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2019 World Silver Survey Results

Gold Market Discussion

Demand Up! Supplies Down!

Today, we glean some information from the new World Silver Survey 2019.  The annual report, released this month, is produced by The Silver Institute, a trade association.

The Survey notes several significant silver supply/demand developments last year.  

Total silver demand rose 4 percent to 1.0335 billion ounces in 2018.  This was the first annual increase in total demand since 2015.  Although the report found a small decline in silver demand for industrial applications, it was offset by “a robust recovery in retail investment, led principally by silver bar demand, which climbed sharply last year.” In fact, the coin and bar market jumped 20 percent last year.  Demand also benefited by increases in jewelry and silverware demand.

Morgan Silver Dollar
1887 Silver Morgan Dollar (NGC Certified – MS64)

Global mine production of silver had climbed for 13 straight years before 2016.  Now it has fallen for three years in a row.  2018 saw mine production fall 2 percent over the prior year, to 855.7 million ounces.  

Silver recovered from prior usage, scrap production, has always been vital to filling the gap between silver production and demand.  Scrap supply has been falling every year since 2012.  In 2018, scrap supply fell 1.6 percent over the prior year to 151.3 million ounces.  

Altogether, including marginal adjustment to the supply and demand figures given here, the Survey reports that there was a physical silver deficit of 29.2 million ounces.  The shortfall must be made up by above-ground stocks of silver.  In 2018, after nine years of growing above-ground silver inventories, those stocks fell by 3 percent to 2,457.5 million ounces.

The Results Indicate Silver is Bullish

In summation, the silver picture is bullish indeed.  Silver demand grew in 2018, while production fell.  Scrap silver recovery continues to decline, while above-ground stockpiles fell as well. 

Silver American Eagle Coin
2014 Silver American Eagle (Bullion)

The complete World Silver Survey 2019 report can be accessed online at The Silver Institute site HERE.  

Call or stop by and visit with an RME gold and silver professional today and learn more about the profit opportunities available in silver.

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Recent Articles

confrontation with Iran high gas prices

Temperature Rising in the Persian Gulf

Gold Market Discussion

The U.S. confrontation with Iran continues to escalate

It is still mostly a war of words, but we are inching closer to something else.  The risk of an incident, even an accident, is rising.  A military engagement of any sort in the shipping lanes of the Persian Gulf is all it would take to kick start a powerful surge in the price of gold.

The US has announced that it will no longer provide waivers to countries not in compliance with its sanctions on Iranian oil importers.  Secretary of State Mike Pompeo confirmed that the US intends to “zero out” Iran’s exports, “Iran’s principal source of revenue.”

Calling the American restrictions on Iran “sanctions” soft pedals what is really an act of war: a blockade. The objective is to prevent Iran from exporting oil and to shut down its access to international markets and financial clearinghouses. It is designed to be a complete blockade of both Iranian oil and commerce, one every bit as effective as a military blockade.

Gas and Gold Prices Could Rise with an Iranian Conflict

Gas prices in California just hit a five-year high.  If the Iranian situation continues to heat up, gas prices could get a lot worse.

high gas prices ahead

Although other Persian Gulf states have promised to hike their oil production to offset the loss of Iranian oil to the world market, Iran’s response to Pompeo was a quick pivot to the Strait of Hormuz shipping lanes. 

It is not enough for more oil to be pumped to make up for the loss to the world market of production Iran will be prevented from selling.  Oil must be moved as well. 

Which is why Iran said if it is prevented from using the shipping lanes, it will act militarily to close the Strait of Hormuz.

It is normally in Iran’s interest to see the shipping lanes open. But there is no telling what Iran will do in extremis.  The threat to shut down the passageway is the only defense Iran has to any kind of attack.

The Strait of Hormuz is a sea-lane between Iran and the Arabian Peninsula. It links the otherwise landlocked Persian Gulf with the Gulf of Oman and the Arabian Sea, providing access to the world’s oceans.

Strait of Hormuz
Strait of Hormuz

Twenty-one miles wide at its narrowest, the waterway is a critical choke point.

The Strait accounts for nearly 20% of global oil trade, with Iran, Iraq, Kuwait, Saudi Arabia, Qatar, and the United Arab Emirates all relying on the Strait to ship their oil. Most of these shipments have Asian destinations: Japan, India, China, and South Korea.

Now, imagine you run a powerful company that owns and operates supertankers that sail through the Persian Gulf. If hostilities break out and the Strait of Hormuz is shut down – even for a day – will you authorize your ships to sail in those waters? 

Imagine you insure oil tankers. You will have very strict terms to suspend coverage for a company foolish enough to ship in the waterways of warfare.

Either way, the flow of oil is interrupted.  Geopolitical alliances begin to shift as countries weigh their self-interest and seek advantage from an international incident.  Of course, oil prices explode.

As does the price of gold.

gold prices could surge with Iranian confrontation

Those with long memories will note the role the Iranian Revolution in 1979 and the taking of 52 American hostages played in the skyrocketing price of gold. Today Iran has a high profile in gold’s action once again.

The war of words with Iran can’t continue to escalate forever.  When temperatures rise, things boil over.

NOTE:  So far this year, any pullback of gold below $1,300 has been a favorable opportunity to add to your holdings. 

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Recent Articles

global trade slowdown money

Slowdown Money: World Trade Downturn Worst Since 2008

Gold Market Discussion

There’s a lot of talk about a slowdown in the economy.

World trade has slowed sharply… the worst downturn since the Panic of 2008.  

We saw a story the other day that 6,000 retail stores have closed so far this year.  That’s more than all of last year.

Housing starts have fallen to a two-year low.  

And David Stockman asks how the stock market can be up when business profits are down year after year.  Here’s a chart from the Federal Reserve he uses to make the point graphically:

President Trump and his advisors are very concerned about evidence of a slowdown.  They want the Fed to lower rates, and to print and pump money into the economy.  

Now.

They are calling for interest rate cuts that will put real interest rates (rates after inflation) into negative territory.  

Return to QE?

President Trump is himself explicitly calling for another round of Quantitative Easing, a repeat of the biggest money-printing binge in US history.

You know what that does to the price of gold?

We do.  We’ve seen it before.

Treasuries held by Fed chart- slowdown money

Quantitative Easing began in November 2008.  Gold took off like a rocket ship.  This chart shows the shocking increase in the Fed’s holdings of US Treasury securities (the blue line).  Those holdings had been about $800 billion for some time before this chart begins in 2008.

Before long it had $2 trillion in US securities.  Where did the Fed get the money to purchase a fresh $1.2 trillion in US government bonds?

Silly question.  It made it up on a computer. 

As a part of QE, the Fed not only ratcheted up its purchase of Treasury bonds with money it made up out of nothing more than a digital keystroke, it began purchasing mortgage-backed securities, toxic and worthless mortgage portfolios from the crony banks (the red line). 

The Fed had no mortgage-backed securities before QE.  Before long, it had more than $1.6 trillion of them.

I’ve overlaid the price of gold so that you can see how the launch of QE pulled gold up to a high of $1900 in 2011.  

The chart might suggest that gold became indifferent to the QE money pumping before QE leveled off in 2014.  But in reality, money managers around the world realized that all of that bond and mortgage security buying was going to firehose money right to Wall Street and money center banks.  So they all piled into the stock market.  Many sold gold to buy stocks.

The result has the US in a dilemma.   It has taken a lot of loose money to drive the stock market to today’s levels.  Now the market, addicted to loose money, is growing skittish.  As we saw at the end of last year, the stock market wants the Fed to provide it with another fix.

It’s like a junkie getting the heebie-jeebies.  If it doesn’t get its fix, it will fall.  Hard.

And money will come rushing out of the stock market and into gold.  Gold will take off.

If it does get the QE fix it wants, like last time, gold will skyrocket again.  Just like it did when they started this whole QE mess.

Either way, gold moves up.  “Bigly,” as the President might put it.

If you’d like to know more about the gold and silver markets and learn how to participate in the coming boom, speak with the RME gold authorities.  Simply call our office and you will be connected to one of our knowledgeable gold and silver professionals.

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Recent Articles

the fed bubble

The Fed Bubble

Gold Market Discussion

Recessions, depression, and destroying 96 percent of the dollar’s purchasing power. Yes, the Fed’s track record is pretty bad.

But the Federal Reserve is good at one thing:  Creating bubbles.  Like the dot com bubble and the housing bubble.

And now the Fed’s massive money printing, pumping trillions to Wall Street, has created the biggest bubble of all… the stock market bubble.

Since he took office, President Trump has tied himself pretty tightly to a rising stock market.  He has not been shy about taking credit for it on the way up.  It worked out well for him since the Dow Industrial went almost straight up in his first year.  But things were a little choppy in 2018 his second year. 

 By the end of last year the market plunged, just as we had warned.

The market fell from a high of 27,000 in the fall to 21,700 at the end of the year.  Only a pivot by the Fed, a decision to halt interest rate increases and back off efforts to modestly reduce its toxic bond portfolio, has allowed the market to recover, closing Friday (4/12) of 26,412

But Trump and those around him know just how precarious the stock market still is.  And they know a bear market would play against them in next year’s election.  If he owned it on the way up, he’ll own it on the way down whether he wants to or not.   

That’s just the way it works.

Note how anxious the Trump team is to get the Fed’s printing presses going full-tilt.  It is a frank acknowledgement that only loose money sustains this market.  

Larry Kudlow, Chef Economic Advisor
Larry Kulow caricature by DonkeyHotey

Larry Kudlow, the president’s chief economic advisor, is calling for interest rate cuts.

Trump Federal Reserve Board nominee Stephen Moore has called for an immediate rate cut of half a point.  

Think about that.  The Fed funds rate is about 2.4 percent right now. The inflation rate in March was 1.9 percent.  That means he is calling for a real interest rate (the interest rate minus inflation) of zero percent.

Now that’s loose money!

President Trump is characteristically the most explicit about the Fed policy he wants.  “I personally think the Fed should drop rates; I think they really slowed us down,” he said.  “In terms of quantitative tightening, it should absolutely now be quantitative easing,” he added.

None of this will be enough to keep the stock market bubble from popping, no matter how much it gets juiced.     You can juice a runner with something to keep him going, but not forever.  Eventually he can’t be juiced any more.

We survey world events — deep economic trouble in China, the European Union coming apart at the seams, trade hostilities growing – and add in a weakening domestic economy – and there is no shortage of pins to pop this bubble.

You’ll be happy to have moved to gold when the air comes out of stocks.  And wait until you see what happens then, even crazier Fed policies like “helicopter money” that we wrote about here, and even “Modern Monetary Theory,” the newest hyper-inflationary enthusiasm of people like Alexandria Ocasio-Cortez.  

We’ll keep you informed.  But get out of the way. 

Now

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helicopter money

Helicopter Money

Gold Market Discussion

Dropping Soon from a Sky Near You?

We know what the Fed will do.  

We just know don’t know exactly when and by what means.

The Federal Reserve will inflate.  It will print money.  It will debauch the currency.  

It will do what it has always done.  That is the source of its power.  Short of inflating, there is no other reason for it to exist.  

An Observer says the Fed will start dropping money from helicopters next.

Let me explain.

Over the centuries the means of inflating have changed.  The kings of old used to re-mint the precious metals coins that came through their counting house, adding base metals to dilute their gold or silver content. 

A hundred coins came in.  Presto!  A hundred and ten coins went out.

That’s an old-fashioned means of inflation.  But we saw a variation on this when US silver coins, dimes, quarter, and half-dollars, were replaced with cheap metal.  President Johnson said at the time that silver had become too valuable to be used as money,  

Of course money is supposed to be valuable.  That’s why its called… money!

Later inflation took the form of just printing more paper dollars, marks, francs, pesos, lira, yen and other currencies.  A lot of that still goes on around the world.

Inflating the Currency

In more sophisticated countries like the US, inflating the currency is done by a more sophisticated process.  The Federal Reserve expands the supply of money and credit with policies called liquidity operations, debt monetization, interest rate management, and Quantitative Easing.  

High-powered inflation depends on the so-called “fractional reserve” banking system, as the Fed empowers banks to lend out the amount of their deposits many times over. 

But there can be a problem with that.  What if banks can’t find enough credit-worthy borrowers?   If a business can’t sell what in already has, or is losing money, will it borrow more money to expand?

This had economist scratching their heads.  How can we inflate in a fractional reserve economy when borrowers are in trouble and don’t want to take on more debt?

But then they realized that they could just take a step back to the old money-printing era and inflate the money supply without the help of banks.  They could print the money and get the Treasury department to help shovel at out the doors of helicopters to the people down below.

Although the term “helicopter money” had been around since the 1960’s, The Federal Reserve’s Ben Bernanke brought it back to life in a speech in 2002.

Ben Bernake
Former Fed Chairman Ben Bernanke revived the phrase “helicopter money” in 2002

That brings our story up to the present and to David Rosenberg, chief economist of Gluskin Sheff, a major Canadian wealth management firm and former chief economist of Merrill Lynch.  He is generally a standout among people in such positions.

That’s why we sat up and noticed the other day when an interviewer suggested to Rosenberg that helicopter money would be the next Fed initiative.  

“I think actually you’re 100 percent on the money with that observation,” said Rosenberg.  “Quantitative easings and incursions by the Bernanke Fed were all aimed at promoting a stronger stock market.”  The result, he says correctly, was record income inequality.  But that also created record wealth inequality.  So the next time, the policy will be different.  

Because wealth inequality has turned America into a powder keg ready to blow!

The political reality is that the Fed won’t be able to get away with stove-piping money to Wall Street in the next inflationary round.  It will have to use a more populist policy.  In other words, “Fire up the helicopters, boys!”

“The Fed prints that money and then hands it over to the Treasury to do with it what you would like,” says Rosenberg.  “And you don’t have to change the tax system. You don’t have to change any laws and have it held up in the House or the Senate. And there’s a whole bunch of things you could do with that money to try and stimulate aggregate demand. 

“And then we’ll create a whole new inflationary experience.”

We think this discussion of helicopter money is one of the most important pieces we’ve published.  It is a policy that will have ruinous consequences for our nation.  You are free to distribute it to your associates, friends, and family and to print it if you wish.

Speak with an RME Gold associate today to find out how to profit from the next round of dollar destruction.  Simply call our office, (602) 955-6500, and you will be connected to one of our knowledgeable gold and silver professionals.

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China gold buying spree

The Gold Buying Spree Continues

Gold Market Discussion

China is Serious About Gold

For the naïve mind there is something miraculous in the issuance of fiat money. A magic word spoken by the government creates out of nothing a thing which can be exchanged against any merchandise a man would like to get. How pale is the art of sorcerers, witches, and conjurors when compared. 

– Ludwig von Mises

Another month, another purchase of tons of gold.  

China continued its gold buying spree in March.  It added 360,000 troy ounces of gold to its reserves.  That’s 11.2 metric tons.  In one month.

It’s the fourth month in a row that China has beefed up its gold stock.  In February it bought 9.95 tons, in January 11.8 tons, and in December 9.95 tons.  

China is also the world’s top gold producer.  China is serious about gold.

China gold bars

Last year the world’s central banks added 651.5 tons of gold.  

In March, I posed the question, “What do they know that most people don’t know?”

It’s reached the point where I have to describe central bank gold buying as a megatrend.  As with most financial megatrends, the mainstream media usually misses its significance until much later.

Like the housing bubble.

What is behind the megatrend?  

It is a move away from the US dollar.  

Some years ago, in congressional testimony, Federal Reserve chairman Ben Bernanke was asked by Ron Paul why central banks own gold.

Bernanke had to come up with something.  He thought fast.  “It’s tradition,” he answered.

Like so much else, he had that wrong, too.   Central banks hold gold because it is money.  

They hold dollars because of tradition.  The tradition became institutionalized with the international Bretton Woods agreement after World War II.  That agreement broke down decades ago.  

They have continued to hold the dollar in the belief that it’s “the cleanest dirty shirt.”  All paper currencies are flawed, although they viewed the dollar is the best of a bad lot.

But with Bernanke’s Quantitative Easing, central banks are slowly realizing that they don’t want any dirty shirt.  If the Fed can conjure up trillions of dollars out of nothing, maybe they better get out of the way.  

Because even the best of a bad lot is still bad.

Central bank gold buying is a megatrend for a reason.  The prognosis for the dollar is negative.

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Your Share of the National Debt

Gold Market Discussion

It’s the Titanic and the Iceberg- Full Speed Ahead.

Icebergs aren’t the only things that are 90 percent underwater.

So is the US national debt.

The visible national debt is more than $22 trillion.  That’s the part that everybody knows about.  If you ask Google, it says $22 trillion.  If you walk by the US national debt clock in midtown Manhattan, you’ll see it registers $22 trillion.  Even politicians answer that the national debt is $22 trillion.

NYC Debt Clock, circa 2017
The clock at its former location near Sixth Avenue and 44th Street in February 2017, at which time it read $19.9 trillion in national debt

Well, not all of them.  Not so many years ago on the David Letterman’s show, President Obama was asked what the national debt was.  He didn’t know.

But like the iceberg, $22 trillion is the only part that people see.  It’s above the waterline.

In the case of both the iceberg and the national debt, the invisible part that is much larger and is also most the most dangerous.

So here are the numbers.  The visible national debt as I write this is about $22,028,000,000,000.    

The US population is just over 327,200,000.  That means the visible national debt is $67,322 per person.  

That’s your share.  It’s about $270,000 for a family of four.

How will the National Debt ever be paid?

We’ll get to that.  But first you need to be aware of the hidden debt, too.  It consists of promises the government has made to people, promises that people have relied upon, for which payment hasn’t been funded.  

Oh, they’re debts all right.  If the million of people who paid into Social Security for a lifetime suddenly stopped getting their checks – checks they depend upon to put food on the table – the economy would melt down.  

These promises are called “unfunded liabilities.” 

Boston University economist Laurence Kotlikoff says this hidden debt amounts to more than $222 trillion.  

That’s ten times the visible debt.  No wonder former Reagan budget director David Stockman says we’re headed for the “debtberg.”

Your share of the hidden debt would be more than $670,000.  It’s about $2,700,000 for a family of four.

When will you get your share?

That’s not really a serious question, because the debt can’t and won’t be repaid.

It will have to be “reset.”

That means it will be defaulted, repudiated, and inflated away.

The Federal Reserve “printed” almost $4 trillion during the Quantitative Easing episode.  Most of that hasn’t entered the consumer economy yet, but a lot of it has been stovepiped Wall Street’s way; hence the stock market bubble.  Watch out. 

There’s no reason that it won’t try to inflate away much of the national debt with more money printing.  

Dollar Devaluation Ahead

Of course, that will sink the dollar.  And send gold prices to the moon.    

The debtberg lies straight ahead.  Think of the Titanic.  We are perilously close and incapable of changing direction in time.  

You need to protect yourself and your family with gold

Now.  Before the debt reset.

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Student Debt problem

Student Loan Debt

Gold Market Discussion

Student debt is a ball-and-chain for the economy

People with homes in forested areas know to remove dry brush from around their homes during fire season.

There’s a lot of dry tinder, fuel to feed a conflagration, around the US economy now.  

And it’s not being cleaned up.  

It’s growing.

One of the biggest dangers now, a candidate for sparking an inferno, is student debt.

We haven’t written about it since September, when we suggested that the student debt crisis was worse in many ways than the mortgage meltdown.  

At least there was a house behind all that mortgage debt.

student debt forces tough decisions

Today 11.4 percent of student loans are 90 or more days delinquent.  What’s behind all the student debt?  Many are “backed” by degrees of questionable market value.

Student loan debt is more than $1.56 trillion today. More than the value of subprime loans that led to the Great Recession.  A half-trillion dollars more than total US credit card debt.

Like other guarantees and promises it makes so cavalierly, the government can only make good on its student loan guarantees by printing money.  That’s because it doesn’t have an extra trillion dollars laying around anywhere.  

Everything about student loan debt is bad economics.  All the easy money flowing the way of colleges and universities has led to a doubling of the cost of higher education over the past 20 years.  It’s made the schools rich.  They’ve become palatial in some places, top heavy with administrators and bureaucrats everywhere, although nobody insists that their graduates are better educated.

Tucker Carlson on Fox News thinks the schools should co-sign for student loans.  If they had some skin in the game the might not offer useless classes like Underwater Basket Weaving, or The Wit and Wisdom of Brittany Spears.  If the institutions were on the note, they’d make sure students learned things that could produce wealth and help assure repayment.

At the same time, the debt loads they stagger under have many millennials unable to afford homes or to start families.  

44.7 million people are carrying student debt.   

That’s about 14 percent of the population.  It’s enough to start a movement.    

We don’t know what exactly will spark the next economic forest fire.  It could be a stock market crash.  It could be the trade war or the next hot war.  It could be unpayable student debt.

No matter where the spark comes from, we think owning precious metals is a wise precaution.  

Like people clearing the dry brush away from their homes during fire season.

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Gold Bars and Nuggets

Gold (Information) Nuggets

Gold Market Discussion

Here are some quick gold facts…

Today some random facts about gold and the gold market, valuable little nuggets of information gleaned from World Gold Council research:

Gold Outperforms Paper Money

“Over the past century, gold has greatly outperformed all major currencies as a means of exchange. This includes instances when major economies defaulted, sending their currencies spiraling down, as well as after the end of the Gold Standard. One of the reasons for this robust performance is that the available above-ground supply of gold has changed little over time – over the past two decades increasing approximately 1.6% per year through mine production.  By contrast, fiat money can be printed in unlimited quantities to support monetary policies.”

Investment Demand for Gold Keeps Growing

“Gold is becoming more mainstream. Since 2001, investment demand for gold worldwide has grown, on average, 15% per year. This has been driven in part by the advent of new ways to access the market, such as physical gold-backed exchange-traded funds (ETFs), but also by the expansion of the middle class in Asia and a renewed focus on effective risk management following the 2008–2009 financial crisis in the US and Europe.”

Institutional Investors Are Getting on Board

“Institutional investors have embraced alternatives to traditional assets such as stocks and bonds. The share of non-traditional assets among global pension funds has increased from 15% in 2007 to 25% in 2017. And in the US this figure is close to 30%.”

In Good Times and Bad

“Gold is not only useful in periods of higher uncertainty. Its price has increased by an average of 10% per year since 1971 when gold began to be freely traded following the collapse of Bretton Woods.”

Gold Outpaces Inflation

“In years when inflation has been higher than 3% gold’s price has increased by 15% on average.”

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How to Acquire More Gold with Ratio Trading

Gold Market Discussion

Put the Gold to Silver Ratio to Work

If you will spend a minute or so on the following story problem, I will share with you a secret that professional traders, dealers, and investors use to grow their precious metals holdings.

1- Bill has 10 ounces of gold.

2- He agrees to trade it for 800 ounces of silver.  

3- When prices change, Bill trades his 800 ounces of silver back into gold.

Bill ends up with 16 ounces of gold instead of the 10 he started with. By Today’s Prices, that is somewhere in the neighborhood of $7,750 in profits.

Question:  Would that be a pretty smart thing for Bill to do?

Answer:  Yes.

In this example Bill is using a strategy well-known to professionals.  It’s called the trading the gold/silver ratio.

Bill didn’t invest any more money, but the amount of gold he owns just increased by a sixty percent!  

It’s Common Sense Trading

The gold-silver ratio is the price of gold divided by the price of silver – essentially how many ounces of silver can you buy with one ounce of gold.  

Right now, an ounce of gold will buy 85 ounces of silver.  That is the highest level in about 25 years, and even more advantageous for trading than our example! 

gold to silver ratio chart at 80-1

We strongly recommend trading gold for silver with the ratio this high.  

Our example using the spot prices of gold and silver, is for purposes of illustration only because of transaction costs and since different coins and bars have their own premiums relative to the spot prices. 

Because gold and silver each have their own supply-demand fundamentals, their prices don’t move in lockstep.  Down the road as prices change the ratio between the two metals will change.  

For example, in April 2011 the ratio hit 30 to 1.

In short, the objective is to hold the precious metal poised for the most rapid appreciation.  Because silver is underpriced relative to the gold price, it’s is a favorable time to trade gold for silver.  I don’t want you to miss the opportunity to add to your precious metals holdings without investing additional money.

The gold-silver ratio doesn’t tell you where the price of either metal will be next month or next year.  But at 85 to 1, it is very persuasive evidence that the price of silver is low relative to the gold price.  

So that is the secret strategy professionals use to increase their holdings of gold and silver.  Many of our clients and I, myself, have used this powerful strategy for years to substantially increase our precious metals holdings.

I urge you to speak with your RME Gold professional advisor about this strategy.  

After all, why should the professionals get all the profits?

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gold charts up

Reason #4,397 to Own Gold

Gold Market Discussion

Reason #4,397 to Own Gold

They just never stop.  The people who want to control your life, your money, and your wealth, that is.

They never stop!

After watching the authorities destroy 96 percent of the purchasing power of the dollar, after watching all the bubbles they inflate that then pop in a spectacle of widespread disaster, one wonders what claim that should have on managing anybody’s affairs.  

It’s like watching the giants on Wall Street lined up with their tin cups in Washington begging for handouts from everyday Americans who didn’t speculate recklessly on toxic mortgage securities.  

And these are the financial institutions, the advisors, and geniuses we should trust with planning our affairs, our savings, investments, and retirement plans?  When they can’t even manage their own affairs?

Alright.  That’s enough ranting. 

But they never stop wanting to get their hands on your wealth.  

Here’s the latest.

Something called the Independent Commission for the Reform on International Corporate Taxation has jumped on board a proposal to launch a “global wealth registry” using blockchain technology

A proposed pilot program would require the registration and tracking of private assets in things like real estate, gold, and other financial assets in proposed amounts of $10,000 or more.

One of the targets of the program is “wealth inequality.”  And more efficient taxation.  

So virtually everything – stocks, real estate, savings accounts, checking – every conventional investment and form of wealth you own is already registered in on form or another with someone.

In fact only precious metal allow you to hold the world’s most time-tested monetary assets anonymously.  

We think that is a good thing, especially in an era of unrestrained snooping by governments and mega-corporations.  

https://www.economicpolicyjournal.com/2019/03/picketty-and-stiglitz-call-for-global.html

And that is reason #4,397 to own gold.

Speak with an RME associate today to find out how to maintain your privacy in an era of intrusion with gold and silver.  Simply call our office, (602) 955-6500, and you will be connected to one of our knowledgeable gold and silver professionals.

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$10,000

$10,000 Gold?

Gold Market Discussion

When the US Defaults…

Well.

The conversation is certainly changing.  

Not so long ago the suggestion that the US might default on its debt was considered slightly reprehensible in mainstream circles.

But we noticed an article on Fox Business News the other day from the principal of a Dallas investment firm asking just how an inevitable default should be managed. 

Todd Stein writes that the answer may be a “soft default.”

And $10,000 gold.

Here’s what he suggests:

“The Treasury would peg the dollar to gold, oil, natural gas or silver — or perhaps a basket of those commodities. By choosing a weak valuation, for instance, $10,000 per ounce of gold, compared to the current market price of roughly $1,290 per ounce, much of the debt could be paid down thanks to a much weaker dollar.”

The soft default he describes is the rough equivalent of a massive devaluation of the dollar.  It is a recognition of US insolvency.  

A soft default is the least bad of bad options.  The alternative is a hard default, the State’s repudiation of all or most of its debt.

“To be clear, a soft default isn’t a good idea., writes Stein.  “It certainly isn’t moral. It’d hurt everyone who socked away money in bonds, certificates of deposit or savings accounts.”

“But realistically, a default of some kind will happen anyway — simply put, the debt load isn’t sustainable.”

The governing classes, and their fiscal and monetary officials have put this country and the American people between a rock and a hard place.  

But it’s good to see the curtain being pulled back on their malperformance.  It’s good to see the conversation changing.  

But we also think it is good idea to get out of the way before dollar holders are victimized by either a de facto devaluation or a default.  

Owning gold is the best way to do that.  

Now.  

Before it is $10,000.

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The Doom Loop

The Doom Loop

Gold Market Discussion

Washington has us in the “Doom Loop”

Call it what you like.  A vicious circle.  A downward spiral.  The point of no return.  

I prefer to call it The Doom Loop.

Here’s an example.  Suppose your business has to borrow a dollar to make 90 cents.  You’re headed for big trouble.

Here’s a better example of the Doom Loop.  Thinking to spur growth – increased productivity, more taxable activity – the government borrows and spends a lot of money.  

But the growth doesn’t materialize.  So it borrows and spends more.  

Still, growth lags behind the rising debt.  More borrowing and spending.

The hoped-for increases in productivity and therefor higher tax revenue fails to materialize.  

But all the borrowing has a cost.  Debt compounds.   Compounding debt means more borrowing despite lagging growth.

Now we’re in the Doom Loop.

And that’s the situation Washington has gotten this country into.

US debt has passed total US productivity.

We reached the crossover point in the fourth quarter of 2012, at the end of Obama’s first term, when the debt surpassed the GDP for the first time since the World War II era.   

US GDP at the end of 2012 was $16.24 trillion.  US debt was $16.43 trillion.

Soaring National Debt

Today the national debt has climbed more than a trillion dollars past the nation’s total productivity.  2018 GDP was $20.89 trillion (an update of the 2018 estimate is due out in days).   The national debt is $22.03 trillion.

Take a look again at the chart we provided in our recent post It’s When… Not If!  It shows US Debt in red blowing right past US GDP.  And the debt is climbing at a steeper rate.

Economists talk about the marginal productivity of debt:  How much growth do you get for each additional dollar of borrowing?  

Again, suppose your business has to borrow a dollar to make 90 cents.  You’re in the Doom Loop.

Economist Keith Weiner has formulated this into an economic law:  If the marginal productivity of debt is less than 1, the economy is not sustainable.  

Economist Keith Weiner
Economist Keith Weiner

To the extent there is any acknowledgement of this problem in Washington, the stock answer from both Republicans and Democrats has been, “We’ll grow our way out of it.”

Except we haven’t. 

We are ten years into the current economic expansion.  The average length of an economic expansion is just over three years.  The odds of the current expansion continuing are slim, the signs that the economy is slowing are plentiful.   

The Doom Loop is a global phenomenon.  The IMF says that global debt is now equal to $184 trillion which is 225 percent of global GDP. 

How can you escape the Doom Loop?

Don’t expect the government to deal with the problem.  When President Trump’s advisors showed him graphs of the coming “hockey stick” debt spike, he merely shrugged, “Yeah, but I won’t be here.”  

Economist Weiner says,  “It is time for gold to enter the mainstream monetary discussion. Interest rates and the marginal productivity of debt do not fall when there is a free market in money and credit. And the market will choose gold, if it is free to do so.”

But you can choose gold.  Speak with an RME associate today to find out how to protect yourself from the Doom Loop.  Simply call our office, (602) 955-6500, and you will be connected to one of our knowledgeable gold and silver professionals.

Politicians and government will not choose gold.  Printing money is a source of power.  It is a major means of vote-buying.

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now is the time to buy gold bars

Mish Calls for Gold Before Dow’s 460 Point Drop

Gold Market Discussion

Now is the time to buy gold!

One of our favorite market commentators, Michael “Mish” Shedlock from Global Economic Trend Analysis, cut right to the chase this week.

“Buy gold,” said Mish.  That was on Wednesday, two days before the Dow’s stunning 460 point drop.

Mish was watching anomalies in the interest rate market.  Wall Street figured it out later.

Mish has a great track record on the big events.  Like Ron Paul, he was a small, still, voice crying out about the housing bubble back when nobody wanted to hear it.

Now Mish is alarmed by action in the interest rate markets.  Normally longer-term interest rates are higher than short-term rates.  After all, whatever you might charge to loan someone money for three months, you would certainly want a higher rate to loan money for ten years.   You have given up the use of your money for a longer time during which market rates may change markedly, while a longer-term increases the risks that can befall the borrower and the return of your money.  

In normal markets, long-term rates are higher than short-term rates.   An interest rate inversion, when long-term debt instruments develop lower yields than short-term ones, is a classic indication of a weakening economy and of recessions.

Mish also notes rates on the 30-year government bond and concludes the market is growing “very concerned about US government deficits exceeding $1 trillion dollars for the next five years minimum.”

We think that concern is justifiable.   See our two-part comments “Debt Binging” here and here.

In the meantime…

Mish says, “Meanwhile, buy gold. The budget deficit picture will get much worse in a recession.”

We will note once again just how precarious the stock market is.  It will grow more wobbly as the deficit picture becomes more clear.

We note as well that as the European market was nearing its close on Wednesday, someone stepped in and dumped a billion dollars’ worth of “paper gold,” gold futures contracts, on the market, driving it briefly below $1300.   We don’t know who or why, but observe only that if it was an attempt to manipulate the market lower, it didn’t work.  Buyers stepped in immediately and took advantage of the lower price, quickly moving gold back over $1300.

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Jamie Dimon

Left Behind

Gold Market Discussion

The Decline of the American Middle Class

We don’t often find ourselves citing the CEOs of America’s biggest banks.  Between the bankster bailouts and the way the Fed has stovepiped wealth to the canyons of Wall Street, it’s clear that their influence peddling and cronyism has helped them at the expense of the people.  Their every pronouncement should be viewed skeptically.

But the problem of the overlooked and declining American middle class is too big to be ignored, even by them.  So today I will cite a comment from J.P. Morgan Chase CEO Jamie Dimon (whose bank had a $25 billion bailout windfall) about those who are being left behind:

JP Morgan Tower
JP Morgan Chase Tower

“Forty percent of Americans make less than $15 an hour. Forty percent of Americans can’t afford a $400 bill, whether it’s medical or fixing their car. Fifteen percent of Americans make minimum wages, 70,000 die from opioids” annually.

“If you travel around to most neighborhoods where companies live, they’re doing fine.” 

“So we’ve kind of bifurcated the economy.”

Bifurcated.  Well, that’s one word for it.

In the 1960s, America’s growing middle class was the envy of the world.  Its prosperity and reach haven’t been equaled since.  No one should be surprised that with the end of the gold exchange standard (itself a corruption of a real gold standard) in 1971, the expansion of the middle-class ground to a halt.

The Income Gap

The wealth and income gap have been widening ever since.  But the situation has gotten critical today with the frenzied wealth redistribution of today’s monetary cronyism.  Quantitative Easing saw trillions of dollars made up out of thin air and pumped right into the financial sector.

In the interest of candor, we may call this Federal Reserve activity of creating money counterfeiting.  It may be legalized by the state, but it is monetary counterfeiting none the less.  Murray Rothbard pulled back the curtain on the practice long ago:

“It would be difficult to see the point of counterfeiting if each person is to receive the new money proportionally. In real life, then, the very point of counterfeiting is to constitute a process, a process of transmitting new money from one pocket to another, and not the result of a magical and proportionate expansion of money in everyone’s pocket simultaneously.”

American Economist Murray Rothbard

Little wonder that the state and its cronies resist the discipline that an honest gold standard imposes on them.  The alchemists of old couldn’t create gold out of lead, and today’s Washington wizards can’t create gold out of thin air.

The growing divide between the rich and poor that results from Washington’s monetary sleight of hand are, incidentally, a surefire recipe for social breakdown and violence.  Even Dimon acknowledges the danger, saying, “We made a mistake by ignoring some of these things. If we don’t [act], society is going to get worse, because these problems aren’t aging well.”

We’ll go one step further and assure our readers that the problems will not get fixed.  Living through a monetary collapse is not a pleasant thing, but get ready for it.  If you know that it is coming you can protect yourself and your family with gold and silver.

Don’t be left behind.

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Whos buying billions worth of gold

Who’s Buying Billions of Dollars Worth of Gold?

Gold Market Discussion

The answer is the central banks of governments around the world.  They are on a gold-buying spree!  

And they are using money they used to keep in US dollars.  

We think they know something most people don’t know. 

In fact, we’ve seen this pattern before.  Let me explain.

The World Gold Council reports that central bank gold buying is at the highest levels since 1971.  Why is that date important?

President Richard Nixon Closed the Gold Standard 45 years ago in 1971
President Richard Nixon Closed the Gold Standard in 1971

Because that is the year the United States broke its promise to back its dollars with gold.  Until then, if for some reason the central banks didn’t trust the US dollar, they could exchange their dollar holdings for gold, no questions asked.  

But the US was printing money recklessly.  Like writing bad checks, the US was printing more dollars than it had gold to back up those promises.  

yellen printing money
Janet Yellen did her fair share of printing while she was head of the Fed.

The world’s central banks could see where this was leading.  So even before the end of dollar’s gold backing was made official, they began scrambling to get gold for their dollars.  Buyers around the world were taking down hundreds of tons of gold with their discredited dollars.  

It was a smart move.  Over the following decade, from January 1970 to January 1980, gold moved from $35 to $850 an ounce.

Central banks today own 30,000 tons of gold. But they are adding more because they see what is coming.  Like last time, they are acquiring gold fast.  And like last time, they are doing it with money they used to keep in dollars.

We have written about this revealing megatrend many times. We strongly suggest you review this material.  In More on the Central Bank Gold Rush in February, we wrote that “Russian dollar reserves have fallen over the last ten years from about $180 billion to around $10 billion today.  On the other hand, its gold reserves have jumped from 40 tons in 2006 to nearly 2000 tons today.”

Altogether in 2018 central banks added more than 650 tons of gold to their reserves.  That’s an increase of 74 percent over 2017.  And as 2019 gets underway they are still at it.

China Continues to Add More Gold

After not announcing any new gold acquisitions since 2016, China suddenly announced in January that it increased its gold holding by almost 15 percent in 2018.  As we pointed out at that time, in adding 10 tons to its gold reserves in December, “China has grown its official gold holdings by 75 percent in 3½ years.”  

china-yuan-dollars

Just weeks ago, China announced that it kept buying gold in February, the third month in a row.   India added 6.5 tons of gold in January alone and is now jockeying to be the tenth largest gold holder in the world.

Buying gold is not just for economic powerhouses

Perhaps I can underscore the purposes at work in this gold buying by pointing out that in addition to buying more gold, there is a stampede around the world of foreign governments repatriating their gold.  Countries big and small are having gold they used to leave in storage with the US Federal Reserve or with the Bank of England or Banque de France returned home. 

It’s almost like the early stages of a run on the bank as central banks seek to avoid being victimized by a coming dollar debt crisis and the reckless money printing it implies.

Germany recently completed a repatriation of $31 billion in gold from New York and London.  But what had many market observers scratching their heads is that an operation that should have taken just weeks – or perhaps a couple of months – inexplicably met delays stretching out over four years.  

Germany buying gold

So more countries began calling their gold home.  Even tiny Romania is moving to bring home its gold held by the Bank of England.

Having been through the dollar chicanery of the 1970s and the subsequent decade of high inflation, central banks are moving to put their trust in gold instead of the “printed” paper money (or, more accurately, the digital bookkeeping entries) of the world’s largest debtor.  

They see monetary upheavals ahead.  They want gold.  In their hands. 

You should to.

Our precious metals professionals believe that educating as many Americans as possible is part of our job.  If you have family members, friends, and colleagues that would like to learn why central bankers around the world are moving aggressively into gold, we can be of help.  Have them contact Republic Monetary Exchange right away.

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debt black hole

It’s When…Not If

Gold Market Discussion

Why a Crisis in Inevitible

Everyone knows – perhaps I should say “every thinking person” since there are some in Washington who don’t actually know and therefore should not be accused of thinking – that the US debt can’t keep growing forever.

When the day arrives that it is evident to all that the US can’t pay its debts except by printing money, the game is over.

When foreign governments are no long willing to buy US debt, that end game has arrived.

Because no one will want to loan money at any kind of reasonable rate knowing that they will be paid back in cheaper dollars.

Governments always count on some slippage in there, allowing them to inflate away the currency for a while before most people sit up and take notice.  And just because they begin to notice doesn’t mean that they won’t be fleeced a little more.

So, for example, if government inflation results in a ten percent loss of purchasing power over a given period, most investors will demand an “inflation premium” on government bonds to compensate for the diminished purchasing power of the currency.

If a normal interest return of, say, five percent a year is expected, a bond would have to offer a fifteen percent return.

That sort of device works for a while, but generally not for long.

After all, why should the ten percent inflation rate in our hypothetical example, not give way to a 15 or 20 percent rate?  Or higher.

Of course it will.  Most gold investors understand this.  

They aren’t suckers.

The rationale for government debt, going back to John Maynard Keynes, is that deficit spending will allow the authorities to “goose” the economy and get higher productivity.

But take a good, sober look at where we are right now.  We are ten years into an economic expansion.  Unemployment is said to be low, with armies of working people paying taxes.

And yet, what is happening to US debt?  Despite a growing economy and low unemployment, the debt is climbing even faster!  As you can see from the following chart, the gross federal debt (the red line) has overtaken GDP, the total productivity of the economy (the blue line).

Stated differently, a new dollar of national debt is unable to produce even a dollar of productivity.  This crossover took place in 2013.  

If the government cannot reduce its indebtedness in an expanding economy with supposed full-employment, when can it?  

Here’s David Stockman’s answer: “We are probably only monthsfrom the onset of a budgetary red ink eruption that will envelope Washington and Wall Street alike as far as they eye can see.”

Our advice is to take whatever profits you may have in stocks and move to the safety of precious metals at once.

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gold bars as investments

Why You Want to Own Gold: One Chart Says it All

Gold Market Discussion

Why Do Informed People Own Gold?

See what the Federal Reserve has done to our money:
This chart displays the purchasing power of the US Dollar under more than 100 years of the Fed’s management.

HERE’S THE PICTURE WORTH A THOUSAND WORDS!

If you’ve ever wondered where the purchasing power of the dollar has gone, this chart provides the answer.
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david stockman

News Bullet Points that Matter Right Now

Gold Market Discussion

Next week on KFYI in Phoenix, I am beginning a series of radio commercials to alert listeners to some of the major economic events taking place around the world. These events will have a powerful impact on gold and silver.  You can listen to a preview of that here:

These special messages are addressed to our existing friends and clients, as well as people who have never before bought gold and silver.  For that reason, I invite you to share them each week with your own colleagues, friends, and family members, those you think who can profit from the information and use it to protect their own wealth and families. You might even want to share this blog with them. For those of you beyond the reaches of KFYI’s airwaves, we will include the audio each week right here in the GMD.

In the meantime, here’s a sampling of recent news items, things we think our clients and readers should know, a few bullet points about insiders rushing to sell stocks, and China adding still more gold to its reserves in February.  

But let’s start with evidence that the current state of the US economy is much weaker than generally acknowledged.  President Reagan’s former budget director observes that the US economy since 2007 is a case study in underperformance, even though the Great Recession was officially declared over ten years ago.  In fact, the expansion even underperforms the pathetically weak expansion for the same period of the Great Depression following the 1929 market collapse:

“On a peak-to-peak basis, in fact, the 11-year gain (2007-2018) in real GDP came in at 18.85% and that, by your way, is less than the 19.89% gain posted during the Great Depression spanning the 11-year period between 1929 and 1940.” “From a cumulative growth viewpoint, the last 11 years have posted the weakest gain ever recorded since modern GDP statistics were invented.”

David Stockman, 3/1/19 

Stockman goes on to points out that during the 11-year period from 1969 to 1980, which encompassed the “Stagflation Decade of the 70s,” the US experienced a peak-to-peak gain of 38 percent, more than double that of the past 11 years.

Next, a quick note on the stock market’s weakness:

“Stocks fell for a fifth straight day on Friday after the U.S. government released employment data that badly missed expectations, adding to growing concerns that the global economy may be slowing down.”

CNBC, 3/8/19

And, here’s something investors should know.  Corporate insiders are rushing to sell stocks:

A category of investors who correctly picked the market’s bottom in December is retreating from U.S. stocks.

“The number of corporate executives and officers selling shares of their own companies has doubled since December while buying dwindled. Last month, insider sellers outpaced buyers by a ratio of 5-to-1, the most in two years, data compiled by the Washington Service showed.”

Bloomberg, 3/8/19

And a couple of briefs on Asia’s hunger for gold:

Physical gold demand picked up pace in major Asian hubs this week, with bullion being sold at a premium for the first time in more than three months in India, while China saw improved appetite for jewelry.

“In India, the world’s second biggest consumer of the metal after China, dealers were charging a premium of up to $1 an ounce over official domestic prices this week, up from last week’s discount of up to $2.”

– Reuters, 3/8/19

China increased its gold reserves for a third straight month in February, data from the People’s Bank of China (PBOC) showed this morning….

“John Reade of the World Gold Council notes on Twitter that the last time the PBoC reported regular monthly increases in gold holdings, it continued for 24 months.”

Mark O’Byrne, 3/8/19

Next week we’ll focus on who is buying billions of dollars’ worth of gold!

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dominoes falling

Counterparty Risk

Gold Market Discussion

One thing about gold, a defining characteristic that cannot be emphasized enough, is that it does not rely on some one else’s performance or promise.

Gold can be physically held in your hands, under your own control. There can be zero separation between yourself and your wealth– no banks to rely on, no brazen boardroom executives at the company of the stock you own. Simply put, owning physical gold is without counterparty risk.

The same is of course true of silver, which, like gold, has a long and shining monetary history.

What is counterparty risk?

It is the risk of nonpayment, default, and bankruptcy by individuals, companies, financial exchanges, institutions, and banks – quite apart from the risk of the Fed’s fiat dollar.

Gold (and silver) are the only monetary assets that are not someone else’s liability.  They are not dependent on someone else’s solvency, promises to perform, or honesty.  Their value does not depend on the endorsement or propriety of any state or state institution.

It is a wonderful thing for people’s promises to be reliable, for institutions to be vigorous fiduciaries of their clients’ interest.  The modern world with all its miracles is built on the assurance that people will meet their obligations, fulfill their contracts, and respect others’ property.  

When this environment of trust begins to fray, sophisticated civilization itself is at risk.  

I mention this for two reasons:  the monetary authorities sense of obligation to the users of its currency unit is nowhere in evidence.  And debt – personal, corporate, and governmental – has reached unsustainable levels.

Although charged with maintaining the value of the currency (price stability), the Federal Reserve’s dollar management has an arbitrary and incompatible objective:  a two percent annual inflation rate.  At that rate, the Fed is destroying half the value of its currency in 35 years.  Why save?

As for debt, corporate debt is higher than when the trouble hit the fan at the end of 2008.  Low grade debt has exploded.  The number of BBB bonds has more than tripled.  

And you know about government debt.

We saw in 2008 how liquidity and solvency problems cascade from one counterparty to another, from insurance company to hedge fund to bank.  It is in environments like this that counterparty risk becomes crucial.

Proliferating counterparty risks lead wise investors to the safe haven of gold.  But its unique advantage only applies to physical precious metals, the gold and silver coins and bullion that you own outright and have taken into you own possession.  It does not extend to paper gold, stock and other representations of gold ownership, commodity contracts, or ETFs.

Speak with an RME associate today to find out how to profit in uncertain times and protect your portfolio with gold and silver.  Simply call our office, (602) 955-6500, and you will be connected to one of our knowledgeable gold and silver professionals.

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Bryce Harper Tax Benefits

Bryce Harper Escapes Taxifornia

Gold Market Discussion

An American Tale

Today, with a socialist juggernaut loose on the land, here’s a story that I am afraid will soon become as all-American as baseball itself.  

Even casual sport fans by now know that 26-year-old right fielder Bryce Harper just signed a record busting 13-year, $330 million contract with the Philadelphia Phillies.

We’ve liked Harper ever since he replied, “That’s a clown question, bro,” to some reporter.

But it is the economics at work in Harper’s story that interests us as champions of prosperity and sound money.  It is reported that the San Francisco Giants were in the hunt for Harper, too, and were willing to pay an astronomical amount to get him.  

But they were undone by California’s sky-high taxes.  The Giants would have had to pay far more than the Phillies for Harper’s after-tax income to be the same.  So he went to Philadelphia instead of San Francisco.

Not only did he escape taxifornia by not signing with LA or SF— but he also chose the Phils, who are one of only 8 “Flat Tax” states in the country. That means whether you make $5,000 a year or, [cough], $27,538,462, you pay the same flat tax rate.

If he were to have played in California, he would have paid California state tax of $3,675,141. His total tax of his salary would have been 51.1%. 

In Philly, where he will homer his way into the Hall of Fame, he will also save some cheddar- “enjoying” a lower tax rate of 41.8%, because the state of Pennsylvania only rakes $921,000. 

That is $2,754,141 savings per year. Over the duration of his 13 seasons, (if he were to stay the duration of the contract, and the tax code didn’t change) that would be an insane $35,803,833 savings!!!!!!!

Harper’s story is only a large-scale example of calculations that are being made by people at lesser pay grades.   We are seeing a lot of this sort of thing.  Because it is hostile to wealth, the wealthy and even the not-so-wealthy are fleeing California in big numbers for tax reasons.

Charlie Munger of Berkshire Hathaway pointed out recently that places like California along with  Connecticut, and New York City are shooting themselves in the foot with their tax greed. 

“It’s been serious. Driving the rich people out is pretty dumb if you’re a state or a city,” said Munger.

It’s not just tax socialism that drives away wealth.  Central banking itself and fiat money are nothing but monetary socialism.  And you can see a corollary of tax greed in the US dollar. 

In the words of Jim Grant, “the central bank is playing with fire by actively seeking to depreciate the dollar, a currency that, whatever its current lofty status in the world, is a piece of paper of no defined value.”

As we’ve pointed out often in this space, a building US debt calamity and Fed mismanagement are driving foreign central banks away from King Dollar. 

And where are they going? 

They are going to gold.  

They’re buying billions of dollars’ worth of gold.

This flight to safety by foreign states illustrates one thing clearly.  Governments around the world may be quite happy to fleece their citizens with their own bogus paper money schemes.  

They just don’t want to be fleeced by ours.  Just like Bryce Harper didn’t want to be fleeced by California.

You shouldn’t allow yourself to be fleeced either.

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the debt ceiling

Return of the Debt Ceiling

Gold Market Discussion

We’re back in the debt ceiling zone again.

In February 2018, Congress suspended the US national debt ceiling, the statutory limit on how much money the government is authorized to borrow, until March 1, 2019.

It was the tenth time in the last decade the debt ceiling was suspended.

At that time the debt ceiling was $20.5 trillion.  With the suspension of the ceiling, the national debt has risen to $22 trillion.  

Now, for the government to borrow more, the statutory limit will have to be either suspended again or raised.  

We’ve been to this circus many times.  The government will resort to accounting gimmicks, what in describes as “extraordinary measures,” to keep operations going until sometime in September when it runs out of maneuvering room.

But it is without question that Congress will raise the debt ceiling by that time.  Just as it has done dozens of time in the past. 

That’s one of the reasons informed people buy gold.

But if the debt limit is just perfunctory, a time-consuming activity with a foregone outcome, why bother with it at all?

And that is just what a lot of people in Washington would like to do.  Get rid of the debt ceiling.  Take the spotlight off Washington’s big spending ways.  Let the government borrow as much as Congress approves spending.

But debates over the nation debt ceiling are one of the few times the people’s attention can be focused on just how deeply in debt the US has gotten.   It’s not often time is given in mainstream media reporting to a discussion of national solvency, but the debt ceiling is one.  

It’s about all we’ve got.

Now here’s a mystery question for you…

In 2006 the national debt ceiling was “only” $8.965 trillion.  When borrowing bumped up against that level, Congress voted to raise it again.  During the debate one freshman senator voted “no” on the increase.  

He rose to the floor to explain his vote.  “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” he said. 

He was right.

Q: Do you know who that senator was?

A: His name was Barack Obama.

Oh, by the way, the national debt ceiling was raised five time during Obama’s presidency, a period in which the national debt virtually doubled.

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Warren Buffett Says

Warren Buffett Says…

Gold Market Discussion

Smart (and obvious) investing advice: When Warren Buffett speaks, you listen.

Something Warren Buffett said the other day caught our attention.  

In a CNBC interview, Warren Buffett warned companies to avoid states with unfunded pension liabilities.  

It is sound advice.  And it has implications for individuals as well.

Unfunded public pension liabilities are a “disaster,” said the Oracle of Omaha.  

“If I were relocating into some state that had a huge unfunded pension plan, I am walking into liabilities,” Buffett warned. “Because I mean, who knows whether they’re going to get it from the corporate income tax or my employees — you know, with personal income taxes or what. But that — that liability isn’t going — you can’t ship it offshore or anything like that. And those are big numbers, really big numbers…. they will come after corporations, they’ll come after individuals. They — just — they’re going to have to raise a lotta money.”

Undoubtedly.

They will come after the money

Buffett’s logic must be applied to the financial behavior of the United States government.  Because the problem of a state’s unfunded pension liabilities are chickenfeed compared to the unfunded pension liabilities of the US.

You know that the US national debt is now $22 trillion dollars.  But that’s just the visible part of the debt.  The hidden debt includes the government’s unfunded pension and other liabilities.  These are IOUs and other promises the government has made to workers, retirees, and others that are inadequately funded. 

An honest measure of its indebtedness should include promises the government has made to pay for things.  That’s how we reckon debts in the real world.  Instead, the US uses Bernie Madoff accounting.  More about the fanciful world of government accounting HERE.

US unfunded liabilities are estimated to range between $123 trillion and $210 trillion.

That’s not chickenfeed.  

Now, Buffett is right.  State will seek to solve their problem of unfunded liabilities with income taxes and corporate taxes.  

But, oh, how the states would love to be able to do what the US government can do.  How envious they must be of the federal government’s ability to just print the money.

It’s a time-honored technique of governments throughout history.  And while everybody notices when the tax bite gets bigger, most people don’t understand that the declining purchasing power of their money is a tax on them as well.  The new money the government prints to pay its bills takes on purchasing power to the exact extent the money you have in your pocket or in the bank.

It’s taxation by sleight of hand.

Buffett warns that states with unfunded liabilities are money pit that can be avoided by staying away from those states.  But the US government money pit is not as easily avoided by Americans.  Most of us can’t just pack up and move away and most of us don’t want to.  

But we can take prudent steps to insulate ourselves from the government’s inevitable currency destruction.

Find out how by speaking with an RME Gold associate.

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Federal Reserve Eagle

The Precarious Fed

Gold Market Discussion

Do You Really Think This Can End Well?

We do occasionally run into someone who doesn’t understand our beef with the Federal Reserve.

You would think having destroyed 96 percent of the dollar’s purchasing power since it  went into business in 1913 would be reason enough to be dissatisfied with the Fed.  Not to mention engineering the worst economic upheavals in the country’s history, events like the Great Recession and Housing Bust, the Inflation Crack-Up and double-digit interest rates of the 1970s, or the Great Depression.

For those who don’t see the hand of the Fed behind those calamities, we can only point to the Fed’s serial stock market bubbles and ask, “Do you really think this can end well?”

By “this” we mean the Fed’s slavish relationship to Wall Street and the money center banks.

To illustrate the precariousness of it all, we have attached a chart overlaying the Fed’s interest rate suppression of almost forty years (the brown line) with the heights to which  it has driven the stock market (the blue line) represented by the Wilshire 5000 Total Market Index.

Having created the double-digit interest rates of the 70s, the Stagflation Decade, the Fed engineered the record high rates seen on the left-hand side of the chart beginning in the early 80s.  It has spent the following decades driving interest rates down.  Along the way the Fed has made its role as the handmaiden of Wall Street explicit.  You can see the result:  artificially low rates have made borrowing cheap and provided a major subsidy for Wall Street.

Look carefully at the decades of falling rates.  Down, down, down.  Year after year of interest rate suppression.  The Greenspan Fed.  The Bernanke Fed.  The Yellen Fed.  

And when the current Fed chairman, a fellow named Powell, thought he would change things, he was handed his lunch.  In a prior post, we noted the speed with which Wall Street was able reverse even a modest effort by the Fed to normalize interest rates.  

Wall Street’s temper tantrum, The December collapse of stock prices, drew a quicker response than the government shut down.  

The Fed’s about-face was total.  “Raise rates?  Why, no sir.  Never had any such thing mind.”

So, for all the aforementioned Fed calamities, this stock bubble promises to be the biggest and baddest of them all.

For the last decade or so, real interest rates (the nominal interest rate minus the inflation rate) have been bumping along near zero.  Wall Street has loved it.  But now ask yourself, if it takes constantly lower interest rates to sustain the stock market, how much lower can rates go?

Not only is the answer not much, but all the economic fundamentals militate for higher rates.  To provide one example, observe the growing revolt against America’s international sanctions regimes.  Foreign countries have discovered they don’t like being told where they can buy the energy they need to keep warm in the winter, or who they may or may not sell their goods to.  And they don’t want their dollar accounts frozen by Washington bureaucrats.  Already foreign buyers presence in the US Treasury market is described as “fading.” Their search for alternatives to dollar jeopardy eventually will mean the US will have to offer higher rates to sell its debt instruments.

What we are saying is simply this:  The stock market is a bubble of enormous proportions.  The Fed will try to keep it inflated, but eventually it will fail.  Eventually rates will rise.

And as always, the bigger the bubble, the bigger the bust.

That’s just one reason why you should own gold.

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rising interest rates

The Fed and Rates

Gold Market Discussion

Fed Chairman Powell Reconsiders Interest Rates

In trying to explain the complexities of interest rates, inflation, money and banking, exchange rates and business cycles to my students, I leave them with this comforting thought: Don’t blame me for all this, blame the government. Without the interference of government, the entire topic would be duck soup.”

Murray Rothbard

In December, the Federal Reserve raised its Fed funds interest rate target to 2.5 percent.  It clearly expressed its intent to hike interest rates at least a couple of more times in 2019.

But the stock market threw a fit.  In seven consecutive trading days, the Dow Jones Industrials fell at least 350 points six times.  In no time at all the DJIA gave up 4,000 points.

Fed chairman Jerome Powell felt the heat.  And he saw the light.  Additional interest rate hikes are off the table for now, Powell having observed that the case for rate hikes had “weakened.” 

Fed Chairman Jerome Powell

Not for the first time Wall Street demonstrated its veto power over Fed actions.

And the stock market has returned to its December highs.

For those of us that understand that interest rates, the costs of borrowing and returns on lending,  are simply prices, the price of money, the entire episode reveals the madness of the monetary authorities.  Prices are not just arbitrary things.  They communicate vital information about supply and demand.  When, instead of moving freely, prices are set arbitrarily by government authorities, they create harmful and wasteful conditions.   

Prices that are set artificially low create harmful shortages, while those that are set above what real conditions of supply and demand would dictate create wasteful surpluses.  

In the process vital information that directs valuable resources to where they are most needed by producers and savers and consumers is corrupted.  Think back no further than the 2008 housing bust when artificial interference in mortgage lending and rates deceived builders and sellers and lenders about the extent of credit worthy buyers.  When reality was finally revealed, the artificial boom was followed by a painful bust.

Yet central banks are like wrecking machines for crucial information about real conditions of credit.  And while the Fed’s low rates are what its Wall Street overseers want, they are harmful to persons on fixed incomes that depend on interest income.  They encourage older people and retirees to take investment risks that are inappropriate to their circumstances.  They are harmful to pension funds that are underperforming and will soon ask to be bailed out by the taxpayers.  The are a disincentive to savers and encourage speculation.

Interest rate interventions by central banks would be funny if they were not so destructive.  Frantic Fed officials changed interest rates 23 times in 1978.  Financial planning and business decision-making became almost impossible.  

But interventionism is compulsive with central bankers, and not just with the Fed.  Here’s a sample of actual headlines about recent central bank activities around the world:

  • Sri Lanka holds rates, cuts reserve ratio another 100 bps
  • Jamaica cuts rate 25 bps, reserve ratio to boost inflation
  • Tunisia raises rate 100 bps to curb inflationary pressures
  • Egypt cuts rate 100 bps after hitting first inflation target
  • Mozambique holds rate after 9 cuts in prudent policy

The point is that monetary meddling is a world-wide phenomenon.  It is an occupational hazard of central banking and fiat money regimes.

But back to the US and contemporary events, where, the Fed having spoken, the stock market has done a complete 360 in recent weeks, and we’re back where we were.

One thing is different, however.  The Fed’s theoretical objective in raising interest rates was to somehow mop up or sterilize all the mad money printing of Quantitative Easing.  Before that liquidity leaks into the general economy and wreaks havoc with consumer prices.  

Now we know that the QE trillions will not be neutralized.  

One of the most basic principles of economics was made memorable in the oft-repeated aphorism of Milton Friedman: “There ain’t no such thing as a free lunch.”  So, who pays for the QE lunch?  The Fed has decided that the cost of a QE clean-up is too high for its crony constituency.

Said differently, the trillions of dollars the Fed created with QE will exact a cost, a very high cost.  But the Fed is not willing for it to be borne by the financial institutions it serves.  

The gold market has taken note of all this.  While the stock market is back where it was at the beginning of December, gold did not return to its December lows where this turn of events began.  Because gold discounts central banking machinations and paper money frauds, it has convincingly marched higher throughout the entire episode. 

Afterall, gold always shows up wherever and whenever monetary shenanigans are afoot and currency destruction is in the works.  

Like here and now.

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gold bars stacked

Certain Uncertainty

Gold Market Discussion

Gold Continues to Rise

Reporting on a $23 jump in the price of gold the other day, The Wall Street Journal headline read, “Gold Surges on Elevated Geopolitical Uncertainty.”  

We stopped right there.

When a market makes a big move – any market, stocks, oil, bonds, gold – financial writers have to explain it.  In the gold market, if they don’t know exactly what’s behind the move, they can always fall back on “uncertainty.”

That’s probably because the mainstream press always seems to expect as a certainty that the conventional wisdom will prove out in the end, and anything contrary to the conventional wisdom is “uncertain.”  Politicians, they trust, make good decisions for their nations, the monetary authorities know what they are doing, deficits don’t matter, we’ll grow our way out of it, and so on.

Perhaps we flatter ourselves in believing we know better, but we have long memories and are familiar with a rich history of precedents.  We think that where your money is concerned it is wise to be skeptical of the conventional wisdom of the financial press.  Indeed, we suspect that politicians are just as likely to be self-serving, that the monetary authorities don’t know what they are doing, that we cannot spend our way to prosperity.  

In any case, we like to think for ourselves.  And in most cases what the mainstream press calls “uncertainty” is not uncertain at all.  

We invite out clients to review the past six months of these posts.  You will find that we have identified a risky stock market that is sustained only by the Fed’s policies, a flight to quality among wise investors world-wide, including new gold-buying priorities by central banks, a world of troubled paper currencies, a badly deteriorating US debt picture, abounding financial bubbles (like student debt), the dollar reserve standard breaking down, a deteriorating domestic business environment, political uncertainty, fracturing geopolitical relations, a socialism juggernaut loose on the land… shall we go on?

Instead, help yourself to our comprehensive commentary about these and many other topics.  The mainstream media may be uncertain, but you will understand why we view higher gold prices as a certainty.

If you would like to know more about recent market action and learn how you can protect yourself and your family with precious metals, call your RME Gold broker.  If you do not have one, simply call our office and you will be connected to one of our knowledgeable gold and silver professionals

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American debt

Debt Binging: Part Two

Gold Market Discussion

Now That We’ve Passed $22 Trillion…

At $22 trillion of debt, the benchmark the US government hit just days ago, we’re up in the nose-bleed section somewhere.  

Just how bad is it?  In an earlier post we pointed out that the trillion dollar debt the US added in just the last eleven months was more than the Republic accumulated through the Revolutionary War, the War of 1812, the Louisiana purchase and Seward’s Folly, fighting the Civil War, the Spanish American War, two world wars, Korea and Vietnam, and putting a man on the moon.  

The US did all that without accumulating a national debt of $1 trillion.

Now we add a trillion dollars of debt in less than a year.

The National Post, a Canadian newspaper, has done Americans a service with piece called “The utterly unbelievable scale of US debt right now.”  

It even gives you a glimpse at just how inexpensive gold is right now with respect to the unpayable US debt.  We’ll get to that in a minute.  

But first, a few bullet points.  

  • The US debt is higher than the combined market value of all the Fortune 500 companies combined.
  • Just with the money the US spends on interest, it could run Canada or Mexico.
  • Debt from just one Trump term could pay for another World War II.
  • This is all happening, not during a depression or even a recession, but during “good times.”

Here’s the part the puts the price of gold into perspective.  

The article points out that at today’s price, just the debt accumulated during the Obama years would be enough to buy all the gold that has ever been mined in history.  “Every nugget pulled out of the Klondike, every ounce plundered from the Aztecs, every gold bar leach-mined out of Australia:  it all adds up to about 190,040 tons, or 6.7 billion ounces.  At the current price of about $1300, the world’s gold hoard would be just enough to pay off the US debt accumulated between 2009 and 2016.”

gold mining carts

The US has a lot of irredeemable dollar debt out there.  Let me put it another way.  Think of an inverted pyramid, an enormous mass of debt all balancing precariously on a teeny-tiny tip of gold, which is real liquidity.   

Talk about unstable!

Today’s gold price in so low in comparison to the debt mass resting on it, that it is easy to see how a world-wide awakening to this unsustainable debt binge will create a gold rush of unprecedented proportions.  

Call your professional RME gold broker to find out how to beat the rush.

The US is in denial.  Its debt binging is obviously a chronic condition like alcoholism or drug addiction.  It obviously needs help.  

Maybe Canada could stage an intervention.

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US Debt

U.S. Debt Breaks $22 Trillion Barrier

Gold Market Discussion

Debt Binging!

We can’t let this benchmark event pass without remarking on it.  

The US national debt hitting $22 trillion, I mean.

It’s quite an achievement.  All of that money, all $22 trillion of it, had to be borrowed.  And borrowed it was, despite the fact that every lender knows it can never be paid back – except by borrowing more tomorrow.  

It’s sort of like a Ponzi scheme.  It’s quite an achievement for a sketchy borrower!

debt running out of time

The US broke the $22 trillion borrowing ceiling on Monday, February 11.  

Just to review, its borrowing reached $1 trillion during President Reagan’s first term.  It broke above $10 trillion at the end of Bush the Younger’s presidency.  And hit $20 trillion at the end of Obama’s tenure.

Imagine that.  The national debt doubled during the Obama presidency.  Who would have thought?

Think about this for a moment.  America won its independence in the Revolutionary War, fought the War of 1812, made the Louisiana purchase and that of Alaska, fought a Civil War, the Spanish American War, two world wars, Korea and Vietnam, and put a man on the moon – all without accumulating a national debt of $1 trillion.  

And yet the debt climbed another trillion dollars in just the last 11 months.  (It hit $21 trillion last March.)  

Well, the only thing changing about the debt trajectory is that it keeps getting steeper.  

Worse, still, is that there is no coalition in Congress to do something about it.  Out of 535 members of Congress, only 7 voted last year to reduce federal spending.  

So, I think we can all see where US debt binge is headed.

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Central Bank of Russia

More on the Central Bank Gold Rush

Gold Market Discussion

Central Banks Continue the Gold Rush

The importance of the rush of the world’s central banks to buy gold cannot be over-emphasized.  After all, how could a class of gold buyers that already own 30,000 tons of gold and are intent on acquiring more not deserve our full attention?

We think that this move to gold is a megatrend in the making, but one that is being largely overlooked by others.  We want our clients and readers to be among to most informed about it.

Central bank gold buying is not just gold positive.  Because much of the money that they are using to purchase gold comes from their dollar reserves, it is dollar negative as well.  

As an example, Russian dollar reserves have fallen over the last ten years from about $180 billion to around $10 billion today.  On the other hand, its gold reserves have jumped from 40 tons in 2006 to nearly 2000 tons today.

Recently we reported on what we described as “aggressive” gold buying by China, boosting its gold position by 75 percent in 3½ years.

Like Russia and China, many central banks having been adding to their gold reserves right along, but it is notable that the central banks of countries that have been absent from the gold market for years are buying again.  That includes India, Thailand, the Philippines, Egypt, and Poland.  

Here is a brief description of the trajectory of central bank gold buying as reported by the World Gold Council:  

“Central bank gold reserves are rising. Net purchases totaled 351.5 tons in the first 10 months of 2018, up 17 percent year-on-year and the strongest showing since 2015. Momentum is growing too, with net purchases of 148.4 tons in the third quarter alone, up a full 22 percent year-on-year.”

Little noted in the popular press, foreign gold buying foreshadows changes in the US dollars’ status.  The dollar and its risks are the unstated focus of their analysis when foreign central bankers explain their new gold rush.

A Russian central bank official says gold is a “100 percent guarantee from legal and political risks.”  Hungary, which has increased its gold holdings by ten times in recent years, describes gold “as a major line of defense under extreme market conditions or in times of structural changes in the international financial system or deep geopolitical crises.”

We couldn’t have said it better ourselves.

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Turkey

Monetary Scapegoats

Gold Market Discussion

We spotted a foreign news story the other day that is right out of the paper money fraudsters’ playbook.  We wanted to highlight it for you because it is a play that governments and central banks run again and again, seeking to deflect blame from themselves for their destructive practices.

Turkey’s monetary policies have been like those of most of the world:  its central bank has been destroying the purchasing power of the currency with money printing.

Why does money printing destroy purchasing power?

Here’s a recent comment by economist Don Boudreaux:  “Wealth is goods and services; wealth is not money. And so to create more money without creating more goods and services is to create, not more wealth, but only more inflation — along with the distortions and uncertainties that inflation unleashes.”

That’s it in a nutshell.  So, Turkey’s money printing is destroying the lira.  The annual inflation rate hit about 25 percent in the last quarter.  Food prices have been rising at a 30 percent rate and higher.  

But what we wanted to call to your attention is the way the government is scapegoating others for its own currency destruction.  The government is on a tear, issuing fines and demonizing farmers, wholesalers, vendors and anybody else it can for high food prices.  It calls them terrorists and traitors.

President Erdoğan says, “The government will finish off those terrorizing wholesale food markets in no time, the way it finished off those terrorists in caves.”

Turkey President Recep Tayyip Erdoğan

All of this will drive commerce to the black market, and suppress production, in turn driving prices higher still.

We see the same pattern often and elsewhere.  And not just in places like Turkey and Venezuela.  When the British were busy destroying their currency in the 1950s, Harold Wilson, the eventual prime minister, blamed “the gnomes of Zurich” for their crisis.   Nixon blamed international money speculators when he took the dollar off the gold standard.  

Consider this just an early warning about events to come here in the US, where money printing has been escalated to heights that make Turkey’s problems look insignificant.  When the effects become conspicuous, and our own government begins looking for scapegoats for its monetary malfeasance, you will know that draconian policies are close at hand.

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Gold and silver

The Bullish Picture of Gold and Silver

Gold Market Discussion

Just over two weeks ago gold broke through the $1,300 per ounce level.  At the time we described for you the technical picture for gold, writing, “Gold’s bullish outlook is also confirmed by a look at the charts.  This week gold’s closely watched 50-day moving average broke above its 200-day moving average.  This ‘crossover’ is a widely regarded bullish indicator.”

Gold has had no difficulty staying above $1,300 since then, closing in New York on Friday at $1,318.

Now a similar technical picture is developing in the silver market.  Silver’s 50-day moving average turned up sharply about three months ago.  Now it is within just a few cents of moving above its own 200-day moving average.  As with gold, this crossover is taken by chart-watchers to be an important bullish indicator.

It has been more than three years since the last time silver’s 50-day moving average broke above the longer-term average, and in fact it was a technical event that heralded a powerful move higher in silver.  

In the space of just a few months from its 2016 crossover, silver climbed from below $15 to over $23 dollars per ounce.  

We think the economic background, the fundamentals that impact the dollar, are much more bullish now that they were three years ago!

Those fundamentals include Federal Reserve policy confusion, years of unassimilated money printing, obvious turmoil in the stock markets, and rising geopolitical temperatures.  

The socialist juggernaut that has been unleashed in this country looks to us to be unstoppable as well.  It should be kept front and center in your financial planning.  The only thing it can deliver is poverty… and much, much higher gold and silver prices.

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shelter from the storm

Follow up on Bonds

Gold Market Discussion

Shelter from the Storm

The US Treasury’s borrowing needs are about to explode, as we wrote last week, and for more reasons than growing deficits.  

Consider the convergence of some of the contributory factors:

The Fed has proposed that it will clean up its balance sheet, swollen by Quantitative Easing (QE), with Quantitative Tightening (QT).  That means when bonds in its portfolio mature, the Fed isn’t rolling them over into new bonds as it had done along the way during the QE phase of its operation.  But the Treasury can only redeem bonds today – including the Fed’s maturing bonds – by selling new bonds tomorrow.  The net effect of QT is that a much bigger supply of bonds needs to be absorbed by a straining market.  For 2019, the Fed planned to reduce its holdings by $600 billion.  

At the same time, and as we have been warning, the global dollar reserve standard is winding down.  In 2000, 72 percent of global foreign exchange reserves were in dollars.  Now it is only 62 percent.  Like reducing the presence of the Fed in the Treasury market thanks to QT, the falling appetite for US debt from foreign central banks means reduced buying presence in the market as well. 

Well, what could be worse than the removal of two major buyers – the Fed and foreign central banks – from Treasury auctions?  

How about this.  At the same time buyers are disappearing, the Treasury has more bonds to peddle.  A lot more.  

Trillions more.

Let me repeat that last part.  The Treasury is looking at having to sell trillions of dollars of additional bonds because now the US is looking at trillion-dollar annual deficits each year as far as the eye can see.  

More supply.  Fewer buyers.

To cut to the chase:  There will be buyers for all of those bonds.  But only when they pay far higher interest rates.

And higher rates increase the cost of funding government debt.  They widen the deficits, which means even more bonds must be peddled.  Or taxes must be raised, which is another drag on the productive and tax-paying economy, once again widening the deficit.  

Because reducing spending is off the table, everything the government does about the deficit and debt from this point forward perversely widens the deficits.  

We have written this piece so far without resorting to a cliché about “a perfect storm.”  

But that is exactly what it is.

Last week we wrote that “some Treasury advisors are aware of the incremental, intersecting borrowing demands ahead.  But they aren’t trying to figure out how to stop it.  They are scratching their heads trying to figure out how to keep the game going.”

Typically, these “solutions” will require that certain individuals, plans, funds and institutions must hold US Treasuries whether they want to or not.  That may mean savings accounts, retirement plans, trust accounts, and investment businesses. Of course, nobody has to mandate good investments.  

Only those you wouldn’t choose must be mandated.  

In times like this, only gold offers shelter from the storm.

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detroit skyline

Market Notes and Quotes

Gold Market Discussion

Sometimes key insights and financial news, things that shed light on the value of the dollar, the solvency of the country, and gold, come our way at a furious pace.  

As part of our commitment to keep our clients and readers informed, we occasionally assemble them in one post.

Cities Can’t Pay Their Bills

“According to a recent analysis of the 75 most populous cities in the U.S., 63 of them can’t pay their bills and the total amount of unfunded debt among them is nearly $330 billion. Most of the debt is due to unfunded retiree benefits such as pension and health care costs.

“This year, pension debt accounts for $189.1 billion, and other post-employment benefits (OPEB) – mainly retiree health care liabilities – totaled $139.2 billion,” the third annual “Financial State of the Cities” report produced by the Chicago-based research organization, Truth in Accounting (TIA), states.”

  • Hartford News Times, 1/31/19

Student Loan Crisis Goes Unmentioned

Student Loan Defaults

Overlooked in the State of the Union Address was “the truly record-breaking $1.465 trillion that Americans face in outstanding student loan debt. Though that figure was measured in November 2018, Politico education reporter Michael Stratford noted that the pending student debt now totals roughly $1.5 trillion.

“… Student loan debt has been cited as one of the reasons for declining homeownership and, only projected to worsen over time, economists worry that it could pose other serious financial risks.”

  • Fortune, 2/6/19

Gold:  The Bubble Alternative

“The essential attribute of gold is that it is a contra central bank asset. It’s the one asset that can’t be influenced, manipulated, created or destroyed, for that matter, by the central banks. It’s the one asset that history has proven, without a doubt, can retain its value regardless of the mayhem and financial disorder caused by governments…

“Gold is the alternative asset to a bubble ridden financial system that is driven by the central banks.”

– David Stockman, quoted in USAWatchdog, 2/6/19

UN Warns of Currency Wars

According to the UN report, continuing or hiking tariffs between [the US and China]  would have an unavoidable impact on the “still fragile” global economy, including disturbances in commodities, financial markets and currencies.

The UN trade conference report said, “One major concern is the risk that trade tensions could spiral into currency wars, making dollar-denominated debt more difficult to service.  Another worry is that more countries may join the fray and that protectionist policies could escalate to a global level.”

… A currency war occurs when nations deliberately depreciate the value of their domestic currencies in order to stimulate their economies.

  • CNBC

Bad News for 25 Million Americans Who Expect Their Pensions Are Funded

“Total unfunded liabilities at U.S. state and local public defined benefit pension plans are about $1.4 trillion — more than three times their pre-financial crisis level. After a decade of strong investment returns, the funded status of public pension plans continues to worsen. The next economic downturn will deliver the coup de grâce to some public pensions. As the probability of defaulting on promised benefits increases with falling asset prices and bloated pension liabilities, retirees nationwide will face the grim prospect of receiving greatly reduced benefits during their golden years.”

– The Hill

Central Banks Own Gold

Alan Greenspan

“If the dollar or any other fiat currency were universally acceptable at all times, central banks would see no need to hold any gold. The fact that they do indicates that such currencies are not a universal substitute.”

– Alan Greenspan

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Buy gold now

Central Banks are on a Gold Shopping Spree

Gold Market Discussion

Central Banks Continue Agressive Acquistions of Gold

The world’s central banks were aggressive gold buyers in 2018, according to a new World Gold Council report.  The banks’ gold acquisitions jumped an astonishing 74 percent over the year before. 

Altogether central banks added 651.5 metric tons to their official gold reserves in 2018, according to the WGC.  

Driven in part by the central bank buying, the most in 50 years, overall gold demand jumped 4 percent for the year, 

Alistair Hewitt, the WGC Head of Market Intelligence, summed up the findings:

“Gold demand rose in 2018 and, although the US dollar gold price was down 1% over the year, it outperformed many other financial assets. Worries about a slowdown in global growth, heightened geopolitical tensions, and financial market volatility saw central bank demand hit its highest level since Nixon closed the gold window in 1971, the volume of gold in European-listed ETFs reach a record high, and annual coin demand leap 26 percent.”

Demand for gold ramped up dramatically toward the end of the year.  Zeroing in on the last quarter of 2018, October-November-December, the WGC reports, Overall demand increased 16 percent in Q4 21018, compared with Q4 2017, while total investment demand grew 35 percent Q4 2018 from Q4 2017.”

“I don’t see any of the risks that investors and central banks are worried about fading anytime soon and I expect gold to remain an attractive hedge in 2019,” said Hewitt.

The world’s central bankers are much more aware of the dollar and debt problems of the United States than are most American citizens.  They are taking steps to reduce their chances of being fleeced by fundamentally dishonest Federal Reserve practices.  Few Americans are taking the same kind of steps.

Our professional RME Gold brokers believe that educating as many Americans as possible is part of our job.  If you have family members, friends, and colleagues that would like to learn why central bankers around the world are moving aggressively into gold, we can be of help.  Have them contact an RME broker right away.

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this times a thousand is a trillion

Fed to Borrow $1 Trillion to Finance Deficit

Gold Market Discussion

A Trillion Here, a Trillion There…

A Bloomberg story begins with this headline:  U.S. Treasury Set to Borrow $1 Trillion for a Second Year to Finance the Deficit.

A trillion here, a trillion there, and pretty soon you’re talking about real money.

That phrase, adapted from a quote attributed to the late Illinois Senator Everett Dirksen sometime in the 1960s, shows you just how far we’ve come.  Because the line actually was, “a billion here, a billion there, and pretty soon you’re talking about real money.”

How quickly we went from measuring federal spending by the billions to the trillions.

Well, a billion dollars isn’t what it used to be.  

Literally.  

In fact, the 1960 dollar has lost 88 percent of its purchasing power.  

How did the dollar lose so much value?  

Simple.  The Fed created a lot of money and credit out of nothing.  As a sort of shorthand, we say the Fed “printed” a lot of dollars.  The chart below is a rudimentary illustration.  The blue line on the chart below depicts the growth of the US money supply since 1960 (M1: basically spendable cash, and cash equivalents like checking accounts and other demand deposits, travelers’ checks).

The gold-colored line tracks the gold price, pulled ever higher by the trajectory of the Fed’s money printing.  

The Bloomberg story describes the Treasury Department’s plans to “maintain elevated sales of long-term debt to finance the government’s widening budget deficit, with new issuance projected to top $1 trillion for a second-straight year.”

Don’t ever forget that when the government borrows, it crowds out other borrowers.  Every dollar the government borrows is a dollar taken out of the private wealth and job creating economy.  It is true that the government spends the money it borrows, but at best government spending is just a wash.  At its worst it is a black hole for the wealth of the American people such as when, for example, it pays people not to work or not to grow crops; or it spends money to blow up schools and bridges in foreign countries and then spends more to rebuild them; or it squanders the money in private subsidies for cronies, bailouts for banksters, or windfalls for beltway bandits.  

Mainstream news sources mostly are missing the bigger government borrowing story. There is more to it than just the growing deficit that needs to be borrowed.  Several incremental additions to the government’s borrowing needs are converging at once.    

It’s a train wreck in the making.

We don’t know how far the fiscal and monetary insanity will go in this country but note that some Treasury advisors are aware of the incremental, intersecting borrowing demands ahead.  But they aren’t trying to figure out how to stop it.  They are scratching their heads trying to figure out how to keep the game going.   

More about all of that in a future post.  In the meantime, remember that one of these days even a trillion dollars won’t be what it once was.  That is not an exaggeration.  Not too long ago, watching its currency be destroyed, people in Zimbabwe were asking themselves what come after a quadrillion.

Better to own gold and not have to worry about such things.

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Venezuela's hyperinflation

The Fall of the Venezuelan Economy

Gold Market Discussion

The New Venezuela

Q:  How many Venezuelan bolívars does it take to buy an ounce of gold?

A:  Who cares?

It’s a good joke because no one we know, or can reasonably imagine, would be willing to trade perfectly good gold for bolivars, knowing full well that the bolivars taken in exchange today will likely be worth much, much less tomorrow.

Venezuela Bolivar Hyperinflation
What hyperinflation in Venezuela looks like.

But the condition of the Venezuelan economy and the suffering of the Venezuelan people is hardly the stuff of jokes.  It is a human horror story only made worse by the fact that it is not the result of some unavoidable natural disaster like a flood or an earthquake.  The deprivation forced on the country’s 32 million people is manmade.  It was entirely foreseeable.  And entirely unnecessary.  

It is the inevitable consequence of policy choices made by Venezuela’s autocrats Hugo Chavez and Nicolas Maduro and their henchmen of the left.  

Actually, as an exercise only, a price for gold in Venezuela could be established by calculating the “official” bolivar/dollar exchange rate and applying it to the dollar price of gold.  In that case, you could come up with a gold price somewhere in the neighborhood of 323,000,000 bolivars per ounce.

But even that price is fraudulent since the official currency we are using to make this calculation was itself the lowest valued currency in the world and last August was replaced with a new bolivar at an exchange rate of 100,000 of the old bolivars for one new one.

Currency prices calculated in millions, billions, and trillions and monetary units that have been subject to exchanges and replacements reveal the ruination of a country.  It is a fascinating field for monetary archeologists, like digging through the ruins and artifacts of ancient civilizations.  

But no history of economic ruin or catalog of its inevitable economic failure is ever enough to demonstrate to ideologues that socialism is the pathway to calamity.  Not the decades of contrast between East and West Germany.  Not the differences in living standards between North and South Korea.  Not the Soviet failures or the experiments of Pol Pot and Fidel Castro. 

Not the prolonged suffering of Venezuela.

Nothing looks likely to stop the socialist juggernaut in the United States.  It has begun to take hold in a manner frightful to behold.

In a forthcoming commentary I will have more to say about the prominent figures of the modern American socialist movement, politicians like Alexandria Ocasio-“Chavez”-Cortez, New York Mayor Bill “Hugo” de Blasio, and Elizabeth “Maduro” Warren.  

Their prominence and the spread of socialist ideas is a really good reason to start attending to your precious metals portfolio today.  The left is determined that America should tread the path of socialism and become the next Venezuela.   Socialism’s manifest failures are not enough to dissuade them from trying to tank what is left of our prosperity and charting a ruinous course for Americans.  

Millions of impoverished Venezuelans wish they had transferred their wealth into gold and silver while they still could.  Before their Hugos and Maduros took over.

Alas, it is too late for them.  But not for you.

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gold in the news

Gold Breaks $1,300 to Hit Seven-Month High

Gold Market Discussion

Gold Breaks $1,300

Gold broke through $1,300 an ounce on Friday, roaring up $22.70 on the day, and closing in New York at a seven-month high of $1302.50.

That’s the second time in this new year that gold has punched through $1,300.  At the beginning of the month it tested that level but didn’t hold. 

This time it held.

We see that as a highly significant technical event.  It appears the new bull is finding its legs.  We advise our clients to take any pauses along the way as a good thing, a chance to get in before the price powers through to a new and higher trading range.

Gold’s strong move on Friday was confirmed by silver as well.

Silver rose 3 percent on Friday, up $0.45 per ounce to close at $15.75.  

That is more than a confirmation.  It was a ringing endorsement.

Technically speaking, gold’s bullish outlook is also confirmed by a look at the charts.  This week gold’s closely watched 50-day moving average broke above its 200-day moving average.  This “crossover” is a widely regarded bullish indicator.

It is not just the price action that is bullish.  It is not just the technical picture that is bullish.  

The economic and monetary fundamentals are unreservedly bullish as well.  

Since we have described fundamentals in detail in our blog posts and alerts, we will simply point to three things we feel it is essential our clients know:

  1. Key geopolitical players like China and Russia are aggressively adding gold to their reserves.  See our comments HERE and HERE.
  1. Gold is at or near all-time highs in many of the world’s currencies.  More HERE.
  1. The stock market remains highly precarious.  Review our call of the market top and other comments HERE, HERE, and HERE.

If you would like to know more about recent market action and the reasons that precious metals are an imperative for protecting yourself and your family, call your RME Gold broker.  If you do not have one, simply call our office and you will be connected to one of our knowledgeable gold and silver professionals.

We urge you to do so right away.

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China adds gold in December

China Adds 10 Tons of Gold to Its Reserves in December

Gold Market Discussion

it’s China’s Turn…

Just last week we reported to you on Russia’s aggressive gold acquisition. 

We wrote, “Russia, seeking to protect itself from a dollar crisis, continues to reduce its holdings of US Treasury bonds while beefing up its gold stock at an accelerated pace.  The Bank of Russia, the central bank, bought 8.8 million troy ounces of gold in 2018, increasing its total gold holdings by 14.9 percent.”

Now we have the latest from China.

After a two-year lapse in reporting on additional gold reserves, China now shows it added ten tons of gold to its reserves in December.  That’s the first reported increase since October 2016.  

Like Russia, China’s gold acquisitions can only be described as aggressive.  From 1,054 tons in June 2015, it now boasts reserves of 1,852.  

In other words, China has grown its official gold holdings by 75 percent in 3½ years. 

As you might suspect, China’s has reduced its investments in US Treasury debt at the same time.  From August 2017 until October 2018, that part of its portfolio shrunk by five percent.

Bear in mind, that these numbers from the People’s Bank of China reflect official state holdings.  But many observers agree that there has been a tremendous flow of gold into private hands in China as well, mostly from Europe and the West.  

Meanwhile, China is experiencing its slowest economic growth since 1990.  The official growth number for China in 2018 is nevertheless positive, up 6.6 percent.  (That’s still about twice the expected 2018 US GDP growth rate.)

A deterioration of US-China trading relations threatens to suppress China’s growth even more.  President Xi has even warned his countrymen recently against “black swan” (entirely unexpected) and “gray rhino” (visible, but underestimated) economic developments.

China President Xi Jinping

Slowing growth strikes fear in the heart of China’s leaders.  The single greatest concern of Beijing’s party bosses is of a restive population, now used to an improving standard of living.  At this stage of its development, widespread unemployment among the urbanized populations would rock the nation to its core.  

Should Beijing feel the need “stimulate” its slowing economy, it has a trillion dollars of resources in the form of US Treasury instruments that will be the first to be spent.  

We offer that observation without further comment now, but will will have more to say about China’s impact on the dollar in days and weeks to come.

For now, we will just note that your best protection against our own black swan and gray rhino events is ownership of precious metals.

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gold coins stack

Sam Zell is Buying Gold

Gold Market Discussion

Sam Zell, realestate billionaire, is buying gold for the first time in his life.

It’s enough to make us sit up and take notice.  Sam Zell is a real estate billionaire many times over.  His Wikipedia entry repeatedly uses the word “largest” to describe Zell’s accomplishments.  

His company, Equity Group Investments, Wikipedia tells us, “was the genesis for three of the largest public real estate companies in history, including: Equity Residential, the largest apartment owner in the United States; Equity Office Properties Trust, the largest office owner in the country; and Equity Lifestyle, an owner/operator of manufactured home and resort communities. With their entry onto the public markets in the 1990s, Zell became recognized as a founding father of the modern real estate industry.  In addition, Zell has created a number of public and private companies in various other industries.”

“In 2006, the Blackstone Group announced the purchase of Zell’s Equity Office Properties Trust for $36 billion, which was the largest leveraged buyout in history at the time.”

Now Sam Zell is buying gold.  

In a Bloomberg TV interview a few days ago, Zell observed that “the amount of capital being put into new gold mines is a most nonexistent.  All of the money is being used to buy up rivals.”

“Supply is shrinking and that is going to have a positive impact on the price,” he said.

“For the first time in my life, I bought gold because it is a good hedge.”

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Russia ditching US treasuries

Russia Adds Gold, Surpasses China… (For Now!)

Gold Market Discussion

Russia Agressively Adding to Their Physical Gold Position

Russia, seeking to protect itself from a dollar crisis, continues to reduce its holdings of US Treasury bonds while beefing up its gold stock at an accelerated pace.  

The Bank of Russia, the central bank, bought 8.8 million troy ounces of gold in 2018, increasing its total gold holdings by 14.9 percent.

Russia is serious about gold 

Although its economy is only about 13 percent the size of China’s, with its latest purchases, Russia has now surpassed China to become the world’s fifth largest holder of gold.

Russia buying gold instead of US treasuries

Russia’s disinvestment in dollar instruments and emphasis on gold reserves is in part a response to the US-driven sanctions regime.  Gold, Russians note, is not subject to political interventions the way paper money or government securities are.  Russian president Putin has said the US dollar monopoly is “not reliable.”

Putin

Russia has made gold production a priority and is now the third largest world gold producer, after China and Australia.  The United States is fourth.

In a recent post I noted that gold is still the real reserve currency of the world and cited as evidence the rush of central banks to build their gold reserves ahead of the coming crisis.  

Total foreign holdings of US government debt securities exceed six trillion dollars.  The largest of those foreign creditors of the US are China and Japan, each with more than a trillion dollars of US debt securities.  

China's new block currency?
Russia has reportedly surpassed China as the world’s fifth largest holder of gold reserves

The threat of both increased trade conflict and militarized disputes between the US and China is very real.  In that case, as the Russian example illustrates, rising tensions carry the very real prospect of massive Chinese disinvestment in the dollar and accelerated purchases of gold – the only real alternative to their dollar holdings.

In that case, gold’s dollar price will climb to unimaginable heights.

All bets are off!

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Ben Hurt

Inflation Unchained: Part Two

Gold Market Discussion

Currencies are Being Inflated to Eventual Worthlessness

In our last post, we wrote that “A hundred years ago a dollar bought roughly 0.05 ounces of gold.  Today the dollar buys only 0.00077 ounces of gold.”

“Something changed, but it wasn’t the gold.”

Of course, the same kind of value destruction that has taken place with the dollar has taken place with currencies around the world.  That is why gold today is at or near all-time highs in 72 world currencies.

Currencies are being inflated to eventual worthlessness.

In our last post, we explained that a rising price is not inflation.  It is simply a rising price.  If the price of oranges goes up because of a freeze in Florida, that is not inflation.

If recent technological advances make new electronic miracles, like flat-screen HDTVs, more affordable, that is not deflation.  It is a drop in prices in one sector.

The classical economists understood this.  They understood that inflation is a monetary phenomenon.  Sustained price increases throughout the economy reflect state meddling or corruption of the supply of money and credit.  Governments engage in these practices for a number of reasons.  They may wish to spend more and hide the increased taxation of the people by simply printing the money.  They may wish to devalue unpayable government debt by devaluing the unit of account of that debt and pay it down with cheaper money.  Or the may wish to subsidize powerful financial interests and cronies with an inside line on monetary interventions.

Sometimes they may wish to do all those things at once.

This explains why governments hate gold.  The cannot print more gold or wave a policy wand and double the amount of gold in government warehouses.  Gold provides financial discipline on states and politicians.  

Politicians and governments around the world have gotten away with their monetary shenanigans for a long time, but the game in almost up.

Preferences are shifting everywhere.  They are shifting from paper money to gold.   Ross Norman, the CEO of Sharps Pixley in London, reports that the price of gold is at an all-time high or within a few percent of an all-time high in 72 currencies around the world.  That means that each of those currencies buys less.  

It means that those currencies are all falling against the most reliable monetary standard in history:  gold.

Inflation has been Unchained Around the World

If currencies buy less gold, they will eventually buy less of just about everything else.

That goes for the dollar, too. 

We recommend that you keep your wealth in real money that cannot be corrupted by politicians and central banks.  And we recommend that you make the move now, while you can.

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inflation chart

Inflation Unchained: Part One

Gold Market Discussion

Inflation: Prices are Rising All Around Us

They deny it.  They suppress it.  They even ignore it.  

Then it bursts out into the open and suddenly it can’t be ignored any longer.

I’m talking about rising prices.  Those of us that watch the economy like a hawk keep a close eye on things like the consumer and producer price indices.  We pay attention to the money supply figures and Fed finagling.  The statist economist tell us there’s no inflation, even while the rising costs of healthcare, insurance, education, and especially taxes are on display wherever you look.

As the saying goes, who are you supposed to believe, the government or your lying eyes?

But when inflation bursts out into the open in other venues, it’s time to believe your own eyes.  

A couple of examples this week:

The cost to mail a letter will jump 10 percent later this month.  The Postal Service is hiking the price of a first-class stamp from 50 cents to 55 cents.  The average price of Priority Mail will climb 5.9 percent.  

But that’s an old-fashioned government service.  It’s snail mail, a remnant of the pre-digital economy.   

What about the new economy?

Prices are going up in the new economy as well.  Netflix is raising prices across the board.  Its standard plan is going up 18 percent.  And that, by the way, is not the plan that snail mails DVDs to your home and therefore has to raise prices because of higher postal rates.  No, that is an all-digital plan for HD video.  

Other pent-up price hikes will follow.

Rising costs of food and goods

Now, what does the government say?  It says inflation is tame and cites the new producer price index numbers reported this week.

Let me unravel this just a little.  Even though food prices took a pretty good jump, energy prices were lower.  Gasoline, as you may have noticed at the pump, is sharply lower.  So, thanks to lower gas prices, the overall index is lower.

If the price of a single good or service goes up or down, it is not inflation or deflation.  If the price of asparagus goes up it may be because of the weather, a flood, a poor crop, an infestation, farmers switching to more profitable crops, or for some other reason.  But it should not be called inflation.

By the same token, if energy prices fall it is not disinflation.  It is simply a lower price, in this case thanks to increased US production and the easing of restrictions on Iranian exports.  

Real inflation is a monetary phenomenon, a policy consequence of the authorities.  But confusing the definitions helps the guilty parties, the monetary machinators, escape blame for their malpractice. 

 When we say the price of gold is rising, we would be more accurate to say that the purchasing power of the dollar is falling.  After all, as a monetary standard, the dollar is just a flash in the pan, compared to gold, the monetary standard of the world for a very long time (and incidentally still the real reserve currency of the world. For evidence of that look no further than the rush of central banks to build their gold reserves ahead of the coming crisis).

In fact, the dollar is about as reliable as a monetary standard as an elastic yardstick or a rubber band ruler.  Consider that a hundred years ago a dollar bought roughly 0.05 ounces of gold.  Today the dollar buys only 0.00077 ounces of gold.  

Something changed, but it wasn’t the gold.

You might see a trend there.  

This erosion of purchasing power is not limited to the dollar alone.  Failure is the ultimate fate of paper money everywhere and at all times.  More on that in my next post. Inflation Unchained:  Part Two.

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gold bars 50 day moving average

Still Time for the Gold and Silver Strategy

Gold Market Discussion

Gold and Silver Ratio: It’s Not Too Late

Both gold and silver have shown impressive strength lately.  Regular readers of these comments will note that we repeatedly urged clients to take advantage of the Gold/Silver Ratio late in 2018.   (See our December 14 post, Time for Silver to Play Catch Up! and September 30 The Gold-Silver Ratio is Making a Strong Case for Silver).

During that period, about six weeks ago, the ratio hit a high for this cycle of just under 87 to 1.  Since then, the ratio has moved lower, showing a marked downward bias in the last three weeks.  

The wisdom of our recommendation to trade gold for silver at these levels has been validated by silver’s stronger performance and a drop of almost five points in the ratio.

Trading the gold/silver ratio is a time-honored strategy that involves switching your position into the precious metals that are relatively undervalued and promises the most appreciation.  

With Friday’s close, the Gold/Silver Ratio is 82:1.  For now it continues to favor shifting your precious metals investments out of gold and into silver.  At some future date, when the ratio moves lower, the strategy will involve trading that silver back into gold WITH A NET INCREASE IN THE TOTAL NUMBER OF OUNCES OF GOLD YOU OWN!

gold and silver investments

We recommend this strategy as a means of growing your precious metals holdings over time without making additional investments.  Its chief advantage is that you are always holding precious metals, either gold or silver.

We still think there is still time at these levels to employ this strategy.

Please take a minute to review our earlier posts about the Gold-Silver Ratio.     

Trading the Gold-Silver Ratio is a preferred strategy.  It is one I have used myself for many years.  Your RME broker will explain to process in easy to understand terms.


Take a listen to our latest commercial, although it’s nothing new to readers who have already been listening for the past several months…

RME :30 Commercial- January 2019
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Fed Building

The Fed: Mighty, but Flighty!

Gold Market Discussion

Audit the Fed

Washington is a land of hypocrites.  You probably don’t need any convincing but let me give you one example because it is relevant today.

In 2010, Congressman Ron Paul’s bill to audit the Federal Reserve had 320 sponsors in the House of Representatives.  No surprise that it had so many sponsors.  Their constituents were losing their homes and jobs right and left, while the Wall Street cronies were getting bailed from the latest Fed-created market collapse.  

So, the Audit the Fed bill had a lot of sponsors.  But when the vote finally came up, it only received 198 votes and so it failed to pass.

Sponsors voted against their own bill.  The Fed, said Dr. Paul afterwards, “is a very powerful institution.”  It had gone to work and stopped the measure dead in its tracks.  

We later learned that during the Great Recession, while Americans were losing their homes and savings, the Fed had secretly loaned more that $16 trillion to some of the largest and most powerful banks and financial institutions in the world, including foreign banks and governments.

No wonder the Fed so desperately resists an audit.

I have written lately (see here) about the way the Fed quietly booms and busts the economy for its own purposes.  A small example of that power was on display on Friday, January 4, when a word or two from Chairman Powell sent the stock market climbing for several consecutive days. 

Our economy is made to rock back and forth on the words of unknown, unelected, and mostly invisible bureaucrats.  The financial community and the markets ricochet around waiting for the next throat clearing from some Fed official in the Marriner Eccles building.  

America used to be on the gold standard.  Now, says Jim Grant, we are on “the PhD standard.”  

Speaking of the PhD standard, the head (another PhD, of course) of the New York Fed, the most influential of the Fed regional “banks,” recently announced that inflation is too low!  Sure, just print a few trillion more and watch what happens.  They still haven’t figured out how to dispose of the previous trillions they printed.  The PhDs can’t even agree among themselves on what to do.  There is nothing objective about monetary meddling.  

It is little more than whim and caprice cross-dressing as rationality.

No wonder paper money always comes to a bad end.

No wonder we prefer the impartiality of gold.  

By the way, a new bi-partisan audit the Fed bill has just been introduced in this session of congress by Representative Thomas Massie, H.R. 24, the Federal Reserve Transparency Act.


Take a listen to our latest commercial, although it’s nothing new to readers who have already been listening for the past several months…

RME :30 Commercial- January 2019
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Gold Bars and Nuggets

Gold Targeted at $1,425 Over Next 12 Months

Gold Market Discussion
W

Wall Street Can No Longer Ignore Gold

Gold’s bullish performance in the face of political, geopolitical, and economic confusion is exactly what we have been expecting and writing about.

Now, even though they would like to, Wall Street – the money center banks and brokerages – are finding gold hard to ignore.

Political, geopolitical, and economic confusion?  Sure.  You can’t miss it:

  • The US government shutdown
  • Divided government, including the Democrats’ takeover of the House
  • The socialist juggernaut in American politics, personified by figures like Alexandria Ocasio-Cortez and Bill DeBlasio
  • Mixed messages in US foreign policy (in or out of Syria, Afghanistan, Iraq, Yemen?)
  • The decline of America’s and the dollar’s global economic dominance
  • Trade wars
  • Trillion-dollar deficits
  • Unpayable national debt
  • Stock market gyrations
  • Shifting interest rate messages from the Fed

All of these, and other challenges too numerous to name (okay, I’ll name a couple more:  the pension crisis and the looming student loan crisis) are forcing Wall Street to acknowledge gold as a safe haven and alternative to the dollar and the wobbling stock market. 

Analysts Very Bullish on Gold

Here, from a recent Bloomberg story, are examples of what is being said.

Goldman Sachs has “raised their price forecast for gold, predicting that over the next 12 months, the precious metal will climb to $1,425 an ounce – a level not seen in more than five years.”

A New York analyst with Standard Chartered, the British international bank, says “investors are not only closing bearish bets (on gold) but are also adding to their bullish positions.”

Cantor Fitzgerald analysts says, ““We expect the safe haven bid, and to a lesser extent, gold’s inflation hedge properties, to remain key drivers of the metal’s price in 2019, complemented by a resurgence of physical demand.’’

Now, with political, geopolitical, and economic confusion at every turn, is the time to speak with an RME Gold broker about prudent steps you can take to protect yourself and your family in the New Year.


Take a listen to our latest commercial, although it’s nothing new to readers who have already been listening for the past several months…

RME :30 Commercial- January 2019
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Its not Alive

Making Sense of the Markets

Gold Market Discussion

The Wild Ride in the Stock Market Continues… 

“Get the defibrillator!  Grab the paddles!”

The flatlining stock market was jolted into an appearance of life at the end of the week by two electro-cardio interventions:

The first jolt was the release of the employment numbers.  The Drudge Report shouted the news with this headline:  “JOBS UP BIG!  +312,000RECORD NUMBER WORKING.”

More voltage came from Federal Reserve Chairman Jerome Powell, who said the Fed is “listening closely to the markets.”  

Translation: “All those interest rate hikes we’ve been promising?  Well, we’re not that committed to them after all.”

You could almost hear the famous words of Ronald Reagan that tell you everything you need to know about political behavior: “When I feel the heat, I see the light.”   

Powell has been feeling a lot of heat, from both Wall Street and from the Oval Office.   

The Friday run up on the Dow of 746 points had traders sounding like Gene Wilder in Young Frankenstein:  “It’s alive!  It’s alive!”

Not so quick there, boys!

As usual, there is more to both of these stories than meets the eye.  For example, jobs may have been up 312,000, but the labor pool grew by even more.  It grew by 419,000.  

If the workforce increased faster than the number of jobs, unemployment must have grown.  And it did.  The unemployment rate actually rose in December 0.2 percent.  If you factor in all the people who have given up or dropped out of the labor force, the unemployment rate is much, much higher than the headline number.

As for Chairman Powell, slowing the pace of Fed interest rate hikes may cheer the floor traders and trigger some stock algorithms, but it can’t mask the real weakness in the economy.   It can’t mask the fact that Apple lost $463 billion in market capitalization since October.

That’s not just a little arrythmia; that’s a massive market coronary event. 

Powell’s shift amounts to a “so what?” That’s according to Michael Shedlock of Global Economic Trend Analysis.  He agrees that our “economic imbalances are staggering following decades of Fed officials blowing repetitive economic bubbles of increasing amplitude.”

For more on those staggering imbalances and the reasons we were able to alert you to the top of the stock market in the Fall, go here, here, and here.

One more thing:  Gold traded briefly above $1300 an ounce before it pulled back while the Young Frankenstein moment in the stock market played out.  As I noted in my latest radio commercial, gold is up more than 10 percent since August, while the stock market is in trouble.  In fact, the Nasdaq Composite is down almost 30 percent.


Take a listen to our latest commercial, although it’s nothing new to readers who have already been listening for the past several months…

RME :30 Commercial- January 2019
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Gold and silver

Gold and Silver Performance Over Last Six Months

Gold Market Discussion

A Few Words about the Last 6 Months of Gold and Silver Charts…

Gold, as I mentioned last week, remains above its 50-day moving average (MA), and moved decisively above its 200-day MA about the same time the Dow Industrials broke down below its 200-day MA.  (The moving average is the average closing price over a given number of days.)

The stock market picture is grim.  Both the 200-day and the 50-day moving averages have turned down.  In fact, the shorter term 50-day moving average broke below the 200-day shortly before Christmas.

If you understand that the trend is your friend and that these trends reflect some long-term economic realities, comparing price action to these longer-term moving averages demonstrates that the trend is not a just a flash in the pan:  It is sustained.

Silver has been above its 50-day MA since the beginning of December.  Now, like gold, it has moved above its 200-day MA.  

To state this differently, the picture for precious metals is bullish.  The picture for stocks is bearish.  Our previous posts will provide you an “intelligence briefing” on why this is so.  Please review them carefully.    And if you have any questions, simply call your RME broker.  They are here to help you protect your wealth and to profit.

Have a look at Gold the previous 6 months:

spot gold past 6 months

…and Silver the previous 6 months:

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razors edge

Watching the Fed’s Actions in 2019

Gold Market Discussion

The Fed is on the Razor’s Edge

We enter 2019 on the financial razor’s edge.

One wrong move, one little slip by the Federal Reserve, and the money supply and price inflation could explode.

That’s not just my view.  I’m citing the views of a former chairman of the Senate Banking Committee.  In a Wall Street Journal article this week, former Senator Phil Gramm and a co-author, an economist at Texas A&M, spell out just how vulnerable we are to a monetary policy error by the Fed.

Phil Gramm
Phil Gramm

They write, “A small error by the Fed in following market interest rates could cause a large change in the money supply.”

For those of us familiar with the Fed’s 105-year track record of policy errors, that is not a comforting thought.  In fact, the Fed seems to have missed every major turn in the economy in its history, especially big ones like the exploding of the 2008 housing bubble.

Just to refresh your memory, neither Ben Bernanke nor Alan Greenspan saw the housing bubble when it was in formation.  And when it burst, Bernanke expressed the view that it wouldn’t seriously affect the economy.

Wouldn’t seriously affect the economy?  The unemployment rate doubled as eight million American lost their jobs, four million homes were lost in foreclosure, and 2.5 million businesses went under.

The authors trace today’s extreme vulnerability to the Fed’s decision to pay banks for keeping deposits with the Fed, a component of Quantitative Easing.  “When the subprime crisis caused financial markets to freeze up in 2008, the Fed responded by pumping liquidity into the banking system. It also did something that was not widely discussed at the time and even a decade later is almost never taken into account: It started to pay interest on reserves, in essence paying banks not to lend.”

Imagine that.  With millions of businesses shuttering their doors, with billions of Americans out of work, instead of doing the works that banks are supposed to do, ferreting out credit-worthy borrowers and lending money that fuels growth, the Fed induced the banks to park assets with the Fed, and paid them a risk-free interest return to do so.

That is a demonstration of absurdity not seen since FDR ordered crops plowed under and farm animals slaughtered, even while millions of impoverished Americans desperately needed affordable food.

“[T]he danger posed by the Fed’s bloated asset holdings and the resulting massive level of excess bank reserves is that with a full-blown recovery now under way, the demand for credit will accelerate and force the Fed to move quickly to raise interest rates on reserves or sell securities to sop up excess reserves,” writes Gramm

The prospect of the Fed losing control is outsized during this juncture of stock market volatility, new interest rate regimes, trade wars, exploding deficits, and political turbulence.  When the Fed performs in its usual inept manner, gold rises.  

You don’t have to live on the razor’s edge.  Speak with an RME Gold broker today for find out how to protect yourself in the New Year.

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2019 Ten Things

Ten Things That Won’t Happen in 2019

Gold Market Discussion

The end of the year calls for new year predictions, so here are 10 things you won’t see in 2019…

10.  The Federal Reserve won’t stop managing the monetary system to benefit the banks that created it to serve their interests in the first place.

9.  Foreign central banks won’t increase their dollar holdings, although they will increase their gold holdings.

8.  Congress won’t reduce federal spending; it won’t stop creating trillion-dollar deficits; and, it won’t make a serious attempt to reduce the $22 trillion debt.

7.   The Washington establishment won’t hold most of its members to the same legal standards that it applies to the ordinary people.

6.  Washington Republicans and Democrats won’t stop trying to divide the people to win elections.  They will, however, concentrate their attention on smaller divisive issues while the fundamental issues of America’s freedom and prosperity go unaddressed.  

5.  The establishment’s lapdog press won’t bother to report accurately on the fate of the dollar.  Nor will their reporting on gold be accurate.

4.  The establishment lapdog press won’t blame the nation’s monetary problems on the Federal Reserve and the nation’s money manipulators.  It will blame the people instead.   

3.  While Washington may commission a study, launch a new bureau, or even appoint a bureaucrat, nothing meaningful will be done about the declining lifespan of the American people. 

2.  Monetary and fiscal policy won’t stop shrinking the American middle class.

1.  In an economic crisis, such as Venezuela, you won’t see people standing in line to exchange their gold for paper money like dollars.  It’s always the other way around.


How accurate do you think these predications will be when we look back on them at the end of 2019?  

We’ll review them then.  In the meantime, all we can say is buy gold, and have a Happy New Year!

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Jerome Powell

Confidence in the Fed

Gold Market Discussion

Trump Criticizes Fed, Chairman Powell

It’s not hard to see that confidence in the Federal Reserve is collapsing.  Usually the Fed quietly booms and busts the economy for its own reasons and escapes unnoticed for it, like a thief in the night.

But President Trump has changed that, unleashing a firestorm of criticism on the Fed and Chairman Powell.

Economic policy writer Stephen Moore, a Trump campaign advisor, said this weekend that the Fed is “the swamp,” and the Trump should drain it.

Another economic commentator, Robert Wenzel, points out that “since Trump has intensified his tweets about the Fed over the last month, it has been good for the price inflation hedge, gold.”

Trump Advisor Stephen Moore says the Fed is the “swamp” and that Trump should drain it.

It has.

You don’t have to look far to find those that believe the Fed’s recent policies of interest rate hikes and the crashing of the stock market are little more than political acts by the Washington establishment targeting President Trump.

Certainly, the Fed is the “Mother” of all establishment institutions. 

Look at it this way:  money is 50 percent of every commercial transaction.  And the Fed is in charge of the value of the money.  So, its policies reach into everything, everywhere, all the time. 

Gold, of course, in the “un-Fed.”  The Fed can’t press a button and create more gold overnight like it does with paper money.  It can’t stop people around the world from preferring gold.

So, when confidence in the Fed is failing, people turn to the un-Fed.  To real money.  They turn to gold.  

Let me sum up this commentary by citing an observation about gold prices the other day from financial blogger Mike “Mish’ Shedlock:

“I believe much higher prices are coming, sooner, rather than later, as confidence in the Fed and central banks in general dives.”

I couldn’t have said it better myself!

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Bull vs Bear Market Gold

Things You Need to Know About Bear Markets

Gold Market Discussion

About Bear Markets

Here are a few things you need to know about bear stock markets, some bullet points from CNBC:

  • A “bear market” is when stocks see a 20 percent decline or more from a recent high — but they’re also marked by overall pessimism on Wall Street.
  • Since World War II, bear markets have lasted 13 months on average, and stock markets tend to lose 30.4 percent of their value.
  • During those conditions it usually takes stocks an average 22 months to recover, according to analysis from Goldman Sachs and CNBC

Those are averages.  But just as successive financial crisis in our era have been deeper than the ones before, successive bear markets have grown worse.  (Note that the 2008 Great Recession was much more painful that the Crash pf 2000-2001.)  It is because the manipulation and malinvestment that causes these conditions goes uncorrected, the scale of our serial crises grows.  

One of the ways financial crises announce themselves is with volatility, and in fact turbulence has been the key to our markets during this period. So, if you will forgive me, I’d like to quote myself from this blog back in October:

“Sometimes, in the face of a stock market sell-off, powerful forces will be put to work trying to stem the tide:  central bank operations, guidance about future policies, plunge protection team money shuffling.”

“Remember that all such interventions only make the ultimate problem worse.  With each new manipulation, the money we use becomes less resilient, and less reliable.  And in fact, nothing can stop economic reality from eventually asserting itself.”(October 25, 2018)

One other point for those of you who are technically minded.  Gold has been above its 50- day moving average since November.  It has now moved decisively above its 200-day moving average.  That is usually a very bullish indicator.

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Asian Economic Slowdown

The Stock Market has Topped Out

Gold Market Discussion

We’ve Seen the Top of the Stock Market

We’re flattered at the number of our clients and readers that have reached out to comment on our calling the top of the stock market last fall.

And our repeated recommendation to ”take any stock market profits and move them into gold.”

There’s an old saying that nobody rings a bell at the top of the market.  They didn’t have to.  When you’ve been watching these things as long as we have, they don’t have to ring a bell.  We could see the coming stock bloodbath on our own.

Stocks Down

We were so concerned that we sent out a Special Alert on September, Warning Signs Flashing Red!  We don’t do that often, but we realized the Fed had stovepiped about all the wealth to Wall Street that it could.  We urged immediate action, writing, “Warnings that go unheeded do no one any good. This is already the longest bull market in stocks in history.  Can it go on forever?  No.”

As evidence, we cited a bear market indicator that was at its highest level in a half century!

A few weeks later we asked, Is the Fed About to Tank the Stock Market?  We asked what should have been the obvious question:  “Today’s sky-high stock prices are the result of years of massive interest rate manipulation by the Fed on the downside.  If lowering rates drove the markets to these levels, what will a regime of higher interest rates do?”

It was clear to us that the Fed was intent on “driving a stake thru the heart of the market.”  It was such a certainty in our eyes that we were left only to ask whether the Fed was doing this on purpose or simply as a continuation of 105 years of Fed blundering.

We don’t claim to be psychic, much less foolproof.  But we’ve seen it all before.  For example, we remember Alan Greenspan driving down interest rates in the early 90s to provide cheap liquidity for the banking sector.  It was good for Chase Manhattan and JPMorgan, but it created a brutal stock market bubble that burst later taking trillions from the American people.

We’ve seen it all before.  The bubbles and the bailouts. The cronyism and Keynesianism.

So, when the S&P 500 peaked at 2940 in September our clients had already been warned.    

The Dow Jones Industrial Average peaked at 27,000 at the beginning of October.  As you know from the screams of anguish in the canyons of Wall Street, it’s been mostly downhill ever since.

On October 9, within days of that top, but before in was evident to the whole world that the stock market was in trouble, we cited Ron Paul.  “We have the biggest bubble in the history of mankind.  The bubble is bigger than ever before. There’s no avoidance of a correction….”

“Because it’s the biggest bubble ever, I think it’s going to be very bad,” he said (Ron Paul: Stock Market Trouble Ahead).

We agreed and wrote, “What can informed people do to protect themselves from a brutal stock market correction?  We recommend our clients buy gold.”

We kept the warnings and Special Alerts about the stock bubble coming for months writing, “Those of our clients that have enjoyed the stock market run over the last ten years are strongly encouraged to move profits into gold now.”  See here, here, and here.

Now the Dow is off 4,555 points.  Nobody’s portfolio should have to suffer that kind of loss. 

But our clients had already been prepared.  Gold’s low this year was $1,167.  Earlier this week it touched $1,270 before settling a little lower.

Our job is to help our clients protect themselves and profit.  So, we’re pleased to hear your kind comments.

The problems for this stock market are far from over.  The need to own gold is becoming hard to miss.  We have a long way to go. 

Stay tuned!

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interest rates up June 2017

The Fed Rate Hike

Gold Market Discussion

Another Hike

So, President Trump’s objections notwithstanding, the Fed raised interest rates once again on Wednesday.  

That’s its fourth rate hike this year.

The Fed does not seem to realize the stress the US economy is under: stress from stock market volatility, political uncertainty, trade wars, threatened hot wars, growing deficits, big debt, global de-dollarization, and high taxes.

But what about the tax cut we got last year?  How can I include high taxes as a major stress on the economy when we got the Trump $1.5 trillion tax cut last year?  

Remember two things:

First, the tax cut was supposed to pay for itself with all the new growth it would unleash.  But instead, economic growth is now slowing, not increasing.  (Third quarter GDP growth was slower than second quarter growth.)  Hence, we have run an astonishing $1.3 trillion deficit over the last 12 months.  

rising interest rates

Second, remember the words of Milton Friedman:  the amount of taxation is equal to the amount of government spending.  Let me state that differently.  Every dollar the government spends must come from somewhere.  It either comes from open, overt taxation, from the hidden taxation of inflation, or from borrowing, which itself comes at the expense of other borrowers in the form of higher interest rates (and still ultimately must be paid back by overt or hidden taxation).

The point is that if government spending is growing (and, boy, is it growing!), then taxes are climbing.  That adds to the load the already overburdened economy must carry.

There is no indication that the Fed understands the stress the economy is under.  That means when a crisis strikes, when reality becomes clear, the Fed will overreact.

It always does.  It drives rates artificially low and creates bubbles like the dot com bubble and the housing bubble.  Or it drive rates unrealistically high and kills off whole sectors of the economy like housing or automobiles.  

Why did the Fed raise interest rates this time?

A better question than why the Fed raised interest rates is this:  why is the Fed meddling in interest rates, up or down?

Interest rates, like all prices, should be determined by the law of supply and demand.  When prices reflect actual conditions of supply and demand, good things happen.  When the price of money, interest rates, are set by politicians or bureaucrats, bad things happen.

Interest rates should be determined by what able borrowers are willing to pay and by what creditors are willing to loan.  

When the Feb sets rates instead of the market, it creates distortions.  Sometimes (the last ten years), it sets rates to help troubled banksters, while it crushes people on fixed incomes.   Sometimes (today), it sets rates to try to offset the harm from its prior credit meddling, money printing, or Quantitative Easing.  

As the economy slows, tax receipts decline.  Government social spending climbs.  The deficit widens.  Then the Fed, to make up for its past meddling, overreacts and does something stupid.  

In the current scenario that boils down to printing money like mad.  

That’s where we are.  That is why gold is moving up.  That is why informed people are buying gold.

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Greenspan The Maestro

Market Bubbles Popping

Gold Market Discussion

Bubbles are Popping

They used to call him “The Maestro.”  That would be Alan Greenspan, the former Chairman of the Federal Reserve.  

Greenspan knows something about bubbles, having engineered several of them during his 18 plus years as the chief money manipulator.  The worst of the bunch was the housing bubble that burst in 2008.  

Now the Maestro is warning about the current stock market bubble.  The bull market is over, he says.

Alan Greenspan

Suppose stocks were to run up a little from here, Greenspan speculates.  If so, then investors better “run for cover.”  He warns that that would make the inevitable drop more painful.

We’re moving into a stagflationary environment, says Greenspan.  That’s a combination of weak or non-existent economic growth combined with climbing prices – price inflation.

Greenspan’s Warning

Greenspan was even more explicit a few years ago when he warned publicly that the ending of the dollar’s role as the global reserve currency – a development that I have been writing about, one that is unfolding now — would result in wiping out the middle class and a quadrupling of the cost of living!

A few days ago, Bank of America reported that the exodus from the stock market was the second biggest ever, as investors pulled $27.6 billion from equity funds in a single week.

When investors run for cover from crashing markets and paper currency crises, where can they go?  “Gold is a currency,” Greenspan advised a couple of years ago.   “It is still by all evidence the premier currency.  No fiat currency, including the dollar, can match it.”

In times of turmoil, of teetering debts and defaults, in times of overburdened borrowers, in times of monetary stress and international tension, in times of market crack-ups and breakdowns, gold offers protection, privacy, and profit.  “Intrinsic currencies like gold and silver are acceptable without a third-party guarantee,” says Greenspan.

When its time to run for cover, call RME Gold and speak with one of our knowledgeable brokers for advice specifically tailored to you needs.

It’s time.

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silver to gold ratio May 2017

Time for Silver to Play Catch Up!

Gold Market Discussion

Time for Silver to Play Catch Up!

Have you taken advantage of the Gold-Silver ratio yet?  

The recent bounce in gold has so far happened without a similar move in silver. That might be about to change, according to Saxo Bank A/S.

Ole Hansen, head of commodity strategy at Saxo Bank, tracks the ratio of gold to silver and said the recent moves “point in favor of higher silver prices.”

That’s the lead of a Friday, 12/14 story in Bloomberg News.

The objective is to hold the precious metal poised for the most rapid appreciation.  Because silver is underpriced relative to the gold price, it’s is a favorable time to trade gold for silver.  You don’t want to miss the opportunity to add to your precious metals holdings without investing additional money. Put your gold to work for you!

stacked silver bars

I have written about this opportunity several times lately, here and here.  Now I’d like you to hear about it from Denmark’s Saxo Bank.

The story, “Bulls Lining Up for Gold Means Now May Be a Good Time for Silver,” says, “The ratio has been stretched out in recent months, showing that silver is the cheapest relative to gold in 25 years. Hansen said the trend is starting to reverse, with the ratio falling below a 50-day moving average this week.  That means that silver is outpacing gold after months of lagging behind. The white metal is up 2.3 percent this month to $14.53 an ounce, compared with a 1.1 percent advance in gold.

Learn how to grow the number of ounces of precious metals in your portfolio.  Trading the gold-silver ratio is a simple strategy, one that many of our clients and I have used for years. Talk to us about how we can help you get the most out of your metals! 

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US Debt

Fundametal Numbers

Gold Market Discussion

Fundamental Numbers

A recent Reuters Business News headline advised readers that, “Foreign buyers find U.S. Treasuries less appealing.”

This may be news to their readers, but not to ours. We have talked and written about this many times. In many ways the US is shooting itself in the foot, driving the rest of the world away from reliance on the greenback, by imposing sanctions, embargoes, restrictions, and even asset freezes on foreigners conducting business in the dollar.

All that is true enough.  Yet even if dollar commerce and trading were entirely free of political oversight and bureaucratic meddling, the world would continue move away from dollars (and US debt instruments) at some rate.

That is because of the economic fundamentals.  Since the dollar is not real wealth in itself like gold or silver, it is only valuable as an IOU (although some wags have called it “an IOU nothing!).  Dollar holders assume that their dollars are valid notes, ones that people will accept in exchange for goods today, tomorrow, and for many tomorrows thereafter.

But if the rate of that exchange for real goods and services is not reliable, other units of exchange, time-tested currencies like gold, become more desirable.  

When we are at the point that the US government can only pay its bill by creating more dollars, existing dollars become worth less.  The dollar’s exchange rate for real goods and services declines.

This is what happened when President Nixon repudiated America’s promise to always exchange gold for its dollars.  The US was clearly printing more dollars to fund its welfare/warfare state than there was gold to exchange.  

The US was like someone writing checks for more money than in his account.  Individuals who write bad checks can end up in prison.

With that in mind, here’s a quick review of some of the US government’s accounts.

The visible US national debt today is $21.85 trillion.  That’s roughly $67,000 per person in America.  Or $268,000 for a family of four.  

That’s big money for most Americans.  

Over the last 12 months, since this time last December, the federal debt has grown by $1.363 trillion dollars.

That is so alarming that Washington politician’s hair should all be on fire!  Instead it is quiet as a mouse.  There is little or no coalition in congress to control the raging debt growth.

Meanwhile, the invisible debt of the US, the unfunded liabilities of the government, promises it has made to pay for things like Social Security, Medicare, and veterans’ benefits, runs somewhere between five and ten times the visible debt.

Those are some of the numbers that explain fundamental reasons why foreigners’ faith in the dollar is in decline.

For those fundamental reasons, as well as the political reasons mentioned earlier, there is a global movement away from the dollar.

Today’s movement out of the dollar is just a trickle.  It will eventually be a flood.  No one can say when that will be, only that it is drawing nearer.

That is why foreign central banks and governments, and individuals around the world buy gold.

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Thanks Fed, for Shorter, Poorer Lives

Gold Market Discussion

Thanks, Fed!

2018-12-11

Researchers at the Federal Reserve know what they have done to the Millennial Generation, and it isn’t pretty. 

But don’t expect them to stop.

Ryan McMaken at the sound money, free market Mises Institute has examined a new Fed report on how the Millennial Generation is doing at this stage of their lives compared to prior demographic groups, the Gen X’ers and the Baby Boomers. 

Ryan McMaken
Ryan McMaken, Mises Institute

The Fed report concludes that, “Millennials are less well off than members of earlier generations when they were young, with lower earnings, fewer assets, and less wealth.”

Here’s one quick fact from the Fed’s researchers that provides a general idea of the overall findings.  “Average real labor earnings for young male household heads working full time [were] 18 percent and 27 percent higher for Generation X and baby boomers, respectively, than for millennials.

McMaken’s article, available here, dismisses the usual explanations:

“A common response in the media has been to blame Millennials for buying ‘too much avocado toast,’ or for having too many other luxury tastes that render them incapable of building wealth. That may be true of the minority of Millennials who spend much of their lives on Instagram, but the Fed report itself concludes that the consumption patterns of Millennials are not significantly different from those of other groups when incomes and other factors are taken into account.

“In other words, Millennials are not any more profligate than the Baby Boomers or Gen X’ers who came before them.”

“Millennials are less well off than members of earlier generations when they were young, with lower earnings, fewer assets, and less wealth.”

– Ryan McMaken, Mises Institute

So what is behind the diminished circumstances of our fellow Americans?  How about contrived interest rates that have made savings a losing proposition?  Capital formation, the engine of growth, just doesn’t make sense in a funny money regime of bailout bills, stimulus spending, Quantitative Easing, “injection of liquidity into the banking system.”  It makes less sense with each unbalanced budget, record deficit, and debt ceiling increase.

The gradual impoverishment of the people is inevitable when the monetary system is governed by bureaucrats and the self-interest of those they serve, instead of by the reliable impartiality of gold.

McMaken writes,

“All of this, of course, happened on the Fed’s watch, and was just the latest example of how the myth of Fed-engineered economic stability has always been a myth.

“So, we have a group of workers who start out their careers in a bad labor market, brought on by more than 20 years of money-pumping by Volcker (later in his term), Greenspan, and Bernanke.

“But once those Millennials were able to get jobs, they then were faced with a world that was particularly hostile to saving, home purchases, and investment for lower-income workers.

“Our current situation is marked by endless monetary activism marked of near-zero interest rates and asset inflation which rewards those who already own assets, and have the means to access higher-risk investment instruments that offer higher yields.

“Meanwhile, banking regulations have been re-jiggered by federal politicians and regulators to favor established firms and the already-wealthy.”

Fed chairmen brag about their “powerful tools,” but those tools have given us slow growth and reduced earnings.

LIfe Expectancy Drops for Third Year in a Row

Meanwhile, it looks like 2018 will be the third straight year that American life spans have decreased.  No surprise there.  Prosperous people live longer than impoverished people.  Ever notice how neatly the shorter life span trend overlays with the bureaucracies’ massive intrusion into the health care field?  In other words, Washington is doing to our life spans just what it has done to our money.

Life Expectancy Chart 2016
Chart shows beginning of life expectancy drop in 2015 that has continued to decline for three (3) consecutive years since

What can you do?  The government is not likely to return to an honest money standard, one that lubricates commerce and enables savings and capital formation.  One that allows people to “live long and prosper.”

But you can begin to insulate yourself from some of the effects of the Fed’s malperformance, including the slow grinding impoverishment of the people that lowers their life spans, by owning gold

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bear markets

Gold as a Safe Haven in a Bear Stock Market: It’s Déjà Vu All Over Again

Déjà Vu (noun):
1) a feeling that one has seen or heard something before.

2) something overly or unpleasantly familiar.

The headline of The Drudge Report December 4, 2018 screamed
DOW DIVE.  FEAR, SLOWING ECONOMY.  BANK STOCKS FLASHING.”


The thing is, we had already seen a lot of these gut-check plunges in 2018:  October 9, off 678 points; October 24, down 608 points; November 12, a loss of 602 points; November 20, down 551 points; December 1, down 679 points.

And the December 4 selloff of almost 800 points.  That’s a single day loss of more than 3 percent, the fourth largest single day point loss in stock market history. Two trading days later it was down another 558 points.

It is simply oxymoronic to describe a market with this volatility as a stable and welcoming investment environment for the American peoples’ savings and future prosperity. 

A Bloomberg’s headline said, “It’s the Worst Time to Make Money in Markets Since 1972.”  It summed up its story with these words: “There’s nowhere to run.”

Of course, there is somewhere.  But we don’t expect the mainstream news media and the financial press, mesmerized as they are by the shiny ties and the titles of Washington bureaucrats and Federal Reserve officials, to have anything but antipathy for gold, its thousands of years of being the world’s most reliable standard of value notwithstanding. 

Their attitude is easy enough to explain.  Politicized money feeds the dreams of the political ambitious, while gold leaves power-hungry operators powerless. That is because gold cannot be manipulated like interest rates and monetary conditions, to the benefit of their influential contributors, Wall Street “banksters”, and other cronies of the State. 

So, they will not tell you to turn to gold when the economy shudders and shakes and the stock market has become a thrill ride of unexpected plunges. 

But we will. 

To do so, we have selected three dramatic stock market collapses in the modern era that resemble today in many ways.  You will learn that gold soared while the stock market was a chamber of horrific losses.


The 1970’s: The Stagflation Decade

Richard Nixon, 37th President of the united States
Richard Nixon, 37th President of the united States

One young man who had started to learn about markets before Uncle Sam sent him to Vietnam, came home and wondered if every stock in America had had a stock split.  That’s because during 1973 and 1974, while he was otherwise occupied, the stock market had fallen in half.

What happened?  First, Nixon had repudiated the dollar’s convertibility to gold.  Since OPEC producers discovered that they were to be paid in dollars that could be printed endlessly without restraint, oil prices began to rise.  Domestically, businesses were staggering under Nixon’s wage and price micromanagement.  And the Federal Reserve changed interest rates like a madman.  It engineered more than 20 interest changes some years.  The official inflation rate hit 12.2 percent in 1974.

Of course, the stock market fell in half.  Of course, gold was the place to go.

The DOW from 1971-1974
DOW (DJIA) from 1971-1974

Incidentally, while the stock market fell in half in 1973 and 74, the pain wasn’t over then.  Although it struggled to recover, it fell again.  In the year and a half between September 1976 and March 1978, the S&P500 fell 19.4 percent.  During the same brief period gold rose 54 percent.

The 1970s became known as the Stagflation Decade:  a combination of stagnate economic growth and inflation.  You could have seen it coming as early as 1971 in the overreaching intervention of Nixon’s economic policies, and in the collapsing of the stock market, evident in 1973.

Incidentally, like today, the presidency was in turmoil.  President Nixon was forced to resign in August 1974.

The ownership of monetary gold only become legal for Americans in 1974.  With the excitement of that development, which resulted in an initial frenzy much like a hot stock initial public offering, gold settled down to just over $100 an ounce in 1976.  But as a safe haven alternative to the battered stock market and the economic turmoil all about, gold started running up from there.  And it just kept running, up to $850 by January 1980. 

Gold from 1976-1980

Suppose you had decided to just “ride it out,” and you stayed in the market during the whole brutal period?  From its 1974 low, it took eight years for stocks to return to the high they had hit in 1972.  But because the intervening period had been characterized by high inflation, in real terms, or in terms of purchasing power, it would have taken more than 20 years to restore your wealth.    


Early 2000’s and the DotCom Bubble

old search engine

In the late 90s, you couldn’t walk into a Starbucks without hearing people talk about the money they were making in stocks with names better off forgotten… Pets.com…  InfoSpace…   eToys.com…. WorldCom…   Drugstore.com…     DrKoop.com….  Some of the companies were not much more than business plans scrawled on a cocktail napkin.  Others with no revenue somehow became hot IPOs.  Internet companies were being valued for their “eyeballs,” or how many people would supposedly visit their web pages. 

Those of us that objected to companies with no profits being valued higher than companies that actually made a lot of money selling real products and services, were told that it didn’t matter because this time “it was different.”

But it’s never different.  The fundamental laws of economics still applied then.  Just as they apply today. 

The dot com rage was just one of Federal Reserve Chairman Alan Greenspan’s bubbles.  When it popped it cost American investors $5 trillion.

The Nasdaq composite index peaked in March 2000 at just over 5,100 points. It fell to 1,300 in less than two years.  It took 4,800 internet companies down with it.    The broader market measured by the S&P 500 fell 49 percent.

It was a bloodbath. 

NASDAQ 2000-2002
NASDAQ 20002002

The attacks of 9/11/2001 gave fuel to the gold market; the gold price immediately jumped, as it does in a crisis.  But there was more to it.  First, Greenspan gunned the money supply.  Then, on March 16, 2002, Vice President Cheney paid a visit to Saudi Arabia.  His message was clear.  The United States was going use 9/11 to roll-out a larger war in the Mideast.  The empire was going to go for broke.  And the financiers of the world now knew it. 

Congress, having heard Cheney’s explanation that “deficits don’t matter,” raised the national debt ceiling time after time.

But it came to pass that deficits do matter.  Ignited by the stock market crash and fueled by Greenspan’s money printing and wild deficit spending, a new gold bull market roared ahead.    

The S&P 500 from 2000-2002
The S&P 500 from 2000-2002

Gold had seen a low of $253 in the summer of 1999.  Some people date the beginning of the gold bull market to the year 2001 with gold around $260 an ounce.  Either way, by December 2005 it had more than doubled to $520.  By March of 2008 it was over $1000 an ounce.

gold from 2002-2008

What about those that decided to ride out the Nasdaq crash?  For them, it was a long fifteen years waiting for the market to return to its old highs.

What if instead they had moved prudently out of stocks in 1999 or 2000 before the market plummeted, but when it was clear that, like today, stocks were in an unsustainable bubble?  And what if they had then moved their gains into gold before the prices took off?

And if you didn’t do it then, what if you had another chance to do it now?


 

2008:  The Great Recession

2008 great recession

Since deficits didn’t matter, when George W. Bush came into office the national debt was  less than $6 trillion.  When he left, it had climbed to $11.35 trillion.  Bush had presided over seven increases in the national debt ceiling in eight years.

When he left, the country had just entered the worst economic downturn since the storied Great Depression.  Greenspan had been at it again.  To compensate for the popping of the prior bubble, the dot com bubble, the so-called “Maestro” cut interest rates 13 consecutive times between the beginning of 2001 and the middle of 2003, driving the Fed funds rate to 1 percent, and leaving it there, below the inflation rate. 

He had created the housing bubble! 

The S&P 500 from 2007-2009
The S&P 500 from 2007-2009

With trillions of dollars of unsupportable real estate loans being made with a that cost free money, it was what someone described as a bubble in search of a pin! 

Now, here is the part that today’s investors need to know.  The Fed began raising interest rates.  Sound familiar?  The pin had been found!

After a year at one percent, the Fed raised rates 17 times, to 5.25 percent by June 2006. 

DOW from 2007-2009
The DOW from 2007-2009

The Great Recession began knocking at the door.  Mortgage delinquencies climbed and Wall Street powerhouses – like Bear Stearns and Lehman Bros. with their subprime mortgage hedge funds – began to crumble.  The Panic of 2008 ensued.

Here’s what happened to the stock market.  From its high in October 2007, the S&P 500 fell for 17 months.  It lost 56.4 percent of its value.  The Dow Industrials fell from 14,198 in October 2007 to 6,443 in March 2009, a loss of more than 54%.

Gold, on the other hand, soared. From its low of $713 in the fall of 2008, it raced to $1900 an ounce three years later.  (Silver, incidentally, did even better.  From a low of $8.80 that fall, it raced almost $50 an ounce in April 2011.)

gold from 2008-2011

Today

Trump vs. the Fed


We have chosen these three stock market crashes to illustrate where we are today and the future that is being signaled to us by today’s extreme market volatility. 

Each of these crashes was preceded by a monetary policy binge: the reckless delinking of the dollar from gold in the 1970s, the joyride of the dot com bubble, and mortgage the bubble. 

Just as the Fed responded to the popping of the dot com bubble with the creation of another bubble that ended badly, today’s stock market has been frothed to its present high levels by another money creation mania, Quantitative Easing, a madcap policy to offset the damage from the popping the mortgage bubble. 

You should note that the carnage will be worse this time.  Much worse.  That is because the Quantitative Easing bubble is so much bigger that anything before.  The Fed today owns $1.7 trillion of toxic mortgage securities it bought to take off the books of its crony banksters.  It owns another $2.3 trillion of federal government debt, purchased to make Washington’s deficit spending easier.  Each of these trillions of purchases was paid for by creating “money” out of nothing more that digital bookkeeping entries.

This money creation represents the biggest bubble in the history of the world.  At the same unfortunate time, the United States is the biggest debtor in the world. 

Just as it triggered the collapse of the housing bubble and brought the stock market to its knees with its higher interest rate regime, today the Fed is raising rates again.  And once again the stock market is gyrating wildly.  It is virtually shouting that there is no safe space to be found in stocks.

As of writing, USA Today has just published a piece headlined, “Stocks are plunging.  Here’s what you can do.”  Speaking as the establishment voice that it is, the newspaper says nothing about gold’s exemplary profit performance in these episodes.  But it does advise you to “control your emotions,” as though the fault is somehow with you instead of with the boom and bust makers in Washington.  And it tells you to think long-term. 

We advise you to think long-term as well.  Over the long-term of this survey, the market has crashed, crashed, and crashed again.  Each time the monetary authorities create a new bubble to cushion the pain of the prior one.  Each new bubble pops in succession.  This, the biggest-of-all bubbles, will end like the rest. 

As we have been telling you since last Fall just before these monster sell-off sessions got underway (-678 points, – 608 points, -602 points, -551 points, -679 points, -799 points,  -558 points), the system is blinking red.

As with each of the prior crashes, there is only the safe haven of gold.


“I know of no way of judging of the future but by the past.” – Patrick Henry

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watch the Strait of Hormuz

Watch This One Carefully…

Gold Market Discussion

Watch This One Carefully…

Sometimes the things that move the markets the most violently – gold, silver, and other markets as well – are things that aren’t on most people’s radar screens.

Hassan Rouhan
Iranian President Hassan Rouhan

Front and center in the attention of economic and financial news observers is the on-again, off-again trade war with China.  I do not dispute in the least its significance.  It is very important for many reasons, not least is the US dependency on foreign creditors like China to fund it exploding debt needs.

No less significant is a remark made by a Chinese official the other day, that trade wars can readily become shooting wars.  It is an oft-repeated adage, but one to remember.

While all eyes were on the G-20 summit in Argentina, and the high drama of the US-China decision to apparently kick the next escalation of their trade war down the road, I want to turn your attention to something else.

Strait of Hormuz
Strait of Hormuz

The prospect for a military confrontation with Iran continues to mount.  The aim of the US sanctions regime against Iran is to stop all Iranian foreign oil sales.   It won’t work, of course, even though National Security Advisor John Bolton insists that US sanctions on Iran will be “aggressive and unwavering.”

In a televised address this week, Iranian President Hassan Rouhani said, “If one day they (the US) want to prevent the export of Iran’s oil, then no oil will be exported from the Persian Gulf.”

It is not the first time in the current environment that Rouhani has made that threat, a clear reference to Iran’s willingness to close the Strait of Hormuz. 

A third of the world’s sea-borne oil moves through that chokepoint. US officials like to talk knowingly about how they can keep the Strait open.  They are fooling themselves in overestimating their own capacity and underestimating their opponents.  This seems to be a congenital defect among US strategists, the geniuses who thought the Iraq war of 2003 would be over in days. 

In any event, if things get hot over the Strait of Hormuz, it will realign the major powers of the world, creating explicit new alliances and sorely test America’s geopolitical dominance.  It will change the dollar’s role in international trade and send energy prices to crippling highs.

It will send gold prices soaring.

A hot showdown over the Strait of Hormuz is beginning to look like a certainty.  Buy gold and watch this one closely.

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Indian Wedding Tradition

The January Gold Spike

Gold Market Discussion

Gold in Indian Tradition  

With the turn of the calendar page to December, the holiday season is underway. Here and throughout the Western world it means a jump in consumer spending for Christmas presents. 

But the approach of the New Year means something else in other parts of the world. It  often means a big, cyclical jump in precious metals prices. 

The gift giving cycles in Asia are behind this pattern. Gold is a traditional and prized wedding gift in India and elsewhere in Asia, so manufacturers, jewelers, and the people themselves often start buying at the beginning of the year for spring weddings. 

The Indian government, like many governments, has often been at war with the people’s traditional desire to own gold. It prefers people to hold only government printing press money that can be devalued at will, to the benefit of the state and at the expense of the people. 

But the people will not be denied and the precious metals tradition wins out each time. The calamity of India’s paper money call-in and exchange two years ago further discredited the state and its monetary authorities. The attempt to demonetize the common currency was so disastrous that it will linger in the memories of the Indian people for a long time…and add fuel to their appetite for gold.

Year after year we see a surge in gold prices at the beginning of the year. For that reason, we recommend that you take action now on your planned precious metals acquisitions.

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Fed Treasury

Their Own Man Says So!

Gold Market Discussion

Their Own Man Says So!  

I have been warning about the overvalued stock market for some time.  Because we are clearly moving into a very troubling economic period, I have suggested you take profits you have in stocks and move them to the safety of gold.

The problems that I have described are so apparent that even the Federal Reserve itself is now warning about them.  So today, I will borrow from a story on CNBC describing a new report by the Fed.  The headline reads:

“Fed warns that a ‘particularly large’ plunge

in market prices is possible if risks materialize”

Here is a Federal Reserve chart showing price movement of the Dow Industrial Average over the last couple of year.  Note the double-top it has put in at around 27,000. 

Fred Graph 11-2018

Now I urge you to carefully read the story:

The Federal Reserve issued a cautionary note Wednesday about risks to financial stability, saying trade tensions, geopolitical uncertainty and a buildup in corporate debt among firms with weak balance sheets pose strong threats.

In a lengthy first-time report on the banking system and corporate and business debt, the Fed warned of “generally elevated” asset prices that “appear high relative to their historical ranges.”

In addition, the central bank said ongoing trade tensions, which are running high between the U.S. and China, coupled with an uncertain geopolitical environment could combine with the high asset prices to provide a notable shock.

“An escalation in trade tensions, geopolitical uncertainty, or other adverse shocks could lead to a decline in investor appetite for risks in general,” the report said. “The resulting drop in asset prices might be particularly large, given that valuations appear elevated relative to historical levels.”…

The report further noted that the Fed’s own rate hikes could pose a threat. A market and economy used to low rates could face issues as the Fed continues to normalize policy through rate hikes and a reduction in its balance sheet, or portfolio of bonds it purchased to stimulate the economy.

Sometimes, when it becomes virtually undeniable, an economic calamity announces itself in advance.   It is as though there are warning signs, in bold, red letters, screaming about the stock market so loudly that even the Fed can no longer whistle past the graveyard.

Please speak with your RME GOLD broker today!

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monetary lab experiments

Monetary Lab Experiments

Gold Market Discussion

The failure of a currency is not a pleasant thing. 

It is usually accompanied by widespread social unrest, crime, impoverishment, and ruin.

Venezuela is like a laboratory experiment in currency failure – something going on before out very eyes.  Of course, a lab experiment is useful only if something is learned from it. 

Yet there is no evidence that our monetary and fiscal authorities are learning anything at all from Venezuela’s monetary fiasco, running an annual inflation rate now of about 46,400 percent.

Of course, Venezuela didn’t have to ruin its economy and impoverish its people with its own laboratory experiment in bad-faith money.  It could have learned from other modern inflations, such as in Hungary in 1945-46 in which prices doubled every 15 hours!  Even the famous frenzied Zimbabwe inflation was only about half that rate. 

bolivarThe Venezuela tragedy continues to play out year after year, without a course correction, a return to honest money.  Accounts of the suffering of its people would fill countless book and endless documentaries.  Here are a few observations from a recent USA Today report on Venezuela.

“You would need a stack of money to even pay for a tomato,” says one 19-year-old mother who finally fled across the border into Columbia with her 1-year-old daughter in her arms.  “You would need a big stack of money,”

Three million other Venezuelans like her have fled the country, a million to Columbia, half a million to Peru, and the rest to other South American countries.  “Without shelter and without jobs, throngs of immigrants sleep on the streets and beg for money and food,” USA Today reports.

“At sunset each night, young Venezuelan women gather in Bolivar Plaza or by churches, looking to sell their bodies for sex.”

What is the fundamental difference between any failed currency and the US dollar?  Except for degree, not much.  Like other currencies that have in time returned to their ultimate commodity value (what is the value of little rectangular pieces of paper, especially those that have already been printed on?) the US dollar in unbacked and issued without restraint. 

If you think that is an exaggeration, let me point you to the trillions of dollars the Fed created out of thin air to buy government bonds and toxic mortgage securities from the money center banks in the years between 2008 and 2015.  That’s money printing on a Venezuelan scale!

Incidentally, that money still hasn’t been assimilated into the general economy and reflected in consumer prices. 

But it will be.

Meanwhile, Reuters is reporting on a trend we have discussed:  foreign investors, both sovereign and private, are turning up their noses at US Treasury offerings.  Reuters reports the weakest foreign participation in US auctions in a decade.

Just when the US needs to borrow the most.

If they aren’t buying US debt, what are they buying? 

Gold, of course. 

So is anyone who has learned from monetary laboratories like Venezuela.

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Jim Rogers

The Next Bear Market According to Jim Rogers

Gold Market Discussion

When a Legendary Investor Speaks, We Should Listen.

Jim Rogers deserves his reputation as a legendary investor.   

Right now, Rogers says the next bear market in stocks will be “the worst of my lifetime.”

Rogers knows something about stock bear markets.   The bear market of the 1970s was brutal for stocks, but during that period when Wall Street was suffering, the Quantum Fund, which Rogers co-founded, turned in a performance that was simply astonishing.  1970 to 1980 the Quantum Fund climbed an eye-popping 4,200%. During the same ten-year period the S&P 500 managed to rise only 47%. “Nobody we know has ever been right about every turn in multiple markets, but we often look to Jim Rogers for his enviable record at foreseeing the broad, sweeping turns of the markets, including the Mortgage Meltdown and the Panic of 2008.”

So why does Rogers think the next bear market will be so rough?  Here are some of his thoughts from a recent interview with Portfolio Wealth Global:

“The federal government, for better or worse, has been gigantically deficit spending.  The Federal Reserve, the central bank, has had a lot of loose money around.  So all of this money is going somewhere and it is going into the American stock market.”

“When the problems come, and they will come, I assure you, everybody is going to be looking to blame somebody.  They’ll blame foreigners, they’ll blame banks, they’ll blame rich people, they’ll blame someone.”

“The situation now is America, the United States, is the largest debtor nation in the history of the world.  Whenever that has happened historically, whenever someone gets massive amounts of debt, excesses set in and then you have a problem.  Every country in history that has gotten itself in this kind of debt situation, has had a crisis eventually or a semi-crisis.”

“So, yes, it’s coming.”   

“First of all, I should remind you we have always had financial setbacks, economic problems every five or ten years throughout history, so there’s nothing unusual about it.” 

“It’s coming again.  The next time its going to be really, really bad because the debt is so much higher now.”

“We had a crisis in 2008 because of too much debt.  Since then the debt has gone very, very high everywhere in the world.  So, the next economic problem is going to be the worst in my lifetime.”

Rogers understands the role of gold in an honest and stable monetary system and has been a great advocate for everybody owning gold.   Speak to your RME broker about a sensible plan to protect your wealth from the next crisis.

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tech stocks down

Something’s in the Air – 11/19

Gold Market Discussion

Something’s in the Air- 11/19

Another Stock Market Sell-Off.

The Drudge Report headline Thursday morning read, “STOCKS ERASE GAINS FOR YEAR; TRILLION WIPED OFF TECH; GOLDMAN: BOOST CASH.

Another wave of selling in the stock market was no surprise to our readers.

It’s been a rout in Nasdaq stocks.  We have already pointed out the good times are over for the popular FANG stocks — Facebook, Amazon, Netflix, and Google.

Meanwhile Goldman Sachs has dialed down its forecast for the stock market to merely “a modest single-digit absolute return” in 2019.

Forecasting a single-digit return may be optimistic for the likely performance of the stock market. 

Morgan Stanley recommends trading the stock market “like it’s a bear market rather than a bull.”

Our recommendation is to not trade it at all.  We recommend safety first.  When destructive market forces have been unleashed, we prefer the shelter of gold to playing dodge ball in the stock market.

And make no mistake.  Destructive forces have been set loose, including the Fed’s new interest rate regime.

Bigger still is the growing trade war.  When Goldman Sachs says to prefer cash, it is apparently stuck in the old paradigm definition of cash, the post-war Bretton Woods agreement.  King Dollar.  The Reserve Currency of the World.  All that.

But all that is history.  Much of the world is dissatisfied with the dollar reserve standard.  Much of the world is moving slowly away from it with bi-lateral and multi-lateral trade deals and settlement option.  Many nations are stockpiling gold reserves.

That movement has been low-grade, mostly unnoticed so far.  But in a trade war it can erupt into a megatrend overnight.

And with that in mind, our view of cash is something more enduring than pieces of paper with government printing.

Our preference is gold.

Meanwhile, both the Dow Industrials and the S&P500 are trading below their key 50-day and 200-day moving averages.

Gold, on the other hand, is above its 50-day moving average.  It is approaching it 200-day moving average.

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household debt

Debt, Debt, and More Debt

Gold Market Discussion

Debt, Debt, and More Debt

Here’s the headline:  US Household Debt Hits Record $13.5 Trillion As Delinquencies Hit 6 Year High. 

A New York Fed report says that “that total household debt rose by $219 billion to reach $13.51 trillion in the third quarter of 2018—an increase of 1.6 percent, up from a rise of 0.6 percent in the second quarter. Balances climbed 1.6 percent on mortgages, 2.2 percent on auto loans, 1.8 percent on credit cards, and 2.6 percent on student loans this past quarter.”

“It was the 17th consecutive quarter with an increase and the total is now $837 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008. Furthermore, overall household debt is now 21.2% above the post-financial-crisis trough reached during the second quarter of 2013.”

Okay.  Let me cut through all this.  Total world debt is now approaching $250 trillion dollars.  Government debt.  Corporate debt.  Consumer debt.

That a quarter quadrillion dollars!

And debt is climbing faster than productivity.

It’s one thing if debt is productive.  Say someone borrows money to buy some equipment or capital goods that allow him to become still more productive.  A farmer buys a tractor and cultivates more land.  A shoemaker in the third world borrows for a machine that enables him to make more shoes than he could stitching them by hand. 

But its something else again if the money is not used productively.  Then the debt increases while the ability to service that debt does not.

That’s what happens when consumers borrow for consumption goods or fancy vacations.  It’s what happens when governments borrow to buy votes with giveaway programs.

And that’s the situation today.  Global debt is growing faster than productivity, faster than GDP.

As economist say, the marginal utility of debt is down.   A dollar of debt is not producing a dollar of GDP.

Got gold?

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dragging gold down

Dragging Gold Down

Gold Market Discussion

Dragging Gold Down

It’s been a pretty bloody few weeks in the oil trading pits.  From the high at the beginning of October of almost $77 per barrel, the benchmark price of West Texas Crude fell to around $55 this week. 

A sell-off of that magnitude in any market is a big deal. 

It’s a crash.

It’s important to us because for a few days earlier this month it looked like oil was dragging gold and silver down with it.

That sort of thing can happen when commodity futures traders see one commodity selling off, and dump their position in others “just in case”.  Traders in markets with perfectly sound economic fundamental can sometimes liquidate their positions to meet margin calls in collapsing markets.

But as the week unfolded oil showed its first higher closes following twelve days of successive loses dating back to October 29.

Having shown their resilience in the face of the 28 percent bloodshed in oil, gold and silver showed gains as well by midweek.

The petroleum story revolves around both Russia and the Saudi ramping up production in anticipation of additional sanctions choking off more Iranian production.  When the sanctions didn’t materialize as expected, the petroleum market was staring at oversupply.

For those interested in a little historical perspective, oil ran up to $145 a barrel in July of 2008 just before the economic meltdown that year.  Five months later, as the crisis picked up steam, it broke below $31.

In October 2008, as the extent of the 2008 Great Recession was becoming clear, gold saw a low of $713.  Savvy investors started moving in.  Those prices have never been seen again.

 

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stop digging

Stop Digging

Gold Market Discussion

Stop Digging

When you find yourself deep in a hole, the best advice is to stop digging.

Governments that find themselves in a fiscally unsustainable situation must either stop digging or destroy their currencies.  When the hole is too deep to climb out, you can be sure that a crisis looms ahead. 

Of course, it goes without saying that gold is the prime alternative to a currency headed for destruction.

Today I’m going to cherry-pick a few numbers from a piece this week in the Wall Street Journal that will give you an idea just how deep the government’s fiscal hole is.  It’s titled “U.S. on a Course to Spend More on Debt Than Defense:  Rising interest costs could crowd out other government spending priorities and rattle markets.”

  • In the past decade, U.S. debt held by the public has risen to $15.9 trillion from $5.1 trillion, but financing all of that debt hasn’t been a problem. Low inflation and strong global demand for safe U.S. Treasury bonds held the government’s interest costs down.

That’s in the process of changing.

  • In 2017, interest costs on federal debt of $263 billion accounted for 6.6% of all government spending…. The Congressional Budget Office estimates interest spending will rise to $915 billion by 2028, or 13% of all outlays…
  • It will spend more on interest than it spends on Medicaid in 2020; more in 2023 than it spends on national defense; and more in 2025 than it spends on all nondefense discretionary programs combined, from funding for national parks to scientific research, to health care and education, to the court system and infrastructure, according to the CBO.
  • Debt as a share of gross domestic product is projected to climb over the next decade, from 78% at the end of this year—the highest it has been since the end of World War II—to 96.2% in 2028, according to CBO projections. As the overall size of our debt load grows, so too do the size of interest payments.

 

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Jeff Sessions

Three Items of Note

Gold Market Discussion

Matthew Whitaker
Matthew Whitaker

1. WELL, NOW.  THIS IS DIFFERENT!

With President Trump’s firing of Jeff Sessions, the new acting Attorney General is Matt Whittaker.  Whatever else he may believe and ultimately do in his new position, we have learned that Whittaker has a more sensible view of the nature of money, the Fed, and gold than 99.9 percent of the Washington bureaucracy.   

Here are a couple of tweets from Whittaker in 2012 while he was in private law practice in Iowa.

On February 7, 2012 Whittaker tweeted:

“We need to begin to move to a gold/commodity standard.  The Federal Reserve’s explicit goal:  Devalue the dollar 33%.”

A few weeks later, on February 23, he tweeted:

“… the dollar is… fiat currency.  There is no inherent limit as to how far the price of gold in dollars can rise.” 

The next month, on March 23, Whittaker tweeted about gold again, this time making note of the Chairman of the Federal Reserve:

“Ben Bernanke’s shocking Gold Standard Ignorance.”

At least for now, Whitaker will directly supervise Robert Mueller’s Special Counsel investigation.  Whittaker is likely to be a central figure in the Washington for the rest of Trump’s presidency.

 

2. WHAT THE ESTABLISHMENT SEES

I want to share with you the outlook of the head of BlackRock, the largest asset manager in the world.  Blackrock was once called “the most powerful company that no one has ever heard of”.    

Larry Fink is the CEO.  His firm manages $6.4 trillion in assets. 

At a conference in Singapore last week, Fink spoke about the $1.3 trillion dollar deficit looming in Fiscal Year 2019.

“If indeed we do have that $1.3 trillion deficit, and the economy isn’t growing at three percent, we’re going to have a far bigger crisis in the coming years.  And then the fear of the ending of this (stock) bull market is probably going to be a reality.”

Fink says that forty percent of the US deficit is funded by “external factors.”  And yet the US is fighting with its creditors worldwide.  “Generally, when you fight with your banker, it’s not a good outcome.”

3. DOOMSDAY MACHINE!

David Stockman, US Budget Director under President Reagan, now says “the nation’s Fiscal Doomsday Machine is now unstoppable.”

Essential to Stockman’s argument are these points:

  1. The Federal government’s current fiscal year budget already has a projected deficit of, says Stockman, $1.2 trillion. 
  2. The Federal Reserve will be dumping $600 billion in bonds as it tries to unwind some of its QE swollen portfolio. 
  3. Currency speculators can be expected to dump hundreds of billions more in Treasury instruments.

By our calculation, that amounts to some $2 trillion of US Treasury bonds that the market will have to absorb in the current fiscal year.  That’s a pretty big task.

As careful watchers of the precious metals markets for a very long time, we have learned that when the government finds itself between a rock and a hard place, it does imprudent things and gold’s luster grows brighter

 

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voting booths

No Change

Gold Market Discussion

You may be cheered or dejected by the results of this week’s election. Certainly, there is something for everybody on the political spectrum to find either encouraging or discouraging in the outcome of Tuesday’s voting.

But our beat is money:  the dollar, spending, debt, the Fed, and the monetary system.  In short, all the things that impact precious metals and your financial future.  And with that focus, we see nothing about Tuesday’s election that changes our trajectory in the least.

  • The dethroning of the dollar as the world’s reserve currency will continue apace.  The implications for the value of the dollar and the American standard of living are enormous.
  • The trajectory for wars around the world is unchanged by the election.  Almost nothing was said about the general thrust of foreign policy by candidates of either party.  The outbreak of hostilities in the Persian Gulf, the South China Sea, or anywhere along Russia’s frontiers would be unquestionably bullish for gold.
  • As conspicuous in its absence as any real national debate about the Establishment’s foreign policy is the absence of any show of concern among the contenders about America’s trillion-dollar deficits and the national debt that is now closing in on $22 trillion.
  • America’s socialist drift has continued year after year, under both Republican and Democratic majorities.  If anything, the crony capitalism best captured in the bankster bailouts beginning ten years ago – and supported by R’s and D’s alike – has left a sense of betrayal and disgust among the middle class in its wake that has been diligently exploited by the growing socialist movement.  It should go without saying that socialism destroys prosperity, and that it usually begins that task by destroying the value of the currency.

There are other important items we could cite in evidence that the election changes none of the economic fundamentals:  sky-high corporate debt, unpayable student debt, and a precarious stock market propped up by Fed interest rate machinations and stock buybacks.

Those of us who hope for more substance in our politics and more wisdom from the voters will cynically remember the old line, that if elections really changed anything, they’d make them illegal.

We take some comfort, however, in also remembering that gold and silver are the best protection from the financial and monetary folly of governments.

 

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It’s Still Money– and They Know It!

Gold Market Discussion

Ben Bernake
Former Fed Chairman Ben Bernanke

One day, not so many years ago, in the middle of testimony before the House Banking Committee, Federal Reserve Chairman Ben Bernanke was asked a question by committee member Congressman Ron Paul.

“If gold is not money,” asked Paul, “why does the Federal Reserve insist on owning it?”

It is an important question, one that gets right to heart of the contradictions in our monetary system.  But Bernanke was quick on his feet.  The Fed owns gold, he explained, because “it’s a tradition.”

Was the Chairman saying that the Fed feels obligated to abide by all kinds of monetary traditions, or simply monetary traditions having to do with gold?  Or only the tradition that required the Fed to hold title to gold of the people of the United States?

Of course, Bernanke’s answer was simply balderdash.

The Fed insists on owning gold because it is the world’s premiere form of money, prized everywhere around the globe by both people and governments alike, and in both good times and bad.

Consider this.  When the US government made it a felony for American citizens to own monetary gold under presidential executive order and the Gold Reserve Act of 1934, it wasn’t simply trying to demonetize gold, to force it out of the monetary system.  It certainly wanted to eliminate gold as a competitor to its new paper money scheme, one that allowed it to print dollars without backing or limitation and to devalue that money when it suited the State.   

It was serious enough about that objective. 

But the government also wanted all the people’s gold for itself.  So, the law threatened the people with fines of $10,000 and ten years imprisonment for its violation. 

Rather severe threats for something that has no more significance than some old-time tradition, wouldn’t you say?

In reality, central bankers like Bernanke pretend that gold isn’t money, but in the real world, even among central banks, it remains money nonetheless.

When countries invade one another, the don’t rush to grab digital bookkeeping entries in which phony money is created out of nothing.  Nor do the grab Christmas trees or maypoles or other symbols of traditions.

They rush to grab the gold.

Just recently Venezuela attempted to repatriate 14 metric tons of gold held by the British central bank, the Bank of England.  It is gold that the South American socialist state has been using for “swap” operations.  In other words, when it has borrowed from foreign institutions and central banks, they have insisted that Venezuela’s gold serve as the collateral for those loans.  Because they are all really still on the gold standard.

Venezuela is finding getting its gold back to be very difficult indeed, thanks to US sanctions.  That is because in their international operations nations and central banks are still on the gold standard.

The monetary authorities’ and central bankers’ manipulation of credit conditions and interest rates, their ability to boom and bust economies at will, is utterly reliant on people being persuaded that gold is not money.

But they know better themselves.

We hope you know better, too.

 

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The Kremlin

Something in the Air!

Gold Market Discussion

What War Means to Gold and Silver

Putin

Through centuries of invasions and wars, conquests and collapses, occupations and upheavals, there is one constant:

In such a crisis, the go-to money is some form of gold or silver: coins and bars, jewelry, art, watches, and even silverware and tea sets. 

While wars are one of the worst things in the human experience, they are very good indeed for the price of gold and silver.

With that in mind, one should always be clear-eyed about the prospects for war and realistic about the approach of military confrontations.

Many Americans would be shocked to learn just how close the leaders of both China and Russia believe we are to war.  Both countries are preparing for it.  And both countries, long antagonists, have linked arms with military exercises and other planning for a seeming inevitable war with the United States.

Speaking in response to the recent withdrawal of the US from the Intermediate-Range Nuclear Forces Treaty, the agreement forged by Reagan and Gorbachev in 1987, Russian foreign ministry official Andrei Belousov said, “Yes, Russia is preparing for war.”

“We are preparing to defend our homeland, our territorial integrity, our principles, our values, our people – we are preparing for such a war,” he said.

It is a common view in the Kremlin.  Right now, the largest NATO exercises since the end the Cold War are underway in Scandinavia.  Trident Juncture involves forces from all the NATO countries:  some 50,000 soldiers, 10,000 vehicles, and hundreds of aircraft and navy vessels.

Not only are the military preparations growing, the rhetoric has escalated sharply.  Here, for example, is a recent apocalyptic remark from Russia’s Putin:  “If any nation decides to attack Russia with nuclear weapons, it may end life on Earth.”

China is equally candid about its war preparations.  Says President Xi, “It’s necessary to strengthen the mission … and concentrate preparations for fighting a war.”

While Americans are mostly oblivious to the risks of warfare, US military personnel are not.  According to a poll by Military Times, 46 percent of our active-duty troops believe the US will be drawn into a new war within the year. 

In a future post I will detail something of the ways that trade wars tend to morph into hot wars.  But for now, I will only stress that war between mighty powers causes havoc in their currencies., While gold becomes the go-to money of all nations. 

And now you know one more reason why the world’s central banks are scrambling to grow their gold reserves!

Are you doing the same?

 

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Rising costs of food and goods

Paper Money’s Last Hurrah? Trump fears the “Crazy” Fed

Gold Market Discussion

Consumer Goods Prices are on the Rise

Trump Crazy FedPresident Trump says the Federal Reserve is “the biggest threat” to his presidency.

He is afraid the Fed will create a new recession. “I think the Fed has gone crazy,” he said last week. 

The stock market is noticeably nervous about the Fed as well.

But the Fed may be do more than hurt one presidency, affect one election, or usher in just another garden-variety recession.

Congressman Ron Paul thinks that the next recession, which will come sooner than later, could be the major catastrophe that leads to the end of fiat currency.

Dr. Paul agrees with Trump’s use of the word “crazy” to describe the Fed. “When not forced to use a government-created currency, individuals have historically chosen to use a precious metal such as gold or silver as money. The reasons include that precious metals are durable, and their value tends to remain relatively stable over time. A stable currency ensures that prices accurately convey the true value of goods and services.”

Meanwhile an era of crippling inflation is beginning to raise its ugly head.  More on that last week from the Financial Times :

“The world’s big makers of consumer goods are starting to raise prices on everything from soap to soup as rising costs of raw materials spread through supply chains to supermarket shelves.

“Companies including Procter & Gamble in the US and Unilever in Europe recently put shoppers on notice to expect higher charges at the checkout, and several other leading groups including L’Oréal, Reckitt Benckiser and Kellogg could add to this trend with their earnings reports next week.

“It is a marked change from earlier in the year…”

WHAT THIS MEANS FOR INVESTORS:

Rising prices are the equivalent of a decline in the value of your savings. In inflationary periods gold tends to anticipate price increases to come and is thus your best hedge against inflation.

Owning gold and silver is a good idea in inflationary periods. But it is an absolutely crucial financial survival tool for the period that Dr. Paul foresees, one in which the “crazy” Fed’s tired fiat money system stops working.

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Stocks Tumble

What Does It Tell You When the Stock Market is Breaking Down and Gold is Running Up?

Gold Market Discussion

It was a rough week for the stock market. 

Commentators and headline writers are calling it everything from a rout to a bloodbath.

The Dow Industrial average is down 8.4 percent from its recent record high.  The Nasdaq market is 13 percent lower, while the S&P500 is off about 10 percent. The fun of the last few years looks to have ended for the popular FANG stocks — Facebook, Amazon, Netflix, and Google.  They  are off 33, 19.75, 28.8, and 16.4 percent respectively. In aggregate value, the companies on the S&P 500 have lost about $1.7 trillion in just a few weeks. Globally, equity market losses are nearing $9 trillion.

That’s big money.

The dollar headed down on Friday as well. Now, is all this action simply because the Fed is raising interest rates?  Not at all.  The story is bigger than that. 

As we have been shouting, the central banks of the world don’t want to be fleeced by the American money printing presses.  They no longer have faith in the dollar as the world’s reserve currency. Market analyst David Rosenberg tweeted as much this week: “Go ahead, blame Powell.  Don’t tell anyone that foreign buying of Treasury debt has been cut in half this year and keep it a secret that the dollar share of world FX reserves has shrunk to a 5-year low of 62.5%. The USD role as the reserve currency is on its last legs.” Gold, on the other hand, has moved higher, just as you would expect for a haven from the stock market carnage and loss of faith in the dollar.

What does it tell you when the stock market is breaking down and gold is running up?

Remember that stock markets are generally thought of as leading economic indicators:  signaling broader economic conditions to come.  Now they are experiencing their worst October since 2008.  You probably remember what happened in 2008.  It wasn’t pleasant. Market commentator Michael Shedlock says the question is whether we will experience a sharp economic crash or a slow bleed.

In either case, you will want to protect yourself and your family by owning gold.

jim-sign

stock market warning signs

Warning Signs Still Flashing!

Gold Market Discussion

October 24, 2018:

 Investors hit by another DOW tumble as another 608 points are lost.

The stock market has given up all of its 2018 gains. 

The Dow Industrials have already lost 7.1 percent of their value just this month. 

The NASDAQ is currently having its worst month since November of 2008. (Yes, that infamous 2008).

We hate to see anyone lose money, but it is good to hear from those of you who have been taking to heart our warnings and special alerts about the precarious stock market.

More than six weeks ago we headlined a post “Warning Signs Flashing Red.” They indeed were flashing red!  They they still are. 

This is why we have been recommending taking those profits from the stock market and moving into the world’s premier monetary sanctuaries – gold and silver!

Since the day we wrote about the warning signs, the Dow has dropped about 9%.

Gold is up more than 4%.

And we’re just getting started.

Sometimes, in the face of a stock market sell-off, powerful forces will be put to work trying to stem the tide:  central bank operations, guidance about future policies, plunge protection team money shuffling.

Remember that all such interventions only make the ultimate problem worse.  With each new manipulation, the money we use becomes less resilient, and less reliable.  And in fact, nothing can stop economic reality from eventually asserting itself.

If you haven’t acted to lock in any profits you have made in stocks, there is still time to do so.  Big economic events have been set in motion. 

As a Gold Market Discussion subscriber or a Republic Monetary Exchange client, you likely bought gold in the past and were protected during the 2008 crisis because of the gold you owned. 

Don’t wait until the last minute to move back to the safety of precious metals.

Talk to your broker about your options to take advantage now while we are still in the $1200’s!

Take advantage of the current Gold-to-Silver Ratio! 83-1!!

This favors shifting your precious metals investments out of gold and into silver.  At some future date, when the ratio move lower, the strategy will involve trading that silver back in to gold WITH A NET INCREASE IN THE TOTAL NUMBER OF OUNCES OF GOLD  YOU OWN! 

Trading the Gold-Silver Ratio is a preferred strategy.  It is one I have used myself for many years.  Your RME broker well explain to process in easy to understand terms. 

Please take a minute to review the September 30 post here on the Gold Market Discussion about the Gold-Silver Ratio.

THERE ARE MANY OPPORTUNITIES IN THE PRECIOUS METALS MARKET RIGHT NOW.

Call us at 602-955-6500 or 877-354-4040 to find out more. 


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Save a Millennial

Help a Millennial Today!

Gold Market Discussion

Help a Millennial Today!

As the stock market sell-off continued this week, I saw a headline that asked if Millennials are about to get slaughtered.

Could be.

Millennials, generally agreed to be those born between 1981 to 1996, are about a quarter of the US population.  They are almost 30 percent of the voting age population.  And in a few years, they will surpass in sheer numbers what’s left of the outsized Baby Boom generation.

Now comes news that the more well-off of the Millennials, having lived through the Great Recession, expect another such financial calamity in their future.

Left to Right: Former Fed Bosses Alan Greenspan, Paul Volcker, Ben Bernanke

Paul Volker, the former Fed chairman who helped break the back of the double-digit inflation at the beginning of the Reagan presidency, agrees.  Volker says that we’re “in a hell of a mess in every direction.”

USA Today recently reported on a marketing firm study finding that more than three out of four Millennials with $50,000 of investable assets or $100,000 in family income, believe that “it is just a matter of time before the bad behavior of the financial industry leads us into another financial crisis.”

They are right.  Volker is right.  It is just a matter of time. 

Now the Millennials desperately need to learn what to do about it.

Otherwise, they are set up to be financially slaughtered.

Each week we detail the kinds of financial behavior that will necessarily bear bad fruit.  Things having to do with deficits and debts, spending and promises, Fed-driven market bubbles, monetary malfeasance, and more. 

In fact the things we spell out for our clients here on the RME Gold blog and the developments our brokers follow day in and day out can serve as a “crash” course in economic reality — especially suitable for those Millennials who sense that  “bad behavior” will lead to another crisis.

The people who prepare for monetary crises by investing in precious metals are the people who come out on top on the other side of the calamity.  We’d like to recommend that you refer the Millennials you know – family members, friends, work colleagues – to this blog.  You may also feel free to forward any of our posts and analysis to them.  You will empower them to prepare wisely for what they already sense is coming. 

MillennialsIn doing so, you not only help them as individuals, you help our country.  History demonstrates that the more people who own gold and silver, the more quickly an economy can recover from the tragic implosion of its paper money.  Because of their numbers, Millennials will be essential to this hoped-for recovery.

In fact, if they have any questions about the things they read here, or any of the economic and monetary issues on the horizon, they are always welcome to call one of our brokers.  You are, too.  There is no obligation.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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hungary buying gold

In a Nutshell

Gold Market Discussion

In a Nutshell: Hungary is Buying Gold

Here’s a little noticed item that tells the whole story.

The central bank of Hungary has just announced a 1,000 percent increase in its gold holdings. 

That’s right.  It increased its gold reserves 10-fold!  And it did it all in the first two weeks of October!

Hungarian Parliament in Budapest

Here’s what’s going on:  The central banks of the world don’t mind fleecing their own citizens with their unbacked paper money.  They just don’t want to be fleeced by ours.

They see the handwriting on the wall.  So they are moving their reserves out of dollars. 

The Hungarian National Bank succinctly explained its move in an official statement. 

It is well worth reading, especially the passages I have emphasized:

Following the substantial increase in the Bank’s gold reserves in physical form, its repatriation has already taken place. The possession of precious metal within the country is in line with international trends, supports financial stability and strengthens market confidence in Hungary.

In keeping with the historical role of gold, gold remains one of the safest instruments in the world, and, even under normal market conditions, provides a stability and confidence-building function….

The role of gold reserves in the nation and in the nation’s economy strategy is becoming more and more appreciated while both the possession and the increase of nations’ precious metals holdings appears to be decisive international trends….

Gold is not only for extreme market environments, structural changes in the international financial system, and deeper geopolitical crises. Gold also has a confidence-building effect in normal times, that is, gold can play a role in stabilizing and defending. 

Gold is still considered to be one of the world’s safest assets, whose characteristics can be attributed to gold’s unique properties such as finite supply of physical gold, and lack of credit and counterparty risk given that gold is not a claim against a specific partner or country.

That’s the gold story in a nutshell.   And while the case it makes for owning gold needs no elaboration, note, too, that Hungary has taken physical possession of the gold it owns.

It is not buying gold ETFs, GDX or gold stocks, gold options, or futures contracts.  It wants to move out of paper and into real gold.

There was a time the foreign central banks were willing to leave their gold in storage with the US Federal Reserve.  No longer.  Germany, the Netherlands, Venezuela, Russia, China, Turkey, and Austria are all among the countries that have repatriated gold. 

Now Hungary is both aggressively acquiring gold and taking delivery of it. 

In a nutshell, we strongly suggest you do the same.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

government accounting

What We’re Up Against: Government Accounting

Gold Market Discussion

What We’re Up Against: Government Accounting

There are a lot of things fishy about the way the government operates.  But nothing is fishier than government accounting. That’s a problem for us all, because government accounting helps determine the prospects for the US dollar. The financial news outlets this week are filled with stories about the Fiscal Year 2018 US budget deficit. They report the deficit for the accounting year that ended September 30 was $779 billion.  That’s nothing to sneeze at, but it’s way short of reality. There’s nothing fishier than government accounting.

When the fiscal year ended a couple of weeks ago, I wrote that the deficit was $1.27 trillion.

government accounting racketThere’s a big difference between $779 billion the news media report, and $1.27 trillion I reported.  The difference is almost a half-trillion dollars.

What gives?

Who’s right?  If the picture of the nation’s finances the government provides is correct, you should go your merry way. But if the picture I provide is correct, you will want to make sure you are substantially protected with precious metals. Let me show you how to find out for yourself who is telling you the truth.  The US Treasury maintains a site that reports the federal debt “to the penny” each business day.  Here is the link. Call up the national debt at the end of September this year, FY2018.  It was $21.516 trillion.  Now look up the national debt one year earlier, at the end of September 2017.  You will see that FY2017 finished with a national debt of $20.244 trillion.

The difference is the increase in the national debt in a year.  It represents a deficit, a gap between what the government took in and what it spent. 

It is not $779 billion.  It is $1.27 trillion.

Government accounting!  What a racket!

Still the financial news sites – CNBC, CNN Business, MarketWatch, Bloomberg – all report the lower number.  It is an example of news coverage by merely running government press releases. 

But we prefer our clients to know the real story.

Even the $21.516 trillion national debt figure – as mind-boggling as it is – is another product of government accounting.  An honest measure of its indebtedness should include promises the government has made to pay for things.  That’s how we reckon debts in the real world. Among the promises the government has made that people rely upon are things like Social Security and Medicare.  These unfunded liabilities are debts of the country, no less than any other government promises to pay. Accordingly, the real national debt should be measured in the hundreds of trillions of dollars! Government accounting is also what has allowed the Federal Reserve to destroy 97 percent of the dollar’s purchasing power, even at it is charged with maintaining price stability. If private businesses operated with the flim-flammery of government accounting, people would be locked up in jail.

There is really only one broad-spectrum protection against government accounting and the destructive practices in enables. 

It is gold.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Global Financial Weapons

Weapons of Global Financial Warfare

Gold Market Discussion

Weapons of Global Financial Warfare

The establishment financial press denies it.  Experts laugh at the idea.  Few people think about it.

But…There are a lot of weapons aimed like arrows at the heart of the American economy. 

For example, the conventional wisdom is that the Saudi’s will never use their oil as a weapon against the West or the United States.  Never mind that they did just that in the 1973 oil embargo.

financial weaponsOn the heels of some tough talk in Washington about consequences for the mysterious disappearance and apparent murder of Saudi dissident and Washington Post columnist Jamal Khashoggi, the head of the Saudi government’s Al Arabiya new network responded with tough talk of his own.  “If the price of oil reaching $80 angered President Trump, no one should rule out the price jumping to $100, or $200, or even double that figure.”

Such an event would give rise to a dollar crisis, as did the oil price shocks in the 1970s.  The event contributed an explosion in gold prices.

The same head-in-the-sand posture applies to conventional thinking about China using its substantial dollar reserves as a weapon in the trade war.  China would never do such a thing, we have been assured for years by presidents, treasury officials, and the New York Times alike.

But dollar disinvestment by China is a real threat.  For years China has advocated the replacement of the dollar world currency reserve system. 

And it has been aggressively acquiring gold through both visible and obscure channels.

Dollar dumping by China would be a global-scale event with consequences for the dollar that would rattle the world’s financial markets. But trade wars often give rise to such mega-reactions.

It is events like these – an oil crisis or a dollar crisis – that we advise our clients to prepare for.  We think world events are becoming less stable, that financial turmoil is becoming more certain.

If you agree, you will want to protect yourself and your family with gold.  Please speak to your RME broker at once.

Do not delay.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Ford layoffs

The Outlook for Businesses is the Outlook for Stocks

Gold Market Discussion

Ford Says Trade War has Already Cost $1 Billon and Could Layoff 24,000 Workers

Gold ended the week higher.  Stocks ended the week lower.  

Now that the dust has settled, I’d like to ask you to look at the prospects for the stock market in this economic environment.

Ford Trade WarA trade war is tax on the businesses and the economy.  Import prices are higher.  Agricultural exports are fetching less.  Ford motor Company is announcing layoffs, as many as 24,000 jobs.  It has reportedly lost a billion dollars so far in the new trade war.

Higher interest rates are a tax on the businesses and the economy.  Businesses that borrow for inventory and other reasons face increased costs.

Increased government spending is a tax on the businesses and the economy.   The eye-popping deficit of $1.27 trillion for fiscal year 2018 that I wrote about recently should remind everyone of the common-sense observations of Milton Friedman, who said that the level of taxation is equal to the level of government spending.  

It cannot be otherwise.  If the US spends more this year than last – and it does no matter what politicians tell you about cutting your taxes – then the economy is being taxed more.  To describe it otherwise is a shell game:  the real level of taxation is always equal to the level of government spending.

So, with the wake-up call of the past week’s stock market sell-off and bounce in mind, ask yourself how the businesses that make up the stock market will do in an economy burdened by increasing tax loads:  the tax of the trade war; the tax of higher interest rates; the tax of government growth.

Let me close with the recommendation I made a week ago, before the stock market shock.  It is more important than ever:

“Those of our clients that have enjoyed the stock market run over the last ten years are strongly encouraged to move profits into gold now.”

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

low tide

The Good News About the Stock Market Sell-Off

Gold Market Discussion

Gold is up.  Stocks are down. 

At RME Gold, we’re in the business of helping people protect their wealth and prosper, so we don’t like to see anyone lose money.

But some good can come out of this week’s treacherous stock market:  Ithousing and real estate bubble is proving to be a wakeup call for a lot of people who are now beginning to realize just how badly exposed they are. 

A sell-off like this calls attention to the stock market bubble.  It is a bubble created by the Fed and its manipulation of rates.  It is a bubble inflated by unsustainable practices such as corporations borrowing money to buy back their own stock.

Borrowing at artificially low interest rates to buy back stock is little different than the home buying frenzy a decade ago.  It, too, was driven by interest rate manipulation.  Just as homebuyers found themselves in deep trouble as their adjustable rates began to climb, corporations will have to face the pain of higher rates on the money they borrowed to play the stock market. 

It reminds me of Warren Buffett’s remark that when the tide goes out, you see who has been swimming naked.

Well, the tide is going out.

Fed manipulation of the real market conditions of money and credit ALWAYS creates malinvestment.

A volatile stock market can be a wakeup call.  It should create urgency to move to the safety of gold.

As you can tell by gold’s strong response to stock market weakness, some have already gotten the message. 

We hope you have, too.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Ron Paul Stock Market Bubble

Ron Paul: Stock Market Trouble Ahead

Gold Market Discussion

Ron Paul with Jim Clark
Jim Clark with Dr. Ron Paul at the RME booth, NYC monetary conference, 2013

What does Ron Paul have to say about the stock market bubble?

Former congressman Dr. Ron Paul says we are in the midst of “the biggest bubble in the history of mankind” and a correction in inevitable.  In fact, Paul has said that a 50 percent stock market sell-off should not be a surprise.

“If you run up debt, print money, and distort interest rates you get distortions and distortions have to be corrected.”

“You can’t do that forever.  That is what the housing bubble was all about.”

Those of us concerned about debts and deficits, about honest money and Fed money printing know to listen when Ron Paul speaks.  His remarks in Congress about the housing bubble in its building stages proved to be like a play-by-play description of the tragic events that eventually played out. 

Now Dr. Paul is warning us again about the stock market bubble.  “We have the biggest bubble in the history of mankind.  The bubble is bigger than ever before. There’s no avoidance of a correction. The only thing that makes a difference is how to handle it.”

“Republicans and Democrats are alike, they don’t concern themselves about deficits. The only thing that they can do is print money and spend money and teach everybody to ignore the deficits,” he said.

“Because it’s the biggest bubble ever, I think its going to be very bad.”

“We’re getting awfully close. I’d be surprised if you don’t have everybody agreeing with what I’m saying next year some time,” said Paul.

Dr Paul is also warning of a likely surge in oil prices to over $100 a barrel. 

Oil has been climbing more or less continuously since early in 2016.  Prices have almost tripled since then.  Remember that spiking oil prices in 2008 were a prelude to the stock market calamity that unfolded later that year.  Like higher interest rates, rising oil prices are like a tax, a depressant on the economy, on corporate profits, and on stock prices.

What can informed people do to protect themselves from a brutal stock market correction?  We recommend our clients buy gold. 

Dr. Paul agrees.  Earlier this year Dr. Paul told a CNBC interviewer, “”I personally would be better off if I did buy a little bit more gold.”

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Is the Fed About to Tank the Stock Market?

Gold Market Discussion
Fed BuildingSometimes I like to share the views of others, views that deserve serious consideration.  One of those views is that the Federal Reserve is about ready to tank the stock market.

Although there are some, not all of those who believe this think the Fed is about to drive a stake through the heart of the bull market in stocks on purpose.  Others think the Fed will do so as a part of its typical blundering.

105 years of Fed calamities and dollar destruction convince us that both views are possible.  Let me sketch some of the evidence.

Interest rates are flirting with levels that haven’t been seen in seven and a half years.  The benchmark 10-year Treasury bond traded this week with yield of almost 3.23 percent, the highest since May 2011. 

Behind that climb lies three increases in the Fed funds rate already this year.

Meanwhile, the chairman of the Fed, Jerome Powell, has virtually promised more rate hikes in the not-too distant future.  Stock market investors have already lost $1.5 trillion this year following speeches from Powell.  That calculation comes from JPMorgan Chase & Co. analysts.

Today’s sky-high stock prices are the result of years of massive interest rate manipulation by the Fed on the downside.  If lowering rates drove the markets to these levels, what will a regime of higher interest rates do?

Bond expert Jeffrey Gundlach of Doubleline Capital said this week that bond market action, with the 30-year Treasury having closed twice over 3.25 percent, foretells significantly higher rates.  “The last man standing was the 30-year, and it has definitively broken above a multiyear base that should over time carry us to significantly higher yields,” he said.

stock market tumble

 

Let’s sample some other opinions:

“We look for 10-year Treasury yields to hit 3.5% at some point – later this year, early next year – and I think that’s going to be a real problem for stock markets.” – Bob Baur, Principal Global Investors

“Although some say the neutral rate is difficult to observe, stocks see the barrier quite clearly. A ‘maximum tolerable peak’ for the fed funds above the neutral rate has been associated with bear markets since the late-90s global-debt boom.” Stifel analyst Barry Bannister.

“The Powell Fed is playing with fire.” – Bretton Woods Research

Let me be blunt:  Higher rates are not good for stocks or bonds.

Those of our clients that have enjoyed the stock market run over the last ten years are strongly encouraged to move profits into gold now.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Russian Mig-29 fighter jets

Crisis Investing

Gold Market Discussion

CRISIS INVESTING

Gold is the currency of choice in times of crisis.  Whether it is called a “flight to quality” or a “flight to safety,” gold is the world’s money of choice in times of trouble.  That’s because of its superior qualities as money, qualities that have outlasted every conceivable type of government and countless paper money schemes, and survived world wars and global depressions.

Gold is a sensitive barometer of trouble.  Sometimes the price of gold jumps and only later do we get the news of a military incident or confrontation somewhere in the world that triggered the move.

With that in mind today I’d like to remind you of a few global trouble spots, dry geopolitical tinder that can burst into flames with little warning and spread into global wildfires.

flag of Iran

IRAN:  Economic wars and trade sanctions are often preludes to hot wars.  The kind of rhetoric bouncing back and forth between the US and Iran is now so fever-pitched that the only surprise will be if things don’t boil over. 

The Strait of Hormuz is the world’s most vital oil artery, a waterway transited by hundreds of tankers each month, and by 17 million barrels of oil per day.  Iran doesn’t have much leverage in a confrontation with the US, but it has made clear that it will target shipping through Hormuz in a crisis.

Often debated is how long Iran could keep the chokepoint closed. But more important is how a confrontation there is likely to spread.  In any event, I am not even willing to guess just how high gold will go if the US and Iran reach a tipping point in the Persian Gulf. 

But the move will be dramatic.

flag of Russia

RUSSIA:  This week U.S. ambassador to NATO Kay Bailey Hutchison threatened to “take out” new Russian missiles in development.  Others have already pointed out the obvious, that when you “take out” a country’s weapons, war ensues (cf. when the US “took out” Iraq’s non-existent WMDs).  Russia, said the ambassador, is “on notice.”

Over at the UN, ambassador Nikki Haley is “seething,” “threatening,” and “warning” Russia on an almost daily basis.  (For fun, I did a Google search on “Nikki Haley warns Russia” and got 2,330,000 hits!)  How any of this fits in with President Trump’s campaign position on seeking peace with Russia is not the subject of this post.  Instead, we will point out that, like it or not, Putin is correct that the promiscuous use of economic sanctions hurts the dollar in the long run.

flag of China

SOUTH CHINA SEA:  There was a close encounter between the US and China this week when a Chinese ship came within 150 feet of a US destroyer in the South China Sea. 

China warned the US to leave the area, while Vice President Pence charged China with “reckless harassment.”

While that incident has been widely reported, less noted is that the US Navy has drawn up classified plans to stage a global show of force in the region in November.

The world can be a very dangerous place.  It only takes one spark to ignite a conflagration.

And to light the fuse on a runaway gold market.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

wall street

Two Thoughts on the Market Action

Gold Market Discussion

The gold price spiked after a close, but brief, encounter with reality on Tuesday.  From a low of $1192, gold surged to a high of $1212, before coming to a close at $1207.

The price of silver popped, too, knocking on the door of $15 an ounce before closing at $14.69.

As always, the question is “what happened?”  It was something we had forewarned you about a couple of weeks ago.  The federal government’s accounting year, Fiscal Year 2018, ended on Sunday, September 30. 

national debt clock
The yesteryear debt of 9.2 trillion on the famous National Debt Clock in New York City doesn’t look so bad compared to today!

On Monday the truth was told:

The deficit for the year was over a trillion dollars, as we had warned.  Originally the FY2018 deficit was projected to total $526 billion.  We knew at the time that it would probably be twice that high… and even that fell short of the irresponsible spending reality.

The exact number for the year was an eye-popping $1,271,158,167,126.72.  The government had spent $1.27 trillion more money than it had taken in. 

In 12 months!

Let me put that in perspective. The entire federal debt did not reach $1 trillion until 1982.  I don’t mean the one-year spending deficit. I mean that the entire debt of the US government didn’t reach $1 trillion until 1982. 

The US fought for and gained its independence; it fought the British again; it completed the Louisiana Purchase, fought the Civil War, opened the West and expanded to the Pacific coast;  it fought War One, World War Two, the Korean War and the Vietnam War, and put a man on the moon.  And through all of that, the cumulative federal debt didn’t reach a trillion dollars. 

Until 1982.

But in the year just ended, the deficit was $1.27 trillion! 

For one year!

Maybe you see where this is going.

The total federal debt for the fiscal year skyrocketed to $21.5 trillion.  To be exact, $21,516,058,183,180.23. 

One of the news services figured out that the debt was equal to approximately $138,330 for every person in this country who works.

No wonder the gold market jumped!

But it didn’t take long for on Wall Street and in Washington to say, “If the people aren’t concerned with the debt we’re loading on them, why should we be?  If they don’t realize we’re going to print money and inflate away their earnings and savings, then let’s just keep the party going.” 

So, gold returned to its trading range around $1200. 

We have two thoughts about the turn of events.

First, we’re glad we still have some time to help our farsighted clients invest in gold before the price runs away.  We don’t know how long we have, but events are accelerating.  Please don’t wait until it is too late.

Watching Washington, a second thought occurs. It’s from Shakespeare:

“Lord, what fools these mortals be!”

We don’t know the dates and the times that these events will unfold, but they are underway now and they will accelerate as at first a few countries and then more diversify out of dollars and into gold.

We recommend you beat them to the punch by acquiring gold now, before the inevitable stampede.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

sinking dollar

Abandoning the Dollar Standard

Gold Market Discussion

World Reserve Currency Breakdown:  Abandoning the Dollar Standard

Dollar Devaluation Ahead
Increased spending, tax cuts, and more debt will mean massive inflation and a blow to the American dollar’s purchasing power.

Today I’d like to alert you to what is happening to the dollar’s role on the world stage.

But first, the backstory:

In more sensible times, back before trillion-dollar deficits and a national debt that runs to fourteen places (think about that!), the US was on a gold standard.

Now the US and, for all practical purposes, the world is on a dollar standard.  It is a monetary scheme that evolved after World War II under which the nations of the world and their central banks were persuaded to hold their currency reserves in dollars instead of gold.

It is an arrangement that has made the dollar more valuable than it otherwise would be.  It has also subsidized the US government’s debt. As it comes apart the value, the purchasing power of the dollar, will suffer. 

This post-War system was sold largely as a convenience.  “Don’t worry,” the world was told.  “You can take trust these dollars since you will be able to exchange them for the underlying gold anytime at all.”

That promise was broken long before many of our clients were even born!  The particulars of this structure, with the dollar as the world’s reserve currency, have changed over the years, but it has been given enough international duct tape and secret money rigging for the whole rickety system to have survived.

Until now.

Now the system is beginning to fly apart.  Two examples that you should understand are very threatening to the dollar and its value.

First, the central banks of the world have substantial holdings of dollar.  We have warned you even recently about our vulnerability to China’s official holdings of dollar bonds.  What is little known is that, until recently, even Russia was a major creditor of the US.  But with all the US sanctions targeted at it, Russia decided at the end of last year to unwind its dollar holding.

It sold aggressively through the spring, unloading $90 billion in Treasury bonds altogether over the period.  The bond sell-off spiked 10-year Treasury interest rates over 3 percent for the first time in years. 

What has Russia been doing with the proceeds of its US Treasury bond sales?

Buying gold, of course.

Russia is not the only country beginning to view the dollar more as a cudgel to enforce US foreign policies, than as a neutral and reliable store of value. 

Our second example, reported earlier this week, involves a decision by the three major European powers, Britain, Germany, and France, to join in an agreement with Russia and China to circumvent US sanctions and continue to buy Iranian oil.  The parties announced a new vehicle that allows them to bypass the US controlled and dollar standard international payment system.

Such defiance of the US would have been unthinkable in the past.  Unthinkable.

WHAT THIS MEANS FOR INVESTORS:  What I have described for you are crucial developments that aren’t covered and explained on the evening news.  But they will have more impact on your standard of living than most of the stories you see.  Both of these developments foretell the crack-up of the dollar’s privileged role in the world.  They foretell the end of the post-War system that has artificially subsidized the dollar, giving it – and you – more purchasing power than you would otherwise have.

As the countries of the world look for a time-tested currency reserve that is not subject to political manipulation, they will find only gold. 

We don’t know the dates and the times that these events will unfold, but they are underway now and they will accelerate as at first a few countries and then more diversify out of dollars and into gold.

We recommend you beat them to the punch by acquiring gold now, before the inevitable stampede.

 

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold and Silver Maple Leaf

The Gold-Silver Ratio is Making a Strong Case for Silver

The Gold-Silver Ratio is Over 80:1- Time to Act on Silver

silver bars

Suppose you had 10 ounces of gold and you agreed to trade it for 800 ounces of silver.   Then, sometime down the road as prices change, suppose you could trade that 800 0unces of silver back into gold, but that you got 16 ounces of gold instead of the ten you started with.

You didn’t invest any more money, but the amount of gold you own just increased by a sixty percent! 

Pretty smart move, right? 

You bet it is.  This example, using the spot prices of gold and silver, is for purposes of illustration only, because of transaction costs and since different coins and bars have their own premiums relative to the spot prices.  But many of our clients and I, myself, have used this powerful strategy for years to substantially increase our precious metals holdings.

I would like to recommend it to you now.  Because this is the time to trade gold for silver. 

Let me explain.

The gold-silver ratio, which is the price of gold divided by the price of silver (essentially how many ounces of silver does it take to buy one ounce of gold), is now around 83 to one, the highest level in about 25 years. For more information, read our gold-silver ratio article here.

We recommend trading gold for silver with the ratio this high.  Because gold and silver each have their own supply-demand fundamentals, their prices don’t move in lockstep. Down the road as prices change the ratio between the two metals will change.  The gold-silver ratio can be expected to rise in a falling market, which provides us today’s opportunity to use this strategy.  Similarly, in a rising market the ratio will move lower.  For example, in April 2011, with silver at $50 an ounce and gold at $1,500 an ounce the ratio hit 30 to one. 

Our intent will be to target trading back into gold when the ratio is 50 to one.  But your broker will be able to give you specific recommendations depending on market conditions at the time. 

The gold-silver ratio doesn’t tell you where the price of either metal will be next month or next year.  But at 83 to 1, it is very persuasive evidence that the price of silver is low relative to the gold price. 

I urge to speak with your broker about this strategy.  They will be happy to explain this powerful strategy in more detail and answer your questions.  We especially like it for growing your gold and silver holdings because you are always invested in precious metals, moving  into the precious metal that is relatively undervalued and therefor has the greatest relative price appreciation.

One day people will be more interested in the total number of ounces of gold and silver they have rather than the dollar value of their gold and silver.  When that happens, you will be very happy indeed that you took advantage of the gold-silver ratio strategy.

The ranges of the gold-silver ratio

 

Is Student Debt the Next Bubble

Student Debt: The Next Bubble?

Gold Market Discussion

Is Student Debt the Next Bubble?

Student Loan DefaultsAn article by New York Post contributor John Aidan Byrne the other day made a couple of points worth repeating regarding student debt.   

Bryne wondered if the student debt crisis will be the trigger for the next financial meltdown.  It’s a good candidate.  Today more than 30 percent of student loans are either in default, delinquent, or simply going unpaid. 

The student loan debt totals $1.5 trillion today.  That exceeds the value of subprime mortgages that lead to the Crash and Great Recession.  Byrne notes that “in March 2007, in the lead-up to the financial crisis, the value of subprime mortgages was estimated at $1.3 trillion.”

At its current pace, today’s $1.5 trillion student loan total is “careening to $2 trillion within the next three years,” he says.

The student debt burden is having a depressive impact on the economy that will only get worse.  It has millennials struggling to move out of their parents’ homes, buy their own homes, form capital to start businesses, and save for the future.

At least in the subprime crisis, loans were secured to some degree by the underlying real estate. 

But what secures student loans? 

Nothing.

Humorist P.J. O’Rourke put the question of collateral for student loans in perspective.  “How about an English thesis on Henry James?” he asks.

Yeah.  Take that to the bank.

There are many other things that can trigger the next financial crisis.  Trade wars.  Rising interest rates.  Metastasizing government debt.  A stock market crash.  Money printing.

Student debt is just one of many candidates. 

Like so many other things in the government’s financial house of cards, it reminds us of J.P. Morgan’s testimony to Congress more than 100 years ago. 

“Money is gold, nothing else.”

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

China Buying Gold

Central Banks, China Add Gold

Gold Market Discussion

Central Banks and China Are Adding Gold… Again.

China adding goldThe numbers are in on central bank gold buying for the first half of 2018.  For the six months central banks increased their gold buying by 8 percent over the year before. Altogether central banks accounted for 10 percent of global gold demand

The officially reported numbers for China’s gold reserves have remained unchanged 1842.56 metric tons.  But China has gone for extended periods in the past without reporting any changes in its gold holdings, and then suddenly reports huge new total reserves.

What also goes unaccounted for in these numbers is the flow of the world’s gold from the West to private hands in China.  This is an almost subterranean flow reported by bullion banks and refineries that has huge economic significance and yet has been grossly undernoted in official circles.

While the West’s governments print paper money, their countries are being decapitalized of real, enduring money. 

At the same time, China is also the world’s largest gold producer. It has more than twice the annual gold production of the US.

Much of China’s move into gold remains shrouded in mystery, which is probably what its government prefers. Why let the world know you are aggressively acquiring gold?  Better to operate quietly and buy what you can while prices are still low. Even so, a recent Bloomberg story cites a Hong Kong consultant who observes that with strained relationships with the US over trade, China now has fresh motivation to add to its gold holdings. 

China is the largest holder of US Treasury debt instruments (US government bonds)

That means that China loans money to the US government, enabling Washington to continue to spend more money than it takes in. The US is so debt-addicted that it is dependent on foreign creditors like China.    

While this is a vulnerability of the US, it also means that China is highly vulnerable to the US government’s favorite tool for conducting its foreign policy: embargos, restrictions, and sanctions. 

What this means for investors: Long ago there was an expression in the gold business that asked, “Are you as smart as a French peasant?” It referred to the people’s insistence on owning gold, since they had been fleeced by paper money so many times in their history.

Today we would suggest that our clients be as wise as China, which is quietly acquiring as much gold as it can while prices are low.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Trump Chooses the Printing Press

Trump Chooses the Printing Press

Gold Market Discussion

A Word to the Wise:  Trump Chooses the Printing Press

Last week I promised to share with you some revealing information that makes clear that money printing will be the government’s preferred policy option in the days to come. I said, It is a story that may disappoint some of you. But it is another warning that you will want to take seriously.”

The story comes to us from veteran Washington reporter Bob Woodward’s new book, Fear: Trump in the White House. As you might expect of a book filled with insider sniping at the President, it quickly shot to the top of the bestsellers lists.

Along the way some officials quoted in the book have disputed Woodward’s account of their words. They are doing to, says Woodward, to protect their jobs. And he threatened to release tapes of some of his interviews.

At RME, our beat is gold, money, and the economy. We are interested in commenting on Washington’s endless squabbles only to the extent it helps our clients protect themselves and profit from events to come.

From that standpoint, one of the most revealing quotes in the book comes from Gary Cohn, who was Trump’s top economic advisor.  Cohn isn’t among officials trying to protect his job since he left the White House back in April.  His only comment about the quotes attributed to him has been a sort of on non-denial denial. 

But the relevant passage of the book comes as the President and Cohn were discussing the national debt.  Cohn was trying to persuade Trump that the government can’t go on just running up debt and borrowing money. After all, as a candidate Trump said he would eliminate the national debt in eight years.

Trump’s solution?

“Just run the presses—print money,” said the President.

Now, we are not surprised that governments are quick to resort to printing money. The government’s desire to print money is behind the present dollar standard and Federal Reserve system to begin with.

But printing money is only effective if people are willing to be fleeced by the policy. The government’s newly printed dollars take on value or purchasing power to the degree that the existing dollars people already have lose value or purchasing power.

What I am saying is that if everyone knew the government was intent on debauching the dollar by printing more of them, they would make sure that they are not victimized by the practice.

They would protect themselves by owning gold.

In effect, Woodward’s account of Trump’s money printing policy preference let’s the cat out of the bag. 

It should be a word to the wise.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

2008 Crisis

10 Years Ago

Gold Market Discussion

TEN YEARS AGO: The Financial Crisis of 2008

As the week began, gold continued to trade in the $1200 range; silver’s trading neighborhood so far in September remains just over $14.00.

Ten years ago this week the Panic of 2008 was picking up steam.  It turned out to be the biggest financial calamity since the Great Depression. 

That summer police in California were needed to maintain order as people desperate to get their money out lined up outside an IndyMac Bank.  The bank was taken over days later by the FDIC. 

The government soon had to take over Freddie Mac and Fannie Mae at a cost to taxpayers of hundreds of billions of dollars.

Bank of America was called upon to take over Countrywide Mortgage; Bear Stearns failed and was taken over by JPMorgan with the help of $29 billion from the Fed. 

On and on it went.  After a run on the bank, Washington Mutual, the nation’s largest S&L, failed.  It was followed by Wachovia Bank.  Lehman Brothers, which was founded in the 1840s, filed for bankruptcy.  It had survived the Civil War, two World Wars, and the great depression.  But it was undone in the Great Recession, and resulted in the largest bankruptcy in US history.  Taxpayer money and freshly “printed” Federal Reserve dollars were bailing out one institution after another:  The insurance giant AIG; Citigroup; Merrill Lynch. 

The carnage in the markets was simply unbelievable. 

The Dow Industrials crashed from 14,000 to 6,600.  All together $50 trillion disappeared from the world’s stock, bond, and currency markets.  By one estimate, the American people lost a quarter of their total net worth.

Perhaps the best indicator of the severity of the crisis is this number:  9.3 million American homeowners lost their homes to foreclosure or in distress sales.

Without comment, let me compare the essential metrics of where we were ten years ago and where we are today.

At the beginning of September 2008, total Federal debt was $9.6 trillion.  Today it is $21.4 trillion.

(The scope of the debt problem is global.  Total global indebtedness has skyrocketed over the last 20 years from $40 trillion to $250 trillion.)

The Federal Reserve’s Monetary Base, the amount of money it has “printed” to buy things like troubled mortgage and government securities, has quadrupled since the meltdown.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

What we warned you about

This is What We Have Been Warning You About!

Gold Market Discussion

We are now only weeks away from the end of the US governments 2018 Fiscal Year.  And it will be one for the record books. But not in a good way. In fact, the year-end numbers are very bad, the worst since the last financial crisis.Time to Cut Costs

Originally, the FY 2018 deficit was projected to total “only” $526 billion. 

Wrong. By May, officials had upped that estimate to somewhere just under $800 billion. 

Wrong again.  Nothing is more common that the government having to increase its deficit guesstimates several times as the year goes along. But now, through August, with eleven months of the fiscal year on the books, the deficit has already climbed to $898 billion. 

There are two specific takeaways from this:

  1. This deficit is almost 40 percent higher than the eleven-month total in the prior year.
  1. We are closing in on a trillion-dollar annual deficit for the accounting year that ends on September 30.

We last experienced trillion-dollar deficits during the worst years of the mortgage meltdown and the financial crisis, 2009 – 2012.

fork in the fiscal roadBut this time is different. This time we are operating a scandalously irresponsible deficit – not in the depths of a crisis – but in a period of some growth and higher employment.

No one should be surprised that the deficit is moving back into its old crisis neighborhood. Afterall, the government has both cut taxes and increased spending.

What this means for investors:  At RME we have been warning about this return of skyrocketing deficits. The government has to get the money to cover its deficit spending somewhere.  It can borrow the money, or it can print the money.  Borrowing the money becomes more problematic when interest rates are rising (rising rates threaten to compound the already unsustainable debt), and when the government is on the verge of a trade war with major creditors like China.

That means it must print the money. Next week I will share with you a shocking story that will make it clear that when we say the government will print the money, we are not simply guessing.

It is a story that may disappoint some of you.  But it is another warning that you will want to take seriously.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Currency Deaths

Gold Market Discussion
Currency Deaths Remind Us Why We Own Gold and Silver

Wednesday, 9/12/2018

There is only one answer to the question “how many paper currencies have failed?” All of them. 

Or stated differently, thousands of them have already failed, while those that haven’t quite given up the ghost yet, the newer ones including the paper Federal Reserve dollar, are in the process of failing.

The death of a paper currency may seem to happen slowly, although to anyone watching closely everyday, as we do at RME, it starts slow and then accelerates very quickly. The general public only notices it when the tragedy of a socialist failure like Venezuela makes the network news. However, there are many world currencies in a death spiral right now besides Venezuela’s Bolivar.

Using the dollar as a benchmark, (we’ll come back to that in a moment) here is how much value a half-dozen of the world’s currencies have lost just this year according to the firm Pension Partners:

  • Venezuelan Bolivar – 99.99%

  • Sudanese Pound – 61.10%

  • Argentine Peso – 50.50%

  • Turkish Lira – 44.00%

  • Angolan Kwanza – 38.80%

  • Brazilian Real – 20.70%

A dozen other currencies have also suffered double digit losses so far this year.  Those who have been victimized by them all wish they had put their trust in gold, not paper.

Venezuela Bolivar Hyperinflation
What hyperinflation in Venezuela looks like.

 

Empty Food Shelves in Venezuela
An empty food market in January 2018- Caracas, Venezuela

 

Zimbabwe
The aftermath of currency hyperinflation: Here is actual currency from Zimbabwe. Yes, you read it correctly.

What this means for investors:  Some of the US dollar’s apparent strength is due to those (usually the financial institutions affected, and not the common people) moving out of the most troubled currencies and into dollars.

But remember, the real value of paper money is how much you can buy with it.  And on that measure, no matter how many market commentators tell you the dollar is up or the dollar is down, they are only comparing it to other currencies that are also losing value.  In the real world – the one that matters – the dollar is losing value.  Like the others, the pace of that loss will accelerate.

To protect yourself against the sorry fate of all paper money, you need to own gold.


As always, I encourage you to speak with your broker at RME for more market updates. Experts are available Monday-Friday from 9 AM- 5 PM. Call today-  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Flashing Red!

Warning Signs Flashing Red!

Gold Market Discussion

Tuesday September 11, 2018

“Warning Signs Flashing Red!”
Gold started off the week little changed, continuing to consolidate around $1200.  This leaves us a moment to loop back around and underscore an important item we have already shared with you. 

But we think it is one that demands repeating.

CIA Director George Tenet
CIA Director George Tenet

Goldman Sachs’ bear market indicator for stocks is now at levels which have historically preceded a bear market.”  The firm’s Bull /Bear Market Risk Indicator is higher now than before the deadly 2000 and the 2007 stock market crashes.  In fact, it’s at the highest level in a half century. 

As we noted over the weekend, the indicator is based on five factors: unemployment, the yield curve, inflation, valuation, and growth momentum.  While each of these indicators for determining the outlook for the stock market is important in its own right, Goldman Sachs has consolidated them, and having back-tested the relative importance of each as a forecasting tool since 1948, has weighted the importance of each in its risk indicator.

What this means for investors:
Goldman Sachs says that it Bull
/Bear market indicator “is flashing red.” for stocks. Those words are hauntingly familiar, especially this week as we mark another anniversary of the 9/11 attacks on America.   After that tragedy, CIA Director George Tenet testified that in the weeks before the attacks, “the system was blinking red.” Warnings that go unheeded do no one any good. This is already the longest bull market in stocks in history.  Can it go on forever?  No.  As economist Herb Stein noted, “”If something cannot go on forever, it will stop.” And when it does, there will be carnage in the stock markets and gold will be the beneficiary as investors scramble for safety.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Shortage as US Mint Is Running Out of Silver Eagles for 2018

Gold Market Discussion

US Mint Is Running Out of Silver Eagles

US Mint

Right now everyone is looking for 2018 silver eagles, and few can find them. In fact, the US Mint is running out of silver eagles for this year. They have temporarily sold out of them, but expect more before the end of the year. Last year the 2017 eagles weren’t always readily available either, but it never reached a level where the Mint was sold out.

What this means for investors:Silver eagle sales by the mint were up 33% in August from the previous month. This likely contributed to the Mint’s depletion of silver eagles, however, buyers were also taking advantage of the cheap prices we have been seeing in metals over the summer to stock up. The demand for gold eagles did not increase significantly though. Buyers are also taking advantage of the high gold to silver ratio and buying silver right now to optimize their precious metals portfolio.

Gold Prices Firmer This Week on News of Softer Dollar

dollar and gold correlationGold prices were generally firmer this week and maintained levels from last week. Price were trading in a narrow range around $1,200. They were up most of the week as the dollar index softened. On Friday gold slipped slightly after the U.S. jobs report showed robust data.

What this means for investors: Global stocks were down as well as the dollar as investors were getting jittery over trade war concerns this week. There was talk of even further escalation in the tariff battle between the U.S. and China.


Goldman Bear Market Predictor

Goldman SachsWe (and others) have been talking about recession predictors for sometime now. Some of these are the inverted yield curve and the so called “Warren Buffet” indicator. Now Goldman’s bear market indicator is over 70%…up 10% from last year. This indicator is based on five factors: unemployment, the yield curve, inflation, valuation, and growth momentum. It’s higher now than it was before the last two market crashes and is essentially “flashing red” on forth coming downturn.

What this means for investors: The bear market indicator was at 67% last year and some analysts were warning of recession. Yet the markets (overvalued as they are) have still been showing resilience. The Dow is still going strong and the Nasdaq has hit a new record recently. This is the longest bull market in history, due in part to  extended business optimism for Trump’s pro-business growth tax policies. When it bursts though, there will be far less wiggle room for for effective fiscal and monetary policy to aid recovery. Interest rates, despite rising, are still relatively low, and rates in Europe and Japan are near zero. Debt level and budget deficits are rapidly expanding. So whether the next crash is long and slow or abrupt, the recovery process will be much tougher.

The Debt Clock

The national debt is still one of the stories few want to talk about. With the increasing rate of spending coupled with tax cuts, the U.S. debt is on pace to be twice the size of the economy in 30 years. The deficit has increased by 20% in just the last year alone. Foreign governments hold $6.2 trillion of U.S. debt, and that number is quickly growing. It is costing over $260 billion a year just to pay the interest on the national debt. By 2024 the U.S. could very well be spending more on paying interest on its debt than on defense.

What this means for investors: It’s absurd to think the debt burden will ever be alleviated smoothly. Either the country will have to eventually default or wipe the balance sheet or continue printing money until the system collapses spectacularly. Whichever way it happens, it will be the downfall of the dollar. Countries like Russia and China are already maneuvering to steer away from the dollar as the world reserve currency. When fiat currencies come to a head like this, gold is the answer.

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

gold ingots

Trade Talk and Dollar Weakness Supported Gold This Week

Gold Market Discussion

Dollar Weakness Supported Gold

weaker dollarPrecious metals headed higher this week with gold hovering around $1,200. Dollar weakness supported gold prices, but gold stayed fairly quiet. Silver hovered around $14.50.

Trade talk once again was a mover for both gold and the dollar. President Trump announced the possibility of new tariffs for China in the ever-escalating trade war between the U.S. and China. Since the start of the talk of tariffs and trade war, the dollar index has been going up, which has been gold’s biggest headwind. However, weakness in the Chinese yuan is going to be exerting stronger influence on gold prices as well.

The dollar had dipped mid-week on news of a potential trade resolution between the U.S. and Mexico outside the scope of NAFTA. Investors moved out of some safe haven dollar positions seeing it as an indication that trade conflict with China and the EU might be resolved soon as well.

September Reversal for Gold?

Gold Eagles- BullionGold looks to be headed for a reversal. For the month of August, gold is down. However, this is fairly typical for metals to decline in the summer before reversing going into September. September is the most lucrative month historically for gold with average gains of 2%.

What this means for investors: The dollar is still the biggest obstacle for gold right now. Volatility in an overvalued stock market is likely to be a factor going into the fall though. Many investors are becoming wary of overvalued tech stocks in particular. As always when considering gold buying for a long term safe haven buy, think about price dips as buying opportunities.

The Fed’s Next Move

Federal Reserve Building EagleThe Federal Reserve just had its annual Jackson Hole, Wyoming summit. At it, they outlined potential future direction for monetary policy. Fed Chairman Jerome Powell made the case for a further, gradual increase in interest rates. President Trump recently expressed frustration at the rising rates, and Powell further indicated that the Fed would not cave to political pressure. Powell also downplayed the risk of overheating the economy with rate increases, which has been a source of concern for some. He also noted changing economic structures that are making monetary policy more difficult to navigate.

What this means for investors: Investors have been anticipating a September quarter point rate increase already. Despite remaining on track with rate rises for now, Powell seems to be moving cautiously for now as economic factors and inflation projections are seeming more uncertain. After the last few rate rises, gold has had a boost.

Currency Crisis in Emerging Economies

Argentina PesoArgentina’s economy is rapidly deteriorating. The Argentine peso is down 52% this year against the dollar. This week alone it slid 20% over two days. Argentina now has the highest benchmark rate in the world with rates at 60%. The Central Bank’s five interest rate hikes this year have been ditch efforts to soothe the economic turmoil. A resurgent dollar, spike in energy prices, and a decline in agricultural exports all contributed to the situation. Argentina was forced to ask the IMF for a loan, but investors are worried that the government will default on its debt.

What this means for investors: Argentina, along with countries like Turkey, Brazil, and South Africa, are feeling the squeeze on their currency value that a tight Federal Reserve monetary policy is pursuing. The strong U.S. dollar is making it tough for these currencies to regain traction right now, but there were problems to begin with. The battle against the dollar is merely exacerbating those issues. Many in Argentina blame the mismanagement of its 2001 crisis (its worst) as a source of continued problems.

One of the lessons from currency crises like these are that fiat currencies are unreliable. As they move through crash or collapse, gold is the safety net that protects wealth. For an extreme example of this, just look at Venezuela.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold Bull Market Coming

Gold Regained Traction as Trump Found Fault with Fed Policy

Gold Market Discussion

Gold Regained Traction and Climbed to $1,200 Again

Gold BarsGold had its first weekly gain in over a month this week. By Friday with gold prices up $20, gold regained traction enough to remain firmly over the $1,200 mark. It had been wavering back and forth over $1,200 earlier in the week though. Metals had been under a great deal of pressure lately from the dollar. Silver was up 30 cents Friday and moved in tandem with gold against the dollar.

What this means for investors: Investors are seeing an upside to gold. Buyers seem to think gold had hit a bottom and is going to keep climbing now. Dollar weakness was a major factor in gold prices being up this week.

Weaker Dollar and Uncertainty as Trump Finds Fault with Fed

Trump TarriffsThe dollar lately has been in high global demand as the safe haven by choice in the ongoing trade war and tariff retaliation between the world’s largest economies. This week though, the dollar pulled back after some comments that the President was “not thrilled” with current Fed direction on interest rates. In a Reuters interview, Trump admonished Fed chairman Jerome Powell for not doing enough to boost the economy. The Fed had its annual summit in Jackson Hole to discuss rate increases and the economic outlook. The decision was reached to delay with a rate hike and rather put off the hike until September. In the same interview, Trump also criticized China and Europe of manipulating their currencies to the detriment of the U.S.

What this means for investors: It isn’t the first time that the President has criticized the Fed. The President and the Fed are going opposite ways in fiscal vs monetary policy. Some analysts see this as the President trying to protect himself in the event of an economic recession. The perfect storm of tariffs, trade war, and rising rates happened before in 1930 and exacerbated the Great Depression.

Sanctions and Gold

moscow catheral

This week, new sanctions against Russia are taking effect. As sanctions ramp up, Russia’s accumulation of gold and discarding of U.S. debt ramps up as well. Russia isn’t the only country dumping U.S. debt either. Turkey is as well as its currency sharply declines and they turn to gold as a refuge. Gold continues to prove it’s the ultimate safe haven refuge when planning for downturn.

What this means for investors: China and the U.S. also slapped new tariffs on each other this week. Since the trade tensions between China and the U.S. kicked off, there has been far less uncertainty and safe haven trading in gold happening than one might expect. With indications lately that the trade war is ramping up rather than abating any time soon, the gold trade will catch up.

Gold Output to Slow

gold miners slowing outputAnalysts expect gold output to hit generational lows in the next few years. Mines in Australia and Peru in particular are approaching peak gold, and will struggle in the coming years. Over the next year or so, output is going to peak, and then reverse. In fact, miners forecast that output will sink 15% by 2022. In Australia, it will be a record 33% sink in 3 years.

What this means for investors: Lower supply means higher prices – especially as production costs go up. This is just one factor that could have an impact on gold within a few years. With prices already low now and factors like the dollar and a record stock market (now the longest bull market) putting pressure on metals’ prices, it’s something to factor in when looking at long term gold investment.

 


VOTE FOR DR. KELLI WARD THIS TUESDAY

Dr. Kelli Ward and Jim Clark

To our Arizona clients and subscribers- The Primary Vote is this coming Tuesday. I supported Kelli when she ran against John McCain and I support her now as she runs for the seat vacated by Jeff Flake. Let’s take the first step to getting Dr. Ward in the U.S Senate this Tuesday!

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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Global gold prices

Gold Prices are Rising Elsewhere Despite Sinking This Week in the US

Gold Market Discussion

Gold Prices are Rising Elsewhere than in the U.S. – Why?

global gold pricingThis week gold dipped under $1,200. Silver took a hit this week too. It dropped under $15, keeping the gold-silver ratio high. It was able to clamber back some gains by Friday and close up $10, but many investors are favoring treasuries as a safe haven right now. However as metals prices are meeting resistance here, overseas gold prices are still holding value. For example, in Turkey as the lira threatens collapse, gold is trading up 30%. Turkish president Erdogan as recently as last year was even suggesting his people buy gold. Now Turkey is looking at it as a possible lifeline. (As a side note, it the ancient kingdom of Lydia, now modern day Turkey, where gold coinage first originated). A few months ago as well in Europe, gold posted higher gains in the euro over political uncertainty in Italy, Spain, and Germany. Additionally, the central banks of Russia and China continue to be the world’s biggest buyers.

What this means for investors: The dollar is remaining resilient for now, which is hammering gold. In fact it’s so strong right now that safe haven gold buying is not happening despite global uncertainty. Currencies like the lira and other emerging market currencies are plunging though, keeping the uncertainty trade in gold in those places robust. Silver’s pull back offered an attractive buying opportunity as it has been throwing indicators that it is undervalued.

Is Gold Ever Going to Fight Back Against the Dollar?

The Dollar vs GoldWith gold at an 18 month low and the dollar at a 13 month high, it doesn’t seem like gold can catch a break anymore. The U.S. economy is certainly the bulwark holding up the global economy right now, so investors are comfortable keeping the dollar as a safety net. Analysts – and even the President – have been cautioning that the dollar is getting too strong. However the pressure has yet to be released.

What this means for investors: Debt is still a huge factor to weigh in for the dollar down the line. U.S. debt has tripled since 2007 and is projected to hit $1 trillion by 2020. President Trump’s tax cuts are not being offset by decreased government spending. Rather, spending is increasing (as it has for years), meaning the debt will balloon even faster. The debt level is already unsustainable. When it comes to ahead, you can bet the dollar is going to break.

Case for Gold

There are still indicators making a case for gold, despite the pull back of recent weeks. Even internet entrepreneur Kim Dot Com (best known for his file sharing websites) has started advocating for buying gold before the dollar crashes. Gold, after all, is ultimately insurance against downturn and uncertainty.

Turkish Uncertainty

Tariffs on Turkish goods and a rapidly plunging lira could have a ripple effect on European banks. The increasingly hostile rhetoric between Turkey and the U.S. will ramp up uncertainty as well. Gold prices in Turkey rose 30% as the currency started collapsing.

Production Cost

Gold is selling for under production cost right now. This is partly due to lack of discovery of new gold deposits in the ground. The global supply is depleting. Once the production costs begin to catch up though while gold prices remain low, it won’t be worthwhile to produce as much. As production falls, prices will start to go up.

Gold to Bottom Out Soon

Once gold bottoms, it has nowhere to go but up. Analysts at ABN Amro think it is close to the bottom now. Metals prices have been falling for sometime now, but Q3 looks like it could be the bottom. ABN Amro has positioned for gold to reach $1,400 by 2019.

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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gold and silver bars split

The Gold to Silver Ratio Is Near 80 – Is Silver Undervalued?

Gold Market Discussion

Gold to Silver Ratio Is Near 80, Signaling Time to Buy Silver

gold-silver ratioRight now the gold to silver ratio is near 80 (hovering in the high 70s). Essentially, about 80 ounces of silver are equal in value to 1 ounce of gold. This is an unusually high ratio, and historically, it signals a buying opportunity for silver. It’s no secret right now that metals prices – both gold and silver – have been facing some headwinds against a strong dollar. However silver is looking particularly undervalued. Some investors are choosing to trade in gold for silver right now in order to maximize portfolio value.

What this means for investors: Looking back at the gold-silver ratio from 1991 to 2007, the current ratio is sitting closer to the market low than to later highs. Yes, silver prices are low right now, and that’s why it is a great buy. The charts indicate that a bullish break for silver is coming. Historically, wide gold-silver ratios like the current one precede upward price movement, which is why savvy investors are buying now while silver is cheap. The ratio now is similar to what it was just prior to the 2008 financial crisis and recession. Following the financial meltdown, silver rallied 400% over three years, as these charts show. Read our original article about the Gold-Silver Ratio here.

Turmoil in Turkey Sends Markets Into Retreat

TurkeyOn Friday, stocks took a big hit over economic turmoil in Turkey with the Dow falling triple digits. The Turkish lira dropped 28% this week with investors worried that Turkey can’t cover its debt. Furthermore, President Trump authorized tariffs on metals imports from Turkey. This was done over the jailing of an American minister that Turkish president that Erdogan accused of participating in an attempted coup last year. Other emerging market currencies experienced a hammering as well. The European Central Bank was concerned over the Turkish contagion spreading to banks in Germany, France, and Italy that were not adequately hedged. These geopolitical concerns raised volatility, which is usually a driver for gold prices.

What this means for investors: Turkey seems to have been preparing for an event like this. For example, they have been repatriating gold, shifting reserve holdings to gold, and private citizens have been buying more gold. Gold, as the ultimate safe haven, offers a lifeline as Turkey faces currency crisis. It is also worth pointing out that emerging markets in general were hammered by the news from Turkey. If volatility continues to go up over possible contagion spreading from Turkey, expect stocks to continue to get hit. Surprisingly however, gold only got a small boost from the news, since the dollar is still looking strong as a safe haven.

Warren Buffet’s Favorite Market Indicator

Billionaire Investor Warren Buffett

The stock market is overvalued. Numerous investors and analysts have been warning for some time of this. In the words of Ron Paul, we’re in the biggest bubble in the history of mankind right now. Famed investor Warren Buffett’s favorite indicators are the saying the same. That indicator is simply the total market value of all stocks divided by the gross domestic product. When that ratio is over 100%, stocks are considered overvalued. Prior to the dot-com bubble burst, it was at 145%. Right before the 2008 financial crisis, it was at 110%. Currently, it’s at 149%.

What this means for investors: This means that the stock market right now is the most overvalued it has been in American history. But the overvalued stock market isn’t the only recession indicator at play right now though. The yield curve has been flitting towards inversion for some time now. With more Fed rate rises on the way, short term bond rates are threatening to move higher than long term rates, which historically has always preceded recession.

 

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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silver to gold ratio May 2017

Trading the Gold-Silver Ratio

What Is the Gold-Silver Ratio?

gold-silver ratioYou may have already heard the term Trading the gold-silver ratio, but let’s look into what the ratio represents and why it is often advantageous to exchange metals within a position. The gold-silver ratio is often a signal for an investor to exchange silver for gold or vice-versa to optimize the value of a precious metals portfolio. The gold-silver ratio measures the value of an ounce of gold relative to an ounce of silver. In other words, how many ounces of silver it takes to equal one ounce of gold. Right now, in August of 2018, the gold -silver ratio is unusually high. It’s currently sitting at about 80, and such a ratio indicates a lucrative buying opportunity for silver. This means that 80 ounces of silver are equivalent in price to 1 ounce of gold. Historically, a ratio like this precedes a bull run. As you will see in the chart below on this page, a ratio in the 80-90:1 range is quite rare, as the range historically represents only 5.3% of the the monthly closes since 1915. So through every economy in the past 103 years, including the crash of ’29, the ensuing Great Depression, BOTH World Wars, crash of 1987, and the banking disaster of 2008– throughout all of that history– we have only been in this range a little over 5% of the time. That simply makes this market of mid 2018, and the corresponding ratio, historic.

Silver, like gold, has been considered something of monetary value used to mark wealth throughout human history. Take a look at the fluctuations in the gold-silver ratio over the centuries. (Source)

–  2011 – The ratio collapsed to about 31. Silver had rallied, collapsing the ratio to 31.

  2007 – For the year, the gold-silver ratio averaged 51. This means 51 ounces of silver were equivalent in price to an ounce of gold.

–  1991 – When silver hit its lows, the ratio peaked at 100.

–  1980 – At the time of the last great surge in gold and silver, the ratio stood at 17.

–  End of 19th Century – The nearly universal, fixed ratio of 15 came to a close with the end of the bi-metallism era.

–  Roman Empire – The ratio was set at 12.

–  323 B.C. – The ratio stood at 12.5 upon the death of Alexander the Great.

Understanding and Reading the Gold-Silver Ratio

So how exactly does the ratio work, and how does an investor read it?  It’s no secret right now that metals prices – both gold and silver – have been facing headwinds against a strong dollar. Even in an economic environment of trade war, tariffs, record debt, an overvalued stock market, and uncertainty, metals haven’t been getting the demand one might expect to drive prices. Silver is looking particularly undervalued. But reading the gold-silver ratio can help predict how to maximize a portfolio’s value.

Looking back at the gold-silver ratio from 1991 to 2007, the current ratio is sitting closer to the market highs than to later lows. Yes, silver prices are low right now, and that’s why it is a great buy. The charts indicate that a bullish break for silver is coming. Historically, wide gold-silver ratios like the current one precede upward price movement, which is why savvy investors are buying now while silver is cheap before it makes makes that bullish break. The ratio now is similar to what it was just prior to the 2008 financial crisis and recession, when it also hovered around 80. Following the financial meltdown, silver rallied 400% over three years.

The ranges of the gold-silver ratio

Why Silver Prices Will Go Up

It isn’t just investment buying that drives silver though. Silver has a multitude of expanding uses as an industrial metal (more so than gold). Some of these applications are solar panels, medical devices, and touch screen technology – all technology expected to grow. Rising demand in these sectors will eventually contribute to a rise in silver prices.Price of Silver Aug 1998-Aug 2018

Trump vs Fed Rate Hikes

Trump Vs the Fed: The President Confronts Federal Reserve on Rising Rates

Gold Market Discussion

Trump vs. the Fed

It was President Trump vs the Fed and chairman Jerome Powell this week. The President caused a stir when he questioned the Federal Reserve’s monetary policy.  It was something of an unprecedented move. Since the Federal Reserve is independent and separate from the federal government, it broke the standard norm of the relationship between President and Fed.

Trump’s sharp words towards the Federal Reserve had to do with the continued, gradual raising of interest rates. The Fed is projecting another rate increase in September, and it could be making the dollar less competitive, which is why President Trump isn’t a fan. Trump disapprovingly contrasted the dollar’s resiliency to the declining Euro and Chinese yuan. Have a listen here.

Trump: I don’t necessarily agree with raising rates from CNBC.

What this means for investors: So what did gold do this week? After the President’s words, gold jumped about $14 and the dollar’s raging strength fell back. Silver had a similar spike. Uncertainty over policy and the possibility of pressure on the dollar were the reasons for this. Overall, gold had a slightly stronger week this week than last, but is still battling the headwinds of the strong dollar. On Friday, positive economy growth (at 4.1%!) stats triggered a pullback on metals as well.

Is Trump 2 Steps Ahead or Behind?

Trump vs. the Fed

In the Trump vs the Fed drama, who has the upper hand? It turns out it isn’t just Trump who doesn’t like the rising interest rates. In fact, he’s far from the only one. Analysts – including some Fed officials – have been wary for some time of rates rising too fast. Timing is everything with rising rates. In an economic environment strong enough to handle them, they are stabilizers. However when they go up too fast, it sets off a chain reaction. Higher borrowing costs lead to less spending, which in turn leads to recession. This is what Trump is afraid of right now.

He has good reason to be. Look at what happened during Herbert Hoover’s Presidency. Rates were rising, government spending increasing, tariffs set off a trade war, and the chain reaction culminated in the market crashing. Right now, the markets have dropped when rates have gone up. If the Fed loses control, a big market crash is going to be ultimately blamed on the President. The question now is whether Trump is going to be able to get ahead of the Fed now (as he is trying to do) with his caution, or whether monetary policy might undercut him.

What this means for investors: Regardless of how Trump’s confrontation of the Fed plays out, just taking on the Fed in this unprecedented way is going to increase uncertainty in the markets. The Friday growth numbers were positive, raising optimism in the markets. But if Trump is right on the rising rates, it’s time to think about preserving your wealth.

Your Safety Deposit Box May Not be Safe after all

Bank Deposit BoxHow often (if you have one) do you check the contents of your deposit box at your bank? Recently, some Bank of America customers realized not often enough. A Bank of America customer in California went to check her box of 16 years only to find it had disappeared and the bank had no explanation where the jewelry and coins it stored had gone. Another customer had her possessions (some of which were damaged) from her deposit box mailed to her randomly in a plastic bag with no explanation. Yet another family had their items shipped to them in a similar manner, but with $17,000 worth of jewelry missing. While Federal rules allow banks to drill safe deposit boxes when there is a court order, search warrant, delinquency on fees, or requests from estate administrators, these actions were unprecedented and inexplicable.

What this means for investors: If you’ve been storing your precious metals or other valuables in a bank safety deposit box, now may be the time to consider other options. While it is true that the cases here are not the norm for safety deposit box holders, is it worth the risk to give a bank control over your valuable assets? There are other options for storing your gold or silver safely. Consider a deposit box at a private vault (many of which have 24 hour access) or a secure, home safe storage system. If you have any questions on home or private storage, our advisers are happy to discuss with you.

Ron Paul: We’re In the Biggest Bubble in the History of Mankind

The stock market’s bull run has been painting a rosy picture for some time now. Certainly it has made many investors excellent returns. However, Ron Paul, a longtime market bear, cautions that we are still in a bubble, and its the biggest one yet. According to the former Congressman and Presidential candidate, the underlying problem is debt and a fiat currency. Have a listen.

There’s a bubble building in markets that will burst, Ron Paul says from CNBC.

Problem viewing the video? Click here for the direct link.

Gold Is Still Important on World Stage

Upper Savior CathedralAlthough it appears gold is being shunned by investors right now, world powers continue to gobble it up. Russia, for example, is dumping US bonds and buying gold. In 2010, it was one of the world’s top ten holders of U.S. debt. Since March, its treasury holdings have dropped from $96 billion to $14 billion. In that time, Russia has overtaken China as the largest holder of gold. In beleaguered Venezuela as a socialist economy collapses with a worthless currency, famine, and medicine shortages, sanctions against Venezuela are leading the government to start refining gold in Turkey.  The South American country is rich in oil and gold, and gold mined in the south is sent to Turkey to be refined and then returned. Venezuela is using gold to shore up its reserves that have tumbled since the economy’s implosion.

What this means for investors: The dollar won’t remain the world reserve currency forever. Increasingly, nations are looking for other options. Gold is so far the option of choice, as it has been for centuries.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Mining Experts Caution that World Gold Supply Is Running Out

Gold Market Discussion

Mining Experts Caution that World Gold Supply Is Running Out

gold mineThe miners are getting nervous as it appears the world gold supply is running out. Experts are warning that discoveries of gold are becoming more difficult to find. In fact, they expect to hit “peak gold” (which is the maximum rate of extraction) within a year. For the last forty years, production has been increasing, but it appears to have hit the peak and will start decreasing now. Numerous mining companies and industry experts are sounding the same warning. Not only is it ore becoming more difficult to find, but exploration costs are making it more expensive to mine. As the rate of extraction from the ground dwindles, it is difficult to see how gold demand will be met.

What this means for investors: One of the reasons gold has been so valued as wealth for millennia is because of scarcity. It sounds like it will soon become even more scarce, if the industry experts are right. Basic economics says that as supply falls, prices increase. Expect dwindling global supply to support gold prices in the long term.

President Trump Announced $200 Billion More Tariffs against China

US and China trade warThe trade war continues. It intensified this week after the President Trump slapped 10% tariffs on $200 billion worth of Chinese goods. China responded with harsh rhetoric and threats of counter-tariffs.

What this means for investors:Why aren’t we seeing the upset that happened in 1930 after the Smoot Hawley Tariff Act and ensuing trade war? There could be a few reasons. One is that there was confidence in the U.S. economy before the trade war kicked off, so the effects are taking longer to affect the markets. In fact, confidence is already starting to waver as fears mount of rising prices leading to economic slowdown. It could also be that investors think it will be an easily won war (as the President has asserted) or that the tariffs won’t come to pass. But China, Canada, and the EU have all already struck back against U.S. goods, so escalation seems inevitable.

Gold Prices Still Feeling Resistance This Week

gold vs dollarsUncertainty from trade war wasn’t enough to lift gold prices significantly this week. Gold continued to face headwinds from a stronger dollar, as did silver. An expectation on higher interest rates also created some push back on prices. Spot price for gold dipped under $1,250. The summer is historically a slow time for metals.

What this means for investors: There are still bullish investors, and there are still reasons to remain bullish. Gold is attracting buyers looking for a bargain who see turbulence ahead. For example, rising inflation in an overheating economy will drive investors back to gold. Escalation between the U.S. and China over trade should eventually spur some safe haven buying as well.


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

us-china-trade-war-mi

Trade War with China Dominated Market Movement

Gold Market Discussion

Gold Made Slight Gains for the Week

gold chart July 2-6, 2018

Gold posted slight gains for this week after battling tough headwinds the last couple of weeks. It closed over $1,250. On Wednesday with the U.S. markets closed for 4th of July, gold hit over $1,260 on the global exchange. The dollar softened and fear levels were elevated this week over trade fear. Silver prices also had a slight gain. We’re still not seeing a flight to safe haven metals that would boost prices because the dollar is maintaining strength while other major world currencies devalue.

Trade War with China Dominated the News

On Friday, the markets opened to the news that China had imposed the promised tariffs on U.S. imports, and the repercussions over trade war with China dominated the headlines. The tariffs on Chinese goods coming into the U.S. are going to impact sectors like airline manufacturing, the auto industry, and other industrial spaces. The Chinese tariffs are most significantly on things like pork, soy beans, and other agricultural products (among other).

A trade war in a rising rates economy. We’ve seen it before in 1930, and it’s a lesson that few analysts are reporters are paying attention to. Read back on our blog about the Smoot Hawley Tariff Act and what it did to economic recovery during the Great Depression. However, there is another factor to pay attention to here. In 1930, the trade war was primarily with Canada, a friendly neighbor. Right now it’s primarily with militaristic China, with whom the U.S. has never been exactly been friends (despite China being a primary holder of U.S. debt). Couple that with Chinese build up in the South China Sea and a U.S. naval presence in the Pacific that China is vocally unhappy about, and it’s a different equation entirely. It’s also worth noting that two U.S. warships sailed through the Taiwan Strait in the aftermath of the trade war announcement.

What this means for investors: Volatility. The markets and monetary policy makers are still feeling it out. There is certainly an increased risk sentiment though. We saw gold get a little boost on Friday, and if trade tensions continue to worsen, we will see more of it.

Tariff News Triggers Stock Sell-Off

Made in China is getting more expensiveThe tariff announcement triggered a sell off in the stock market Friday. Last week investors were already exiting U.S. stocks at near record pace. Outflows from U.S. stocks were the third highest ever at $24 billion and the largest since the financial crisis. A chief investment strategist at Merrill Lynch said that this selling was reversing a “pervasive euphoria” about U.S. stocks from earlier this year.

What this means for investors: Investors are shifting from stocks to safe havens like U.S. treasuries. Gold should eventually see higher demand too if the safe haven buying trend continues. Likewise in the silver market.

Fed Warns of Upcoming Volatility in the Economy 

Federal Reserve BuildingThe Federal Reserve announcement this week was seen as more of a non-event for market movement. However, it is still worth noting what the Fed said. The announcement stated that the next planned rate hike would go forward as intended, due to the economy running strong right now. However, the officials also noted the trade war and tense geopolitical relations are raising risk and could start strangling growth and hurting business sentiment and investment.

What this means for investors: For the last few rate hikes, gold weakens beforehand, and rallies in the immediate aftermath. Rate hikes are usually negative for gold, but there are other factors to consider that are undermining that relationship. Fear in the Eurozone around ECB head Mario Draghi’s monetary policy and rising inflation expectations are keeping gold afloat. For more on what the end of quantitative easing means for gold, click here.

 

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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gold bars for diversification

Weak Gold Demand Kept Prices Subdued This Week

Gold Market Discussion

Weak Gold Demand Kept Prices Subdued As Dollar Stays Strong

stacked gold coinsIt was a quiet week for precious metals. Weak gold demand kept prices subdued continuing the trend from last week. Gold spent much of the week fluctuating just over the $1,250 mark. Silver closed out the week at $16.10. Friday saw metals slightly up with some pull back on the dollar. The stronger dollar has reined in gold prices for now. There was also significant sell off of both gold and silver this week, which brought metals down. Canada’s announcement that it would place tariffs on U.S. goods on Sunday also gave a slight boost to metals. Stocks trended similarly to gold being down most of the week.

Looming trade wars are actually boosting the dollar right now. Because of that, for now, gold prices are going to be against some pressure. Countries like China are having to devalue their currency, which helps the dollar. Canada and the European Union also engaged in trade tariff tit-for-tats with the United States. Falling oil prices as OPEC increases production has also dragged adversely on gold prices.

What this means for investors: There is uncertainty in the markets right now, but the uncertainty is over how the trade wars are going to play out. Safe haven buying of gold remains in a holding pattern, as the dollar’s support is keeping investors there for now.

When Is Gold Going to Pick Up?

There are many analysts confused by gold’s lackluster performance lately. In this video, Bill Baruch of Blue Line Research discusses long term possibilities for gold and the technical indicators.

Precious Metals Analyst Suki Cooper of Standard Charted Bank discusses buying the dip and why the second quarter of 2018 is going to be the weakest quarter for gold.

 

Inflation Data Picking Up

inflation pushing down what the dollar buysA key indicator of inflation in the U.S. just hit a 6 year high. The rise in the Personal Consumers Expenditures price index came even as consumer spending slowed. Weak spending could weigh on GDP growth in the second quarter.

What this means for investors: Rising inflation generally correlates to rising gold prices. The Fed is trying to allow inflation to run above target for a while, in fact, to compensate for growth rates. When inflation runs up, gold and silver are the best stores of value.

 

Bitcoin Down 70% in Half a Year

Gold as a safe haven is down right now. So are bitcoin and other cryptocurrencies. In recent years, advocates for crypto have touted it as being an alternative safe haven investment that could trounce gold. In fact, many enthusiasts have sold gold or other investments to get on the bitcoin train. However now it’s down 50% for the year, and even more than that off its high. In December 2017, bitcoin traded over $20,000. Now it’s struggling in the $5,000 range.

What this means for investors: Gold may be down right now too, but it has stood the test of time as a storage value. Blockchain technology used by bitcoin and cryptocurrency certainly has exciting potential for future application. However it’s volatile journey so far proves that it isn’t going to be gold’s replacement. Gold and silver are true money and preservers of wealth.

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Russia ditching US treasuries

Russia Is Ditching Treasuries for Gold, Re-Thinking Safe Haven. But Gold Prices Remained Stuck This Week.

Gold Market Discussion

Russia Is Ditching Treasuries for Gold, and It’s Not the Only One

Russia buying gold instead of US treasuriesAre the Russians re-thinking safe haven? Russia is ditching treasuries for gold in recent months. In April, Russia slashed its holdings of U.S. debt in half. This was following fresh sanctions slapped on various Russian businesses and individuals. The senior adviser at Danske Bank stated the reason had to do with rising yields and Russia wanting to “keep money safe.” In the wake of the sell-off, Russia added another 600,000 oz of gold to its reserves, raising its total holdings now to 62,000,000 oz. It’s the highest level of gold reserves in Russian holdings in over 18 years. Furthermore, Putin stated in his recent inaugural address that Russia is looking to break from the dollar.

What this means for investors: U.S. treasuries are generally a source of safe haven refuge, but gold is still the ultimate safety. Despite gold under-performing treasuries so far this year, central banks are finding gold more attractive. It seems the Russians are more focused on saving for a rainy day than making an immediate return on investment. And it’s not just Russia. As geopolitical tensions and trade war rhetoric heat up, countries like India, Turkey, Mexico, Iran, and China are also drastically increasing gold holdings. The question now is whether China will follow suit. China owns significantly more U.S. debt than Russia did – $1.18 trillion.

Gold Prices Still Stuck This Week

gold prices stuckGold continued to face the headwinds that pulled it down last week.  The dollar retained the strength it has been building up, which weighed on gold prices. In fact, they were at their lowest level in months, but the gold market is now short-term oversold which means it’s due for a corrective bounce. Trade war fears continue to weigh on stock and commodity prices.

What this means for investors: Trade war fears aren’t generating the flight to safety gold demand that one might expect. The U.S. economy right now is still growing in contrast to struggling markets in the EU and other countries. As the U.S. trades of tariffs with China and the EU, global investor demand is still in dollars for now. Uncertainty in these other markets though is driving gold demand there. On Friday gold got a slight reprieve as the EU imposed new tariffs on U.S. goods increasing uncertainty in the markets.

The Fed’s Bank Stress Test

The Fed is testingThe Federal Reserve released the results of its annual stress test this week. Its optimistic outlook weighed on gold too. The bank stress test was introduced after the 2008 financial crisis as a means to prepare for future crises. Since the first test in 2009, the biggest banks’ results have generally improved, and this year once again, all the test banks met the minimum capital requirements.

What this means for investors: The Fed modeled the test around a similar 2007 – 2009 scenario. However, there could be discrepancies between the next downturn and the Great Recession. One thing to consider is that there will be less room for fiscal stimulus given that U.S. debt-to-GDP has increased from 63% to 106% since 2007. This is a problem around the globe as well. Furthermore, an increase in automation in industry has replaced many jobs. So while right now the economy is growing and unemployment is down, in a shrinking economy, the loss of labor will affect a greater number of people. For more analysis on the stress test, click here.

How Much Gold Is Left in the U.S.?

How gold is left?As countries like Russia and China increase their gold holdings, many countries are also repatriating gold that has been held overseas. Germany is the prominent example of this, but Austria, Hungary, The Netherlands, and Belgium have also brought their foreign held gold back within their borders to have greater control over their wealth. Turkey is the latest, having reclaimed 220 tons of gold this year that was held in the Federal Reserve system. But how much gold does the U.S. hold itself? The U.S. Treasury claims it is 261,000,000 ounces in Fort Knox and elsewhere. But the lack of reliable and consistent auditing has many skeptical. This lack of transparency has many of these countries nervous.

What this means for investors: There’s a global shift away from the dollar as the world reserve currency. Russia, China, and Iran have also vowed to break from the dollar. Increasingly, there is talk of a return to gold as a basis of wealth. The uptick in repatriation and gold buying around the world is one prominent indicator of a future break in the dollar’s hegemony.

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Trade War with China

Gold Hammered by Strong Dollar Friday And Trade War with China Remains in Focus

Gold Market Discussion

Gold Hammered by Strong Dollar Friday As Trade War Remains in Focus

Trump TarriffsPrecious metals struggled Friday. Though gold hit a two week high earlier in the week climbing to $1,313, Friday saw gold hammered by strong dollar index. Trade war and tariffs dominated headlines. President Trump levied 25% tariffs on 800 Chinese imported goods, and China countered with their own tariffs. In this environment the dollar surged to an 11-month high, and gold pulled back to $1,280. Prior to the announcement, gold had rallied on uncertainty, but the dollar’s pick up in strength brought it down on Friday.

What this means for investors:Trade wars in a rising rate economy like what we are seeing right now never bode well. Read back on what happened with the Smoot Hawley Tariff Act in 1930 that contributed to sinking the economy into the Great Depression. This week the trade spat with China strengthened the dollar thereby hammering gold prices, but this is a short term effect. Furthermore, although gold priced in dollars was down this week, gold priced in nearly very other world currency is up as currencies around the world teeter.

Commodities and Stocks Down

gamble on stock marketGold was acting more in line with commodities than as a safe haven as it fell this week. The whole commodities sector reacted negatively to the tariff announcement. The stock market also had a rough close to the week. Gold didn’t get the safe haven lift that it usually does when the equity market drops because of the dollar’s renewed strength Friday.

What this mean for investors: Inflation and geopolitics are still factors for the gold trade. The geopolitics trade has been quieter lately due to the diplomatic meeting between President Trump and north Korean leader Kim Jong-Un. Trade war and Middle East conflict will increase tensions though.

Eyes Were on the the Fed and ECB This Week

The world’s leading central banks announced monetary policies that helped gold prices this week. The Federal Reserve raised interest rates another quarter point this week, giving gold prices a boost. In the European Union, the European Central Bank’s Mario Draghi is putting the brakes on. Uncertainty and volatility are becoming a prominent feature in the Eurozone as Italy’s populist, Europskeptic governing party toys with the idea of alternate currency and excessive spending. Additionally, the whole southern EU region is seeing a slowdown, which is worrying investors and bankers.

What this means for investors: The Fed is expecting to raise rates a few more times this year. The more hawkish monetary stance could be too much too fast. Gold’s boost from the rate rises is an indicator of that.

Economy Expected to Slow? Inflation Grows at Fastest Pace in 6 Years

Fed Rate Hike!Despite Fed chair’s optimism this week, analysts are predicting an economic slowdown in 2019. The International Monetary Fund (IMF) cautioned that the current optimism in the global economy’s growth would stagnate by 2020. The report cited trade war and rising inflation as reasons. Other estimates are that the U.S. economy will slow sooner.

What this means for investors: The stock market is continuing to surge, unemployment is at an 18-year low, and earnings reports are solid right now. However wage growth has not been keeping up, and earnings growth is expected to stall. Inflation is growing at the fastest pace in six years and eating away at wage growth. As prices rise and wages stall, less spending means a slower economy. This is why buying gold when it’s down before hard times hit pays off in the end.

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Italian Bond Market Worries

Gold Fluctuated with the Dollar This Week While Italian Bond Drama Continued

Gold Market Discussion

Italian Bond Drama Continued This Week

Italian coinsEuropean geopolitics continued to cause volatility in the markets this week. Last week, Italy in particular triggered concern, and this week the Italian bond drama continued. This week, the Italian 10-year bond yield was at a 4 year high while the Italian 2-year yield had its biggest jump in more than 25 years. While this certainly spooked the markets, it is happening in an incredibly easy monetary policy environment that helped stave off some of the pain for now at least. Without a central bank offering support, or when monetary policy has become more normalized, the shock would be much harder to disperse. As it was this week, the European Central Bank (ECB) was able to ease the bond pain in Italy.

What this means for investors: The coalition, ruling parties 5 Star and Lega also finalized their coalition deal, which helped to ease some fear. However, the coalition’s penchant for spending will put the country’s finances on an unsustainable track. Italy is the third largest economy in Europe, so contagion there could wreak havoc on the Eurozone. It is similar to the situation preceding the great Recession.

Gold Back and Forth with the Dollar

dollar and gold Gold prices were back and forth this week. Bond worries, of course, were one of the factors. Mid-week, the dollar index fell and boosted gold to around $1,305. By Friday though the dollar gained back some strength on upbeat jobs data, and gold fell just under the $1,300 mark. Promising signs of dialogue between the United States and North Korea eased some of the safe haven buying from last week as well. Silver closed out the week just short of $16.50.

What this means for investors: May is historically a slow month for gold. Because of that, it is often a time to look for price dips to buy. If the dollar index maintains its strength, gold could be under pressure for a while yet. However, sky-rocketing debt, inflation, currency crises around the world, and a too-rapidly-rising-rate environment are poised to support gold prices long term.

Trade War Fears Were Back This Week

Trump Trade WarThe markets retreated on Thursday on fears of trade wars, which boosted gold prices. The United States put tariffs on steel and aluminium imports Canada, Mexico, and the European Union. The EU expressed displeasure, Mexico threatened tariffs, and Canada did impose tariffs on some U.S. goods. Commerce Secretary Wilbur Ross, however, stated that he doesn’t think it will be detrimental long term. Stocks recovered some of those losses by Friday.

What this means for investors: We have previously discussed the historical lesson from the Smoot Hawley Tariff Act of 1930 here, but it warrants looking back at again this week. It also involved impositions of tariffs by the United States on key trade partners, and retaliatory tariffs by those partners. Furthermore, it occurred in a rising bond yield environment much like today’s. The repercussions of the Tariff Act ultimately furthered the economic pain of the Great Depression and hindered recovery. Of course though, a successful re-negotiation of NAFTA (which is President Trump’s plan) could stave off future volatility around trade and currency.

Gold and Oil Price Correlation

oil rigsGold and oil prices have had a predictable correlation since the early 1970s when the United States left the gold standard. That correlation (a ratio of around 15 to 1, give or take) stayed much the same through the 1980s and 90s. Through the Great Recession the two commodities held together until 2014 when oil took a huge dive and gold took a lesser fall. Right now, the prices are converging again and the ratio seems to be stabilizing.

What this means for investors: Interest rates, the dollar’s strength, uncertainty in the markets, and volatility are all the chief drivers for gold prices, but some of these other factors too, like the relationship to oil prices, are indicators worth noting. As oil prices continue to rise and the oil price to gold price correlation normalizes, gold could sees some additional support.

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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North Korean tension

Gold Rallies on North Korea Fear, and Interest Rates Are Sounding Alarm Bells

Gold Market Discussion

Gold Posted Best Day in over a Month on North Korea Tension

threats from North KoreaGold had its best day in over a month this week. On Thursday, gold prices pushed back up to over $1,300 after continuing to struggle from last week. Gold held on to the gain through Friday. Silver prices hovered around $16.55.

A stronger dollar was keeping gold down earlier in the week. However metals got a slight boost Wednesday from Federal Reserve data released. Gold got its big push from heightened geopolitical fears though. President Trump announced Thursday that the much-anticipated summit with North Korean leader Kim Jong-Un was cancelled due to, what the President called, “tremendous anger and open hostility” by the North Korean regime.

What this means for investors:

Investors were hedging risk with gold this week. Conflict with North Korea has been a significant market mover in the past, and the de-escalation talks had alleviated those fears until this week.

Interest Rates are Sounding Alarm Bells

Rising Interest Rates sounding alarmsAfter the news on the North Korea summit this week, bond buying started up again, leading to a fall in yields. However, U.S. bond yields have been surging over 3% recently. It is alarming because rates could be rising too fast. Minneapolis Fed President Neel Kashkari warned of exactly that this week. His fear was that the Fed is getting too aggressive with its rate hikes. Dallas Fed President Robert Kaplan expects the economy to slow over 2019 and 2020, and is also more dovish on future hikes. However the Fed is still projecting more hikes this year.

Right now, the yield curve is flattening. Short rates are moving faster than long rates and indicates an expected higher interest rate environment. As the curve flattens and inverts, this is often a harbinger of recession, as we have discussed before.

What this means for investors:

Every Fed tightening cycle has produced some kind of “event” or crash. Check out some charts and examples here. For example, in 2004-2006, the Fed tightening cycle seemed benign, but in its wake followed the housing bubble collapse that set off financial contagion in the whole global financial system. The liquidity that has been driving the current bull market is fading, and it is going to cause volatility to skyrocket.

The question of how this will affect U.S. debt is noteworthy as well. The U.S. continues to pile up debt (over $20 trillion) that is already near impossible to pay back. Rising interest rates means higher payments to service the debt. Interest payments alone on the national debt is on pace to take over as the number one budget line item.

Rising rates can push gold prices down, since gold bears no interest and thus becomes less desirable. But when they are rising too fast in this kind of environment, it can lead to a crash and recession.

Return of the PIIGS? European Economies in Trouble with Bond Sell-Off

PIIGSInterest rates are sounding alarm bells in a big way in some of the periphery, European economies too. Notably, there seem to be problems stemming from the “PIIGS” (Portugal, Italy, Ireland, Greece, and Spain) – the acronym for the countries at the hub of contagion during the last financial crisis.  This week, it was primarily the Italian economy and political scene triggering uncertainty and alarm.

On Friday, Italian bond yields soared with the 2-year having its biggest one day rise in five years. the 10-year was at the highest in over a year. Partly this is due to uncertainty over Italy’s new government. It is being formed primarily by populist, Euroskeptic parties Lega and Five Star, and they have a penchant for spending and an anti-EU outlook. The new government has supposedly even proposed a new currency, “the mini-BoT” for parallel trading, perhaps in an attempt to ditch the euro. Consequently, the sell-off in Italian bonds widened the gap over German bund yields by 18 basis points. Portugal and Spain also saw a significant sell-off, which could signal that Italian contagion is spreading and economic momentum slowing. Greece, which was the hub of contagion during the last crisis, is continuing to have its economy artificially propped up, having just completed its fourth bail out.

What This Means for Investors:

The possibility of Italian contagion spreading would put pressure on the euro. If Lega/Five Star embark on their proposed idea of departing from the euro and EU, this will be even more pronounced. Economic weakness or collapse would force the European Central  Bank (ECB) to halt its tightening plans  and force Mario Draghi to embark on more quantitative easing. Contagion in the eurozone could certainly spread through the whole financial system. In this case, expect gold prices to soar.

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Military special price for Memorial Day Sale on Silver Eagles

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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

gold bars

Gold Prices Struggled During Sell-Off, But There’s Still an Upside with Increased Volatility

Gold Market Discussion

Gold Prices Struggled This Week and Saw a Sell Off

gold bars bullionIt was a tough week for metals after a positive week last week. Gold prices struggled and dropped under $1,300 as a huge sell-off took further toll on prices. Silver was down this week too, but posted gains on Thursday. Gold was struggling against a stronger dollar index, and hit its lowest point so far this year. On the geopolitical front, not a lot happened initially to boost safe haven buying, although gold did get some support from disagreements between North Korea and the U.S. over the upcoming, historical meeting in Singapore next month.

Gold rebounded though Friday on global equities volatility. Investors were worried over possible Italian debt problems and elections. Italy’s next government pledged increased spending, which could trigger a worse debt crisis than the Greek crisis.

A Stronger Dollar Kept Gold Down, But There’s Still an Upside

strong dollarRising rates and an upbeat dollar kept gold down this week, but gold has been on an upward trajectory this year. One reason is because of increased volatility. The CBOE volatility index, or “fear gauge,” has surged as high as 50 this year, and has been trading mostly around 20-25 range. Over the past couple years, it was trading around 9, so fear is certainly creeping back into the markets after some historic lows.

What this means for investors: Volatility is rising slowly across all asset classes, and as it does, gold demand will pick up. Money managers, including Ray Dalio, are maintaining bullish positions. Because of this, look at these price dips as opportunities to buy gold “on sale.”

Sanctions on Iran, Russia are Bullish for Gold

iran and russia sanctionsLast week the U.S. nullified the Iran deal that was a trademark of the Obama administration. Along with the nullification was the imposition of sanctions against the Islamic republic. The news sent oil prices soaring, and gold rallied alongside.

What this means for investors: Sanctions and trade wars weigh heavily on fiat currencies. It is one reason that central banks like to hold so much of their reserves in gold. The Russian and Chinese central banks, for example, have been raising gold reserves at very high rates in recent years. Russia has been sanctioned by the U.S. and Europe ever since its annexation of the Crimea in 2014, and sanctions have only increased. Gold, however, is fungible, and holds value, so while sanctions put the brakes on a nation’s economic growth, gold offers a safe refuge of maintaining wealth.

 

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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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gold ingots

Gold Posted a Positive Week after Early Struggle

Gold Market Discussion

After Battling a Strengthening Dollar This Week, Gold Posted a Positive Week by Friday

cash on goldMetals were down in the early part of the week. However on Thursday it got a slight boost that it held onto through Friday. In the end gold posted a positive week despite the earlier losses. The dollar rallied this week putting pressure on gold prices. Some disappointing inflation data Thursday gave gold a boost and softened the dollar though. Geopolitical uncertainty further supported metals. The inflation data was positive for gold because it indicated that price pressures are increasing, but not at a pace that warrants aggressive action from the Fed.

The uncertainty this week was over Iran and Israel. President Trump announced that he would be withdrawing the United States from the Iran treaty brokered under President Obama. Furthermore, the U.S. re-instated sanctions against Iran. On Thursday in the wake of the announcement, Iran launched rockets at Israeli military positions in the Golan Heights, and Israel countered with launching rockets against Iranian military infrastructure in Syria.

What this means for investors: With reconciliation on the Korean peninsula looking more promising, gold has not been getting much support on the geopolitical trade. However there is still a ramping up of tension in the Middle East that is going to increase volatility. Gold is up for the year, and in fact has outperformed the S&P 500 so far this year, despite the continuing stock rally.

Oil Prices Hit Highest Level since 2014

oil at high since 2014After news of the President cancelling the Iran deal, oil prices shot up to $70 a barrel. They reached their highest level since 2014 as sanctions were re-imposed against Iran. This is due to lower expected output of oil with the Iranians out of the market. In early 2016, oil prices were sitting around $30 a barrel as eased sanctions were helping Iran raise the global supply. However, the global supply has already been tightening, and the news this week increased investor fears of rising oil prices.

What this means for investors: Gold prices are often positively correlated to oil prices. The spike in oil prices likely contributed to some of the bump gold prices got this week. Rising oil prices indicates trouble ahead, and gold rises on safe haven demand.

Take a Look at the Gold-to-Silver Ratio

silver to gold ratioThe gold-to-silver ratio is at a 20 year extreme right now. It’s a near record high at about 80 to 1 (80 ounces of silver being equivalent to approximately an ounce of gold).

What this means for investors: We are recommending converting gold to silver right now. It’s a buying opportunity for silver. Give us a call to discuss further how the gold silver ratio is impacting your portfolio right now and how to optimize your precious metals holdings.


Rick Santelli on the U.S. Debt

It’s not news anymore that the U.S. debt level is at unprecedented levels. This year it hit $21 trillion and interest payments on the debt alone are at $800 billion. In the following video, Rick Santelli breaks down why we should be paying more interest to the debt problem.

Santelli Exchange: Taking more “interest” in our debt from CNBC.

 

 


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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Bandaged Ben

Fed Leaves Interest Rates Unchanged and Inflation Expectations Are Increasing

Gold Market Discussion

Gold Battled Headwinds

gold barsEarly in the week gold struggled against a rising dollar index. It managed to hold just above $1,300. Some muted geopolitical fears after North and South Korean peace talks continued to put the brakes on gold as well. There was also some sell-off, which pushed prices down further. On Wednesday though, gold prices rose again. They continued to hold around $1,315 through Friday. Following a Federal Reserve announcement and as inflation expectations are increasing, buyers turned more bullish on gold. Gold prices also remained positive on Friday after a weaker than expected jobs report with fewer jobs created than were expected. While unemployment decreased, the labor force participation rate remained high.

Federal Reserve Leaves Interest Rates Unchanged This Week, Lifting Gold Prices

Fed Building

The Federal Reserve announcement on Wednesday was the most anticipated event for the week. Gold had dipped ahead of it, but bounced higher after the announcement that rates would remain where they are for now, with a rate hike in June still in the cards.

What this means for investors: A rise in rates this week might have kept gold prices down, since higher interest rates usually mean interest bearing assets are more desirable than gold. However when rates rise too fast, which is something many analysts have been concerned about for some time, it overheats the economy. As rates rise, consumer prices rise and spending often goes down if not offset by rising wages). This in turn leads to slower corporate spending and a slowing economy.

The significant reason that investors are concerned about the rate rise right now has to do with the 10-year U.S. Treasury bond. In just a few years, the interest rate on bonds has gone up more than 200 percent (from 1.4 to around 3%). The recent, heightened volatility in the bond market is making investors nervous, since such a rise in bond rates has historically been a harbinger of recession. Right now, the Federal Reserve is trying to cool off the market. However the interest rate balance is very fragile right now, and could collapse. When it gets out of control and rates rise too quickly (leading to recession) gold goes up as a safe haven asset.

Inflation Expectations are Increasing 

inflation pushing down the dollarA key part of the Fed announcement for gold prices was the indication that inflation expectations are increasing. Inflation has been low recently, and in low inflation environments, gold is often up against headwinds. On inflation, the Fed said that inflation has moved close to 2% and is seeing things as symmetric. This implies that the Fed is going to let inflation run on the higher side for a while before raising rates in an effort to maintain the balance between growth and interest rates.

What this means for investors: As inflation goes up, the dollar index goes down. This leads to higher prices for both gold and silver. While some inflation is healthy, out of control inflation leads to currency devaluation and collapse. For an extreme case of hyperinflation that is happening right now, look at Venezuela. The South American country has seen inflation quadruple in only two months to 18,000 percent. There is currently no end in sight, and the country is being ravaged by food and medicine shortages and skyrocketing prices.

Billionaire Converts Half of Assets into Gold

Naguib Sawiris
Billionaire Naguib Sawiris

The second richest man in Egypt, Naguib Sawiris, recently invested half of his assets in gold. The billionaire’s wealth is second only to his brother’s. He announced this week that he had converted half of his $5.7 billion assets into gold. Sawiris is apprehensive about the overvalued stock market, and sees gold surging. He also warned that there would continue to be crises coming out of the Middle East and China, and that gold will be the best protection.

What this means for investors: For the full interview, click here to see the video.


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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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dollar and gold correlation

Gold Under Pressure This Week from the Greenback, But Problems in the Bond Market Are Looming

Gold Market Discussion

Gold Under Pressure from Rising Greenback This Week

dollar-14-year-highPrecious metals were rallying early in the week, but faced some push back on Thursday. By Friday gold prices lifted again slightly and were sitting just over $1,320. Silver ended the week around $16.55. The resistance mid-week came from a rising dollar index. As it retreated again Friday, metals were able to eke out a slight edge up, but remained vulnerable for the week.

What this means for investors: The dollar’s strength and its fluctuation has been subject to much debate by political leaders recently. President Trump and Treasury Secretary Steve Mnuchin have both said recently that the dollar is too strong, and later flipped to say it needs to stay strong. Gold and the dollar generally have an inverse relationship. However in the past year, the price of gold relative to the value of the dollar has gone up while the dollar went the opposite. Even as gold is under pressure this week, there’s a longer term trend indicating more movement for gold ahead. Furthermore, rising inflation looks bullish for gold.

Historic Korea Summit 

A historic summit between the leaders of North and South Korea on Friday eased back potential safe haven buying. Kim Jong-Un and Moon Jae-In vowed to finally end the Korean War. It has been 65 years since the armistice that ceased hostilities, though the war technically never ended. They also pledged to end nuclearization on the Korean peninsula.

What this means for investors: Gold has been getting a consistent boost over the past couple years from bellicose rhetoric from North Korea and its missile tests. The welcome news of reconciliation will mean less of the short term, geopolitical fear bumps gold has been getting.

 Rising Interest Rates and Problems in the Bond Market

rising interest ratesWhile a volatile stock market the past couple months has prompted jitters from investors, problems in the bond market are also looming. Yields have risen to levels not seen since the 2008 crash, and the yield curve is flattening. As the yield curve narrows, it generally means less optimism about economic growth. Right now, the Fed wants to keep raising rates as projected, despite the troubling signs of inversion on the yield curve.

What this means for investors: Yields over 3% is partially what kept gold prices down this week. Usually higher interest rates do mean lower commodity prices. Although that won’t be the case when it leads to economic crisis. Right now the Fed is tightening monetary policy by pushing up short term rates. However as it attempts to “normalize” rates, it is actually flattening the curve. If it inverts, the Fed is going to have to slow down or reverse current policy to prevent an overheated economy. This is something many experts are already preparing for.

Rising interest rates is also a problem for the huge budget deficit. The U.S. is running a $100 billion deficit PER MONTH and rising interest rates compound the problem. U.S. interest payments on debt alone are set to nearly overtake defense spending as the number one line item in the federal budget.

Further reading: Currency Crisis?

For further reading on the topic of Federal Reserve manipulation, fiat currency, and inflation, check out this excellent article from the Ludwig von Mises institute by clicking here. It explores the fragility of fiat money systems and their inevitable boom and bust cycles, and what current economic conditions in the bond and currency markets – despite pundits’ optimism – are warning.

 


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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Magnified Crossover

The Price of Gold Relative to the Value of the Dollar in the Last Year

Gold Market Discussion

The Price of Gold Relative to the Value of the Dollar – CHART

Dollar to Gold Chart

This chart depicts the price of gold relative to the value of the dollar over the last 15 months. The price on the left is the movement in gold prices since January of last year until last month. The right side shows dollar index level. What it reflects is that the value of the dollar is declining in terms of the price of gold (the dollar illustrated by the green line and gold by the blue). In dollar index terms, gold spot price has gone up, while conversely in gold price values, the dollar index has declined.

What this means for investors: The dollar index is going to be up against a significant amount of pressure ahead. Rising interest rates and raging debt are going to lead to further dollar decline. Gold and the dollar move inversely, so as the dollar takes heat, gold becomes more desirable. The interest payments alone on U.S. debt is approaching $800 billion. As interest rates go up and the debt expands, the dollar is going to be further devalued.

Gold Price Up and Down This Week

gold up and downGold prices were stuck this week. On Wednesday, it had its highest close in a week after rallying over $1,350. Gold had started the week just under $1,350 and closed just over $1,350. Inflation concerns, tension with China over trade, and carrying over geopolitical fears prompted gold’s gains. Some of the fear trade abated by Friday, and gold prices slipped from the Wednesday highs. The prospect of higher interest rates also helped the dollar recover, which put some resistance on gold.

What this means for investors: It was a relatively quieter week for gold than it has been in recent weeks. However it is still holding on to its gains it has made this year. As long as the dollar finds some resiliency, it will continue to face headwinds. Metals are holding on though, and sitting poised for a break out.

Silver Rallies This Week and Looks Poised to Go Higher

silver barsSilver’s movement this week gave silver bulls optimism for the metal approaching a break out point. The white metal hit an 18 month high this week reaching $17.35. It was up from Monday’s open of $16.66 and finished the week at $17.15. Silver prices have been stuck relative to gold in recent months, so the rally this week bodes well for both metals.

What this means for investors: Silver, being cheaper, is always more volatile than gold. It has more industrial uses than gold, which can drive prices. Investors are seeing more potential for silver right now to break out right now, and took advantage of the buying opportunity last week while prices were still low. The gold-silver ratio also narrowed this week to its lowest level in a few months.

The Gold Repatriation Trend Continues as Turkey tries to Move Further from the Dollar

TurkeyThis time Turkey is repatriating its  gold reserves that previously had been stored in the U.S. Germany recently repatriated its foreign-held gold and other countries such as Hungary have made similar moves. Meanwhile Russia, China, and India have been ramping up gold reserve accumulation. Turkish president Erdogan further said that the country’s debts “should be in gold rather than the dollar.”

What this means for investors: Not only are these countries moving further towards gold, but they also are attempting to move away from the dollar. China announced recently as well the launch of the petro-yuan to challenge the petro-dollar for oil trade. The U.S. dollar has been the medium of exchange for crude oil for decades, and the petro-yuan challenges the dollar’s dominance in the crude market.


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“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Syria conflict

Gold Hit Its Highest Close in 2 Years This Week as Tensions Ramp Up in Syria

Gold Market Discussion

Gold Hit Its Highest Close in 2 Years

golden buying opportunity in July 2017On Wednesday, gold hit its highest close in 2 years. Gold started the week at around $1,335, climbed to over $1,350 mid week, and settled around $1,345 by Friday. Silver finished the week just shy of $16.70. Silver looks poised for  surge right now, in fact. Gold is hanging on to recent gains, and the gold-silver ratio (the amount of ounces of silver needed to equal an ounce of gold) is narrowing. It’s a bullish indication for silver right now.

What this means for investors: Gold’s recent rally has been due in large part to uncertainty over trade war fears with China. This week it was bigger fears over actual war in Syria that propelled gold higher. There was some pull back Thursday due to the Fed announcing interest rates, but for the most part gold’s rally remained consistent. Late Friday the U.S., U.K., and France launched around a hundred missile strikes at Syrian facilities. The rush to safe haven gold will likely continue through the next week.

Crisis in Syria, Missile Strikes, and Heightened Geopolitical Tension

Syria planesThreats of military action and retaliation between The United States and its allies and Russia and Syria were a significant mover for gold and the markets this week. Images and reports came out of an alleged chemical attack by Syrian President Bashar Al-Assad on civilians (days after Trump announced potential withdrawal of U.S. troops). The United States and allies like France and the U.K. denounced the attack and threatened military action against the Syrian regime. Russia, Syria’s primary ally, declared that it was not an attack by the Syrian government. Russia stated it was more likely the work of government opposition fighters or perhaps even staged. President Trump responded forcefully, and even went as far as to tweet to Assad that “smart missiles may be coming.”

Russian ships at Tartous Port in Syria immediately left port after the news to begin exercises offshore while the U.S. sent aircraft carrier the USS Harry S Truman to join the U.S. sixth fleet in the Mediterranean. Russia has warned the U.S. about retaliation if the U.S. were to target the Assad regime with strikes. Yet late Friday, the U.S., France, and the U.K. launched a joint missile strike against Syrian facilities rumored to be responsible for chemical weapon manufacturing. Russia condemned the strikes in the strongest terms.

What this means for investors: As foreign military presence increases, likelihood of all out war between powerful countries increases. There is no shortage of Iranian, U.S., French, and Russian military bases in Syria now as this map shows. Buyers will continue flocking to gold as tensions continue to ramp up. As Russia, and the U.S. all vie for influence in Syria, the chance of peaceful resolution seems less likely.

Not Just War Fear Driving Gold

Russian Army ParadeHowever, it wasn’t just the bellicose rhetoric and that spurred gold prices this week. Gold certainly reacted to the fear of war with Russia, but a weak dollar is driving gold up as well. Weak inflation data also helped push gold higher on Wednesday in addition to the Syria worries.

What this means for investors: Even if military action is not as imminent as the markets seemed to fear this week, gold is still looking bullish. Some strategists suspect that the inflation data may make the Federal Reserve slower to raise interest rates. However, the Fed has yet to say anything to the contrary. Jobs data last week was also reported to be lower than expectations. A weak dollar, indications of some slowing growth, and the choppy couple months the equity markets have had all point upwards for precious metals.

Gold Taking Defensive Spotlight Back from Cryptocurrency

As defensive plays for protecting wealth took the spotlight this week, gold was clearly preferred by strategists over bitcoin and other cryptocurrencies as an alternative wealth storage option. Gold hit its highest close in 2 years as uncertainty rocked the markets, and cryptocurrencies continued to see investors move out of them and into physical gold.

What this means for investors: It’s not just geopolitical uncertainty and crypto disillusion that’s going to drive metals though. This gold rally has been years in the making. Check out this video to see more.

Gold is surging to two-year highs. But does the rally have legs? from CNBC.

 

 

 


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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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US-China Trade War

Gold Continued to Rally on Trade War Fear This Week and Stagnating Output

Gold Market Discussion

This Week Gold Continued to Rally on Trade War Fear, Stocks Got Slammed

china-yuan-dollarsThe biggest news this week for the markets and gold was trade war fears. Gold continued to rally this week as China and the U.S. imposed and threatened new tariffs on each other. By Friday the Dow had fallen nearly 3%.

The U.S. announced tariffs on $46 billion more of Chinese goods. China countered with tariffs on $50 billion worth of American goods. Late Thursday, President Trump threatened $100 billion more in tariffs.

What this means for investors: History has already taught us some important lessons about what happens in a trade war. The most notable example, which we’ve talked about before but bears remembering, is the Smoot Hawley Tariff Act  of 1930. Gold finished out the week around $1,335 and silver was around $16.50. The dollar is going to continue to be a catalyst for gold prices to go up as well if it continues to weaken.

Gold Met Resistance Thursday, But Recovered by Friday

Jobs Data is weakOn Thursday, some of the trade war fear eased, and gold pulled back while the stock market recovered some of its recent loss. However, that was short lived, as Friday brought new tariff talk and the Dow fell over 600 points. Treasury Secretary Steve Mnuchin and Commerce Secretary Wilbur Ross tried to calm market fears, but the plunge continued until the close.

Soft economic data also was also something to watch this week. The U.S. jobs report released Thursday showed weaker than expected jobs growth. This kind of data usually boosts gold, but it was mostly overshadowed by the drama around trade war.

What this means for investors: China has another possible move in a trade war. It holds $1.1 trillion in U.S. treasuries. If China dumped its American debt holdings, it would devastate the U.S. economy. China doesn’t seem poised to do that just yet, despite rumors a few months ago that it wanted to dump treasuries.

Is Now the Time to Buy?

As gold prices start to climb, there are several reasons to remain bullish on gold. Analysts discuss why now is the time to move into safe haven bets like gold.

Gold is catching a bid on trade war fears, but is now the time to buy? from CNBC.

Stagnant Gold Production and Increased Global Demand Will Send Gold Prices Up

Gold production seems to have peaked. The World Gold Council estimated that gold mining output peaked last year, and this means prices will move up. There is a lack of exploration, and the industry is not able to replenish the reserves that it is mining. However while supply is falling, demand on a global scale is increasing. Countries like Russia, India, Turkey, and China continue to shore up their gold buying.

What this means for investors: Higher demand and lower supply always mean higher prices. If production didn’t peak last year, it will this year, according to the WGC.


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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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gold bars

Several Reasons Gold Is Looking More Bullish Right Now to Investors

Gold Market Discussion

Gold Is Looking More Bullish As Goldman Sachs Upgrades Gold Expectations to “Outperform”

Goldman SachsAs the stock market teeters on correction mode, gold is looking more bullish. Goldman Sachs even upgraded gold outlook this week. The investment bank expects precious metals to “outperform” over the coming months. This is based partly on empirical data that shows gold outperforming after four of the last six interest rate hikes. With the Fed promising more rate hikes this year, it looks good for gold.

Last week the Dow entered correction mode. This also has prompted gold prices to move higher as investors start looking to safe havens. The Dow was back and forth this week, but some analysts are warning of as much as a 30% correction.

On Monday, gold hit a 5 week high over $1,350 continuing its rally from last week. Gold prices held strong through the week, with some resistance Thursday as the stock market managed to recover and trade in the green. Gold stayed over $1,320 though, and safe haven buyers took the dip as a buying opportunity. Silver followed trend.

What this means for investors: Continuing trade war fears also kept gold’s rally going this week. As the gold bulls finally start seeing significant potential for gold prices, it’s a perfect time to buy. Dips like Thursday’s are an even better opportunity. Furthermore, gold has been posting over 10% yearly gains now for the past few years, so it’s no surprise gold is finally breaking out.

Gold Has Best Run So Far Since 2011

gold bars

Gold accomplished just something that hasn’t happened since it’s run in 2011. It posted its third consecutive quarterly gain, with gold up between 1.6 and 3.1% over the last three quarters. The rise has been coming even as the Fed raises rates.

What this means for investors: Furthermore, global buying is picking up as well. Everything from inflation to politics to Fed policy to an overweight gold market is looking bullish for gold right now.

Three Reasons Gold Is Going to Climb

Gold IRA with physical gold

Other than stock market correction, there are three other important reasons that gold is looking more bullish.

Inflation. Inflation is trending up right now, and it seems to be rising faster than expected. Higher inflation is always bullish for gold prices.

Weaker dollar. The dollar has shown incredible resilience for the past couple years, but it’s strong run looks like it’s coming to an end. Even President Trump and Secretary of the Treasury Steve Mnuchin have been quoted saying the dollar needs to weaken. A weaker dollar is better for trade, and with the new tariffs that the President has imposed on imports and threat of counter tariffs by key trade partners, trade will be an incentive for a weaker dollar policy.

Politics. Geopolitical events almost always trigger gold prices to climb higher as well as domestic politics.

What this means for investors: Some are even predicting gold could hit $1,500 or more this year. As the graph here shows, gold prices have actually crushed the markets so far this century. Precious metals certainly go through corrections and bear markets, but in the long run, they always keeps value.

The Gold Supply is Falling

stacked gold coins

A lack of gold could eventually be another reason that gold prices could go up. Mine supply of gold seems to be peaking out, and new discoveries are not occurring at the same rate as they used to. Looking forward several years, the supply is expected to tap out even further.

What this means for investors: Gold is a finite resource, and only so much of it can be taken out of the ground. When supply of any good declines, prices go up.


 

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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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trade wars

Trade War Fears, Market Sell-Off, and Fed Action Triggers Moves This Week

Gold Market Discussion

Trade War Fears Spark Market Sell Off

Trade wars with ChinaIt was another dramatic week for the markets as the Dow fell over 700 points on Thursday due to trade war fears. In fact it was the worst week for stocks in over two years. President Trump announced the likelihood of tariffs on at least $50 billion worth of Chinese imports as well as tougher restrictions on acquisitions and technology transfers. The prospect of trade war between the world’s two largest economies rocked the global markets through Friday trading as well. Furthering the trade war fears, on Friday China proposed measures to slap $3 billion of U.S. imports with tariffs. China also threatened to stop buying U.S. treasuries on Friday.

These tariff threats between China and the U.S. are reminiscent of the trade war sparked in 1930 after the passage of the Smoot Hawley Tariff Act. The U.S.’s imposition of tariffs on imports prompted key trading partners to impose counter tariffs. Ultimately, the result was higher prices and economic slowdown, which exacerbated the Great Depression.

What this means for investors: The global stocks fear predictably sent investors to gold and other safe havens. Gold started the week just over $1,312, however on Thursday it shot up over $1,330 and nearly hit $1,350 in Friday trading. Silver closed around $16.55.

Federal Reserve Announcement on Rates Was Bullish for Gold

Federal Reserve BuildingIt wasn’t only trade war fears that lifted gold this week. Gold got a boost on Wednesday as well following a Federal Reserve announcement. Chairman Jerome Powell kept to the plan for three rate hikes this year. Furthermore, the dollar weakened as the Fed raised a key short term rate by a quarter point, and gold went up. A weaker dollar generally means higher gold.

What this means for investors: One reason for gold going up is that the economy growth projections are slightly lower than what is expected. Inflation expectations are going to be key going forward as well. There is some growing worry that the recent tax cuts are leading to higher inflation without the expected economic growth. Rising rates often work against gold, but regardless, last year gold was up 13% for the year despite rising interest rates.

U.S. Debt Hit $21 Trillion This Week

Another important event this week was the $1.3 trillion omnibus spending bill signed by Trump on Friday. It is the second biggest spending bill in U.S. history, and the President signed it to the chagrin of many conservatives. The bill follows immediately in the wake of U.S. debt topping $21 trillion. One trillion of that was in the last six months. The passing of the spending bill avoided a government shut down, but is a huge step closer to an impending debt crisis.

What this means for investors: There is concern that the ramping up of spending – including higher defense and infrastructure spending – is going to happen without a solid plan to raise government revenue. This is all highly inflationary and bodes ill for the dollar. When fiat currencies devalue, gold’s intrinsic value increases significantly.

Gold Poised to Spring Out?

Trade war fears and inflation are just some of the reasons why gold looks poised to make significant gains this year. Even before gold hit a one month high this week, analysts were making the bullish case for gold. Last month the stock market had a steep correction and gold failed to rally as much as the gold bugs expected. This week the markets had a steeper correction with the combined inflation expectation and trade war fears and gold shot up. The dollar index is key to watch for gold right now. Check out what Vertical Research’s Michael Dudas sees for gold this year.

Gold ‘jitters’ to fade and prices will rise, metals expert predicts from CNBC.

 

 

 


 

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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Gold Remains Desirable Despite Struggle to Break Out This Week

Gold Market Discussion

Mixed Week for Gold and the Markets

gold moves

Gold had an up and down week. It was under $1,320 to start out Monday, but during the week it rallied past $1,325. However on Friday it pulled back again to around $1,315. Silver followed a similar rise and fall pattern. The stock market was similarly choppy. It dropped mid-week on political uncertainty with Secretary of State Rex Tillerson’s departure from the State Department. The dollar index also struggled until rebounding Thursday, putting pressure on gold. Bond yields were up with the 2-year hitting its highest level since 2008. The cryptocurrency market had the roughest week with a market drop of about $60 billion this week across the board.

Gold Remains Desirable

gold remains desirableDespite the struggle this week, gold remains desirable right now. It has been trading this week on uncertainty trade coming from geopolitics and domestic politics, but other factors are driving it as well. For one, gold and bonds are not trading together, and a breakdown in the bond market could benefit gold. Gold has also been reacting bearishly to hawkish interest rate policy tones out of the Fed, while the dollar strengthens. Historically though, the correlation is not as clear cut as future speculators think and react. This is a short term pattern for gold and the dollar.

What this means for investors: No one can say exactly when the break out is going to come for gold. The stock market’s run has extended further than many expected already with indications it could continue to stay strong for a while yet. Gold and silver are still both treading water for now though and investors are taking advantage of buying opportunities in expectation of a break out in the near future. As the dollar puts pressure on prices, look for those dips to buy.

How Much Gold Is in Fort Knox?

How much is really in Fort Knox?It’s well known that countries like China, Russia, and Turkey are rapidly increasing gold buying. Where does the U.S. stand for gold consumption? The U.S.government  reportedly has 8,133 tonnes of gold sitting in vaults in Fort Knox, Kentucky (according to Federal Reserve data). The Fed claims it has been at this level since 1974. In 1953 though, the U.S. had 20,000 tonnes of reserve gold. 1953 was also the last year it was audited. So although over 11,000 tonnes were recorded as sold between 1953 and 1974, between 1974 and now, there has reportedly been none sold since. While this would be reassuring if verified, it does not seem plausible.

What this means for investors: Does the U.S. gold hoard and how much is there really matter? Absolutely. Gold is a bedrock of financial security. Inflation today is 79 times greater than what it was in 1953, and, adjusted for inflation, the debt level is over 900 billion dollars higher now. There is nothing to back up or ensure all of this fiat money if they become worthless one day. What will it mean for the dollar if those countries holding the majority of U.S. debt accumulate more gold (which seems likely)? Certainly nothing good. These emerging market countries want economies with a sound position in gold because gold is real wealth.

Hungary Is the Latest Country to Take Back Gold

Hungarian Parliament Building
Hungarian Parliament Building

The rate of gold buying by governments and central banks has been rising for some time as gold remains desirable. However, it’s not just gold buying that some countries are doing. Germany recently repatriated most of its physical gold from abroad back to within its borders bringing it back to its direct control in Frankfurt. Now Hungary just followed suit. The National Bank of Hungary (NBH) brought back 100,000 ounces (3 tons) of gold that was being held in London to Budapest. The head of the NBH said it was not just to have a safe investment secured within the nation’s borders, but to have a strategic tool to support economic confidence both domestically and abroad.

What this means for investors: As the threat of geopolitical risk rises, nations are increasingly keen to have physical assets secure and under their direct control. Gold is wealth and means security and confidence both in geopolitics and to the private individual.

 

 


 

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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Buy gold now

Mixed Week for Gold as Trade War, Geopolitics, and Jobs Data Drives Markets

Gold Market Discussion

Mixed Week for Gold Starts with Rally

Gold BarsIt was a mixed week for gold this week. Monday started out with gold continuing its upward move from last week and crossing $1,330 midweek. On Friday though it fell to just over $1,320. Silver also had a midweek spike. By Friday though, metals pulled back initially as the dollar index had strengthened.

Last week, President Trump announced that the U.S. would levy tariffs on imported steel and aluminum this week as a fulfillment of a campaign promise. The tariffs are touted as an effort to make domestic manufacturing more competitive, however, many analysts worry it could lead to trade war and higher prices.

Trade War, Tariffs, Italy, and North Korea

North Korea ThreatsThe tariff announcement immediately triggered fear of an impending trade war last week. It is reminiscent of the Smoot-Hawley Tariff Act of 1930 that led to higher prices, exacerbated the Great Depression, and hindered recovery. This week the White House gave further details on the tariffs and offered temporary, possible exemptions for Mexico and Canada as well as key military allies. Trading partners such Japan, Brazil, and as those in the European Union (among others) expressed strong disapproval and threatened (or imposed) counter-tariffs on U.S. goods.

Gold also got an early week boost on political uncertainty in Italy. The Italian elections over the weekend resulted in a sizable shift towards populist, anti-EU, and anti-establishment parties. This could lead to further push back against an already weakening EU by member states. In other geopolitical news, President Trump agreed to meet North Korean leader Kim Jong-Un sometime between now and May to discuss de-nuclearization. He will be the first sitting U.S. President to talk to North Korea’s leader by person or phone.

What this means for investors: The tariff announcement carried over this week in shocking the markets, and the uncertainty gave gold a boost. If a trade war shakes out, it will mean higher prices on goods both domestic and imported. Right now the move is causing uncertainty and prompting safe haven buying.

Political uncertainty in Europe as populist movements win elections and turn against the establishment is going to continue as well. Geopolitical instability generally leads to hedging with gold, and buying has been increasing significantly in Europe for a couple years now. The prospective talks with North Korea did the opposite and helped calmed the markets with the hope of diplomatic resolution to the crisis. These conflicting geopolitical factors contributed to the mixed week for gold.

Jobs Data Release Friday Triggers Pullback for Gold Friday

US Jobs and Labor ForceThe prospect of diplomacy with North Korea helped to boost the markets on Friday, but the markets got the most significant lift from the U.S. Labor Department’s jobs report that was released. 313,000 jobs were added last month, which was slightly higher than expected. The unemployment rate remained low as well. The dark cloud for the jobs report was that wages only rose a tenth of a percent. This initially led to a decline in gold during Friday trading as it was a positive indicator for the economy. However gold reversed some of its losses as the dollar index weakened Friday against other currencies, and the weaker dollar meant higher gold prices.

What this means for investors: Economic indicators are a mixed bag right now though. The euphoria over the jobs report might not last as there are deeper, not-talked about worries on the horizon, which even Janet Yellen warned about recently. The most notable is the expanding U.S. debt. It’s been a scary prospect for years. Last year the projection for government debt for 2018 was $689 billion. The projection has now increased to $1.15 trillion for this year with increased spending and a drop in tax revenue. Inflation is already rising, and budget deficit numbers like these will spur it on. Check out these charts for more on the debt projections.

Gold’s Near and Long Term Prospects

Gold Eagles- BullionDespite this week’s pull back on the economic report, investors aren’t ditching gold just yet. One reason is because analysts are expecting a top out and correction of the stock market any day now. No one can agree on the exact timeline, but it can’t continue to hit record highs much longer, and ultimately complacency is going to lead to correction. Daniel Pinto, a co-President of JPMorgan Chase, forecasts the correction to be as much as 40% when it hits. Even despite gold’s pull back on lessening fear and more risk appetite this week, it is continuing to hang on, and silver looks like it is moving to catch up. Inflation is going to be a key feature as well in affecting gold prices as it starts to creep in.

What this means for investors: A strong dollar index was keeping gold down for much of this week. Metals continue to show resiliency though despite the prospect of rate hikes and a persisting stock market rally. It’s always a good idea to buy when prices are low. As the prospect of a stock market correction comes closer to happening, those who moved into safe havens like gold ahead of time will be glad they did.

 


 

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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Looking Back at the Smoot Hawley Act after Trade Tariff Announcement This Week

Gold Market Discussion

Possible Trade War? It’s Time to be Looking Back at the Smoot Hawley Act of 1930

Smoot and Hawley
Smoot and Hawley on April_11,_1929

History has a cyclical way of repeating itself, and looking back at the Smoot Hawley Act could provide some crucial lessons right now. The big news of the week for the economy was President Trump’s announcement that the U.S. would impose tariffs on imports next week. Such a measure was not entirely unexpected. When Trump first came in to office he was toying with the idea. Now it has come to fruition, as countries exporting steel and aluminum to the United States will now have to pay a higher tariff (a 25% duty on steel and 10% on aluminum). The claim is that it will make domestic goods more competitive and give materials companies an edge.

It isn’t the first time the government tried this experiment though, and looking back at the Smoot Hawley Act shows the lesson to be learned is the opposite of the intended outcome. The protectionist Tariff Act of 1930 raised tariffs on 20,000 imported goods and, in the opinion of the majority of economic historians, exacerbated the Great Depression. The agriculture and manufacturing sectors suffered significantly.  The 1930 bill had a multitude of fierce opponents, but President Hoover yielded to his party’s pressure and signed it into law.

The result was that key U.S. trading partners imposed counter-tariffs, which reduced U.S. exports by more than half in an all out trade war. Canada, the U.S.’s chief trading partner, imposed new tariffs on 16 goods that comprised 30% of the U.S.’s exports to its norther neighbor. This time, Canada is again willing to punch back in a trade war. Major trading partners like China issued similar cautions.

Dow Turns Negative for the Year after President’s Announcement

President Trump Tariff
photo by Gage Skidmore

Trade war and tariff talk was the hot topic for the markets and economy. The stock market fell on the news, reversing much of its recent gain. After the tariff announcement Thursday, the market fell nearly 500 points. On Friday morning it dropped a further 300. By Friday afternoon, the Dow Jones had experienced its longest losing streak since September, and is overall negative for the year.

What this means for investors: In 1930, protectionist trade policy deepened the crisis of the Great Depression. In this case, we are approaching the end of a long bull run for stocks, and a potential trade war could worsen a correction and hinder recovery.

Gold Suffered This Week on Higher Rates, Stronger Dollar, but Rallied on Friday

stronger dollar holding down gold
Metals started out the week with a pull back. On Wednesday, Federal Reserve chair Jerome Powell testified before Congress. Powell stated again the case for gradual rate hikes. This boosted the dollar index, but hurt gold and stocks. Gold managed to tread water above the $1,300 mark though. At the low on Wednesday it reached $1,310. It started the week around $1,328 and was back above $1,320 in trading Friday.

What this means for investors: Powell also made a case for rising inflation. As it rises, gold should rise as well. Gold’s Friday rally was driven by safe haven buying against the tariff talk. There is also some fear that the economy is overheating and the Fed may need to ease back on interest rates.

Volatility Is Up as Fear Grows of Stock Bubble Burst

Even if the stock market continues to rise for the time being, it is in a different atmosphere than 2017’s rally. Last year we had ultra low volatility, whereas this year it is creeping ever higher and causing some worry.

What this means for investors:

The hedge fund manager who called the October 1987 crash just gave a stark warning from CNBC.

David Stockman: Market crash will be a ‘doozy’ from CNBC.


 

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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

BRICS

Gold Buying Goes Up Around the Globe As BRICS Countries Eye More Gold, Venezuela Toys with Gold Backed Cryptocurrency

Gold Market Discussion

Russia Passes China in Gold Holdings as Gold Buying Goes Up Around the Globe

The Russian central bank passed China last year in increasing gold holdings as gold buying goes up around the globe. Russia has been buying gold every month for almost three years, while China’s accrual has tapered off slightly. This past month, Russia acquired 20 metric tons to put its gold reserves at 1,857 tons. It also makes it the fifth largest holder of sovereign gold in the world. The U.S. is still far ahead though with over 8,000 metric tons reportedly held in Fort Knox. Russia considers its gold holdings as a feature of “national security.” Russia Central Bank’s first deputy governor Sergei Shetsov said that Russian citizens and banks owning gold is a way of “beefing up national security.” His implication of course is for economic security rather than military for the U.S. and EU sanctioned Russia.

Shetsov also discussed the possibility of possible BRICS (the nickname Brazil, Russia, India, China, South Africa due to similar features of large, fast-growing, emerging global markets) agreements on gold pricing and trading to upset the current global dominance of the U.S. dollar. Moscow and Beijing have already signed a memorandum of intent on bilateral precious metals trading. This will likely pave the way for further avenues for gold hubs in global trading. Furthermore, in the past couple years China has introduced the Shanghai Fix as an alternate gold pricing market to the New York COMEX and London Fix.

What this means for investors: It is clear that on the global stage, gold is considered wealth. The BRICS countries consider it a key part of sustaining economic security and gaining power in the global market. As geopolitical tensions around the globe increase, expect gold acquisition to increase as well.


Currency Alternatives: Can Gold and Crypto Salvage Venezuela? 

As gold buying goes up around the globe for powerful, emerging markets like Russia, Venezuela looks at it as a possible life raft. Venezuela’s ravaged economy has much its people unable to buy food and necessities. In the midst of the severe economic crisis, hyperinflation has pushed the Venezuelan bolivar down to next to nothing. It is worth less than World of Warcraft virtual currency and 100,000 bolivars is worth only $4 USD.

In an effort to prevent a worsening of the political and economic situation, President Maduro is attempting to launch a national cryptocurrency. First he announced the launch of an oil-backed cryptocurrency called the petro. The following day he announced a coming gold-backed cryptocurrency called the petro gold. He gave few other details about the currencies though.

What this means for investors: Maduro must believe himself out of options to bank on something as volatile as cryptocurrency. The oil and gold backed cryptocurrencies are an attempt to skirt financial sanctions. However, they will probably not save Venezuela from hyperinflation and its collapsing, socialist economy. Investors question whether they have any real, impactful value given concerns about Venezuela’s solvency and transparency. Maduro’s thought is probably that commodities like gold and oil have tangible, lasting value. Whether this will translate to the murky world of cryptocurrency though is doubtful. Venezuela right now is a lesson on the pitfalls of fiat currencies in a socialist system, and there is no apparent easy way out of its current crisis.

Gold Swings Back and Forth This Week on Stronger Dollar and Interest Rate Hikes

Gold stayed rather quiet this week. At the beginning of the week it was trading lower in anticipation of a Fed announcement on interest rates. Sure enough, the Fed announced a rise in interest rates that raised bond yields and firmed the dollar. However there is also an expectation for rising inflation that led to a softening of the dollar index and a gain for gold by Thursday. Rising inflation generally means rising gold prices. However, overall, gold struggled this week and had one of its worst weeks for the year.

What this means for investors: Despite the weak performance for gold this week, there are reasons to remain bullish on gold. Check out analyst Carter Worth’s case for gold to reach $1,400.

3 charts that show gold is going to $1,400 from CNBC.

The Gold/Silver Ratio

gold-silver-ratio-5 year chart

Analysts often look at the gold/silver ratio to predict movements in the precious metals markets. The ratio is simply the price of gold per ounce divided by the price of silver per ounce – or how many ounces of silver it takes to buy an ounce of gold. Right now, the gold/silver ratio is indicating that silver is relatively cheap compared to gold. The last time we saw such a relationship was February of 2016, and shortly thereafter, both metals took off. In recent weeks as gold saw some big upward movement, silver lagged behind, but once it catches up, both metals could be in for gains.

What this means for investors: Silver prices jump around with greater volatility than gold prices. Historically, the current pattern is bullish for metals, so this is a good opportunity to increase both. With silver relatively cheaper and poised to make a catch-up run, it is an especially good time to consider silver.


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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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gold bars

Gold Was Up and Down this Past Week As Inflation Concerns Set In

Gold Market Discussion

Gold Was Up and Down This Past Week

Analysts predict $1500 gold
After previously being quiet, gold was up and down this past week. However by Friday it was on pace for its biggest weekly gain in two years. It started the week just under $1,320 and rallied to $1,350 on Wednesday. Friday opened with gold still over the $1,350 mark. Silver rose with gold mid-week as well, but it remained under $17 an ounce all week. Metals were helped in part this week by a weaker dollar index (a 3 year low) and some inflation concerns. Chinese gold buying ahead of the Chinese New Year (the Year of the Dog begins this weekend) also helped gold.

 

Inflation Concern Leads to More Gold Buying

inflation chartGold got its bump this week in part due to Wall Street starting to eye it.  The U.S. Labor Department released its Consumer Price Index (CPI) report Wednesday, and this helped give gold that mid-week boost. The CPI (which tracks prices of consumer goods) had risen more than expected. This was its largest increase in thirteen years. Another labor report documented an unexpected rise in wages and sparked an equity sell-off, sent the Dow Jones into correction, and lifted the 10-year Treasury note to a four year high.

What this means for investors: There is growing indication that inflation is making a comeback. Precious metals are the classic hedge against inflation, and with its return, gold prices will likely rise. Gold was up and down this week, but rising inflation will eventually translate to rising gold.

Stock Market Bounces Back for Week of Gains

gamble on stock marketThe stock market bounced back this week after it’s drop off last week. Last week it dropped by levels not seen since 2008. The markets posted gains throughout this week though. In fact, it reversed most of the correction from last week. Despite the correction last week, gold remained fairly quiet, and metals actually gained more this week due to the weaker dollar and rising bond yields. The bull market for stocks doesn’t seem to be over quite yet, despite the eerie correlation of this economic climate to 1987.

What this means for investors: Some analysts still think volatility is ahead for stocks though, despite the bounce this week. This means that these gains wouldn’t last. The 10-year Treasury yield will probably continue to rise higher, which is going to worry stocks. Strategist Jim Paulson expects a 15% correction later this year. Rising rates and potential inflation are worrying investors and starting to think about safe havens now.

Emerging Market Junk Bonds Less Risky than U.S.

US junk bonds riskier than emerging marketsRight now, U.S. junk bonds are riskier than those from emerging markets. According to Bloomberg data, bond yields on emerging market junk bonds are below those of the U.S. for the first time in over two years. Emerging markets are essentially economies in countries that do not have advanced levels of market efficiency and strict standards in accounting and regulation, but are moving towards it (for example: Hungary, South Africa, Brazil, Mexico).

What this means for investors: The bond market and rising yields is what has many investors worried. This spike in risk in U.S. junk bonds indicates a disconnect between fundamentals and prices in this economy.

 


 

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As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Stock Market Drop Off: One of the Worst Weeks Since 2008, but Gold Remains Quiet

Gold Market Discussion

Stock Market Has One of the Worst Weeks since 2008, But Gold Remains Quiet For Now

DJIA fallsVolatility was the word of the week. The Volatility Index went as high as 40 points Friday before closing around 30 (last week it was around 17). The volatility in the stock markets is becoming more pronounced, especially following last week’s shaky week. Once again this week – and to a greater extent – the markets experienced wild falls and fluctuations. By Friday afternoon, the Dow regained some of the lost ground in the afternoon, but it had its worst week in two years. It was a similar story for the S&P and Nasdaq. In fact the Dow traveled 20,000 points this week. Furthermore, on Monday it experienced its worst daily point drop on record.

On Friday, the stock market was on pace for one of the worst weeks since 2008, but gold remains quiet at the moment. Gold closed out the week just shy of $1,320, which was down nearly $20 from the week’s open. Silver fell too just over 20 cents over the week. This seems counter-intuitive for metals, given the heightened stock volatility over the past couple weeks. You would expect some safe haven demand to pick up.

However, there were other forces weighing on gold this week. It was under some pressure from expectation of rising interest rates and a stabilizing dollar. Some analysts also estimate that there was gold selling this week as investors sold some of their holds to meet margin calls on leveraged equities.

What this means for investors: It looks like the stock market’s bull run is come to a head, as the stock, bond, and currency markets have been flashing warning signs of for a while. Investors are preparing for more volatility ahead with rising inflation expectations and rising bond yields.

With rising inflation, expect gold prices to rise as well. Despite gold’s quietness this week through the upswing in volatility, the future is looking good for gold. Long term, a dropping stock market is going to push investors to the safe haven buy in gold. Gold did not drop below $1,300 on the firming dollar, which indicates it has support. Gold is up 6% from its December lows. If the market volatility has you concerned, look for gold buying opportunities as a hedge.

Foreign Gold Buying Continues to Climb on Volatility Expectations

foreign goldThe global equity market volatility is just one reason why foreign gold buying is going to continue to rise. Russia has been buying gold at record pace for some time now. China, the second largest economy in the world, is the top global buyer, and India is also becoming a significant player in the global market. The latest Bank of England policy signals that U.K. investors should think about buying gold now. The BoE voted to keep rates unchanged, and analysts are worried that at this rate, rates will not raise fast enough to offset inflation. The central bank is acting out of line with its methodology and previous policy outlines.

What this means for investors: Gold generally gets an additional boost at the beginning of the year from traditional Chinese New Year gold buying. However, as volatility ramps up, the speed of buying is going to continue.

Cryptocurrency Rout Eases

cryptocurrency volatility
The cryptocurrency markets have been experiencing even more volatility lately than the stock market did this week. With the focus on the stock market drop this week though, cryptocurrencies had a bit of a breather. More and more analysts though are coming out against the concept of it as a currency, despite some of the other practical applications for blockchain technology. With volatility fears plaguing the stock market now though, it appears investors are not leaping to put their money into the even more volatile cryptocurrency markets.

For more on what this means for investors, check out the link below…

 


Read our latest original article to see what the gold investor should know about cryptocurrency

WHat gold investors need to know about cryptocurrencies
Bitcoin and cryptocurrency are undoubtedly a hot topic right now. How exactly the virtual, unregulated “currency” works though can be complicated to understand. Check out our original article that breaks down bitcoin mining, blockchain technology, and their future implications for gold, money, and society.

Read the article here!

 


Stay Connected to the Markets. Subscribe Now to Get the Gold Market Discussion Delivered Every Sunday Directly to Your Inbox!


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Stocks Tumble

Volatile Week for Stocks Sparks In Worst Trading Week in 2 Years

Gold Market Discussion

After a Volatile Week for Stocks, Gold Set To Move Higher?

Stocks are downIt was a volatile week for stocks all week with Friday marking the worst day this year for the markets. Friday saw the Dow Jones plunge nearly 700 points and it marked the biggest loss in 2 years for the Nasdaq. It was overall the worst week for stocks since January 2016 with the markets down most of the week leading up. The VIX rose 28% to 17 after hovering at record lows several months prior. It was the highest percentage point loss since the Brexit turmoil in June 2016 and steepest point decline since the 2008 financial crisis.

What this means for investors: A rapid jump in treasury yields is one of the reasons for the sharp sell off Friday. Rising rates are making the markets jumpy, and this is a stock market already due for a correction. In fact it has not corrected more than 3% in nearly two years. Many analysts – including Goldman Sachs – are predicting a high probability of a coming correction. This could be a start, especially if the bond market continues along this path. For metals, the spike in volatility should give gold a boost as it spurs some safe haven buying.

Fluctuating Dollar Index Shakes Up Gold This Week

The dollar is fluctuatingDespite the heavy Dow loss on Friday, gold was down as well to close out the week. Generally gold would be up with such a decline as investors move to safe haven assets, but it was not the case this week. Gold hovered in the mid $1340 range for the beginning of the week, but closed Friday closer to $1330. The dollar, which has been showing weakness recently, got a boost this week from the Fed announcement and economic data released Friday. Silver, which is always inclined to more volatility than gold, started around $17.30 and closed just under $17 at the end of the week.

What this means for investors: Metals have been taking a cue from the dollar recently and moving in opposition. The dollar was still showing some resiliency Friday, which is part of the reason why the plunge in the stock market didn’t lift gold as much as it might have seemed it would. However, many buyers still took advantage of the price drop Friday to hedge against increased volatility in the stock market.

U.S. Debt Set to Spike Over $600 Billion in Next Several Months

time running out on debtA big story that is probably not getting enough attention though is the U.S. debt level and its projected increase. The U.S. national debt is set to spike by $617 billion in the next five months, according to the U.S. treasury. Its approaching its debt ceiling again, and Secretary treasury Steve Mnuchin called on Congress to lift the ceiling as soon as possible.

What this means for investors: Having such a massive deficit is fiscally reckless not to mention dangerous. In 2008 the economy turned on a dime. If it were to make a similar turn in the next few years, a deficit like this would make recovery even more difficult. The dollar would crumble and set off a chain reaction around the globe. And yet the government is increasing spending programs rather than addressing the debt problem.

Cryptocurrency Can’t Replace Gold

cryptocurrency can't replace goldOn Friday bitcoin fell under $8000. This is an over 50% decline from its December high of $20,000. Other cryptocurrencies experienced similar declines this week. The Friday rout resulted in an overall market loss of about $100 billion in cryptocurrency. Cryptocurrency certainly has made many investors richer quicker than gold ever has, but it won’t replace it as a store of value in the long run. These massive spikes in price over short amounts of time are indicative of that. The World Gold Council recently released a report on how crypto is far too volatile to ever replace gold. Gold has a more liquid market, trades in an established and regulated framework, and has well understood value in an investment portfolio.

What this means for investors: The crypto mania of last year is quickly fading as its volatility becomes more alarming. Because of this, the amount of early bitcoin buyers taking their profits and turning them into physical gold is rising exponentially. Until recently it was the opposite, with investors selling gold and mortgaging property to buy into the craze at its height, often to quickly experience significant losses. For a more in depth look at how bitcoin and gold are related (or just to better understand it), check out our original article below.

 


Read our latest original article to see what the gold investor should know about cryptocurrency

WHat gold investors need to know about cryptocurrencies
Bitcoin and cryptocurrency are undoubtedly a hot topic right now. How exactly the virtual, unregulated “currency” works though can be complicated to understand. Check out our original article that breaks down bitcoin mining, blockchain technology, and their future implications for gold, money, and society.

Read the article here!

 


Stay Connected to the Markets. Subscribe Now to Get the Gold Market Discussion Delivered Every Sunday Directly to Your Inbox!


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

The dollar is losing value

Gold and Oil Hit Multi-Year Highs This Week While the Dollar Hit a 3-Year Low

Gold Market Discussion

The Dollar Hit a 3-Year Low, Boosting Gold Over $1,360

Dollar to Gold 3 Year Chart
The recently falling dollar hit a 3-year low this week, and helped gold rally to its highest level in 17 months. The last time we saw gold prices reaching $1,360 was in August of 2016, and it looks like they will keep rising. Silver also rallied this week. It touched just under $18 on Thursday and settled to around $17.43.

The recent dollar weakness we have been seeing was further exacerbated this week by Treasury Secretary Steve Mnuchin’s comments at the Davos World Economic Forum – the annual summit of world and business leaders that takes place in the Swiss Alps. On Thursday Mnuchin said that the dollar needs to weaken, and that it will be good for trade if it does. Later that day however at Davos, President Trump stated – in a reversal of his position 13 months ago – that the dollar would get “stronger and stronger,” pushing the index up again. Following his address on Friday there was a further boost. Gold prices had some pull back, but seemed to remain supported.

Despite the boost though from Trump’s comments, the dollar remained stagnant. GDP data released Friday was less optimistic than expected. The euro was also up this week which weighed on the dollar index.

What this means for investors: A weaker dollar means higher metals prices. When the dollar is down, gold, the world’s oldest currency, is a better wealth preserver. The dollar is signalling a buy sign right now as its strength of the past few years retreats. But the dollar isn’t the only thing signalling further optimism for gold right now…

Oil Reaches Multi-Year High This Week Alongside Gold

Gold to Oil 3 Year Chart
In an inverse movement, oil prices hit a 3-year high this week while the dollar hit a 3-year low. Oil price passed $71 per barrel for the first time since 2014 due in part to OPEC supply cuts and dwindling U.S. crude inventories.

What this means for investors: Rising oil prices are historically a bullish indicator for the entire raw commodity sector. Both gold and oil have an inflationary relationship and historically move up when the dollar is down. Movements in oil have a significant impact on gold, and until recently oil has not been moving much. It looks like that could be about to change. Geopolitics also drive both, and growing volatility in the Middle East and Korean peninsula will fuel safe haven buying. Furthermore, there is rapidly growing appetite for both in China, the world’s second largest economy.

Bonds and Interest Rates Signal Time to Buy Gold

Gold to Interest Rates 3 Year Chart
The bond market is also signalling that it’s time to buy metals. The slope of the yield curve can give indications on short term interest rates, inflation, and economic activity. A flattening yield curve can be a harbinger of recession. Interest rates and yields keep going up as bond prices go down. If the bond sell off continues, it could be disastrous for the markets and economy.

What this means for investors:Right now we are seeing rising bond yields, Fed tightening, a weak dollar, and a soaring stock market: just like in 1987 before the crash . Metals are security in such an environment, and rising inflation will lift prices.

Is Silver Finally Confirming the Gold Rally?

Silver on the rise
In recent weeks as gold rallied, silver has been lagging a little behind. This has made a great buying opportunity for the cheaper, more volatile metal. But it looks like it could be catching up. Silver, along with gold, rallied this week and posted a 4 month high and 3% gain. The weaker dollar and boost in oil prices this week also lifted silver. The gold to silver ratio has been unusually wide lately, and some analysts have been looking for signs about whether this bodes well or poorly for the gold rally, worrying it could mean gold is headed lower.

What this means for investors: Both metals look on track to continue their rally. Silver’s move this week allayed some fears that gold was running too fast too quickly. The current ratio along with the indications this week that silver will keep riding gold’s coattails is indicating buy silver now.

 

 


Read our latest original article to see what the gold investor should know about cryptocurrency

WHat gold investors need to know about cryptocurrencies
Bitcoin and cryptocurrency are undoubtedly a hot topic right now. How exactly the virtual, unregulated “currency” works though can be complicated to understand. Check out our original article that breaks down bitcoin mining, blockchain technology, and their future implications for gold, money, and society.

Read the article here!

 


Stay Connected to the Markets. Subscribe Now to Get the Gold Market Discussion Delivered Every Sunday Directly to Your Inbox!


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

The Bitcoin bubble

Good News for Gold in 2018: Bitcoin, Bonds, and Bubbles to Drive Prices?

Gold Market Discussion

Investors Fleeing Bitcoin to Gold in Increasing Numbers

Bitcoin for goldGold continued to hold strong above $1330 this week. There was some pull back midweek on profit taking, but by Friday it got another bump on news of a possible government shut down.

While gold rose though, crytpocurrencies had another sharp drop off. This week bitcoin came down over $10,000 from its pre-Christmas high that broke $20,000. There could be a subtle correlation here; or, at least, it brings up a recent trend among crytpo investors looking for exit options. Many of those who are selling bitcoin right now are looking to transfer their profits into gold. Bitcoin can be tricky to move out of though. Sellers have to sell through intermediaries before purchasing gold (or other assets). Online trading platforms have been known to go suddenly offline, and there are often high transaction costs. Yet regardless, physical gold dealers have seen a both long and short term bitcoin buyers getting out now – some with enormous profits.

What this means for investors: On paper, gold and cryptocurrency couldn’t be more different. They represent opposite ends of the spectrum: volatility and safe haven. However gold, with its 4000 year history as a gauge of value, will always be what investors return to when they get spooked by bubbles.

Bond and Stock Market Bubbles = More Good News for Gold in 2018?

David Stockman, Ronald Reagan’s White House budget chief, issued a warning this week that gold is the only safe asset left. In his interview, he cautioned that the new tax plan will add $2.5 trillion to the public debt. His most dire warning though was about movement in the bond market:

“…By the fall (of 2018), they (the Federal Reserve) will be shrinking their balance sheet by $600 billion a year.  What that means in plain simple English is that they (the Fed) are dumping $600 billion a year of existing bonds into the market just as Uncle Sam will be attempting to borrow $1.25 trillion more.  Now, if you don’t think that is a financial collision waiting to happen, then I am not sure what would be.

We are heading for a thundering collision in the bond market that will drive yields upward far more than the market is expecting.  The stock market operates on the illusion of permanently low interest rates.  When interest rates start to rise, everything is going to come apart because cheap debt has been priced in forever, and we are heading for far more expensive debt. . . . Bond prices are going to collapse when yields begin to rise. . . . Stock prices are going to collapse big-time when the underlying predicate of cheap debt, massive stock buy backs and M&A deals and everything else supporting the market today finally reverses.”

What this means for investors: The financial crisis that Stockman is predicting might seem like a depressing prospect – rightfully so. Gold gives investors peace of mind during such times though – hence Stockman’s praise of it as the only safe asset to buy right now.

Watch the full, 36 minute video with Stockman here.

Gold Has Room to Run with Global Demand on the Rise

gold has room to grow

Although this week gold eased back some from its New Year rally, strategists are seeing multiple reasons for it to continue this year. One analyst even predicts it reaching $1,400. January and February are also historically the strongest months for gold, so there could be some pull back before that higher climb. However, a weaker dollar and a bearish bond market could continue to drive metals all year. Global demand is another significant factor that will boost gold. Demand in China especially continues to stay strong.

What this means for investors: A smart strategy is to watch for the dips and buy. Gold is still nowhere near its peak. The unraveling bond market and weakening dollar will eventually break the stock market rally. Investors are starting to see this and looking for exit options into safer havens.

Silver Could Be Set to Soar in 2018

silver set to soar in 2018Good news for gold in 2018 will be good news for silver as well. In fact, right now silver might have some catching up to do. The gold/silver ratio has averaged about 63.8 for the last ten years, but right now it’s sitting at 78.1. This means it is historically speaking undervalued right now. Silver is traditionally much more volatile than gold, so given the volatility, its current under-performance, and the potential for gold right now, silver is in an optimal position to start a run up. When gold demand increases, silver demand inevitably follows.

What this means for investors: As more investors start positioning into gold to protect their portfolios, silver will eventually catch up. Furthermore, silver has a high industrial demand that gold does not. There are multiple reasons to be bullish on silver right now, and while it is approaching a break out and prices are low is a perfect time to buy.

 

 

 


Read our latest original article to see what the gold investor should know about cryptocurrency

WHat gold investors need to know about cryptocurrencies
Bitcoin and cryptocurrency are undoubtedly a hot topic right now. How exactly the virtual, unregulated “currency” works though can be complicated to understand. Check out our original article that breaks down bitcoin mining, blockchain technology, and their future implications for gold, money, and society.

Read the article here!

 


Stay Connected to the Markets. Subscribe Now to Get the Gold Market Discussion Delivered Every Sunday Directly to Your Inbox!


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign