Month: June 2021

CNBC/Holly Ellyatt/6-9-2021

“Any pullback in the money supply as a result of central banks pulling back will be, I think, very bad for the markets. So I think we have to watch this very carefully. We’re in a very uncertain time, that’s for sure.” – Mark Mobius

USAGOLD note:  Mobius has recommended gold ownership in the recent past as a refuge in times of uncertainty.

The post Today’s top gold news & opinion first appeared on Today’s top gold news and opinion.

MarketWatch/Greg Robb/6-7-2021

“Move over Larry Summers. Former Bank of England Governor Mark Carney indicated Monday he is in the camp of economists worried about an outbreak of higher inflation.”

USAGOLD note: With the warnings coming almost daily from analysts, like Carney, with lofty credentials, it’s a wonder the price of gold and silver are where they are – and not significantly higher.

The post Today’s top gold news & opinion first appeared on Today’s top gold news and opinion.

The S&P 500 moved to within a smidgen of a new record high earlier this week. Based on this benchmark stock market index’s recent performance, all seems well and good for risk assets.

Underneath the surface, however, warning signs are flashing for investors in financial markets.

Over the past several weeks, significant selloffs have occurred in some of the more speculative sectors and asset classes that may serve as leading indicators of trouble ahead.

Nothing is more of a pure speculation than an unbacked cryptocurrency. And since peaking in April, Bitcoin prices have plunged nearly 50%. Dogecoin has shed even more.

Meanwhile, Tesla’s stock price peaked in January, and the broader technology sector has started to underperform.

Equity valuations overall remain historically high by many measures, including the “Buffett indicator” – total stock market capitalization as a percentage of GDP.

With bullish sentiment also at an extreme, any disappointment to investors’ rosy outlook could trigger a wave of selling and a flight to quality.

Among the risks ahead are economic growth downgrades, jobs numbers misses, rising inflation, and the potential for the Federal Reserve to start “thinking about thinking about” tapering its massive asset purchase programs.

Of course, we’re already seeing alarming inflation numbers with the Consumer Price Index running above 4%.

The Fed along with most mainstream economists assure us high inflation is just a temporary anomaly caused by base effects from last year’s economic crisis.

But other economic forecasters see a bigger, more sustained inflation problem brewing. Deutsche Bank analysts see an inflation time bomb waiting to explode.

“Inflation leaves global economies sitting on a time bomb,” they said. “The effects could be devastating, particularly for the most vulnerable in society.”

According to Deutsche’s analysis, the Fed must act sooner rather than later to rein in excess liquidity: “The consequence of delay will be greater disruption of economic and financial activity than would be otherwise be the case when the Fed does finally act… In turn, this could create a significant recession and set off a chain of financial distress around the world.”

Traditionally, economic distress triggers a flight to high-quality bonds and cash. But bonds and cash provide no safe haven from inflation.

In fact, Treasury bond yields are now deeply negative in real terms – ensuring holders will suffer purchasing power losses when measured against inflation.

In an inflationary environment, quality assets are those that can retain or gain value in real terms.

Some stock market sectors may fare relatively well. The natural resource sector in particular has the potential to generate gains amid rising inflation.

In general, companies that have pricing power and the ability to raise their dividends would be considered high quality.

At the end of the day, though, stocks are financial assets and are vulnerable to selling off in the event of broader market instability.

Although no asset is impervious to losing value over any given day, week, or month, real money itself has an unparalleled track record for retaining value over time.

Real money isn’t represented by U.S. Federal Reserve Notes or other fiat currencies. Real money is represented by gold and silver.

Unlike financial assets, physical precious metals carry no counterparty risk and are not dependent on third-party promises to pay. The value of gold and silver is the metal itself.

An argument can be made that precious metals are the highest quality assets an investor can own. Gold, in fact, is considered by the Bank for International Settlements to be a “Tier 1” asset within the banking system.

Even central banks around the world, despite refusing to redeem their fiat currencies in gold, continue to hold and accumulate gold in their own reserves. They evidently don’t consider a portfolio consisting entirely of paper promises to be prudent!

Yet many financial advisors – typically the ones who get paid by selling Wall Street products – trivialize or outright dismiss precious metals when it comes to making portfolio recommendations to the general public.

That is a form of malpractice.

It’s not that holding conventional stocks and bonds is necessarily a bad idea. Often, they will perform in line with expectations and deliver decent returns.

The problem is that there are certain times during the economic cycle when financial assets will perform poorly – and precious metals will shine.

An investment portfolio bereft of a healthy hard money allocation is deficient. It will be to investors’ advantage to remedy any such deficiency in their portfolios before the next major flight to quality commences.

      

Washington, DC (June 10, 2021) – As foreign governments reportedly accumulate gold and de-dollarize their sovereign wealth funds, a Republican congressman is asking tough questions of the U.S. Treasury about its secretive gold activities.

Representative Alex Mooney (R-WV) – sponsor of the Gold Reserve Transparency Act of 2021 (H.R. 3526) to require the first true audit of America’s gold in decades – wrote to Treasury Secretary Janet Yellen this week requesting detailed information about the U.S. gold holdings delegated to the Federal Reserve and the International Monetary Fund and posed other questions.

From Rep. Mooney’s letter:

1. According to testimony in 2011 by Mr. Gary Engel, the Director of Financial Management and Assurance at the Government Accountability Office, about 5 percent of the U.S. gold holdings were stored at the time at the Federal Reserve Bank of New York. He also stated that this gold is not considered “audited” and that no assaying or inventorying of that gold had occurred since at least 1986.

   At the current time, what amount of U.S. gold holdings is vaulted at the Federal Reserve Bank of New York (or by the Federal Reserve using other depositories)? Also, has this gold been recently audited, assayed, and/or inventoried? If so, please provide me with a copy of any relevant reports.

2. For what purpose(s) is United States gold bullion stored at the Federal Reserve?

3. According to testimony by Mr. Engel, the Federal Reserve Bank of New York holds gold for other nations as well. Is the U.S.-owned gold stored at the Federal Reserve held in a physically segregated manner from the holdings of other nations?

4. During the 2011 hearing, Rep. Luetkemeyer referenced a report that 261 million ounces in U.S.-owned gold is part of the IMF’s reserves. At present, how many ounces of U.S.-owned gold are in the possession of the IMF or pledged to the IMF – and where is that gold kept? Also, please describe the purpose and nature of this arrangement as well as what oversight procedures are in place.

5. How much U.S.-owned gold is in the possession of and/or used by the Exchange Stabilization Fund as part of its activities? What is the purpose and nature of the ESF’s gold activities?

6. Please provide details as to what U.S.-owned gold is currently pledged, swapped, leased, or otherwise encumbered – and for what purposes – including, but not limited to, arrangements involving the Bank for International Settlements (BIS), World Bank, IMF, and other financial institutions, foreign or domestic.

Mooney’s inquiry comes shortly after he introduced H.R. 3526 to require the Comptroller General to immediately conduct a full assay, inventory, and audit of the United States’ gold reserves and repeat the process every five years.

There is evidence the U.S. Treasury may have sold, swapped, leased, or otherwise placed encumbrances upon some of America’s gold over time.

However, federal government officials have strongly resisted disclosure of these activities for decades.

To address these concerns, H.R. 3526 also requires a full accounting of any and all sales, purchases, disbursements, or receipts, a full accounting of any and all encumbrances, including due to lease, swap, or similar transactions presently in existence or entered into in the past 15 years, and an analysis of the sufficiency of the measures taken to ensure the physical security of such reserves.

To fulfill its obligations under the Gold Reserve Transparency Act, Government Accountability Office auditors would gain access to any depository or other public or private depositories where reserves are kept as well as related records.

“People are rightly concerned about the state of America’s gold holdings,” said Jp Cortez, policy director at the Sound Money Defense League. “The lack of full transparency by the Federal Government has hobbled public confidence. The Gold Reserve Transparency Act will ensure our gold reserves are accounted for.”

The full text of the bill, which has been referred to the House Financial Services Committee, can be found here.