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(USAGOLD – 2/19/2019) – Gold climbed in overnight markets and early U.S. trading as investors reacted to potentially widespread coronavirus repercussions for global business and signs of recession in Japan and Germany. In addition, the perception is gaining ground that central banks are likely to head off future financial uncertainty by turning up the monetary spigots. The yield differential between three-month bills and 10-year Treasuries, by the way, inverted again this morning – a sign in the past of impending recession. Gold is up another $5 this morning at $1606 after yesterday’s $17 gain. Silver is up 20¢ at $18.36 – and up 67¢ over the past two days.
In an article titled The White Swans of 2020 published at Project Syndicate, Noriel Roubini, the controversial professor of economics at New York University, details a number of potential “seismic” events on the geopolitical horizon mostly centered around accelerating economic conflict among global players. He says China and Russia in this atmosphere are likely to continue stockpiling gold – a strategy that explains the 30% spike in gold prices since 2019. “So far,” he says, “China and Russia’s shift into gold has occurred slowly, leaving Treasury yields unaffected. But if this diversification strategy accelerates, as is likely, it could trigger a shock in the US Treasuries market, possibly leading to a sharp economic slowdown in the US.” We would add that China and Russia are not alone among nation-states stockpiling gold to shore up their national reserves.
Chart of the Day
Chart courtesy of Hubert Moolman
Click to enlarge
Chart note: “With the significant decline in the US Monetary Base since 2016,” says Elliot Wave analyst Hubert Moolman, “there are some serious threats facing the monetary system. These are setting up really favourable conditions for Silver prices and the position it has in the international monetary system. The expectation for much higher Silver prices are certainly reflected in the charts. I have previously presented this chart (now updated) to show how the current bottoming process (2015 to 2018) is similar to that of 2001 to 2003 . . .” He goes on to say that “this time we will likely see far greater price increases in a shorter period, especially given the serious threats facing the monetary system.” Though Moolman’s thesis is intriguing to say the least, we feel the necessity to caution once again that past performance is no guarantee of future results. His chart is reproduced with permission.