being issued by the federal government has gone vertical, it does not mean that the rules of the game have changed.

Table from the U.S. Treasury Department showing major holders of Treasury securities by country September 2020

Source:  U.S. Department of the Treasury • • • Click to enlarge


Repost from 11-18-2020

Posted in Today's top gold news and opinion |

Biden’s one-two stimulus punch

Axios/Hans Nichols

photo of $100 bills rolling off the printing press at the Bureau of Engraving and Printing“Joe Biden is considering asking Congress to help suffering Americans in two steps: give them the balance of their coveted $2,000 coronavirus payments, followed by a $3 trillion tax and infrastructure package.”

USAGOLD note: Looks like the Biden administration is setting itself up to give the Federal Reserve exactly what it has asked for – a major, government big-spending program. The government will spend. The Fed will roll the printing presses.


Repost from 1-11-2021

Posted in Today's top gold news and opinion |

Short and Sweet

How much gold is enough?

graphic design of gold coins as part of pie to show idea of diversification

Investors often ask about the percentage commitment one should make to precious metals in a well-balanced investment portfolio. Analyst Michael Fitzsimmons offered an interesting take on that subject in a recent Seeking Alpha editorial, “Assuming a well-diversified portfolio (which does include cash for emergencies),” he says, “my belief is that middle-class investors (net worth under $1 million), should own at least 5-10% in gold. I also believe that as an American investor’s net worth climbs, the higher that percentage should be because, in my opinion, he or she simply has more to lose by a falling US$. For instance, an investor with a net worth of $2-5 million might have a 15-20% exposure to gold; $10 million, perhaps a 30-40% exposure.” USAGOLD recommends, as it has for many years, a diversification of between 10% and 30% depending on your view of the risks at large in the economy and financial markets.


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Posted in Short and Sweet, Today's top gold news and opinion | Tagged |

Gold is ready to shine, time to accumulate

photo of American gold eagle pile – long-term wealth

Edelweiss/Sahil Kapoor and Ankita Pathak/December 2020

“Gold has entered a multi-year bull run. Over the next few years our initial targets are placed at $2600 to $2800 per ounce. In H1 2021 we expect volatility, a US Dollar bounce back and an ideal opportunity to add to gold positions.”

USAGOLD note: This report out of India consists mostly of charts sprinkled with a few short comments. It serves as a quick overview for those looking for fundamental incentive to add to their holdings or make their first purchase. They see a buying opportunity in the first half of the year.


Repost from 1-8-2020

Posted in Today's top gold news and opinion |

Gold drifts higher in quiet mid-week trading

(USAGOLD –1/13/2021) – Gold drifted higher in quiet mid-week trading, with the $1850 looking like the support level – at least for now. It is up $3 at $1860. Silver is down 12¢ at $25.52. Generally speaking, the markets are in the quiet mode this morning, with nothing standing out save the latest chapter in the unfolding saga in Washington. Of late, the financial world has had its eye on rising longer-term bond yields. “[I]nvestors searching for an explanation [for gold’s recent plunge],” writes Gold Newsletter‘s Brien Lundin in a client advisory e-mailed yesterday, “need to remember one basic fact: The bond market drives everything.” Rising yields and weakness in the gold market have created something of a deja vu harkening back to last March’s “Great Liquidity Crisis.” (Please see “The bubble either inflates or bursts…”(1/12/2021) Gold sold off early in that crisis then surged as concern about the widespread systemic risks and the effect on the dollar became apparent. On the other hand, the dollar went into a steep retreat, as shown in this morning’s Chart of the Day. As you can see, the two took separate paths beginning early in 2020 – a process that accelerated as the year progressed.

Chart of the Day

overlay chart showing the US Dollar Index and gold divergence in 2020

Sources:  St. Louis Federal Reserve [FRED], Federal Reserve Board of Governors, ICE Benchmark Administration
Click to enlarge

 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Notable Quotable

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“We live in a technological golden age but in a monetary and fiscal dark age. While physicists discover the so-called God particle, governments print and borrow by the trillions. Science and technology may hurtle forward, but money and banking race backward.”

James Grant
Grant’s Interest Rate Observer

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Posted in Notable Quotable, Today's top gold news and opinion | Tagged |

Silver leads the way in annual commodity survey

grpahic image of a periodic table of commodity returns in 2020 silver leads way

Table courtesy of Visual Capitalist • • • Click to enlarge

USAGOLD note:  It will not come as a surprise to most or our readers that silver led the way on The Periodic Table of Commodity Returns for 2020.  Metals led the way and gold finished fourth in a tight race for the number spot taken by copper.

Posted in Today's top gold news and opinion |