Our primal instinct for gold
Money Week/Dominic Frisby/7-20-2023
“The experience of beauty, whether derived from nature, art, music or even mathematics, correlates with activity in the emotional brain, the medial orbitofrontal cortex. Beauty has long been associated by philosophers with truth and purity – also qualities commonly associated with gold. Our instinct for gold and the emotions it inspires from beauty to desire are basic.”
USAGOLD note: Frisby examines mankind’s age-old attachment to gold.
Short and Sweet
Only real intrinsic money survives the test of time
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 courtesy of the World Gold Council
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Oil markets will face ‘serious problems’ as demand from China and India ramps up, IEF secretary general says
CNBC/Charmaine Jacob/7-22-2023
“Oil demand bounced back to pre-Covid levels quickly, “but supply is having a tougher time in catching up,” said Joseph McMonigle, secretary general of the International Energy Forum, adding that the only factor moderating prices right now is the fear of a looming recession.”
USAGOLD note: Rising oil prices could have a profound effect on the inflation rate as it settles in, assuming McMonigle is right.
Most of what we’ve heard about the yuan dethroning the dollar is from the West. Here’s what China’s actually said about it.
MarketsInsider/Huileng Tan/7-31-2023
“While China might not be happy with American dominance — in global politics, culture, or the financial system — Beijing is far from openly advocating for the ‘redback,’ another name for the yuan, to immediately replace the greenback.
USAGOLD note: Important insights at the link……
Notable Quotable
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“‘Experience keeps a dear school,’ said Ben Franklin, ‘but fools will learn in no other.’ The wise man remembers. The fool forgets. The wise man listens. The fool talks. He ignores both the living and the dead… the immemorial dead, whose whispers carry the distilled wisdom of history. No – this time is different, comes the fool’s eternal cry. The past is of no use to me.”
Brian Maher
Daily Reckoning
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Traders brace for $102 billion wave of Treasury bond sales
Bloomberg/Liz Capo McCormick/7-31-2023
“The US Treasury is set this week to begin a ramp-up in issuance of longer-dated securities that’s likely to stretch into next year, forced by a rapidly deteriorating budget deficit and soaring interest rates.”
USAGOLD note: The new bond sales come at a time when the Fed, Japan, and China are no longer buyers. What happens if support doesn’t materialize?
China’s gold consumption reaches 555 tons, rising 16.4% in the first half of 2023
“Among the gold consumption, the purchase of gold bars jumped 30.12 percent year-on-year to 146 tons in the first six months, while that of gold jewelry reached 368 tons, up 14.82 percent from the same period last year. Gold used for industrial and other purposes declined 7.65 percent to 40 tons, the data showed.”
USAGOLD note: China’s appetite for gold grows as its middle classes gain wealth……Note the strong gain in bullion bar demand, a sign that Chinese investors are buying gold as a safe haven.
Thinking about buying gold and silver?
Gold in six easy lessons
1. Don’t buy it because you need to make money; buy it to protect the money you already have.
2. Don’t look at price as a barrier; look at it as an incentive.
3. Don’t buy the paper pretenders; buy the real thing in the form of coins and bullion.
4. Don’t fall prey to glitzy TV ads; do your due diligence instead.
5. Don’t allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.
6. Don’t forget the golden rule: Those who own the gold make the rules!
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Buy gold and sell U.S. dollars, this strategist says. Here’s why.
MarketWatch/Frances Yue/7-21-2023
“When a global slowdown has been lacking, the dollar has declined at a per annum rate of -1% whereas gold has gained 10% per annum…” – Tim Hayes, Ned Davis Research, chief global investment strategist
USAGOLD note: Ned Davis Research recently downgraded the U.S. dollar from neutral to bearish and upgraded gold from neutral to bullish. It points to an important technical indicator as further evidence of the changing dollar-gold scenario. In January, gold achieved “a golden cross, when its 50-day moving average rose above the index’s 200-day moving average, while the U.S. dollar saw a death cross.” Since the January crossover, gold is up 7.75%, and the US dollar index is down 2.2%.
Chart courtesy of GoldChartsRUs • • • Click to enlarge
Who wants to keep hiking rates on the FOMC and who doesn’t?
Bloomberg/Steve Matthews, Kyungjin Yoo and Dave Merrill/7-25-2023
“After more than a year of solid agreement that higher interest rates were needed, differences among policymakers have started to deepen as they weigh when to stop hiking and how long to keep rates elevated.”
USAGOLD note: The politics of economics at the Fed broken down. A good lead in to today’s rate decision and press conference……
Short and Sweet
Inflation is a process not an event
But history, as we are learning now, shows runaway inflation can come suddenly and without warning
Image courtesy of Visual Capitalist • • • Click to enlarge
We sometimes forget that inflation is a process rather than an event. One of the better-known examples of that axiom is the nearly two centuries-long debasement of Rome’s silver denarius. The Roman citizen who had the wisdom to hedge that process by going to gold at nearly any point along the way ended up preserving some portion, if not all, of his or her wealth. Those who did not suffered its debilitating effects. In the inflationary process, the line between cause and effect is not always a straight one, and its timing difficult to discern. History teaches us, though, that when runaway inflation does arrive, it comes suddenly, without notice, and with a vengeance. That is why it pays to view gold as a permanent and constantly maintained aspect of the investment portfolio. “A change of fortune,” Ben Franklin tells us, “hurts a wise Man no more than a change of the Moon.”
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(Related please see: News & Views Special Report / March 2020 / Hedging the decline and fall of a currency – The baseline case for gold hasn’t changed much in 1700 years)
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The inflation giant has awakened. Why price growth will persist.
Barron’s/Brian Swint/7-23-2023
“To the contrary, inflation is likely to be a more persistent threat than it has been in decades, owing to the long list of powerful forces that have driven prices higher, and the limits of central-bank efforts to control it.”
USAGOLD note: Anyone who lived through the decade of the 1970s can tell you that claims that inflation had been tamed were often wildly overblown.
Inflation rate 1970s
Chart courtesy of TradingEconomics.com
Daily Gold Market Report
Gold down in lackluster trading pushed by stronger dollar
Credit Suisse sees new record high for later in year, then $2355
(USAGOLD – 8/1/2023) – Gold is down this morning in lackluster trading pushed for the most part by a stronger dollar. It is down $10 at $1957. Silver is down 29¢ at $24.54. Credit Swiss is not allowing the summer drag alter its bullish stance on the yellow metal.
“We maintain our long-held view,” it says in an advisory released yesterday, “for a major floor to be found the key rising 200-DMA of $1,883 and for an eventual retest of major resistance at the $2,063/2,075 record highs to be seen. We still stay biased to an eventual break to new record highs later in the year, which would then be seen to open the door to a move to $2,150 next, then $2,355/65.”
Chart by USAGOLD • • • Data source: Macrotrends. net
The role of gold in central bank reserves
“Every independent central bank in the world holds at least some amount of bullion. Gold’s status as a currency is therefore borne out by the fact that bullion is counted as part of a central bank’s foreign exchange reserves. It is the only commodity-currency to have survived as money into the electronic age. This implies gold’s unique monetary status.”
USAGOLD note: Steele provides historical background on gold’s role as a central bank reserve asset and offers seven monetary functions that encourage it. All seven have to do with gold’s status as the ultimate store of value and final means of payment.
The Fed’s newfound focus on data is bad news for the sliding dollar
MarketsInsider/George Glover/7-29-2023
“The dollar is one of the few assets that’s gone down, rather than up this year – and analysts are warning that there could be bleaker times ahead for the greenback now that the Federal Reserve looks set to wind down its interest-rate hiking campaign.”
USAGOLD note: The most important data, as pointed out in this article, provide reasons for lowering rates which would continue to fuel the dollar’s slide against other currencies.
Defective Fed policy ensures inflation’s revival
ZeroHedge-Bloomberg/Simon White/7-28-2023
“Federal Reserve rate hikes have had minimal disinflationary impact in this cycle, opening the door to a re-acceleration in inflation. At first glance, Fed Chair Jerome Powell has little in common with the Wizard of Oz. But in one respect he may: pulling levers that do nothing.”
USAGOLD note: Yet another under-the-radar analysis predicting more inflation down the road – second coming……
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USAGOLD specializes in gold and silver coins and bullion delivered to our client’s safekeeping. For over 49 years, we have resolutely advocated owning precious metals for asset preservation purposes rather than speculation. Admittedly, this philosophy does not resonate with all prospective gold and silver owners, but if it does with you, we think you will find our firm a kindred spirit.
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Everyone thinks the Fed’s rate hike next week will be the final one — except the Fed
MarketWatch/Greg Robb/7-21-2023
“Wall Street economists seem convinced that the Federal Reserve will raise its benchmark interest rate by 25 basis points next week and that this increase will turn out to be the final hike of this cycle. But they also don’t expect to hear Fed Chair Jerome Powell say so, at least not yet.”
USAGOLD note: Several analysts have come forward over the past month to state their belief that inflation is down but not out – in a lull rather than full remission. If that proves to be the case, the Fed could be chasing the inflation rate for many months to come.
The collapse of the risk-free delusion: Implications for the $133 trillion bond market
International Man/Nick Giambruno/July 2023
“Did you know that 2022 was the WORST year for US Treasuries in American history? The benchmark 10-year Treasury fell nearly 18%, and the 30-year Treasury collapsed over 39%. Many other bonds did even worse.”
USAGOLD note: Giambruno warns that “It may be tempting to think the worst is over for bonds – it’s not. As you’ll see, the pain for bondholders is just starting.” The result he says will be a mass movement over time to reliable stores of value.
Short and Sweet
“Bear markets are sneaky beasts. . .”
“Bear markets are sneaky beasts and they like to do their damage as secretly and as unobtrusively as possible. I hate to say it but somewhere ahead, the bears going to get it all together and the innocent little stream is going to turn into a waterfall. What can you do about it? Stay out of the market? Protect yourself by remaining in pure wealth, gold. For thousands of years, silver and gold have been treated as pure wealth. As the standard measures of wealth (stocks and bonds) have deteriorated, veteran investors have forgone profits and moved their assets into pure wealth.” – Richard Russell, King World News, 2016
King World News called the late, great Richard Russell – who regaled us with his wisdom in the Dow Theory Letter for nearly half a century – “the greatest financial writer in history.” We can only guess what Russell would have had to say about the current state of affairs, but the quote above provides a clue. Never predictable in his opinions, he was rock solid on one axiom throughout his career – the necessity and transcendence of gold as a permanent component of the well-balanced investment portfolio. As he said, so often, it helped him sleep at night.
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