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Gold Goes TINA

Gold Goes TINA



Gold Goes TINA Tyler Durden Fri, 07/31/2020 - 11:55

Authored by Adam Taggart via,

Peak Prosperity publishes ALERTs very rarely, and only when my co-founder Chris Martenson and I are concerned enough to take personal action.

On May 8, I released an ALERT informing our premium subscribers that, concerned by the ramifications of the global central banks’ response to the coronavirus,  I was moving a material percentage of my portfolio’s cash reserves into precious metals, notably into silver as the gold/silver ratio then of 110:1 remained near a record high.

Since the issuance of that ALERT, gold has broken above it’s previous all-time high price, moving up 14%, from $1,717/oz to $1,950/oz.

And silver has performed strikingly better: rising over 55% from $15.75/oz to $24.50/oz. As anticipated, the gold/silver ratio has fallen nearly 30% to 80:1.

However, much more important than this near-term pop in the precious metals is their outlook going forward.

We’ve been writing for years here at about gold and silver’s extreme undervaluation given the risks we’re facing in our monetary and financial systems. And yet, for years, the metals languished as capital flowed eagerly into “paper wealth”, fueled by central bank liquidity, record low interest rates, and a rampant increase in debt and deficits.

Back in 2017, Grant Williams famously and correctly nailed the neglected state of the precious metals in his prescient work, Nobody Cares.

A year ago, as gold managed to break above it’s longtime ceiling of $1,350/oz, we began loudly alerting our readers that the years of neglect were finally over. That, indeed, investors were beginning to “care” again.

Fast forward to where we are today, a pandemic and +$5 trillion in global central bank liquidity later, and now it’s seeming that suddenly Everybody Cares about the precious metals.

Gold’s - and silver’s - time has arrived. Precious metals are finally back in a secular bull market.

Key questions to address at this moment are:

  • How much further are prices likely to move from here?

  • What are the odds of a price correction in the near term, given how far and how fast prices have moved recently?

  • How well-positioned are you to take advantage of this bull market in the metals?

Fundamentals: Higher Prices To Come

Money Printing/Inflation Concerns

More currency = inflation. Milton Friedman famously and correctly stated: “Inflation is always and everywhere a monetary act”.

Well, since March 1, the US Congress has already approved nearly $3 trillion in legislation (with another $1-3 trillion on the way, depending on which political party’s plan gets passed). And the Federal Reserve has already expanded its balance sheet by over $2.5 trillion, with forecasts of another $2+ trillion being added later this year:

And that’s just the US. The rest of the world is following suit:

Billionaire seasoned investors like Paul SingerRay Dalio, and Paul Tudor Jones are now raising loud concerns about the diminishment in purchasing power all of these new freshly-printed trillions will have on national fiat currencies. When big dogs like these, who have feasted on and benefitted magnificently by the status quo over the past decade, fret about about the central banks “printing too much”, you know it’s time to worry.

TINA (There Is No Alternative)

In today’s environment of zero-to-negative interest rates, big financial institutions and pension funds aren’t able to get a meaningful return on the bonds the hold in their portfolios:

The absence of yield is forcing portfolio managers to diversify into gold. While gold also has no yield, it offers a hedge against today’s extreme valuations in equity and bond prices, as well as powerful purchasing power protection:

Gold’s Record Rally Fuelled by Unlikely Buyers (Bloomberg)

July 29, 2020

“Safe government bonds have always played a very important role as a portfolio diversifier and will continue to be, but we have to recognize that their potency is diminishing due to the low absolute level of yields,” said Geraldine Sundstrom, who focuses on asset allocation strategies for Pacific Investment Management Co. in London.

“We need to diversify our diversifier and look for safe haven beyond government bonds. Given Pimco’s view that rates will be kept very low for years to come causing depressed levels of real yield, gold feels like an appropriate diversifier,” she said.

Pimco, which manages $1.9 trillion in assets, is far from alone. In a May note, Citigroup Inc. cited “new non-traditional investors in bullion, including insurance companies and pension funds” as part of the fuel behind the rally.

As we’ve been educating readers about for year, it’s very important to note that gold  — and especially silver — is extremely underowned as an asset class even though the investable markets for the metals are much smaller than many realize. It will only take a small percentage of the world’s capital to shift from stocks and bonds into the metals to send their prices soaring much higher:

“There has definitely been more widespread institutional ownership of gold than in previous rallies,” says John Reade, chief market strategist at the World Gold Council. “Gold’s in the conversation now with much more investors than it was 10 or 20 years ago.”

Even so, gold ownership among the professional class is viewed to be low. The total value of investor positions in gold futures and exchange-traded funds is equivalent to just 0.6% of the $40 trillion in global funds, according to UBS Group AG strategist Joni Teves. That position could easily double without the allocation looking extreme, she wrote in a note.

Reade, who previously worked at hedge fund Paulson & Co., reckons no more than one in five institutional investors has an allocation to gold.

The world’s privately-held gold bullion amounts to $2.5 trillion, with much of it tightly held by investors not looking to sell anytime soon. If just a few of the large institutional funds not currently invested in gold decide to start accumulating, gold will quickly become known as “unaffordium” (hat tip to’s Mike Maloney).

Silver is much crazier. Since most of the silver ever mined has either been commercially consumed or used for jewelry/religious purposes, private above ground stores are tiny: about $48 billion (that’s with a “b”, not a “tr”). Even if we add to that all of the $17 billion or so in annual silver expected to be mined this year, that’s only $65 billion.

It would take only a few billionaires taking a stake, or the tiniest amount of demand shifting from the $20 trillion US Treasury market into silver, to convert the metal into “unobtanium” (again, hat tip to Mike).

Technical Analysis: A Short-Term Pullback Likely

With such a large advance happening so fast, a short-term pullback in the prices of gold and silver are probable; even welcome.

A 10-15% correction would keep the price action from becoming overheated and turning into a blow-off top, which typically gives up most of its prior gains. Also, such a modest correction would give investors opportunity to enter the market/add to their positions at lower prices.

Cup & Handle Formation?

Most technical analysts see gold as in the process of forming a massive multi-year cup and handle pattern. Once the “cup” is formed, a minor cooling off period follows (the “handle”). After the handle is complete, a climb to new highs usually occurs.

Here’s a classic example of a cup and handle pattern:

And here’s gold, along with a projected price zone should a handle indeed follow next:

Should a handle develop and then complete, gold’s price could easily be in the mid-$2,000s (or higher) in short order.

Weakening Dollar About To Strengthen?

Another reason to be prepared for a near-term price correction has to do with gold’s trading correlation with the dollar. Most of the time (but not all of the time!), gold trades inversely to the dollar.

Gold’s big run-up from $1,500 to $2,000 over the past few months has occurred alongside a sharp drop in the USD. Should that reverse, it would not be surprising to see gold fall as the dollar rises.

And we can see in the chart below that the dollar is now hitting the bottom of its multi-year trading range, which could likely serve as support for it to bounce off:


So caution is calling us to expect a short-term price correction in gold and silver before we expect to see new record highs later on.

What Investors Like You Should Consider Doing Now

Jeff Clark, senior precious metals analyst at, estimates that we are only entering the second inning of this new secular bull market. “The really big gains still lie ahead”, he predicts. (you can hear a lot more from Jeff in this video, recorded today)

So, what should regular investors like you be considering at this moment?

Here are our recommendations, though it’s important that we make it absolutely clear this not personal financial advice. As always, we recommend working with a professional financial adviser to build an investment plan customized to your own needs and objectives. (If you do not have a financial advisor or do not feel comfortable with your current advisor’s expertise with gold or the market risks we discuss here at, consider scheduling a free consultation with our endorsed advisor)

All right, with that important caveat out of the way, here are the steps we think worth seriously considering:

If You Don’t Own Any Gold or Silver (Step Zero)

If you don’t own any, then buy some now, whatever today’s prices are.

Precious metals first and foremost are insurance against financial/monetary crisis. Just as you wouldn’t drive your car without auto insurance, you don’t want to neglect adding this crisis insurance to your investment portfolio.

So get your initial precious metals position in place now. And start sleeping better knowing you’ve got that protection in place.

For guidance on where to purchase bullion (we particularly like the Hard Assets Alliance and its metal storage solutions), what form to own it in, and where to keep it, read our free Primer On How To Buy And Store Gold & Silver.

If You Already Own Precious Metals (Steps 1-3)

If you already hold gold and silver in your portfolio, pat yourself on the back. You’ve likely enjoyed watching the recent price run-up.

Here are the steps we recommend you consider now:

  1. Explore options for protection against a short-term price correction in the metals. Stops, puts, covered calls — these are all ways to hedge against lower prices. Don’t try using these yourself if you’re not already well-experienced with them! Work under the supervision of a financial advisor with deep expertise using these, who can craft a hedging strategy appropriate for your portfolio and your goals. If you don’t already have such an advisor, click here to schedule a completely free, no-obligation consultation with Peak Prosperity’s endorsed financial advisor.

  2. Create a regular program to increase your position over time. The best way to accumulate precious metals is to do so over time, letting the power of dollar cost averaging work for you. The Hard Asset Alliance’s MetalStream program is our favorite solution for this, as it automatically purchases gold and silver for you at the ratio you want on the frequency you want. But, if preferred, you can certainly create your own DIY program if you have the discipline and don’t mind the hassle.

  3. Determine if and how you want exposure to precious metals mining companies. When gold and silver prices rise, the shares of the companies that mine these metals tend to rise a lot farther. Owning shares of precious metals mining companies can be very lucrative; but you can easily lose a lot of money, too. If you’re interested in exploring gaining exposure to mining shares, first read Jeff Clark’s free guide on the topic and then talk to your financial advisor (or schedule a free consultation with the one we endorse) about how best to put this into action in your portfolio.

2020 has proven to be a year unlike any other. It has shaken our confidence in our economic, financial, political and social systems — proving them to be a lot less stable than we’d previously assumed.

Gold’s re-pricing is reflecting that realization. The big question is: How much more uncertainty remains ahead?

The financial markets remain ridiculously overvalued. The Federal Reserve and the world’s other central banks are hell-bent on continuing to print more $trillions. In the US alone, tens of millions of households have lost their income, while daily deaths from the coronavirus continue to hit records on a daily basis. The upcoming US presidential election is certain to be hotly-contested, should it even happen.

The reality is that the future is packed full of uncertainty. And more uncertainty will drive the price of gold, and silver, higher. Likely much higher — as Jeff Clark reminds us we’re still in the early innings here.

Use the time now to get smartly positioned.

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Spread & Containment

$265 Billion In Added Value To Evaporate From Germany Economy Amid Energy Crisis, Study Warns

$265 Billion In Added Value To Evaporate From Germany Economy Amid Energy Crisis, Study Warns

A new report published by the Employment Research…



$265 Billion In Added Value To Evaporate From Germany Economy Amid Energy Crisis, Study Warns

A new report published by the Employment Research (IAB) on Tuesday outlines how Germany's economy will lose a whopping 260 billion euros ($265 billion) in added value by the end of the decade due to high energy prices sparked by Russia's invasion of Ukraine which will have severe ramifications on the labor market, according to Reuters

IAB said Germany's price-adjusted GDP could be 1.7% lower in 2023, with approximately 240,000 job losses, adding labor market turmoil could last through 2026. It expects the labor market will begin rehealing by 2030 with 60,000 job additions.

The report pointed out the hospitality industry will be one of the biggest losers in the coming downturn that the coronavirus pandemic has already hit. Consumers who have seen their purchasing power collapse due to negative real wage growth as the highest inflation in decades runs rampant through the economy will reduce spending. 

IAB said energy-intensive industries, such as chemical and metal industries, will be significantly affected by soaring power prices. 

In one scenario, IAB said if energy prices, already up 160%, were to double again, Germany's economic output would crater by nearly 4% than it would have without energy supply disruptions from Russia. Under this assumption, 660,000 fewer people would be employed after three years and still 60,000 fewer in 2030. 

This week alone, German power prices hit record highs as a heat wave increased demand, putting pressure on energy supplies ahead of winter. 

Rising power costs are putting German households in economic misery as economic sentiment across the euro-area economy tumbled to a new record low. What happens in Germany tends to spread to the rest of the EU. 

There are concerns that a sharp weakening of growth in Germany could trigger stagflation as German inflation unexpectedly re-accelerated in July, with EU-Harmonized CPI rising 8.5% YoY. 

Germany is facing an unprecedented energy crisis as Russian natural gas cuts via the Nord Stream 1 pipeline will reverse the prosperity many have been accustomed to as the largest economy in Europe. 

"We are facing the biggest crisis the country has ever had. We have to be honest and say: First of all, we will lose the prosperity that we have had for years," Rainer Dulger, head of the Confederation of German Employers' Associations, warned last month. 

Besides Dulger, Economy Minister Robert Habeck warned of a "catastrophic winter" ahead over Russian NatGas cut fears.

Other officials and experts forecast bankruptcies, inflation, and energy rationing this winter that could unleash a tsunami of shockwaves across the German economy.  

Yasmin Fahimi, the head of the German Federation of Trade Unions, warned last month:

"Because of the NatGas bottlenecks, entire industries are in danger of permanently collapsing: aluminum, glass, the chemical industry." 

IAB's report appears to be on point as the German economy seems to be diving head first into an economic crisis. Much of this could've been prevented, but Europe and the US have been so adamant about slapping Russia with sanctions that have embarrassingly backfired. 

Tyler Durden Wed, 08/10/2022 - 04:15

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“Anything But A Cashless Society”: Physical Money Makes Comeback As UK Households Battle Inflation

"Anything But A Cashless Society": Physical Money Makes Comeback As UK Households Battle Inflation

The World Economic Forum (WEF) has been…



"Anything But A Cashless Society": Physical Money Makes Comeback As UK Households Battle Inflation

The World Economic Forum (WEF) has been pushing hard for a 'cashless society' in a post-pandemic world, though physical money has made a comeback in at least one European country as consumers increasingly use notes and coins to help them balance household budgets amid an inflationary storm

Britain's Post Office released a report Monday that revealed even though the recent accelerated use of cards and digital payments on smartphones, demand for cash surged this summer, according to The Guardian. It said branches handled £801mln in personal cash withdrawals in July, an increase of 8% over June. The yearly change on last month's figures was up 20% versus the July 2021 figure of £665mln.

Across the Post Office's 11,500 branches, £3.31bln in cash was deposited and withdrawn in July -- a record high for any month dating back over three centuries of operations. 

The report pointed out that increasing physical cash demand was primarily due to more people managing their budgets via notes and coins on a "day-by-day basis." It said some withdrawals were from vacationers needing cash for "staycations" in the UK. About 600,000 cash payouts totaling £90mln were from people who received power bill support from the government, the Post Office noted. 

Britain is "anything but a cashless society," according to the Post Office's banking director Martin Kearsley.

"We're seeing more and more people increasingly reliant on cash as the tried and tested way to manage a budget. Whether that's for a staycation in the UK or if it's to help prepare for financial pressures expected in the autumn, cash access in every community is critical," Kearsley said.

We noted in February 2021, UK's largest ATM network saw plummeting demand as consumers reduced cash usage. At the time, we asked this question: "How long will the desire for good old-fashioned bank notes last?

... and the answer is not long per the Post Office's new report as The Guardian explains: "inflation going up and many bills expected to rise further – has led a growing numbers of people to turn once again to cash to help them plan their spending." 

So much for WEF, central banks, and major corporations pushing for cashless societies worldwide, more importantly, trying to usher in a hyper-centralized CBDC dystopia. With physical cash back in style in the UK, the move towards a cashless society could be a much more challenging task for elites than previously thought. 

Tyler Durden Wed, 08/10/2022 - 02:45

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Something Just Doesn’t Add Up In Chinese Trade Data

Something Just Doesn’t Add Up In Chinese Trade Data

By Ye Xie, Bloomberg markets live commentator and reporter

An unusual discrepancy has…



Something Just Doesn’t Add Up In Chinese Trade Data

By Ye Xie, Bloomberg markets live commentator and reporter

An unusual discrepancy has showed up in two sets of trade data in China. Depending on which official sources you use, China’s trade surplus, could either be overstated or under-reported by a staggering $166 billion over the past year.

China watchers cannot fully explain the mystery. It’s as if Chinese residents bought a lot of stuff overseas, and instead of shipping the items home, they were kept abroad for some reason.  

China’s exports have been surprisingly resilient, despite a slowing global economy and Covid disruptions. On Monday, General Administration of Customs data showed China’s exports increased 18% in July from a year earlier. In contrast, imports grew only 2.3%, reflecting weak domestic demand.

The result is China’s trade surplus keeps swelling, which has underpinned the yuan by offsetting capital outflows. The surplus over the past year amounted to a record $864 billion, more than double the level at the end of 2019.

But when comparing the Customs data with that from the State Administration of Foreign Exchange (SAFE), a different picture emerges. The SAFE data shows the surplus is growing at a much slower pace -- about 20% less than the customs figure

The two data sets used to track each other closely. SAFE typically reports fewer imports, thus a higher surplus, because it excludes costs, insurance and freight from the value of goods imported, in line with the international standard practice, Adam Wolfe, an economist at Absolute Strategy Research, noted.

The other adjustments that SAFE does include:

  • It only records transactions that involve a change of ownership;
  • It adjusts for returned items;
  • It adds goods bought and resold abroad that don’t cross China’s border, but result in income for a Chinese entity -- a practice known  as “merchanting.”

The relationship between the two data sets has flipped since 2021, as SAFE reported higher imports, resulting in a smaller surplus than the Customs data.

It’s particularly odd because it happened at a time when shipping costs skyrocketed. When SAFE removes freight and insurance costs, it would have resulted in even lower, not higher, imports.

Taken at face value, the discrepancy suggests that somebody in China “bought” lots of goods from abroad, but they have never arrived in China. These transactions would be recorded by SAFE as imports, but not at the Customs office.

Craig Botham at Pantheon Macroeconomics, suspects that Covid-19 may be playing a role here. Foreign firms unable to manufacture in factories elsewhere during the pandemic might have transferred materials to China for assembly, a transaction excluded by SAFE.

Could Chinese buyers overstate their foreign purchases to SAFE, which regulates the capital account, so they can move money out of the country? The cross-border transactions show there was widespread overpaying for imports in 2014-2015, during a period of intense capital flight, but not at the moment, Wolfe pointed out.

Source: Absolute Strategy Research

The bottom line is that there aren’t many good explanations. As Alex Etra, a senior strategist at Exante Data, said, there’s “no smoking gun” to suggest something fishy is going on.

It’s another mysterious puzzle waiting to be solved.

Tyler Durden Tue, 08/09/2022 - 22:28

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