Gold mining can be a terrible business. The metal’s price is volatile, but every once in a while the stars line up in a favorable way… by John Rubino of […]
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Markets rediscovered their fighting elan… by Brian Maher via Daily Reckoning Markets rediscovered their fighting elan. Impassioned pledges of government support stiffened their nerves… and steeled their spines. But will […]
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When crime rates explode because of lack of supplies and people start fighting over access to the meager food lines at FEMA camps, THAT will be panic…. by Brandon Smith […]
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“…gold could be trending higher against the Dow Jones Industrial Index in the next 18 months to two years.” by John Newell via Streetwise Reports The Dow/Gold ratio broke a […]
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The commission won’t say even if it knows of any futures trading by government, though such trading is public record… by Chris Powell of the Gold Anti-Trust Action Committee (GATA) […]
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(USAGOLD – 3/12/2020) –
Silver has had a rough go of it thus far this year when compared to gold. It is down almost 6% on the year while the yellow metal has gained over 8.5%. Most of that has to do with gold being boosted by its safe-haven allure and silver being buffeted by disinflationary/deflationary concerns. Gold Predict’s A.G. Thorson believes all of that is about to change and uses another virus shock – the 2003 SARS epidemic – as a measuring stick to divine silver’s future. “Now, the good news,” he writes at FX Empire. “I think the 2003 SARS outbreak could shed some light on what to expect next. The SARS outbreak of 2003 peaked with the flu and began to decline with warmer weather. It’s too soon to know, but I expect the same fate for the coronavirus. The news tends to overplay the real threat level. As China goes back to work, the pent-up demand will slingshot an immediate need for materials and commodities leading to a second-half reflation.” Under this scenario, Thorson sees silver “by this time next year testing $26.00 – $28.”
Chart of the Day
Chart note: Gold and the U.S. dollar have a long history of being inversely correlated. From May 2019 until early February, however, the two rose in tandem to the surprise of analysts as investors globally viewed both as safe haven hedges in the face of geopolitical eruptions and recession worries. Beginning in about mid-February, as the coronavirus’ full impact began to be felt, the two resumed their old ways with gold heading north while the dollar went south. Thus far in 2020, as shown in the chart, gold is up over 7% even with its recent weakness taken into account and the dollar is roughly level. Gold still enjoys the benefit of safe-haven capital flows. The dollar weakened against other major currencies as the Fed moved aggressively to counter the debilitating economic effects of COVID-19, while other major central banks – most notably the European Central Bank and Bank of Japan – have yet to follow suit.
Bloomberg/John Authers/3-10-2020
“In the meantime, this will put immense pressure on anything that benefits from a high oil price. An immediate effect will be on the U.S., which has profited from the shale oil boom. The economics of that industry now come under threat — which is precisely the purpose of allowing prices to drop so far. Shale operators tend to be heavily leveraged and so now face a great risk of bankruptcy, which will hurt banks, and credit investors.”
USAGOLD note: Bloomberg reports that the Trump administration may be readying a bailout of the oil shale industry following Monday’s 30% drop in the price of oil. On Tuesday oil recovered somewhat, but things still look shaky in the oil patch. Gold gets a mention is this highly recommended opinion piece. “Normally,” says Authers, “when people are scared, they seek sanctuary in dollars … That isn’t happening this time, at least so far. The dollar has fallen to its lowest versus the Japanese yen since 2016, while gold has topped $1,700 per ounce for the first time in 12 years.” Authers, as the title suggests, thinks major adjustments in global monetary order may be in the offing.
Van Eck/Joe Foster/3-9-2020
“As markets gyrate, gold investors must not lose sight of the bigger picture. For over a year the primary driver of the gold price has been falling real rates. Through the coronavirus crash, ten-year treasury yields have plummeted to all-time lows. With the markets in disarray, gold has not responded to this fall in real rates. Once the volatility subsides, we expect real rates to again become a primary driver of gold prices.”
USAGOLD note: Van Eck’s Joe Foster looks beyond the virus to identify what is really driving gold prices now and over the longer run.