Gold News Today

Coronavirus Panic Boosts Gold Miners ETFs  ETF Trends

Looks like a temporary top in gold  Kitco NEWS

Up and down: gold caught in crosscurrents  Kitco NEWS

‘Gold up, the rest down’: it’s a ‘stair-step rally’ for gold prices — Bloomberg Intelligence  Kitco NEWS

Precious metals: Silver to underperform gold – TDS  FXStreet

Gold Price News and Forecast: XAU/USD stays below $1,680 as trade sentiment recovers  FXStreet

Extreme volatility in the equity markets has investors wondering what to expect. Even the hardiest of stock market bulls are finally asking some serious questions about whether the top is in.

Stocks have long been priced for perfection and suddenly conditions are looking far from perfect. The coronavirus may be the pin which pricks the latest Fed-blown bubble.

Precious metals investors have been preparing against a rainy day. They may be less surprised by the turmoil in markets over the past couple of weeks. But there are still big questions about how metals prices might behave, especially if the current turmoil in markets should evolve into a full-blown financial crisis.

Here are two metals-market scenarios worth considering:

Scenario #1 – The 2008 Financial Crisis Revisited

During the immediate aftermath of the event, everything gets sold – a repeat of what happened in 2008. Investors buy bullion, even as traders dump leveraged futures in a rush to the sidelines on Wall Street.

Greg Weldon of Weldon Financial said metals investors could easily see a replay of 2008 in a recent Money Metals Weekly Market Wrap podcast. He noted the record number of active contracts, or open interest, in gold. The weak handed speculators who have chased the gold price higher will be quick to dump positions as prices move against them.

It won’t matter if more conservative investors are pouring into the physical markets for gold and silver. The futures markets are almost entirely untethered from physical supply and demand. Price discovery there is driven more by leverage, volatility, algorithmic trading, and bullion bank fraud.

Thus far the Treasury market action is reminiscent of 2008. Investors are buying bonds hand over fist and yields have fallen to new all-time lows.

As long as confidence remains in the U.S. dollar and U.S. Treasury debt, investors will look for safe haven in those markets. They are currently the widest and deepest markets on Earth and there aren’t too many other places for big money to go.

As the dust settles, look for money to pour back into gold and silver. Just as in 2008, speculators will be trying to position for what comes next.

Precious metals will pop up on the radar as a beneficiary of safe haven demand. These traders will also anticipate the Federal Reserve quadrupling down on stimulus measures and look for assets which can benefit from the weaker dollar and lower interest rates.

However, should confidence in U.S. Treasury debt and the dollar finally collapse, markets will look nothing like 2008.

Scenario #2 – The Mother of All Bubbles Pops

Government debt is far beyond what citizens can hope to repay. A reckoning is coming and the only question is when market participants at large will acknowledge that fact. When confidence evaporates, the party for central bankers and their political allies in government will be over.

Money is currently flooding into the bond markets, so at least some confidence remains. However, there are some key differences today versus 2008. The U.S. Treasury better hope investors continue to buy first and ask questions later, because bonds are an obvious bubble.

U.S. Treasury bond prices are at an all-time high. Meanwhile federal debt has nearly tripled since 2008.

Deficits are currently expected to be more than $1 trillion annually.

If recession strikes and officials respond with stimulus those deficits could easily balloon to $2 or $3 trillion.

The supply of Treasuries is already vast and a tidal wave of new issuance seems to be building. The Fed has been acting as the buyer of last resort. Will investors just continue to shrug as the central bank monetizes ever larger portions of the national debt? Maybe, but maybe not.

Steven Grey recently covered just how precarious the bond market is in a Wall Street Journal op-ed. Should interest rates start to rise, there will be enormous pressure to sell Treasuries. A market at all-time highs makes a dubious safe haven.

Interestingly, the U.S. dollar is not acting like it did in 2008. The DXY index has been under pressure since the market turmoil began a couple weeks ago. Currency traders lack confidence in the dollar. That may be contagious when it comes to the bond markets which most certainly aren’t well positioned for any serious inflation.

Don’t Gamble, Just Prepare

Betting on the first scenario only to find out we got the second would be disastrous. Anyone fleeing into cash or government bonds, just as the debt bubble finally bursts could be wiped out entirely.

The second scenario is coming, whether it be now or later. The sheer amount of debt accumulated cannot be paid, so it won’t be – at least not in current dollars. There is little point in trying to predict exactly when this reality will dawn upon the rest of the country.

It is safer to assume it could happen at any time. If we get a replay of 2008, metals will ultimately do well anyway.

Source: Bob Moriarty for Streetwise Reports   03/08/2020

Bob Moriarty of 321gold explains why he believes gold needs a correction.

In military aviation pilots are taught about an important concept called being on the Back Side of the Power Curve. For every aircraft and altitude there is a speed and power curve. Until the aircraft gets too slow things work just fine. A lot like the Fed. But when the aircraft flies too slow and drag gets too high, the addition of more power makes the situation worse. The aircraft stalls no matter how much power the pilot applies. A lot like the Fed.

On Tuesday the 3^rd of March the Fed surprised the market with a 50 basis point drop in interest rates. The move was intended to reassure the market that the Fed had things under control. The market in turn surprised the Fed by doing the opposite of what those investing using the rear view mirror believed.

The market tanked. Of course it tanked, the economy was on verge of stalling due to the highest debt level in history and just as it hit the stall point, the Fed jammed on the afterburner. Bad idea. But what a wonderful example of why pilots and the Fed should never add power when they are on the backside of the power curve.

Markets don’t trade on fundamentals or because of technicals. At every market top there are a hundred reasons to buy. That’s what makes a top. And at every market bottom there are a hundred reasons to sell, that’s how you know it’s a bottom.

Markets trade on emotion and if you can just measure that emotion with accuracy, you can make a lot of money or in the worst case, avoid losing a lot of money. I wrote about the propensity of the stock market to top based on nothing more complex than the Fear and Greed index on January 1^st.

On Friday March 6^th the Fear and Greed index became the opposite and then some of the late December reading as it hit a reading of 6. That’s really fearful.

Monday March 9^th is going to be an interesting day. The DSI (Daily Sentiment Index) for Treasury Bonds had a near all time high reading of 98 on Friday March 6^th. It’s only been higher one time, which was back in December of 2008.

The DSI may bounce around at record highs for two weeks as it did in December of 2008 during the GFC but there is another interesting issue that makes me think we will have a turn almost at once. The 9^th of March marks a full moon and according to Tom McClellan his research showed that at full moons, markets tended to either accelerate in the direction they were moving or do an immediate U-turn.

Gold has wanted to correct for a couple of months. Gold shares peaked relative to gold at the start of the year at exactly the same time as I was saying to beware the stock market. I started to lighten my percentage of shares to cash during what was a great time to be selling shares. I have kept my core positions but selling when you have a profit beats the hell out of selling at a loss.

Gold needs a correction. Two weeks ago the DSI on gold hit 96 and that says things are getting frothy. I always get a lot of hate mail when I point out that gold and resource stocks sometimes go down but that just tells me I have nailed it.

We have entered the Greatest Depression. The latest chaos in the stock market is just the beginning. It’s going a lot lower. And likewise, bond prices could go higher with gold. But when everyone is on one side of the boat, that’s not a percentage bet.

Meanwhile the coronavirus spirals out of control. In the U.S. the number of cases went up almost 400% in a week, from 68 on the 29^th of February to 378 on the 7^th of March. That’s nothing. In France cases exploded higher from 100 cases on the last of February to 653 a week later for a 550% higher reported number cases in a week. Germany showed a 750% increase in coronavirus cases in the same week.

The travel industry is being destroyed. The world faces a critical shortage of medicine starting at once. Airlines may as well fold now and get it over with. The coronavirus will not cause the Greatest Depression. That was on the cards already due to the incredible amount of debt in the world that will never be paid. The virus is little more than a catalyst but it is a black swan of black swans and makes for a handy excuse.

Meanwhile the latest act out of Washington is Donald Trump playing Archie Bunker in a comedy with tragic overtones with Mike Pence cast as Barney Fife. Pence believes you can pray away an outbreak of a deadly virus while Trump believes women only have two important attributes and you can conduct world affairs on Twitter.

Anyone appointing a born again Christian who believes in neither science nor evolution as the leader of the U.S. fight against a deadly virus is an idiot. But it’s a case of the blind leading the blind.

Readers, don’t be tempted to consider writing a novel or a screenplay to be made into a movie using our own Archie Bunker and Barney Fife as characters. If your plot was identical to the facts it would be rejected as being too far fetched to be believed.

The stock market hasn’t finished its crash. The Everything Bubble just blew sky high and the ensuing deflation is going to take everything down.

Bob Moriarty founded 321gold.com, with his late wife, Barbara Moriarty, more than 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.

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