Month: May 2020

Gold

Extreme monetary policy makes gold even more relevant

Post author By Gold News Club
Post date May 2, 2020

Seeking Alpha/Bang for the Buck/4-29-2020

Ed Stein cartoon 'In case of emergency break glass', gold bar inside “The Fed and other central banks have long claimed they aren’t monetizing the debt since any bond-buying is temporary and the balance sheet will normalize over time. While those statements were questioned by many at the time, it would be difficult to make those claims today given the recent balance sheet expansion and how little the Fed was able to decrease the balance sheet before the u-turn during 2019. There are no absolutes in investing, but gold has historically been a good store of value over time, especially during extreme monetary and fiscal expansion. I fully understand there are few good options at this point for policymakers, I am not looking to suggest a better alternative, but I do think it is very prudent for investors to keep some gold in the portfolio at times like these.”

USAGOLD note: As we have said previously, few on Wall Street would criticize the steps the Fed has taken. On the other hand, a good many are preparing for its potential consequences.

Gold

World Gold Council: Physical gold demand for investment up 80% in first quarter 2020

Post author By Gold News Club
Post date May 2, 2020

World Gold Council/Staff/4-30-2020

bar chart showing demand breakdown Q1-19 and Q1-20 from World Gold Council

“The coronavirus pandemic – and the global response to it – had a far-reaching impact on gold investment in Q1. At the total level, investment in Q1 grew 80% y-o-y to a four-year high of 539.6t. Bar and coin investment was down 6% from Q1 2019 at 241.6t. ETFs, however, attracted 298t of inflows, boosting global holdings to new highs. On one hand, fears over the economic and social impact of the virus drove safe-haven flows into many investment products, most notably gold ETFs and official gold coins, fuelling the gold price. But on the other hand, concerns over the gloomy economic outlook combined with higher gold prices encouraged many to sell their existing holdings in an effort to combat the financial hardship imposed by the outbreak. And investment simply came to a halt in some jurisdictions as markets shut down, preventing investors from buying.”

USAGOLD note: We referenced this report in yesterday’s DMR and repost it now for those who may have missed it. The virus inspired safe-haven rush was led by institutional investors buying through gold ETFs, and to a lesser extent, retail coin and bullion buyers. It is worth noting that the report cuts off in March and, as a result, does not fully reflect the impact of heavy retail coin and bullion demand that began in March and gathered pace in April. The mixed results also raise a question as to how future physical supplies are likely to be affected once Asian demand returns from its understandable decline.

Gold

Post author By Gold News Club
Post date May 2, 2020

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Gold

Will gold prices hit record highs? | What’s ahead.

Post author By Gold News Club
Post date May 2, 2020

Forbes/Steve Forbes

graphic image of a gold anchor, as in anchoring the overall portfolio “In this episode of What’s Ahead I discuss what triggered the global gold rush, and whether this safe-haven asset still represents an investment opportunity. The trillions of dollars being spent to save our virus-battered economy are stoking fears of inflation. Gold has always been a hedge against government’s economic blunders.”

USAGOLD note: Good to see Steve Forbes aboard the gold train, though it does not come as a great surprise. At one time, he advocated a gold standard for the United States as the best way to restore a sound dollar.

Repost from 4-27-2020

Gold

Former COMEX board member: Bullion banks covering short gold derivative positions ……

Post author By Gold News Club
Post date May 2, 2020

…… Time to buy gold

Seeking Alpha/Brian Willis

“Now that the bullion banks are covering their decades-old short gold derivatives positions, it’s time to buy gold. If the banks don’t want to be short, it’s time to go long. The recent blowout of the COMEX April 2020 futures contract price above the London spot price is evidence of this action and a glaring indication of significant adjustments being made by the major gold market participants.

Banks are closing out their short gold positions after all these years because of the present world health/financial crisis and the steps being taken to salvage the world’s economies. Frank Holmes’ recent article, ‘Excess Money Supply Has Been Like Miracle-Gro for Gold,’ provides context.

The present circumstances have also resulted in short-term supply chain issues affecting the banks’ ability to maintain their long London positions. And, more significantly, concerns about counter-party risk are leading banks to start reducing some of their $600 Trillion derivatives exposure.

All during my 20+ years trading gold futures on the floor of the COMEX the bullion banks were major sellers of the nearby spread at rollover. This was done to ‘roll’ their huge short positions out to the next active futures month. The banks held these COMEX shorts against their long positions (physical, forwards, etc.) that they held in London, thereby hedging their price risk. So the banks typically maintain a significant short COMEX/long London position.”

[More at the link above]

cartoon showing the massive influence of derivatives on financial markets