What correlation?

Morning Porridge/Bill Blain/2-11-2021

cartoon of lemming going over a cliff, one has a gold parachute“Yes… Buttcoin is terribly clever. Yes… it might replace fiat currencies if fiat currencies collapse – but so could cowrie shells. I think if you end up stuck in a desert and arrive at the proverbial oasis, the proprietor will sell the last bottle of water to the traveler with the gold bar rather than the one brandishing a crypto-wallet.”

USAGOLD note:  That is about as candidly and bluntly as it can be said …… Blain once again cuts to the core in this lengthy piece on the current speculative excesses.

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Gold: The more things change, the more they remain the same

Gold-Eagle/John Ing

graphic image representing 'store of value'“As such, gold is a good thing to have. Like America’s polarised political system, investors either love gold or hate gold despite gaining 25 percent in 2020. It comes down to trust. The case for owning stocks is based on low interest rates and zero inflation. We believe the inevitable pickup in inflation will fuel interest in gold, a classic inflation hedge. Gold for thousands of years has provided monetary stability as a tool of wealth preservation and for most of its years, a worldwide reserve for money, as a hedge against currency debasement.”

USAGOLD note: Ing puts together a lengthy but well-reasoned look at the current financial markets mix along with plenty of historical context and comes away with the conclusion that ‘the dollar is not forever’ … Countries and investors, he says, are looking for alternatives.


Image courtesy of Visual Capitalist


Repost from 2-11-2021

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Is a new era of retail trading emerging after the GameStop saga?

Financial Times/Robin Wigglesworth

graphic illustration of a people chasing a bandwagon

“Three centuries ago, the Sephardi merchant Joseph de la Vega wrote the first-ever book on a mysterious, disruptive new invention that was taking off in Amsterdam at the time. His evocative description of the stock market still resonates.”

USAGOLD note:  Robin Wigglesworth takes a shot at explaining what’s going on with retail stock market investors and says we may be at “an inflection point for financial markets.” This article is worth the visit just for the quote from de la Vega in Confusion of Confusions written in 1688.


Repost from 2-11-2021

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Gold: To invest, or not to invest?

Arab News/Hala Tashkandi

gold coins against background of bar and line charts stacks“Gold can enhance any investment portfolio in four key ways. It generates long-term returns, acts as a diversifier and mitigates losses in times of market stress, provides liquidity with no credit risk and, finally, improves overall portfolio performance.”

USAGOLD note:  This article, written with the first-time investor in mind, lays out the basic rationale for gold ownership in clear-cut terms.


Repost from 12-30-2020

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Posted in Gold and Silver Price Predictions from Prominent Players, Today's top gold news and opinion |

World’s biggest gold mines

Statista/Niall McCarthy

map showing locations of the world's largest operating gold minesChart courtesy of Statista.com • • • Click to enlarge

“The levels of demand for gold are now prompting questions about whether reserves of the commodity are being exhausted and if humanity has reached “peak gold”. Some experts believe we have indeed reached that point, a view that is supported by annual gold production statistics. Mining has largely leveled off in recent years.”

USAGOLD note:  A little known fact – The highest production globally comes from mines located in Nevada, according to this Statista article.


Repost from 9-30-2020

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Tesla’s interests go beyond just bitcoin, according to BBC News

BBC News

photo portrait of Elon Musk holding spaceship prototype model“In a stock market filing, Tesla said it ‘updated its investment policy’ in January and now wanted to invest in ‘reserve assets’ such as digital currencies, gold bullion or gold exchange-traded funds.”

USAGOLD note:  Tesla’s bitcoin purchase got all the attention in the financial media so it is interesting to learn that it also publicly expressed an interest in owning gold bullion.


Repost from 2-10-2021

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Short and Sweet

Only real intrinsic money survives the test of time

photo of stacks of gold and silver coins

Here is a timeless observation from the now-deceased Richard Russell (Dow Theory Letter):

“Paper money is now being created wholesale throughout the world. Stated simply, all paper currency is now valued against each other. But more important, ultimately ALL paper is ultimately valued against the only true, intrinsic money – gold. In world history, no irredeemable paper currency has ever survived. Since all the world’s currency is now irredeemable (in gold), this means that in the end, the only form of money that will survive is real intrinsic money – gold. It’s not a question of whether gold will survive, it’s a question of when the world’s current paper money will deteriorate and finally die. I can tell you that irredeemable paper will not survive – but obviously I can’t tell you when it will die. The timing is the only uncertainty.”

The chart below from the World Gold Council speaks to Russell’s point. It shows the performance of various currencies – past and present – against gold over the long term.  When the end comes, as the chart illustrates, it can come abruptly and without warning. For those who stick to the proposition that gold is not really an inflation hedge, or that it is not really a safe-haven against currency debasement, the chart offers instruction. For those who already own gold as a safe-haven, it provides justification. For those who do not own gold, it serves as an incentive.  As the old saying goes:  All is well until it isn’t.

Chart showing gold outperforming all major currencies since 1900
Chart courtesy of the World Gold Council


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The coming monetary hurricane is a white swan

ZeroHedge/Reprint of Harley Bassman analysis

“When one hears hoof beats, look for horses not zebras. There is no reason to ruminate over exotic possibilities when the problems we face are quite clear. Once again, ignore the merits of the public policy response – what is important is that there is wide support from both the Democrats and Republicans to offer significant Fiscal relief supported by massive Monetary expansion. Will this be inflationary – Yes; but it is unclear how soon.”

USAGOLD note:  Why a white swan? Because, as the highly respected Mr. Bassman reveals, unlike a black swan which by definition is a surprise, anyone can see a white swan coming and that’s what he sees on the horizon brought on by debt and printing money. He recommends “real assets” and reminds his readers that stocks survived Germany’s Weimar monetary debacle inflating along with everything else. However, that is not, as the chart below shows, what happened during the 1970s inflation. The Dow Jones Industrial Average seesawed wildly going from just over 1000 in 1972 to roughly 600 in 1974 (as gold peaked), then back to 1000 in 1976 before dropping to 750 in 1978. It finished the decade right at 800 – the point being that for the stock market the 1970s were a lost decade. Stocks on average certainly did not keep up with inflation. It is anyone’s guess what will happen the next time around.

Dow Jones Industrial Average
(The 1970s)

line chart showing the stock market's performance between 1970 and 1980

Chart courtesy of MacroTrends.net • • • Click to enlarge


Repost from 2-10-2021

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Precious metals continue lower contrary to investor concerns. BoA says gold will stabilize and go higher despite ‘ongoing challenge’

(USAGOLD – 2/17/2021) – Gold dropped again this morning in a continuation of the downtrend that has been in place since early January and runs contrary to investor concerns registered daily in financial media – an ultraloose central bank monetary policy, the massive upcoming U.S. government stimulus program, and an overblown, manic stock market. It is down $16 in early trading at $1781. Silver is down 23¢ at $27.12. Bank of America updated its views on gold in a report released yesterday. Despite the metal’s current weakness, BoA still sees it pushing back over the $2000 mark in 2021, according to a review of the report posted at KitcoNews. “The gold market has struggled to price in reflation,” says the bank. “Rising breakevens have been mirrored by higher nominal rates. As a result, real rates, usually the key driver of the yellow metal, have been in a tight range since autumn,” However, it says, “many of the underlying issues, including excess liquidity in the system and debt sustainability, have not gone away…Hence, we believe gold prices will ultimately stabilize despite the ongoing challenge.” BoA expects gold prices to average $2063 in 2021 with a peak around $2100 coming in the second quarter.

Chart of the Day

Line chart showing the price of gold for one year through 2-3-2021

Chart courtesy of TradingView.com • • • Click to enlarge

Chart note:  “In a world of increasing uncertainty vs. the endurance of rising debt-to-GDP levels, quantitative easing and low interest rates,” writes Bloomberg’s Mike McGlone in his outlook on precious metals for 2021, “we believe gold is poised to maintain its 2020 upper-hand performance in 2021 vs. most commodities and assets.” He likes the fact that gold corrected in the second half of 2020 and sees that correction as the launchpad for further upside. Put another way, McGlone sees current pricing as a buying opportunity.

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Taking aim at the U.S. dollar, the world builds a multipolar trade-and-payments order

DoubleLineCapital/Bill Campbell/January2021

photo image of various currencies rolled and rubberbanded

“For the postwar period, the United States wielded the dollar’s central role in global trade and finance to its advantage, trying to even the playing field for trading relationships and as a sanctioning facility. The end of this powerful, unipolar advantage might be at hand. The pendulum is swinging in the direction of a new, multipolar world.”

USAGOLD note:  We referenced this well-reasoned report in Monday’s Daily Market Report and repost it here for those who may have missed it. Campbell foresees major changes ahead for the dollar as the world moves from a unipolar to multipolar system for national currency reserves.


Repost from 2-8-2021

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The big view from financial industry notables: What can go wrong?

Financial Times/Katie Martin, Laurence Fletcher and Eric Platt

Graphic image of Humpty Dumpty perched happily on a wall, antiqueInvestors’ views on the big risks to markets in 2021. Against a rosy consensus, dangers lurk in inflation, a virus setback, and the sheer weight of optimism.”

USAGOLD note: Much speculation contained herein contingent on unfolding events, most of it revolving around whether or not we will get inflation in 2021. Scott Minerd’s comments, in our view, go to the heart of the matter. “It [the free market system] has been replaced,” he says, “by cycles of increasingly radical monetary intervention, the socialization of credit risk, and a national policy of moral hazard. This is troubling……” Since we have never been in a situation quite like this one before, there is no operating manual to guide us. For his part, Humpty remains on his wall oblivious to any danger of a great fall.


Repost from 12-26-2020

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Ignore all the market predictions for 2021 except this one

Bloomberg/Jared Dillian

artist rendering of a man chasing a shooting star“As long as Wall Street has been in existence, it has been a tradition around this time of year for market participants to make predictions about what might happen to stock prices, interest rates, commodities and exchange rates in the following 12 months. These predictions garner a lot of attention, as they are made by very smart people with access to the best data and vast resources at their disposal. And yet, far more often than not these predictions end up being hilariously wrong.”

USAGOLD note:  It is because markets and events are so unpredictable that gold (old reliable) makes so much sense as a portfolio inclusion. Dillian, the editor of The Daily Dirtnap, is among our favorite market commentators these days and we link his writings often here. Highly readable, baseline insight at the link above ……


Repost from 1-4-2021

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Hedge fund billionaire Ray Dalio on the Reddit revolt

Axios

photo of Bridgewater Associates Ray DalioUSAGOLD note: In this podcast, Ray Dalio says there’s something important going on in America. The GameStop “revolution” was part of a game, but if it does not go beyond a game to the bigger issues – like governments going into massive debt and printing money to cover it – then it is missing the most important lessons of all. This is an important message from Dalio that hints at why Redditors might want to look beyond gaming the market to the bigger issues. Dalio, of course, is and has been an advocate for some time of gold ownership, and the founder of the biggest hedge in the world – Bridgewater Associates.


Repost from 2-9-2021

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Short and Sweet

headline for nine lessons from prosperous investors

We first introduced our readers to these nine lessons all the way back in 1999. They were passed along to us by the legendary commodity market analyst R.E. McMaster, formerly editor of The Reaper newsletter. The original source for the nine lessons was a highly regarded money manager who handled accounts for wealthy Greek and Mexican merchant families.

1. It is easier to make a fortune than keep it.

2. Intelligence is an inadequate substitute for wisdom. Wisdom fears, respects the unknown and fosters humility. Intelligence can lead to self-destructive arrogance and ultimate failure.

3. Risk must have premium, and we must understand it well.

4. There is no order. There is no formula. There is no equation that works all of the time. It works just long enough to fool just a few more of us just a little longer.

5. What we fail to remember is that a paper gain is just that. Paper. Worth nothing. Not until we say sell, and not until we get cash. Anything less is just that.

6. When the Bass Brothers in Texas write a check for real money, their money, to buy 25% of the Freeport McMoran Gold Series II, we take notice. When the Fidelity Magellan Fund buys a fifty-million in Dell computer, we yawn. So, should you. It is other people’s money.

7. Slick advertising budgets, powerful computers and few slabs of marble do not, by themselves, make a great financial institution.

8.  Never invest in anything you do not feel comfortable with or understand well.

9.  When a thousand people say a foolish thing, it is still a foolish thing.


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Goldman Sachs interviews Stanley Druckenmiller

YouTube/Tony Pasquariello-GoldmanSachs

graphic image showing cycles of the moon with question "Why diversify"
“The CARES Act added trillions in fiscal stimulus. How big was it? In three months in 2020, we increased the deficit more than the past five recessions combined (1973, 1975, 1982, the early 90s’, the dotcom bust and the GFC). The Fed in six weeks bought more treasuries than in 10 years under Bernanke/Yellen. Corporate borrowing, which almost always goes down in a recession, which had already increased from $6 trillion to $10 trillion going into the crisis due to the Fed’s free-money policies, went up $400 billion. Putting that in perspective, it went down by $500 billion during the GFC.”

USAGOLD note:  In this interview, Druckenmiller lays out a solid argument for gold ownership without ever mentioning it specifically as one of his holdings. However, he does acknowledge commodities in general as a large and important part of his strategy. He adds that he has a “very, very short dollar position.”  We would be surprised to learn that gold and silver were not part of his holdings.


GFC = Great Financial Crisis


Repost from 2-8-2021

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Precious metals drop sharply even as physical demand runs at its highest levels since the 2008-2009 financial crisis

(USAGOLD – 2/15/2021) – Precious metals dropped sharply in early trading as government bond yields jumped and the dollar firmed somewhat. Gold is down $18 at $1802. Silver is down 66¢ at $27.03. While prices have been in a downtrend to start the year, investor demand for coins and bullion is running at levels not seen since the 2008-2009 financial crisis. That strong demand is coming from investors concerned about the proposed $1.9 trillion stimulus package, the accompanying massive federal deficits, and Fed promises to allow its ultra-easy monetary policy to run at full tilt for the foreseeable future.

“Obviously, short term, there’s a lot of factors that are causing some push and pull, which has kept gold trading within a very tight range,” says former U.S. Mint Director Ed Moy in an interview at S&P Global Market Intelligence. “But from my perspective, I think the fundamentals for rising gold prices are very strong over the next year. I expect gold prices to eventually break out and head to new records sometime in the next year or two.….” That said, his former employer, as shown in our Chart of the Day, enjoyed a very big January for gold coin sales as investors took advantage of falling prices for much of the month, and February looks to be off to a very strong start.

Chart of the Day

bar chart showing U.S. Mint gold coins sales big jump January 2021

Chart note:  The U.S. Mint posted its best month in five years in January with gold coins sales of 282,000 ounces.

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The only way out of the death trap

Daily Reckoning/James Rickards/2-9-2021

photo of 1907 $20 St Gaudens High Relief Obverse and Reverse
“History shows that raising the dollar price of gold is the quickest way to cause general inflation. If the markets don’t do it, the government can. It works every time. Would the government and the Fed consider the gold trick I just described? They may have no choice ultimately.”

USAGOLD note: Rickards ends his proposal asserting that the way to kick-start a badly needed inflation is to raise the price of gold to $5000 by government mandate. He recommends putting “10% – but no more than 20% – of your investable assets into physical gold” because the only way out of the current debt problem is to inflate it away – one way or another.

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Silver Institute forecasts 11% increase in silver demand in 2021 – over one billion ounces

The Silver Institute/2-10-2021

image of silver bars with rising chart trend line in background

“Going forward, the outlook for the silver price in 2021 remains exceptionally encouraging, with the annual average price projected to rise by 46 percent to a seven-year high of $30.00. Given silver’s smaller market and the increased price volatility this can generate, we expect silver to comfortably outperform gold this year.”

USAGOLD note:  We referenced this Silver Insitute report in Friday’s DMR and repost it here for those who may have missed it.  We include an interesting chart with that report which you might want to take a look at.

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Notable Quotable

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

“I grew up in a purely urban family. We had no relatives in the country. I’m born in 1944. When I was a baby, my mother could only buy food because she still had some gold coins. Without gold, I would have starved. She always told me that. Therefore, this generation already has a certain gold affinity. In extreme times of crisis, this is one of the few things left to be accepted. Gold was the only thing left to the people of the city at that time. Before the silver cutlery was also traded at the farmer.”

Ewald Nowotny
Former European Central Bank governor

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Bubble pop: Janet Yellen could create an economic crisis

1945/Desmond Lachman

Cartoon of giant pig representing U.S. deficit

“George Bernard Shaw famously observed that he knew three types of economists. Those who were brilliantly right. Those who were brilliantly wrong. And those who taught. Judging by her tenure at the Federal Reserve’s helm and her advocacy now as Treasury Secretary of a super-sized budget stimulus package, it would seem that Janet Yellen falls into Mr. Shaw’s brilliantly wrong category. For this, the country is likely to pay dearly.”

USAGOLD note:  There are spending and debt limits beyond which not even the sturdiest economy can  endure, let alone one as fractured and tenuous as today’s. Lachman sees Yellen as all too amenable to the contemporary economic agenda advanced by the Democratic Party – a choice he labels Janet Yellen’s Folly.


Repost from 2-9-2021

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