Investors fear new Treasury auctions will ignite repeat bout of selling

investors-fear-new-treasury-auctions-will-ignite-repeat-bout-of-selling

Financial Times/Colby Smith/3-8-2021

“Investors are bracing themselves for a trio of large US government debt auctions this week, after a recent sale of seven-year notes flopped and set off a bout of frenetic trading.”

USAGOLD note: From all appearances, the Fed has stepped out of the batter’s box for the moment, but that could change in a heartbeat. FT says these auctions are scheduled at a “tenuous time for bond markets.” Another poorly bid auction could release the trap door under the bond market.

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U.S. debt burden to rise to 202 percent of GDP in 2051 – CBO

u-s-debt-burden-to-rise-to-202-percent-of-gdp-in-2051-cbo

NewsMaxFinance/Thomson-Reuters/3-5-2021

“The U.S. federal debt burden will double over the next 30 years, reaching 202% of economic output in 2051, as deficits grow and interest rates eventually rise, the Congressional Budget Office said on Thursday in its latest long-term budget projections.”

USAGOLD note:  This projection from the Congressional Budget Office has a troubling aspect. We post charts regularly here that show the relationship between ceaseless growth in the national debt and the rising price of gold over the longer run. Since the current ratio is 127% as of the third quarter last year, the latest CBO numbers tell us that the deficit and debt problem will be with us for a very long time to come. Since economists consider anything over 100% excessive, questions about the sustainability of the current financial system naturally arise ……

bar chart showing the federal debt as a percent of GDP through Q3-21
Sources: St. Louis Federal Reserve, Office of Management and Budget

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How to choose a gold firm
It may be the most important choice you make as a gold owner

photo shows choosing a king on the chessboard

It is surprising how many prospective investors simply dive into gold and silver investing without much in the way of a consumer inquiry. That lack of simple due diligence has ended up costing a good many investors thousands of dollars, and sometimes even hundreds of thousands before the damage is detected.

Here you will find some brief but useful guidelines
to help
you choose the right gold and silver company.


To end right, start right.
DISCOVER THE USAGOLD DIFFERENCE
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com
ONLINE ORDER DESK-24/7

Reliably serving physical gold and silver investors since 1973

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Goldman Sachs says it’s the beginning of a structural bull market in commodities

goldman-sachs-says-its-the-beginning-of-a-structural-bull-market-in-commodities

MarketWatch/Steve Goldstein

Repost from 3-3-2021

“Lockdowns have driven a wedge between the consumption of services and goods, generating additional demand from both households and governments looking to stimulate activity while minimizing the virus spread,” they said. … The Goldman analysts said the bull market is being driven by demand, not supply.”

USAGOLD note: Goldman led the charge on commodities and its earlier predictions for the commodities’ complex are looking pretty good at this juncture, as shown in the index chart below. The price increases across the spectrum of commodity categories from agricultural to base metals will likely feed into retail pricing as we move through 2021.

line chart showing upward trajectory of S&) GSCI commodities index

Chart courtesy of Trading Economics.com • • • Click to enlarge

 

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Michael Burry warns of Weimar hyperinflation

michael-burry-warns-weimar-hyperinflation

Zero Hedge/Tyler Durden

Repost from 3-1-2021

“Then overnight none other than the Big Short, Michael Burry, who has been rather busy making waves within the financial community with his hot takes (most recently, his slam of Robinhood and his bullish view on Uranium), picked up on the theme of Weimar Germany and specifically its hyperinflation, as the blueprint for what comes next in a lengthy tweetstorm cribbing generously from Parsson’s seminal work.”

USAGOLD note: Burry of Big Short fame says “People say I didn’t warn last time. I did, but no one listened. So I warn this time. And still, no one listens.” Does hyperinflation make the dollar the ultimate BIG SHORT? By the way, in this piece, we learn that Bank of America’s Michael Hartnett, their chief investment officer, also believes hyperinflation a possibility.

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Competitive currency debasement 101 class is in session

competitive-currency-debasement-101-class-is-in-session

TheStreet/Mike Shedlock

Repost from 1-24-2021

photo of U.S. one dollar bills rolling off the printing press“The Jerome Powell Fed is five for five on doing the very things that would cause the dollar to sink and Yellen supports all of them. Other counties are doing many of the same things and if they weren’t the dollar would be dropping faster.”

USAGOLD note: Ultimately, the markets will judge the Powell-Yellen tandem by what it does, not what it says. Shedlock’s five-point guideline on dollar debasement is worth filing for future reference at the line above……

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Yellen: ‘Act big’ now to save economy, worry about debt later

yellen-act-big-now-to-save-economy-worry-about-debt-later

Reuters/David Lawler and Andrea Shalal

Repost from 1-20-2021

photo of Janet Yellen at podium with currency display in backgroundIn more than three hours of confirmation hearing testimony, the former Federal Reserve chair laid out a vision of a more muscular Treasury that would act aggressively to reduce economic inequality, fight climate change and counter China’s unfair trade and subsidy practices.”

USAGOLD note: As we have said since the government’s coronavirus response began, few will quarrel with the steps that have been taken and many investors will prepare for its consequences.

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Analysis: Central banks will happily ignore inflation-mongers

analysis-central-banks-will-happily-ignore-inflation-mongers

chalboard showing inflation pattern as chart with symbols for various currencies

Reuters/Balazs Korany, Howard Schneider/Leika Kihara

Repost from 3-1-2021

USAGOLD note:  In this analysis, Reuters explains that central banks are likely to leave the money taps running full-on “and not just fleetingly” with the United States, Japan, and Europe leading the way. As any student of inflation’s history will tell you, the problem with this approach is once the wildfire is lit, it is very difficult to contain. Fed Chairman Powell told a congressional committee last week that “inflation dynamics don’t change on a dime.” That applies, of course, at both ends of the cycle – coming and going.

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Short and Sweet

gold-coins-hoofs-found-in-2000-yr-old-chinese-tomb

Gold coins, hoofs found in 2,000 year old Chinese tomb

Image of Confucius, old, black and white“Chinese archaeologists. . . discovered 75 gold coins and hoof-shaped ingots in an aristocrat’s tomb that dates back to the Western Han Dynasty (206 BC – 24 AD). The gold objects — 25 gold hoofs and 50 very large gold coins — are the largest single batch of gold items ever found in a Han Dynasty tomb. They were unearthed from the tomb of the first ‘Haihunhou’ (Marquis of Haihun) in east China’s Jiangxi Province. The coins weigh about 250 grams each, while the hoofs’ weights vary from 40 to 250 grams, said Yang Jun, who leads the excavation team.” – Xinhuanet/11-17-2015

USAGOLD note: These gold artifacts were found along with a portrait of Confucius, perhaps the oldest known. Wisdom and gold make easy company. Confucius once said something that has current applicability:  “In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.”  Or at the very least, well-hedged ………


Is the wisdom of a hedge in your financial future?
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Last week’s bond market tantrum explained by market veteran

last-weeks-bond-market-tantrum-explained-by-market-veteran

MarketWatch/Sunny Oh

Repost from 3-1-2021

graphic image showing a sharp second leg to double dip recession“Still, Hu says valid concerns around a surge in inflation and an eventual tightening by the Federal Reserve contributed to the massive Treasury selloff throughout this week. But Thursday’s move, at least, was also the result of backpedaling market participants trying to cut down their positions to avoid being caught by further rapid market moves.”

USAGOLD note:  In short, market momentum has shifted to the sell side at a time when buyers are more important than ever. Some estimates put Treasury needs at over $3 trillion for 2021 after the stimulus package becomes law. Hang Hu, quoted above, is a veteran bond market trader whose resume includes PIMCO, Credit Suisse, and now Winshore Capital Partners.

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Gold tumbles further, after 17 out of 26 ‘red sessions’ since the beginning of February top forecaster calls metal ‘an absolute steal’

gold-tumbles-further-after-17-out-of-26-red-sessions-since-the-beginning-of-february-top-forecaster-calls-metal-an-absolute-steal

(USAGOLD – 3/8/2021) – Gold tumbled further in overnight trading posting its 17th red session out of 26 since the beginning of February. It is down $10 at $1692. Silver is down 11¢ at $25.22 after climbing back near the $26 mark in overnight trading. The downside came as Treasury yields continued to climb and the Biden stimulus package took a major step toward passage by clearing the Senate. The bill now goes back to the House for final approval. Over the weekend, Moody’s Analytics’ economist Mark Zandi and historian Niall Ferguson issued notable inflation warnings with Zandi saying in a CNBC interview that Wall Street is “significantly underestimating” its return over the next decade. Investors, befuddled by the incongruity between the dangers lurking in financial markets and declining precious metals prices, continued to buy the correction as they have since the beginning of the year. Meanwhile, in the paper gold market where the price is determined, the software-driven selling continues.

For those hoping to find a silver lining in the dark cloud hanging over the precious metals market the past several weeks, Ross Norman of MD Metals Daily offers some consolation:

“[O]f course it’s not all about bonds. The dollar has been on a rampage with the USDX at the highest for nearly a year. Late last year you would have struggled to find a dollar bull and so universal was the dislike that the short dollar trade was arguably the most crowded. As a contrarian it worried me then… and it has come to pass. The market has inflicted the largest amount of damage on the greatest number of participants and the short covering rally in the dollar has piled pain on top of misery for gold bugs. Again … for fundamental reasons, the wrong outcome. So where does that leave us … ? Well firstly at current levels gold looks to be an absolute steal. If you didn’t get the memo about the beginning of a new gold bull run in Q3 2018 then this is your last call.”

Norman has finished high or won the annual LBMA price forecasting contest (including last year’s) so often that one is forced to pay attention. In December, he predicted an average price of $2025 for 2021.  “We still hold that view,” he says, adding that the year will be “a game of two halves.”

 

Chart of the Day

Overlay chart showing the percentage gains over the past 12 months for gold, silver and stocks

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

Chart note: Many of our readers will be surprised to learn that out of the three investments tracked regularly on this page, it was not the Dow Jones Industrial Average that turned in the best performance over the past 12 months but silver – and by a wide margin. Stocks are up 32% since last year this time. Silver is up 48.5%, and gold trailed the field at a gain of little over 1%.

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Dylan Grice – ‘Central banks are going to overcook the economy’

dylan-grice-central-banks-are-going-to-overcook-the-economy

TheMarketNZZ/Mark Dittli/2-17-2021

cartoon of a hedge fund manager on the phone telling a client to buy gold

‘We have found there are plenty of managers running highly specialized, niche strategies which generate extremely attractive returns without being correlated to wider financial markets, or being subject to any of the risks we’ve just been talking about. Investors in traditional assets – public equity, private equity, venture, government bonds, corporate credit – are sitting on a time bomb. They have to keep their fingers crossed and hope that bomb doesn’t go off on their watch. If and when government bond yields rise, the traditional assets which have done so well will be smoked.’

USAGOLD note: Grice, a former investment strategist at Societe Generale, is one of those analysts to whom the global market cognoscenti pay a great deal of attention. This interview with that mind is a must-read. There are three approaches to the difficulties Grice communicates. One is to find a money manager, like Grice, who has a deeper understanding of what lies ahead and hope he pulls the right levers. Another is to develop that same deeper sense of what lies ahead, structure one’s investments accordingly and hope that you have pulled the right levers.  The last, and the most sensible in our view, is to diversify one’s portfolio completely and include gold and silver in the mix as the ultimate, unassailable store of value. It leaves much less to chance.

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The first ‘global inflationary depression’ is very possible

the-first-global-inflationary-depression-is-very-possible

Advancing Time/Bruce Wilds/3-4-2021

graphic image of a seated bear gazing quietly back at the viewer“It is possible that we might soon be witness to the first global inflationary depression. This is not a mix of words we normally see placed together. Several factors make this scenario possible. First, we seldom have depressions but instead, tend to roll through mild recessions, however, what we face may be far more severe. Second, in the past, times of falling economic activity have generally been deflationary as defaults rise but this time, not so much. Third, but not least, in the past, many events tended to be regional rather than global, but over the years as economies have become more interconnected the resulting codependency presents an increased possibility of problems spreading across the world.”

USAGOLD note:  Stagflation in extremis …… Wilds says it is likely to have “profound consequences for various inflation-sensitive assets around the world.”

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Notable Quotable

notable-quotable-18

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“Gold can be best viewed as financial insurance. If you believe that you should own insurance, then you should also own gold. In terms of investment performance, gold will do best during times of international financial stress. In the past, the price of gold has moved exponentially higher during these periods as demand for the ultimate safe haven goes viral.”

Eric Lytikainen
Real Investment Advice

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Stagflation cometh

stagflation-cometh

Mises Institute/Doug French/3-1-2021

“Richter points out that sales volumes are down but ‘[g]ross profit per new vehicle sold—the difference between the cost of the vehicle and the selling price—jumped by 50%.’ He goes on to write, ‘So if folks out there say that they cannot see the inflation, I would encourage them to look at industry data.’ Those prices are rising, leading to large profit margins until these companies’ costs begin to rise. ‘This phenomenon is now cropping up everywhere.'”

USAGOLD note: The 1970s were a stagflationary decade and as you see in the chart below, gold afforded investors ample protection. The misery index, the inflation and unemployment rates combined, is now about 7.5% – nowhere near the 23% high in 1973. However, as the history of the 1970s reveals, things can move very quickly from a dead start.  Too, when Shadow Stat inflation and unemployment are used (See Monday’s DMR), the Misery Index is already at 34%.

overlay chart of gold and the misery index, 1970s

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Market Overview

market-overview2

Landscape mode is recommended for mobile phone viewing.

Market Data by TradingView
Delayed data except FOREX

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The inflation regime change is already upon us

the-inflation-regime-change-is-already-upon-us

Bloomberg/John Authers/3-3-2021

composite photos Vocker-Reagan-Powell-Biden

“Let’s make a big assumption. We really are in the process of not only a great shift toward reflation, but toward a new inflationary regime. What is this like, how can we tell, and what does the future hold?”

graphic image of a book and reading glasses A Good Weekend ReadUSAGOLD note: We have noted previously that as the current government/central bank policy mix is fully deployed, it might turn out that what the Reagan-Volcker team were to disinflation the Biden-Powell team might be to inflation. Authers explores that possibility in this essay.  In the process, he offers a few deep insights like this one from Alex Lennard of Ruffer LLP. “Volcker said he was going to tame inflation, unemployment be damned. Now it’s the other way around. I don’t think people have quite realized that you’ve had this huge change in the mandate of policymakers.” Although gold does not come up in this piece, Authers has mentioned it in previous writings. He does not come off in any way as an ardent gold advocate, but he does, it is clear, understand its uses in the contemporary portfolio.

“Inflation has no date of beginning. Inflation is the cancer of modern civilization, the leukemia of planning and hope; as with all cancers, no one can say when it begins or how fast it may spread. It is a disease of money, and when money goes, order goes with it. Inflation comes when a government has made too many promises it cannot keep and papers over the shortfall with currency which, ultimately, becomes confetti — and faith is lost.” – Theodore H. White, historian-political journalist,  “America in Search of Itself” (1982) As quoted by Authers at the link above.

 

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Bitcoin 1.0: The ancient stone money of Yap

bitcoin-1-0-the-ancient-stone-money-of-yap

Financial Times/Gillian Tett/3-3-2021

“That does not render bitcoin invalid or the blockchain useless; after all, the mainstream currencies on which our lives depend rely on sometimes tenuous social norms as well. One way to frame the contest between bitcoin and fiat currency is thus as a battle of norms — and of distributed versus hierarchical trust.”

graphic image of a book and reading glasses A Good Weekend ReadUSAGOLD note: Tett, perhaps inadvertently, makes a point a good many gold enthusiasts will embrace. Bitcoin is more readily comparable to fiat currencies than gold – as its value rests completely in the faith that it will not be printed without restriction. Therein lies bitcoin’s ultimate weakness as a store of value. Who’s to say that any number of copycat cryptocurrencies won’t invade the space and undermine bitcoin’s value? (In fact, a good many already have with varying degrees of success.) Who’s to say that some enterprising software geek doesn’t find a way into the blockchain and begins producing bitcoin willy-nilly? (Which is what happened, by the way, to yap stone money. [More]) Tett ends her essay with some advice for Elon Musk – a new and ardent supporter of bitcoin: “Perhaps Musk’s next trip should be to Micronesia, where those now-useless stone circles still litter the landscape as a sign of what happens when norms and patterns of trust change.” To get to the heart of what Tett – an anthropologist as well as a first-rate journalist – means by that statement, you will need to read her essay in its entirety.

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Gold is the investment for All Seasons

Looking to prepare your portfolio for whatever uncertainty lies ahead?
DISCOVER THE USAGOLD DIFFERENCE
ORDER DESK: 1-800-869-5115 x100/orderdesk@usagold.com

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Biden’s bubble risk: A reckoning in markets as the economy recovers

bidens-bubble-risk-a-reckoning-in-markets-as-the-economy-recovers

Politico/Ben White

Repost from 3-1-2021

“Giant bubbles are once again inflating all over the financial world — creating a potential problem for Washington in the coming months. From meme stocks to cryptocurrencies, tech stocks and the rage for ‘Special Purpose Acquisition Companies,’ or SPACs, risks are clearly rising. Wall Street pros and Washington policymakers know that some or all of these bubbles could explode in spectacular ways. But nobody really knows what to do about it.”

USAGOLD note:  It’s not like any of this is new except for the fact that the market itself is pushing up interest rates – that’s new and it’s a clear and present danger to the stock market bubble, particularly when you blend the level of leverage deployed throughout markets (now roughly $1 quadrillion). The Ramirez cartoon gives it all a sense of proportion.

 

Ramirez cartoon on the speculative trading bubble

Cartoon courtesy of MichaelPRamirez.com

 

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