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10.18.19 - Darkening Outlook for U.S.-China Trade Deal

Gold last traded at $1,494 an ounce. Silver at $17.57 an ounce.

NEWS SUMMARY: Precious metal prices traded steady Friday on a weaker dollar. U.S. stocks fell amid weak overseas data while Netflix led Big Tech shares lower.

A darkening outlook for phase 1 of the U.S.-China trade deal -Axios
"The outlook for a meaningful U.S.-China trade deal continues to deteriorate, as the House passed a bill supporting protesters in Hong Kong and China reportedly backtracked on part of the deal it agreed to last week. The House bill would require an annual review of whether Hong Kong is truly separate from Beijing to the point that it justifies the special trading status it receives under U.S. law and would implement sanctions against officials 'responsible for undermining fundamental freedoms and autonomy in Hong Kong.' Chinese officials unsurprisingly did not take the news well, accusing the U.S. of a 'political plot' to thwart China'’s development. The Chinese Ministry of Foreign Affairs said that it would take strong measures against the U.S. if the bill passed. Bloomberg reported that Chinese officials are seeking a rollback of $50 billion in tariffs before agreeing to raise purchases of U.S. agriculture to the $40-$50 billion range President Trump said was agreed to in the so-called phase 1 trade deal."

gold Why Global Investors Want Access to China's Gold Market -The Street
"Much of the rise of China's gold market comes from the development and growth of the Shanghai Gold Exchange, founded in 2002 by the People's Bank of China, the nation's central bank. In its almost 20 years of existence, the SGE has become the world's largest physical gold exchange. China's government and policy makers created the SGE to be the only official platform for gold in the country, says Samson Li, senior metals analyst, GFMS Refinitiv. All gold imports, domestically mined gold and recycled gold trade through the exchange. 'In order to push the dominance of the SGE further, the Chinese government has also implemented several other policies, including no VAT (value-added tax) on gold purchases, unless a profit is made....According to Metal Focus, China mines 11.5 percent of the global gold output, making it the world's largest gold producer, with 404.1 metric tons produced in 2018...Investors in the Asian nation bought 308 metric tons of physical gold, representing 28.6 percent of worldwide physical gold buying in 2018. Central bank gold buying also contributes to China's gold appetite....Gold's price in non-U.S. dollar terms are already at historical highs. 'The strength of the dollar has hindered the upside in the dollar gold price, which has not been telling the whole story on the global demand for gold,' Li says....Gold often acts as a safe-haven investment for Chinese nationals, too... 'Gold has become one of the most logical investments for the Chinese community,' he says."

Trump's Inner Circle Pushed Him To Cave To China And Cut Trade Deal -Zero Hedge
"As Larry Kudlow transitioned into the role of parroting the administration's economic message on cable news shows, he told his interviewers about the concept of 'fair trade'. Kudlow explained that while he's a believer in free trade, the Chinese have been taking advantage of the US for decades, and that he supports President Trump's efforts to put a stop to it. With that, Kudlow became the White House's preeminent 'fair trade' warrior. As WSJ reported Friday morning, Kudlow last week organized a meeting in the Oval Office with 'outside experts' on trade who reportedly warned Trump that further escalation of the US-China trade war might threaten the stability of the American economy, and hurt Trump's election chances. It's the first sign yet that even Trump's top economic advisors are pushing him to cave to Beijing and strike a deal on trade that would, in all likelihood, involve raising most, if not all, of the tariffs that Washington has imposed on Chinese goods....Since agreeing with Vice Premier Liu He last Friday on a 'handshake' deal for 'Phase One' of a US-China trade pact, reports this week have suggested that the two sides aren't so solid....Trump is 'under immense pressure from Wall Street and those members of the Senate that are aligned with the big donors to get rid of tariffs,' said Stephen Bannon, former White House chief strategist and an ally of Mr. Navarro on China. 'If they have to roll out 'free market' economists that have served as Wall Street's biggest cheerleaders to go down to the Oval and try to convince him to do it, they will.'"

Religion Is on the Decline as More Adults Check 'None' -Wall Street Journal
"Religiosity in the U.S. is in sharp decline, according to a study released by the Pew Research Center on Thursday, with the ranks of people who don’t adhere to any faith growing fast while church attendance has fallen steeply. Christians make up 65% of the U.S. adult population, according the 2018-2019 study, down from 77% in 2009. At the same time, those who don't identify with any religion - often known as 'nones' - now make up more than a quarter of the population, compared with 17% a decade ago....The data reflect a seismic social reordering that has seen the population shift away from Christianity and toward religious disaffiliation. Some 'nones' are atheists or agnostics, while others consider themselves to be spiritual but don't adhere to a particular religious tradition. Every age group, racial group and region of the country is less Christian than a decade ago, according to the study. Less than half of millennials, the youngest demographic group in the study, identify as Christian; 40% of them are unaffiliated....Those who identify as 'nothing in particular' rose to 17% from 12%. Non-Christian religions largely held steady. Jews remain at 2% of the population and Muslims are at 1%."

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10.17.19 - Jamie Dimon warns: 'Recession Ahead'

Gold last traded at $1,498 an ounce. Silver at $17.61 an ounce.

NEWS SUMMARY: Precious metal prices rose Thursday as weak economic data sent the dollar lower. U.S. stocks were little changed despite strong earnings results from Netflix and Morgan Stanley as investors also digested news of a pending Brexit deal.

China's central bank continues to load up on gold -Financial Times
"China has added almost 100 tons of gold to its reserves over the last ten months, underlining its position as one of the leading central bank buyers of the precious metal. The People's Bank of China announced over the weekend that its holdings of the yellow metal rose to 62.64m ounces in September, an increase of 190,000 ounces from August. The increase of nearly 5.4 tons of gold to China's holdings - bringing the total additions since December to about 96 tons - comes at a time when central banks across the world have been trying to diversify their reserve assets away from the US dollar as trade tensions continue to simmer. Gold is considered a haven asset and a store of value in times of uncertainty. Central banks, led by Russia, bought more gold last year than at any time since America decided to move off the gold standard in 1971, with around $27bn worth of purchases. So far this year a total of 14 central banks, primarily from emerging markets, have bolstered their gold reserves, according to data from the World Gold Council....China's central bank has continued to stock up on bullion as the trade war with the US shows little sign of easing and its domestic economy is slowing."

QE4 QE4 Officially Begins: Fed's First T-Bill Purchase Is 4x Oversubscribed Amid Massive Liquidity Demand -Zero Hedge
"QE4 has officially arrived...Specifically, the Fed purchased $7.501 billion in Treasury Bills out of $32.569 billion in T-Bills submitted. In other words, the operation was 4.3x oversubscribed, and when combined with the oversubscribed repo operation announced, confirms that there is a dramatic need for liquidity among the Primary Dealer community....Clearly someone was more than happy to sell them today in a furious scramble to convert Bills to cold, hard cash. Separately, the Fed did not purchase securities with less than 4 weeks to maturity or cash management bills, and sure enough, the 'nearest' maturity purchased today was Bills maturing on Nov 26, for some $20 million. And with that, QE 4, pardon, 'Not A QE' has begun, and will continue 'at least into the second quarter' of 2020, by which point the Fed will have purchased over $300 billion in Bills, and will at some point find itself compelled to shift to buying short-maturity coupons as well as the 'Not A QE' gradually morphs into a full-blown QE."

Craig Smith comment: Well it's official. Another prediction we made years ago coming to pass. In our 2012 book, The Inflation Deception, we mentioned that Q.E.'s would be the Fed's chosen tool going forward. Co-author Lowell Ponte and I warned the Fed would continue money printing all the way up to "Q.E.50" if needed. For this reason, people now agree that owning physical gold is an absolute necessity in a world awash with fiat currency.

JPMorgan Chase CEO Jamie Dimon warns 'there's a recession ahead' -New York Post
"JPMorgan Chase Chief Executive Jamie Dimon warned Tuesday a recession may be on the horizon thanks to the continuing trade tensions with China. 'Of course there's a recession ahead,' Dimon said during a morning call with reporters after the bank announced its third-quarter earnings. 'What we don't know is if it's going to happen soon.' 'It does look like geopolitics, particularly around China and trade, are reducing business confidence and business capital expenditure,' Dimon said....Businesses have been slowing hiring in recent months as the trade war has dragged on into its 18th month - with economists worried that consumers could be next to feel the pinch. 'What the market doesn't want, and what businesses don't want, is an acceleration of the trade war,' Quincy Krosby, chief market strategist at Prudential Financial, told The Post."

Brexit's Opportunity Cost -Wiseman/City Journal
"Preoccupation with leaving the E.U. overshadows a bigger threat - that of a socialist Britain...Given that a general election is around the corner, the spotlight on the two parties and their leaders should be brighter than usual - their plans taken especially seriously, their fitness for office rigorously scrutinized. And yet, that light is largely blotted out by Brexit, which absorbs all attention...But what if, contrary to all assumptions, Brexit isn't in fact the most important issue in British politics? What if the country's preoccupation with getting that one thing right means it risks getting other things wrong? Jeremy Corbyn is widely viewed as having played his Brexit hand badly...The result: a climate in which Corbyn and his team - until 2015, the Labour Party's far-left fringe - are taken seriously by voters who normally would have balked at their plans. Team Corbyn has unveiled the most left-wing economic agenda ever proposed by a major party in Britain, even as the average Labour voter's economic views have shifted to the right, thanks to the Brexit shakeup. The Labour agenda is far more than a reversal of spending cuts implemented by the Conservative-led coalition in the wake of the financial crisis. It amounts to a transformation in the role of the state in British economic life. A Corbyn government would be nothing short of revolutionary, with John McDonnell - his Marxist Shadow Chancellor of the Exchequer - making no bones about his desire to 'overthrow capitalism.'"

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10.16.19 - A New Kind of Recession Threat

Gold last traded at $1,494 an ounce. Silver at $17.42 an ounce.

NEWS SUMMARY: Precious metal prices rose Wednesday on bargain-hunting and downbeat retail data. U.S. stocks traded mostly flat as weak retail sales data, coupled with persisting trade-war fears, offset strong earnings results.

Gold prices lifted on downbeat U.S. data -Kitco
"Gold prices are modestly higher in early U.S. trading Wednesday, after trading steady to weaker overnight. The yellow metal perked up a bit immediately following the release of a weaker-than-expected U.S. economic report. December gold futures were last up $3.10 an ounce at 1,486.60. December Comex silver prices were last down $0.089 at $17.295 an ounce. The just-released September U.S. retail sales report showed a decline of 0.3%. Forecasts were calling for a gain of 0.2% from August. This report falls into the camp of the monetary policy doves who want to see further U.S. lowering of U.S. interest rates....The International Monetary Fund on Tuesday released a report that forecast global economic growth at 3% in 2019, down from a 3.2% growth rate forecast by the IMF in July. The IMF blamed global trade disputes for the slowing economic growth worldwide....Bulls' next upside price objective is to produce a close in December futures above solid resistance at $1,525.00."

china trade Despite Trade Truce, U.S.-China Cold War Edges Closer -Wall Street Journal
"When President Trump first hit China with tariffs more than a year ago, he was pursuing narrowly defined, transactional goals: a smaller bilateral trade deficit and better treatment of U.S. companies inside China. But the trade war has since blossomed into a broader, deeper ideological conflict. Events in the last week show that the two economic superpowers, though reaching a truce in their trade war, are drifting closer to a new Cold War. From China's 2001 entry into the World Trade Organization until 2017, the U.S. and China moved toward greater integration and engagement...Events in the last year have changed that...China's treatment of its Muslim minority in Xinjiang and wayward western businesses like the National Basketball Association, and the Hong Kong protests gave human-rights hawks a voice....The so-called trade mini-deal is most notable for what it didn't do: roll back any tariffs. It simply delayed increases in tariffs announced only two months ago. China agreed to resume purchases of U.S. farm exports but has been vague on the scale and timing....'I think the Chinese really don't believe a full-fledged agreement is possible,' said Scott Kennedy, a China expert at the Center for Strategic and International Studies. 'Not only do [China and the U.S.] have limited trust in each other, neither side seems to be in a position where they desperately need a deal.'....So don't let the mini-deal fool you: Beneath the surface, the split between the U.S. and China is widening."

US retail sales unexpectedly decline in a sign that consumer economy could be cracking -CNBC
"U.S. retail sales fell for the first time in seven months in September, raising fears that a slowdown in the American manufacturing sector could be starting to bleed into the consumer side of the economy. The Commerce Department said on Wednesday retail sales dropped 0.3% last month as households slashed spending on building materials, online purchases and especially automobiles. The decline was the first since February....'While this is by no means conclusive evidence that the consumer is wavering, it nonetheless reinforces our ongoing concern that a spending retrenchment will ultimately trigger a more durable slowdown,' wrote Ian Lyngen, head of rates research at BMO Capital Markets. Auto sales fell 0.9% in September, the most in eight months, while receipts at service stations fell 0.7% in what likely reflects cheaper gasoline....'We think real consumption rose by 2.5% annualized in the third quarter, down from 4.2% rise in the second, with overall GDP growth slowing to just 1.5% annualized, from 2.0%,' said Michael Pearce, senior U.S. economist at Capital Economics."

New Kind of Recession Threat Presents Problem for Powell and Fed -Bloomberg
"This won't be your father's recession...Traditionally, U.S. downturns are home-grown and household-led, triggered by spikes in interest rates and fueled by the unwinding of financial and economic excesses. None of that is arguably at work this time, at least for now. Instead, what's making investors nervous about a recession is a global, geopolitical shock to business sentiment that's prompting U.S. companies to curb spending amid uncertainties from the U.S.-China trade war to Britain's potential pullout from the European Union...The slowdown is being driven by increasing trade tensions and policy uncertainty. That poses problems for Fed Chairman Jerome Powell and his fellow policy makers as they decide whether to cut interest rates later this month for the third time this year....'The scenarios are quite extreme,' JPMorgan Chase & Co. chief economist Bruce Kasman said. 'Either we bend and then break or we bend and then bounce.'....Moody’s Analytics Inc. chief economist Mark Zandi said a recession is all but inevitable if President Donald Trump follows through on his threat to impose tariffs on virtually all U.S. imports from China by the end of this year....'We are having a hard time judging how large this geopolitical shock is,' said JPMorgan's Kasman, who reckons that the odds of a recession over the next 12 months are 35% to 40%."

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10.15.19 - Retail Investors to Extend Gold's Rally

Gold last traded at $1,483 an ounce. Silver at $17.38 an ounce.

NEWS SUMMARY: Precious metal prices consolidated Tuesday amid tempered risk aversion. U.S. stocks rose as the corporate earnings season got off to a strong start.

Gold Set to Extend Rally as Retail Investors Climb on Board -Bloomberg
"The next push in gold prices will come from retail investors as risks remain skewed to the upside, according to Standard Chartered Bank. Having already rallied to the highest in more than six years, bullion will still benefit from safe haven flows, according to Suki Cooper, precious metals analyst at the bank....Bullion is up 16% this year as central banks lower borrowing costs and global growth drags amid the prolonged U.S.-China trade war, boosting demand for haven assets. While some risk appetite returned to markets with the two countries agreeing a partial trade accord last week, investors continue to add to exchange-traded funds backed by the metal, with holdings closing in on record levels previously seen in 2012. 'Although we've seen ETF holdings and tactical investment hitting elevated levels, like peak highs, we think retail demand is really going to be what drives the next leg higher,' Cooper said in an interview. 'Retail investors almost want confirmation of further rate cuts, some weakness in the equity markets before they move into gold. The next leg higher in 2020 is going to be led by the retail side.'"

Fed money Fed's back printing money - so what gives? -Crudele/New York Post
"Although there's been no official announcement, the Federal Reserve has restarted QE - better known as Quack Economics. You might know it better as Quantitative Easing, in which the central bank buys large amounts of government bonds or other assets to help stimulate the economy. There have been three of these QEs since the financial crisis more than 10 years ago. But the big question now: Is there a new crisis that has the Fed dusting off QE? The Fed isn't saying...Here's how it works: The Fed electronically prints trillions of dollars in extra money, which it uses to purchase bonds and other securities. This was supposed to keep interest rates low. And the low interest rates were supposed to help the economy grow....QE didn't do much to help the economy, which has been stuck at around 2 percent annual growth for years...Last week the Fed announced that it would start purchasing $60 billion a month in securities from the open market. This is the same as QE only the Fed didn't call it that. So, if the Fed instituted Quantitative Easing in the first place in 2008 because there was a financial crisis, what's the problem now?....The political crisis in Washington would be my best guess. Although others in the media won't admit it, there is currently a constitutional crisis in this country...Or, maybe the economy is really doing as well as we are led to believe by government statistics. Maybe the Fed knows something we don't."

Global Authorities Aren't Waiting for a Crisis to Move Toward More Debt -Bonner/Bonner And Partners
"Warren Buffett says you can never go right by betting against U.S. business. But guess what? So far this century, that bet has been a winner. Charlie Bilello, a former hedge fund analyst, tweets: Total Returns, last 20 years... International Stocks: +110%...US Stocks (S&P 500): +221%...Long-Term US Bonds: +329%...Gold: +365%. In what kind of economy does gold - which produces nothing, invents nothing, sells nothing, issues no reports, makes no sales or profits, pays no dividends, and has no CEO, no staff, no office, no parking lot, no coffee machine, no PR firm, and nobody to lie about the numbers - outperform the MBAs, capitalists, and people of 'great and unmatched wisdom' who run its major corporations? It is a strange world, you will say....All over the world, the authorities are moving toward more inflation and more debt, without even waiting for a deflationary crisis to set it off. Yes, the bar is open…!...In the U.S., the feds are already borrowing like crazy, with spending rising at twice the Obama rate… and debt piling up at $1 trillion per year."

Nobel Prize in Economics Awarded for Work on Poverty -Wall Street Journal
"Three economists whose work on poverty alleviation has taken them out of universities and into remote villages, fields and schools around the world were awarded the Nobel Prize in economics Monday. Abhijit Banerjee, Esther Duflo, and Michael Kremer were recognized for their experimental work testing ways to improve education or health in the developing world or to address some of the other problems affecting the very poor....Prof. Kremer teaches at Harvard University. Profs. Banerjee and Duflo, who are married to each other, teach at the Massachusetts Institute of Technology. The Nobel committee said their work has led to improvements in the lives of many poor people, noting that as a direct result of one study, five million Indian children have benefited from remedial teaching in their schools, while a number of countries have increased their spending on preventive health care....Speaking with reporters following the announcement, Prof. Duflo said the experimental techniques she helped pioneer in developing countries could be applied to 'people in rich countries who also have difficult lives.' 'We have to do much deeper work to understand the lives of the less fortunate in our societies in the face of all the disruption they face,' she said....Prof. Duflo became only the second woman to have won the prize in economics since it was first awarded in 1969 and, at 46, is its youngest recipient."

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