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2.21.17 - Why and How Gold Hedges Market Risk

Gold last traded at $1,238 an ounce. Silver at $18.07 an ounce.

NEWS SUMMARY: Precious metal prices traded steady on Monday amid ongoing uncertainty despite a firmer dollar. U.S. stocks reach new highs led by energy and consumer staples despite market valuation concerns.

BlackRock Backs Gold to Hedge Market Risk -Bloomberg
"While the stock surge and below-average volatility show investors are more optimistic, markets are underpricing global political risks, said Russ Koesterich, who helps manage the $41 billion BlackRock Global Allocation Fund. He recommends gold as insurance. Looming elections in Europe and political uncertainty in the U.S. are among developments that could shift investor sentiment, Koesterich said. Adding to the threat is the potential impact of Britain’s exit from the European Union and a debt crisis in Greece. Such concerns have helped boost haven demand for gold, which has climbed almost 8 percent this year after posting the worst quarter since 2013. 'That hiding political risk is not reflected in markets,' Koesterich said in a telephone interview Thursday. 'People are not that nervous, and there are things that could go wrong, particularly when you think about all of the political risks. That adds to the argument for having gold in a portfolio.'"

As we cover in our 2017 Gold Report - Early Edition, rising economic and financial market risks are being fueled by dramatic political events which could seriously impact your financial security in 2017. There is perhaps no better moment in time to diversify assets into the enduring value of the world’s oldest form of money than now.

Euphoria returns to markets -The Economist
"Like the weather in Chicago, you don’t have to wait long for a new trend in the stock markets. Just a few weeks ago, investors seemed to have second thoughts about their Trump-related euphoria (which itself was a contrast to the widespread nervousness ahead of the election). Now they have been recording new highs again. While the spark for the rally seems to have been a presidential comment about forthcoming tax cuts, the causes have been much broader; the MSCI World Index has also hit new highs....All this may sit rather oddly with the general air of political turmoil that has set in since June and the Brexit vote....But the election of Marine Le Pen as French president would be a real threat, given her proposal to redenominate French debt into francs, and investors seem to be taking it more seriously as the FT reports today....The risks are high that investors might be disappointed....And valuations remain high, by historical standards...So this latest trend may be as short-lived as the previous ones; President Trump should be careful about claiming credit for the stock market. You never know what will happen next."

market cycle chart Goldman Sachs: Investors are at 'maximum optimism' and have a letdown coming -CNBC
"Goldman Sachs strategists aren't buying into all the optimism surrounding the stock market in 2017. In fact, they believe investors are reaching 'the point of maximum optimism' that will lead later in the year to a pullback....'Financial market reconciliation lies ahead,' said David Kostin, Goldman's chief U.S. equity strategist....Kostin sees a dichotomy between investor hopes and the reality on the ground, and says it's indicative of 'cognitive dissonance' in the market....Investors have pinned their hopes to Trump's plans to cut taxes, reduce regulations and increase domestic government spending. However, Kostin thinks tax reform probably won't get done until the back half of the year. Indeed, there are multiple headwinds that could come along to thwart a rally that seems priced for perfection."

China Economy Forecast for 2017 Signals Potential Collapse -LombardiLetter
"China, which recorded almost 15% gross domestic product (GDP) growth in 2007, is heading toward a GDP level last seen in the 1990s. That was before the country joined the World Trade Organization (WTO). China must make do with 2017 growth estimates of 6.5%. There’s little that China can do to change that. Faced with the protectionism of Donald Trump’s America, China further devaluing its currency, the yuan, might make matters worse. Such a move would not alter the China economy forecast for 2017. It could make matters worse, playing into Trump’s insinuations that China manipulates its currency....China has no choice but to start reducing its trade surplus. It has to become an economy based more on internal consumption....The possibility of China’s slowing GDP growth - which is, for all purposes, a recession, even if it’s 6.5% - converging with tighter credit and aspirations of political change represent a major risk. All the elements for such an explosive process are already in place. The fuse is set, it just needs a spark....Beijing has promoted domestic consumption as a driver of growth. If it fails to work, it will create a crisis of legitimacy for the Communist Party."

Greeks Turn to the Black Market as Another Bailout Showdown Looms -New York Times
"Greece is the crisis that never quite goes away for the European Union, and with another tense negotiation with creditors scheduled for this coming week, the country is struggling to recover from the longest downturn in the eurozone....Few problems are more ingrained, or harder to combat, than the shadow economy, which appears to be growing again as new austerity measures compel once law-abiding Greeks to go off the books. Greece’s black market is estimated at 20 to 25 percent of the gross domestic product, as more people have stopped reporting their income to avoid paying taxes that, by some estimates, have risen to 70 percent of an individual’s gross income....Electricians, plumbers, hairdressers, journalists, computer consultants and a variety of other self-employed workers have all taken the plunge. On a recent afternoon, Yiannis, a young television production designer, stood in line in a government office to de-register as a consultant. Had he not, he said, his take-home pay this year would amount to just 30 percent of earnings."

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2.17.17 - Inflation Threatens Middle Class

Gold last traded at $1,239 an ounce. Silver at $18.03 an ounce.

NEWS SUMMARY: Precious metals traded steady Friday, notching a small weekly gain, despite a stronger dollar. U.S. stocks fell amid growing French election fears and weaker oil prices.

Gold Standard Needed Now More Than Ever? -Alan Greenspan/Kitco
"It would be best not to be short-sighted when it comes to gold; at least that is what one former Fed chair says. '[T]he risk of inflation is beginning to rise...Significant increases in inflation will ultimately increase the price of gold,' noted Alan Greenspan, Federal Reserve chairman from 1987 to 2006, in an interview published in the World Gold Council’s Gold Investor February issue. 'Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection....We would never have reached this position of extreme indebtedness were we on the gold standard, because the gold standard is a way of ensuring that fiscal policy never gets out of line.'"

In 2017, Mr. Greenspan appears to have arrived at the same conclusion he espoused a half century ago, prior to serving as Fed Chairman... "An almost hysterical antagonism toward the gold standard is one issue which unites statists of all and economic freedom are inseparable." -Alan Greenspan, 1966 White Paper-Speech

inflation Why inflation threatens the middle class -Marketwatch
"Buffeted by slow growth and too few decent paying jobs, Americans now have to deal with more inflation. In January, consumer prices rose 0.6%....Yet, economic growth is not likely to accelerate enough to support wages that rise as fast as prices going forward. The Federal Reserve will be faced with an uncomfortable choice - raise rates too quickly to combat inflation or continue printing more money in hopes of further supporting economic growth. Here are four things to know about higher inflation. 1. More Money Won’t Boost Growth, 2. Easy Money and High Inflation Steals from the Elderly, 3. Federal Policies Make Too Much Inflation Certain, 4. A Higher Minimum Wage Will Only Make Matters Worse."

BlackRock: Inflation Is Surging, So Buy Some Gold -ETFDailyNews
"Russ Koesterich discusses the signs that inflation is rising faster than many expect, and what that means for your portfolio. Like the proverbial frog that does not notice the rise in water temperature until it’s too late, investors seem to be experiencing a similarly stealthy rise in inflation. Changes in headline inflation measures suggest a gentle firming in prices. However, underneath the surface there is evidence that inflation may continue to rise past the steady 2% nirvana that central banks prefer. 'Consider the following: Housing costs are now rising at the fastest pace in nearly a decade… Medical inflation is not as contained as many had hoped… Wages are rising… Consumer inflation expectations are also starting to tick higher. None of this signals ’70s style inflation; it does suggest inflation may surpass still modest market based expectations… To the extent realized inflation and inflation expectations continue to rise, investors may want to consider several themes in their portfolios … Finally, should inflation expectations rise faster than nominal rates, gold is likely to continue to merit a place in most portfolios.'"

Currency Manipulation Is a Real Problem -Wall Street Journal
"Passionate defenders of the 'global rules-based trading system' should be wary of thinking their views are more informed than President Trump's. He has been branded a protectionist and thus many conclude he is incapable of exercising world leadership. Meanwhile, those who embrace the virtues of global free trade disregard the fact that the 'rules' are not working for many American workers and companies. Certainly the rules regarding international exchange-rate arrangements are not working. Monetary integrity was the key to making Bretton Woods institutions work when they were created after World War II to prevent future breakdowns in world order due to trade. The international monetary system, devised in 1944, was based on fixed exchange rates linked to a gold-convertible dollar. No such system exists today. And no real leader can aspire to champion both the logic and the morality of free trade without confronting the practice that undermines both: currency manipulation."

The Fed Exists As the Barrier to the American Dream -Real Clear Markets
"The problem with the Fed is not so much the Fed as those who are currently at it. As if we wouldn’t know already by their condescending and nonsensical insult to American workers (and American commonsense), nothing would change if President Trump fired Janet Yellen tomorrow. She would be replaced in exactly the same manner as she replaced Ben Bernanke, who replaced Alan Greenspan, etc.; people who have in the failure of their best designs now blame dumb, lazy Americans for systemic despairing....This used to be the Land of Opportunity, but they would have you believe, in polite terms, it was squandered by you and me. Forgive me if I don’t believe that America stopped being America at exactly the moment central bank monetary failure was most exposed for what it always was - a lie. The consequences of it have finally been revealed even to the ideologically blinded. Both the Fed and I agree for once, the output gap is gone and there is nothing left for them to do. In fact, if they would all just resign, then the road to recovery might actually begin, no rehab or retirement facilities required."

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2.16.17 - UBS advises "Hold Gold"

Gold last traded at $1,241 an ounce. Silver at $18.07 an ounce.

NEWS SUMMARY: Precious metal prices rose Thursday on safe-haven buying as downbeat economic data weighed on the dollar. U.S. stocks drifted lower after joblessness climbed and housing starts dipped.

This Banking Giant Says Take Hold of Gold in 2017 -Fortune
"Hold on to that shiny safe haven asset in your portfolio, banking giant UBS says. The price of gold was at $1,228.76 Monday, a near 7% rise year to date, as President Donald Trump's bumpy first few weeks in office have spread jitters through the investing world, and led to doubts about the three interest rate hikes the Federal Reserve had projected. That's at least part of the reason why UBS's commodity and Asia-Pacific commodity head, Dominic Schnider says the precious metal could reach $1,300 this year in a CNBC interview. 'There's plenty of uncertainty out there,' Schnider told CNBC Monday. 'Inflation is going to accelerate faster than the Fed is going to hike rates; that's good for real assets. On top of it, we are looking for a weak dollar on a broad basis; that combination has a good tendency to boost prices.'"

For additional insights on the many factors driving the gold bull market of 2017 - which could send prices up dramatically - request your free copy of our 2017 Gold Report - Early Edition

business Trump Prepares to “Do a Number” on Dodd-Frank Banking Laws -Craig Smith/SATC
"President Trump wants America to be the most competitive in the world against their foreign rivals. To make that happen, banks need to get back to lending which Dodd-Frank slowed and in some cases stopped altogether...President Trump has made it crystal clear he will not allow another taxpayer bailout and wants to make sure 'too big to fail' never imperils the economy again. However he understands banks have been handcuffed with what has clearly been an overreaction to the 2008 crisis. Simply put Dodd-Frank is far too strict. If the president get the changes he wants, it will increase the potential for bad behavior at the banks. Therefore any changes must be met with a serious focus of prosecuting excessive risk taking. To date not one person who helped cause the crisis of 2008 has faced criminal charges. That needs to change....President Trump has promised to 'drain the swamp'. I believe he will. Dodd-Frank is a small part of that process. But using his analogy is not a nice, easy and clean process - just the opposite. It is messy, dirty and sometimes ugly. However we either do it now voluntarily; or involuntarily when the debt crisis hits." Full story

French Election Puts Possibility of ‘Frexit’ on the Agenda -Wall Street Journal
"What’s striking about the French presidential election is the extent to which the two front-runners share a basic analysis of the choice facing the country. Marine Le Pen, the leader of the right-wing National Front, and Emmanuel Macron, the 39-year-old former economy minister who quit François Hollande’s government to stand as an independent, are poles apart politically. But both agree that the defining issue is France’s membership of the eurozone. Both point to the widening divergence between Germany and France’s economic performance during the past decade as evidence that the status quo isn’t sustainable....Mr. Macron...wants France to stay in the euro and is campaigning for changes to the country’s public sector, welfare system and labor rules, which he says are needed to restore the country’s competitiveness....Ms. Le Pen, on the other hand, believes there is no appetite for cuts to welfare, which the National Front says provides an important economic as well as social safety net, helping to maintain household consumption. It argues that the only way to preserve the welfare system is to quit the eurozone and devalue the currency."

The Dignity Deficit: Reclaiming Americans' Sense of Purpose -Brooks/Foreign Affairs
"'He who establishes conventional wisdom owns history,' a historian once told me. So it’s no surprise that ever since last year’s extraordinary U.S. presidential election, all sides have been bitterly fighting over what happened - and why. The explanations for Donald Trump’s surprise victory have varied widely. But one factor that clearly played an important role was the alienation and disaffection of less educated white voters in rural and exurban areas. Trump may have proved to be a uniquely popular tribune for this constituency. But the anger he tapped into has been building for half a century. The roots of that anger lie all the way back in the 1960s, when President Lyndon Johnson launched his so-called War on Poverty. Only by properly understanding the mistakes made in that war - mistakes that have deprived generations of Americans of their fundamental sense of dignity - can the country’s current leaders and political parties hope to start fixing them. And only once they properly understand the problem will they be able to craft the kind of cultural and political agenda that can heal the country’s wounds."

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2.15.17 - Inflation Up, Real Wages Down

Gold last traded at $1,233 an ounce. Silver at $17.96 an ounce.

NEWS SUMMARY: Precious metal prices were supported Wednesday amid rising inflation data and a flat dollar. U.S. stocks cheered the return of widespread consumer inflation and retail spending data.

Consumer Prices Surge At Fastest Pace In 5 Years As Real Wages Tumble -Zero Hedge
"Stagflationary trouble looms. As prognosticators ohh and aah over the soaring consumer price index (up 2.5% YoY - the most since March 2012), driven by a 14.2% YoY spike in gasoline prices, it appears they missed the fact that real average weekly earnings plunged by 0.6% YoY - the biggest wage collapse since November 2011....The food index rose 0.1 percent in January, its first increase since April 2016....The energy index rose 4.0 percent in January, its fifth straight increase. The gasoline index continued to rise, increasing 7.8 percent....The shelter index rose 0.2 percent in January after increasing 0.3 percent in both November and December....The index for new vehicles rose 0.9 percent, its largest increase since November 2009."

convergence The Great Convergence of 2017 -New Swiss America Special Report
March 31st might bring one of the greatest money moments in history! Why? Because a new law clarifies what nearly a quarter of Earth's population is permitted to do with gold as an investment. This new law could unleash the greatest pent-up demand for gold ever to happen on a single day, according to a critical new Swiss America Special Report, The Great Convergence of 2017. Our bigger concern, however, is protecting your wealth; which will be in danger if you do nothing. If a trillion extra dollars suddenly enter the world economy, each dollar you have invested or saved will lose more purchasing power. To receive your FREE SPECIAL REPORT call 800-289-2646 or register HERE.

Top gold ETF gets Islamic finance certification to tap new markets -Reuters
"The world's largest physically-backed gold fund said on Wednesday it has been certified as sharia compliant, the latest effort aimed at spurring demand for bullion from investors across majority-Muslim countries. Gold had traditionally been classified as a currency in Islamic finance, confining its use to spot transactions, but new guidance issued in December is making room for a wider range of investment products....The SPDR Gold Trust, an exchange-traded fund which holds 836.7 tonnes of bullion worth $33 billion, now falls in line with rules from the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)....'This announcement marks an important step in addressing the demand for gold in the $2 trillion Islamic finance market,' said Joseph Cavatoni, Principal Executive Officer at World Gold Trust Services....'It opens up another source of investor demand, which should at least allow those sources to be more diversified.' Last year, investment demand for gold increased by 70 percent and gold-backed ETFs saw an increase of 532 tonnes, the second highest annual inflow on record, according to a WGC report."

Is Fed's Janet Yellen Hawkish, Dovish Or Just Plain Chicken? -Hedge Eye
"Unsurprisingly, Yellen declined to lay out a specific rate hike timeline but did sound ratchet up rate hike speculation....Investors read Yellen's comments as hawkish (i.e. rate hike possibilities rising)....What if consensus is wrong? What if U.S. economic growth and inflation are accelerating faster than consensus (and the Fed) expects? Will the Fed raise interest rates faster than is currently expected? We think so....The Fed risks falling behind the curve if they don't raise rates (and soon). We think investors don't yet appreciate how fast rates could rise in 2017. The Fed is falling behind and Janet Yellen is a Dead Dove Walking."

Restoring Conventional Monetary Policy At The Fed -Investors
"When Chair of the Federal Reserve Janet Yellen testifies before the House Committee on Financial Services this week, she will face a political and economic environment far different than she encountered during her last visit to Capitol Hill in September. A new president has taken office, giving Republicans unified control of the federal government. And we are wasting no time addressing the regulatory overreaches and bad policies of the last administration that have hamstrung our economy, including the financial regulatory law known as Dodd-Frank. While it is clear that regulatory burdens imposed by the Dodd-Frank Act have thwarted growth, investment and jobs - let's not forget the harm the Federal Reserve's unconventional monetary policy has inflicted on our economy....The Federal Reserve's balance sheet has more than quadrupled from slightly under $1 trillion before the Great Recession to more than $4.5 trillion today after several rounds of quantitative easing, Operation Twist, and other ongoing reinvestments of matured assets....For the sake of families, businesses and taxpayers, we must replace today's top-down monetary mischief with a policy framework where market prices give households and businesses the information they need to find their most promising opportunities. To accomplish these goals, I will work with the members of my subcommittee on a Federal Reserve reform package."

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2.14.17 - Can Gold Make America Great?

Gold last traded at $1,225 an ounce. Silver at $17.88 an ounce.

NEWS SUMMARY: Precious metal prices steadied Tuesday as Fedspeak boosted the dollar. U.S. stocks traded flat following hawkish comments from Fed Chairman Janet Yellen.

US wholesale inflation sees biggest monthly gain in 4 years -AFP
"US wholesale inflation continued its upward trend in January, recording its largest monthly gain in more than four years, according to data released Tuesday by the Labor Department. The Producer Price Index, which measures prices from the seller's perspective, rose 0.6 percent in seasonally adjusted figures, which was the largest such gain since September 2012 and well above an analyst consensus forecast of 0.3 percent....The large month-to-month gain supports views among US monetary policymakers that further interest rate increases may be necessary in 2017 to contain inflation....The large month-to-month gain supports views among US monetary policymakers that further interest rate increases may be necessary in 2017 to contain inflation. The central bank earlier this month left interest rates unchanged after raising them in December for the first time in a year."

titanic Fed Chair Yellen: 'Unwise' to wait too long to hike interest rates -CNBC
"Waiting too long to raise interest rates would be 'unwise' as economic growth continues and inflation rises, Fed Chair Janet Yellen told Congress on Tuesday....Traders do not expect the policymaking Federal Open Market Committee to hike at the March session. However, Yellen did say that increases would be evaluated 'at upcoming meetings.'....Yellen urged lawmakers to focus on long-term growth and productivity and to put the burgeoning U.S. debt load on a 'sustainable trajectory.' The national debt currently sits at $19.2 trillion, of which the public is responsible for $14.4 trillion....The remarks touched little on how the Fed plans to unwind its mammoth $4.5 trillion balance sheet, a topic of increasing concern on Wall Street."

Fed Chair Janet Yellen's comments about waiting too long being 'unwise' are both laughable and a sad testament to what they have already done. The Fed is always behind the curve because their agenda is keeping the big banks afloat, rather than U.S. citizens. As Craig Smith says in the Introduction of his latest book, Money, Morality & The Machine ... "The banks have manipulated the financial system to suit their own ends and our faith in their integrity has all but evaporated. The money for which we labor, save for college and retirement, and use to fund this great experiment we call America is no longer honest."

Big Brother is watching you: Jim Rogers prophesizes death of cash & total govt control of spending -RT
"The time will come when you won't be able to buy a cup of coffee without being traced, warns investment guru Jim Rogers. To control people, governments will increasingly seek to hunt down cash spending, he adds. 'Governments are always looking out for themselves first, and it's the same old thing that has been going on for hundreds of years.'....'Some states in the US you cannot make cash transactions above a certain amount. Governments love it. Then they can control you. If you want to go and buy a cup of coffee, they know how many you drink, where you buy them, etc., if they can all put it into electronic formats and they will. The world is all going electronic,' the investor said. According to Rogers, governments will claim they are doing it for the public good, not for themselves. 'When it's done, the governments are going to be very, very happy they are going to say they're doing it for our own good, this is not them, this is for our good. That they're doing this, but it’s coming, and it's going to be a whole different world in which we live.'"

Jim Rogers tells it like it is. Get the full story in our 12-page White Paper: The Secret War on Cash.

Making America Great Again! Don’t Sit and Watch, Be Prepared! -Carrillo/SATC
"While growth and making America great again are obviously the goals of all working Americans, the unwinding of massive debt, troubled banks and over a decade of bad policies will prove difficult and may come with severe pain for unprepared citizens - especially retiring baby boomers. The new policies being put on the table by President Trump are badly needed, but history shows they could also to be a catalyst for much higher gold prices for many reasons. As Mr. Trump has stated, he needs to drive the dollar much lower vs. the Chinese Yuan in order for us to compete with China and for his new trade policies to be effective....His goal of halting corporate outsourcing of labor to foreign countries could be extraordinarily inflationary and may end up creating an awkward, complex, or hazardous situation for corporate earnings....Because gold and the U.S. dollar move in opposite directions, when inflation rises, gold soars. It is also vitally important to remember that physical gold has no counter-party risk or issuer risk. Gold has always been the ultimate non-investment, simple, sound, store of value money to preserve wealth - unlike government-issued currencies which float (or sink) in an ever-deepening ocean of debt. Full story

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