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With Stagflation Ahead, How Will Gold Respond?

How Will Gold Price Perform During Stagflation?

Photo by Zlaťáky.cz

Analysts think stagflation might be the boost gold needs right now

The gold market continues to experience strange action, having most recently fallen to $1,720 only to bounce back to $1,760 by Friday’s time. It was a repeat of the week before, where strong selling pressure was met with a lot of buyers.

Kitco interviewed a number of market analysts for their take on the bigger economic picture and how gold will respond. Daniel Ghali, a commodity strategist at TD Securities, told Kitco that the headwinds gold seems to be facing come primarily in the form of the markets pricing in scenarios that may or may not happen:

What’s been driving gold these days is market pricing of Fed’s exit. Both the tapering and a potential rate hike on the horizon were being priced in. As a result of that, we’ve seen substantial repricing of the Treasury markets, and that has been primarily weighing on gold.

Even though it has been consistently pointed out that the Fed is poorly positioned for either tapering or rate hikes, the markets seem determined not to be surprised.

Ghali thinks the re-emergence of the threat of stagflation, a mixture of rising prices and a static or weakening economy, could be a wake-up call to market participants. Indeed, there seems to be little to support the idea of any kind of economic strength that would cause the Fed to act in a hawkish manner, and worries over inflation are by now ubiquitous.

Walsh Trading co-director Sean Lusk reiterated that gold ended the week with a bullish note:

…click on the above link to read the rest of the article…

Peter Schiff: Gold Will Explode; The Dollar Will Implode When the Markets Figure This Out

Peter Schiff: Gold Will Explode; The Dollar Will Implode When the Markets Figure This Out

Peter Schiff says gold will explode and the dollar will implode when the markets figure out the Fed is crying wolf when it comes to monetary tightening.

The Federal Reserve wrapped up another meeting without making any changes to its current extraordinary, loose, inflationary monetary policy. But the central bank did hint that it may start tapering its quantitative easing program “soon.”

That was enough for the markets. They continue to expect the Fed will tighten monetary policy and fight surging inflation. Gold sold off after the FOMC statement came out, dropping about $10.

The gold market has battled these headwinds for months. Every time the Fed hints at tightening, gold sells off. Every time inflation numbers come in hot, gold sells off. This doesn’t make sense. Why would investors sell an inflation hedge during an inflationary period? Because they honestly think the central bank can and will sweep in and successfully fight inflation.

But as we have said over and over again, the Fed cannot possibly tighten in this economic environment. In an interview on RT Boom Bust, Peter Schiff said even if the Fed does begin to taper, it will eventually reverse course and ultimately expand QE.

It knows the only foundation this bubble economy has is the Fed’s easy money policies. And I don’t think they have any actual plans to taper. And even if they just kind of feign the process by beginning it, they’ll never complete it because soon after they start the taper, again, if they even ever start, they’re going to have to reverse the process. Because ultimately, the Fed Fed is going to expand the QE program and start to buy a lot more government Treasuries and mortgage-backed securities in the future than it’s doing right now.”

…click on the above link to read the rest of the article…

End of the US Empire–Orwell’s 1984 Newspeak & Dirt Cheap Gold

END OF THE US EMPIRE – ORWELL’S 1984 NEWSPEAK & DIRT CHEAP GOLD

The final phase of Empires normally ends with the same signals whether it was 2000 years ago in Rome or  today in the US.

One of the first signs is losing wars together with excessive debts, deficits, devaluations and decadence  The US being defeated and hurriedly fleeing from Afghanistan in a few days clearly signifies the end of the US empire.

The mighty US military has in the last few decades conducted disastrous wars against very small countries with no big armies or weaponry. Vietnam, Iraq, Libya and Afghanistan come to mind but there are many more as we show below.

Brown’s University has just made a study of the US cost of wars since 9/11. They arrive at a staggering $8 trillion and the loss of 900,000 lives .

So in the last 20 years, the US has spent $8 trillion or 40% of annual GDP on conducting totally unsuccessful wars. The report also states that even after the exodus from Afghanistan the US is still involved in wars in over 80 countries.

Current extent of the US empire

US CURRENT WAR ACTIVITY

The cost of being involved in some kind of war activity in 85 countries will continue to cost the dying US empire dearly for decades to come.

1984 IS HERE AGAIN

Are the 2020s going to be a return to Orwell’s 1984 with Big Brother watching us everywhere?

Well, it certainly looks like many governments and the elite is leading us in that direction.

Covid has been a superb excuse for controlling the people in a number of countries. Free speech has been banned in the media and unacceptable censorship is now the rule on social media whether it relates to vaccines, climate or race.

…click on the above link to read the rest of the article…

Facing Inflation Threat, German Investors Loading Up on Gold

Facing Inflation Threat, German Investors Loading Up on Gold

While most American investors have faith that the Federal Reserve can and will successfully tighten monetary policy to fight inflation — or have simply bought into the “transitory” inflation narrative — Germans are loading up on gold as a hedge against growing inflationary pressures.

Through the first half of the year, gold coin and gold bar demand in Germany hit the highest level since 2009 – the aftermath of the 2008 financial crisis. First-half demand for bar and coins in Germany increased by 35% from the previous six months, compared with a 20% increase in the rest of the world, according to World Gold Council data.

Raphael Scherer serves as the managing director at Philoro Edelmetalle GmbH. He told Bloomberg that gold sales for the company are up 25% on what was already a strong 2020.

We have a long history of inflation fear in our DNA. Now the inflation risk is picking up. The outlook for precious metals is very positive.”

Given Germany’s experience with hyperinflation under the Weimar Republic, it comes as no surprise that Germans are wary of inflation.

Gold investment took off in the country in the wake of the 2008 financial crisis and has been strong ever since. The global recession after the ’08 meltdown led to extremely loose monetary policy in Germany. The country has been in a negative interest rate environment for several years, and the Bundesbank has done billions in quantitative easing. Two and five-year government bonds have traded at negative yields since 2015.

The World Gold Council summarized why Germans tend to turn to gold when inflation looms.

…click on the above link to read the rest of the article…

The Paper Gold Tail Wagging the Golden Dog

THE PAPER GOLD TAIL WAGGING THE GOLDEN DOG

A Wing and a Prayer

 

Investors may hope that the biggest financial experiment and debt bubble in history will last another 100 years. And they can pray that the currency system which has lost 98% of its value in the last 50 years will last another half century.

But that would be investing on a wing and a prayer with extremely poor odds of success.

Since neither the wing nor the prayer is likely to save investors from the greatest economic and financial collapse in global history, the need for protection or insurance is vital.

We are of course looking at probabilities and not certainties when we evaluate the risk of catastrophe.

With virtually all asset markets – stocks, bonds and property – at all time highs, investors are clearly judging the risk of failure to be nearer zero.

Personally I judge the risk of a collapse of markets and the economy to be between 95% and 99%.

So a risk range from 0% to 99% is quite a spread. An actuary would probably pitch it at 1 to 5 percent risk and sell catastrophe insurance on that basis.

Financial Insurance Dirt Cheap

With both investment markets and the insurance industry evaluating risk as virtually non-existent, that is the time when insurance is really underpriced or in simple terms dirt-cheap.

So what kind of insurance are we looking at here. The conventional investment market will look at hedging financial risk in all kinds of complex financial instruments in the form of derivatives.

What the so called “experts” don’t realize is that they hedge their investments with the same instruments that created the risk in the first place, such as paper gold. This would be a real financial tautology.

Or in other words: RUBBISH IN – RUBBISH OUT.

…click on the above link to read the rest of the article…

Gold “Underpriced,” Heading Back to $2,000: Goldman Sachs

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Gold’s path to $2,000 is open, falling Treasury yields are a major tailwind for gold, and gold, silver and platinum all make for good investments in the current climate.

Goldman Sachs: Gold underpriced at $1,800, ready to move back to $2,000

Even though gold met many bullish expectations last week by consistently closing above $1,800, Goldman Sachs analyst Mikhail Sprogis thinks the move could be the start of a much larger uptrend. Sprogis, who had already called for $2,000 gold in a previous note, stuck to his forecast and said that gold is well-positioned regardless of which direction stock markets are headed.

As of right now, Sprogis said that gold is being pressured by what is likely excessive optimism, with investors buying into stocks and betting on a strong global economic recovery. If inflation expectations remain mitigated as they have been after the latest Federal Reserve meeting, Sprogis says that gold is scheduled to move up gradually with subdued real interest rates and a rise in emerging market wealth.

Interest rates matter for gold because sovereign bonds, especially U.S. Treasury bonds, are viewed alongside gold as safe-haven assets. Unlike gold, bonds pay interest to investors. So when bond yields drop, the opportunity cost for holding gold instead of bonds diminishes. Lower interest rates make gold a more attractive safe haven.

Gold’s price rise could be much quicker and stronger if the global economy disappoints or if transitory” inflation emerges as a bigger threat than is currently believed. In this scenario, Sprogis said prices will be supported further by gold’s current undervaluing and relatively low portfolio allocation among the majority of investors.

…click on the above link to read the rest of the article…

Gold “Relatively Cheap” Compared to Other Assets: TD Securities Head

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Expert says gold is still at bargain price, how Basel 3 could boost gold and silver prices, and what’s next after gold’s breakout.

TD Securities: Gold is “relatively cheap” compared to what could come

On May 20th, TD Securities’ head of global strategy Richard Kelly reviewed gold’s current price ($1887) compared to currencies in the current economic outlook. As Kelly noted, gold had quite a pullback from its $2,070 August high, falling to as low as $1,650 at certain points but mostly sticking to the $1,800 level.

Kelly believes this pullback might have frightened investors away from gold despite the metal’s tailwinds remaining in place:

Gold had a phenomenal run-up over the course of last year, and when that reversed, I think it scared a few investors off.

As he explains, the downwards pressure came along with a sudden rise in Treasury yields, one that seems to have caused investors to overlook the true state of the bond market. Optimism came quick as traders started believing that the Federal Reserve might start hiking interest rates as well as reining in its ultra-loose monetary policy in order to head off inflation.

Yet the Fed has consistently promised there’s no intention to start raising interest rates any time soon. Kelly himself believes that many of the top currencies, including the U.S. dollar as well as the euro, are showing undeserved strength (despite the dollar’s recent weakness). This is supported by the sheer scope of monetary supply expansion that has occurred over the past year.

…click on the above link to read the rest of the article…

“Heads, Gold Wins; Tails, Gold Doesn’t Lose” – Jim Rickards

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: How gold could soon break out, U.K.’s Royal Mint experiences peak bullion demand, and why silver can go up much higher.

Heads, Gold Wins; Tails, Gold Doesn’t Lose

As The Daily Reckoning contributor Jim Rickards notes on Zero Hedge, the worst-case scenario for gold appears to be running its course. It’s often stated that the stock market is gold’s primary competitor, but the inverse correlation between the markets has been absent for some years. Instead, bonds position themselves as gold’s archnemesis as investors look at the two and ask themselves: which is the better safe haven?

When the $900 billion December bailout was followed by a $1.9 trillion one and promises of $3 trillion more to be printed, investors were quick to expect inflation, and with good reason. Taking a look at the two safe-havens, Rickards hypothesizes they believed Treasuries were preferable with rates climbing off the floor of 0.508% in August 2020, and bought bonds instead of zero-yield gold.

To Rickards, this is what caused gold to remain rangebound over the past few quarters, (though it’s a pretty good range). The problem is that investors were too hasty in their inflation expectations, while placing too much faith in government bonds.

Rickards believes 10-year Treasury yields peaked at 1.74% on March 31 and are unlikely to spring back up. That view isn’t difficult to corroborate given the dire straits of the global bond market.

…click on the above link to read the rest of the article…

Why Is Billionaire Investor & Former Gold Skeptic Sam Zell Buying Gold?

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Another billionaire turns to gold, Arkansas no longer to tax sales of gold and silver, and Minnesota as a possible source of abundant gold ore.

Billionaire investor and gold skeptic Sam Zell buys gold ‑ here’s why

There has been no shortage of stories of big-name investors touting or turning to gold over the past few years, and especially over the course of last year as the Federal Reserve sparked widespread inflation concerns with its multi-trillion-dollar stimulus. Sam Zell, chairman of Equity Group Investments and a billionaire investor whose portfolio spans across a wide range of industries, recently shared that he, too, has embraced gold primarily over inflation fears.

Speaking to Bloomberg, Zell noted that he previously counted himself among investors who viewed gold as a suboptimal investment compared to higher-yielding assets. But now?

Obviously one of the natural reactions is to buy gold. It feels very funny because I’ve spent my career talking about why would you want to own gold? It has no income, it costs to store. And yet, when you see the debasement of the currency, you say, what am I going to hold on to?

Zell now finds gold to be a safer option to hold over unbacked currencies, with governments around the world experimenting with aggressively-loose monetary policies.

Indeed, Zell said that the Fed is far from the only central bank causing commotion in the global economy, and that all sovereign fiat currencies should be met with a watchful eye…

…click on the above link to read the rest of the article…

Disoreder Will Come–As Confucious Warned

DISORDER WILL COME – AS CONFUCIUS WARNED

 

When bubbles burst, we will discover how very few superior men there actually are – as defined by Confucius:

“The superior man, when resting in safety, does not forget that danger may come. When in a state of security he does not forget the possibility of ruin. When all is orderly, he does not forget that disorder may come. Thus his person is not endangered, and his States and all their clans are preserved.” – Confucius

Superior man can exist at many different levels in society, not necessarily linked to money or investments. There will be many people without money who are prepared at an intellectual or psychological level. These people are probably the happiest since sadly many wealthy people worry about their money all the time rather than enjoy it.

In this piece I am talking primarily about preparedness in relation to one’s wealth.

PS Important Postscript at the end of the article.

FOCUS ON WEALTH PRESERVATION

The investors we meet in our business are people who are risk averse and therefore very much focus on wealth preservation. These investors buy physical gold because they are concerned about the excessive risks in markets. They want to protect and insure their wealth against unprecedented financial and currency risk. Like ourselves, these investors consider physical precious metals, stored outside a fragile banking system, as the ultimate form of wealth preservation.

But investment gold represents less than 0.5% of world financial assets. This means that a minuscule percentage of investors insure their wealth in gold. This is clearly surprising bearing in mind that over 5,000 years gold is the only money that has survived.

…click on the above link to read the rest of the article…

Egon von Greyerz, gold switzerland, inflation, risk, gold, precious metals, wealth, financial bubble, bubble, currency, banking system

Gold Will Emerge Stronger Than Ever From the Post-Pandemic Environment: CPM Group

We’ve often heard that gold is a primary beneficiary of crises unlike any other, when investors and the average person alike wondered what would happen tomorrow. Now, when at least some of the fear has diminished, CPM Group took a look at how the crisis aggravated existing problems that have been turning people to gold for decades.

In their Gold Yearbook, CPM highlighted sovereign and private debt, government deficits and loose monetary policies as the drivers that will position gold exceptionally well over the medium and long-term. The scramble for money to keep their economies afloat by both the U.S. and governments around the world have worsened these issues in monumental fashion. Growth was already contracting prior to the crisis, and CPM believes low growth could be the biggest consequence of the official sector’s liquidity rush.

With many countries appearing to adopt even more protectionist policies, CPM points to the long-standing trade conflict between the U.S. and China as something to look out for. The group also noted that many economies are projected to post a much slower recovery than that of the U.S. Regarding gold price, CPM doesn’t expect any major rushes such as the one seen last year. Instead, its analysts think investors will become more attracted to the metal over a longer period of time, slowly buying gold whenever a dip occurs. (More in line with the behavior expected of buy-and-hold investors rather than speculators’ constant turnover.)

Their sentiment agrees with many reports asserting that money managers are reassessing the traditional portfolio model and coming to view gold as a necessary inclusion…

…click on the above link to read the rest of the article…

birch gold group, gold, precious metals, pandemic, money, wealth, cpm,

When “Unallocated” Becomes Unavailable

For the past ten years, we’ve railed against the Bullion Bank fractional reserve and digital derivative pricing scheme. The solution has always been the removal of physical metal from the hands of the Banks and the Mints. Are we finally making some progress?

Before we begin, it is crucial that you understand this basic point: The globally recognized prices of gold and silver are not determined through the exchange of actual physical metal. Price is instead determined by the exchange of derivative contracts. Thus, the supply and demand of physical metal has very little day-to-day bearing on the derivative price. Instead, it is the supply and demand of the derivative itself that determines price.

About four years ago, I wrote the article linked below with the purpose of explaining, in as simple terms as possible, how and why this digital derivative pricing scheme benefits The Bullion Banks that have monopolistic control of these “markets”. If you’ve never read this post, please do so now:

The key pillars in maintaining this fraudulent pricing scheme are the market activities in New York and London. The CME-owned COMEX and the LBMA collective work together to manage price and the flow of physical metal that is needed to legitimize it. To understand this hand-in-glove approach, consider that Michael Nowak—the recently indicted former head of global precious metals trading for JPMorgan—also sat on the board of directors of the LBMA:

For precious metal investors everywhere, it is vital that we one day force this pricing scheme to collapse. Since The Scheme is built upon leverage and hypothecation, the only way we can win this fight is if we can force a deleverage of the fractional reserve system…

…click on the above link to read the rest of the article…

 

Interesting COMEX Trend: Silver Short Squeeze Appears to Be on Track

Interesting COMEX Trend: Silver Short Squeeze Appears to Be on Track

COMEX is the primary futures and options market for trading metals such as gold and silver. There have been some interesting trends for silver in the COMEX in recent months. More investors are taking delivery of silver. In other words, the short squeeze may still be on track – albeit in slow motion – and this could impact the silver price moving forward.

You will recall that last month, the Reddit investors turned the spotlight onto silver. The hope was to create a short squeeze in the market by buying up physical silver. The price popped temporarily, but it appeared at the time the silver market was just too big for the Reddit Raiders to squeeze. The price dropped back and the spotlight dimmed. But looking at some trends in the COMEX indicates the squeeze might still be on.

A futures contract is a promise to deliver a certain amount of gold or silver at a certain price at a certain time. Speculators play this market, hoping to profit from a price swing. Say you buy a $26 per ounce silver contract and the price of silver rises to $28. The investor can sell the contract and make a few dollars per ounce. Generally, the trades are made on paper. They are made on the promise of that metal and on the knowledge that it exists, but traders rarely take delivery of the metal itself. About 1% of COMEX trades go to delivery.

The following analysis was submitted to SchiffGold and is published for your consideration. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

The COMEX has shown a major divergence in the silver market in recent months. For context, consider this graph. (Open interest is the total number of outstanding options or futures that have not been settled for an asset.)

…click on the above link to read the rest of the article…

 

Forbes: Excessive Monetary Stimulus Leaves Gold “Greatly Undervalued”

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: How the expansion of money supply is boosting gold’s allure, an overview of last year’s precious metals imports to the U.S., and U.S. Mint releases final batch of American Gold Eagle coins with current design.

Historic monetary stimulus is casting a bright light on tangible assets

The multi-trillion dollar stimulus appears to have achieved the desired effect, at least in the short term. The influx of freshly-printed, free floating money encouraged risk-on sentiment, increased bond yields and caused money managers to once again turn away from gold.

Yet, as Forbes columnist Frank Holmes points out, the pressures coming down on gold right now could turn out to be its most powerful tailwind further down the line.

According to the Forbes article, M1 (the amount of readily-available or liquid money in circulation) should be approached the same as any other asset class. This is usually the case; many investors treat cash as a part of their portfolios. Therefore, the law of supply and demand should also be applied to cash. In light of the recent monetary expansion, cash quickly starts to look overabundant in the economy.

Holmes notes that M1 has expanded by 355% year-on-year, marking the highest annual rate increase on record by a wide margin. Unsurprisingly, inflation expectations for the next five years based on the Treasury breakeven rate have risen to their highest level since 2011, when gold posted its previous all-time high. Today’s gold price may be some ways off from August’s peak of $2,070, but there are plenty of analysts calling for a retrace this year, and Holmes thinks inflation could kickstart the next round of gold price gains.

…click on the above link to read the rest of the article…

 

U.S. Mint Rations Bullion Coins – Why Aren’t Prices Rising, Too?

Why bullion prices don’t seem to be in line with demand

Despite record demand for gold and silver bullion coins month after month, the prices of both metals continue to linger within limited ranges. Gold even pulled back to just above $1,800 during Friday’s trading session. So what’s going on? Why isn’t the clearly-demonstrated demand driving prices higher?

U.S. Mint director Ed Moy, whose tenure stretched from 2006 to 2011, recognizes today’s situation and draws many parallels to the start of 2008:

The last time demand was this high was during the [2008-2009] financial crisis. People were panicking and buying into gold, and prices were shooting up. Then the government started injecting both fiscal and monetary stimulus, and you saw gold correct down maybe 20-30%. And then, over the next three years, gold began to climb until it set a new record of $1,925 in 2011. Afterward, gold didn’t decline until it became clear that the economic recovery was going to be slow, which eliminated the uncertainty. The Fed also had the time to mop up all the excess liquidity before it caused inflation.

The former director explained that, besides overloaded mints and supply chain disruptions, there are several other factors that could play an interesting role in shaping up gold’s price over the coming months and years. Moy believes that perhaps the biggest reason for the disconnection between price and demand lies in Wall Street’s shorting of the metals.

…click on the above link to read the rest of the article…

 

Olduvai IV: Courage
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Olduvai II: Exodus
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