The gold price has reached new heights. According to the well-known financial expert Dan Steinbock, this is only the beginning.
Every gold investor knows the rule of thumb: if interest rates rise in the U.S., then the dollar strengthens and weakens the gold price calculated in the American currency.
From this point of view, the latest bull market in gold (an ounce is currently 11 percent higher than at the beginning of the year at 1,278 dollars) is no more than a straw fire.
The normalization of low-interest policy is being seen in the USA. According to most observers, it is only a matter of time before interest rates rise in the other large economic nations. Search For Safe Ports
One who does not believe in a straw fire in gold is Dan Steinbock (picture below). The publicist and founder of the Difference Group, who teaches as a researcher at the Shanghai Institute for International Studies in China and at the EU Center in Singapore, is convinced of the contrary. He believes that a new golden age is coming for investors.
Not surprisingly, Steinbock argues with the escape reflex against political uncertainties. The civil war in Syria, the volatility around North Korea, the upcoming elections in Germany and France, but also the new ice age between the USA and Russia: all this, saysfinews.first author Steinbock, means investors look for safe havens.
A New Gold Standard
According to the native Finn, the most common escape route is blocked. State bonds are no longer the obvious choice in view of the bubble in the bond market, which has been fueled by central banks all over the world. Steinbock, on the other hand, finds the precious metal much more attractive by virtue of the fact that it has been subordinated in many portfolios and undervalued in numerous key currencies.
The Asian specialist also drew attention to subtle shifts in world trade. Last March, the Russian Central Bank opened an office in Beijing. The two countries want to coalesce in the monetary policy - and possibly the Russians could become an important gold supplier to China.
Already there are speculations about a new common gold standard, which does not need the «Greenback» of the Americans.
The Rule of Thumb Forgotten
This comes from the fact that gold is no longer viewed only from the dollar perspective. According to Steinbock, 90 per cent of the demand for physical gold from outside the Americas already comes from India and China.
In the currencies of these countries gold has made a better return than in dollars.
To draw his conclusions is easy, says the financial scientist. Anyone who only follows the old dollar rule of thumb misses the potential that gold offers to investors around the world.
There is much debate about where the U.S. economy is ultimately heading, but what everybody should be able to agree on is that economic conditions are significantly worse this year than they were last year. It is being projected that U.S. economic growth for the first quarter will be close to zero, thousands of retail stores are closing, factory output is falling, and restaurants and automakers have both fallen on very hard times. As economic activity has slowed down, commercial and consumer bankruptcies are both rising at rates that we have not seen since the last financial crisis. Everywhere you look there are echoes of 2008, and yet most people still seem to be in denial about what is happening. The following are 11 facts that prove that the U.S. economy in 2017 is in far worse shape than it was in 2016…
#1 It is being projected that there will be more than 8,000 retail store closings in the United States in 2017, and that will far surpass the former peak of 6,163 store closings that we witnessed in 2008.
#2 The number of retailers that have filed for bankruptcy so far in 2017 has already surpassed the total for the entire year of 2016.
#3 So far in 2017, an astounding 49 million square feet of retail space has closed down in the United States. At this pace, approximately 147 million square feet will be shut down by the end of the year, and that would absolutely shatter the all-time record of 115 million square feet that was shut down in 2001.
#4 The Atlanta Fed’s GDP Now model is projecting that U.S. economic growth for the first quarter of 2017 will come in at just 0.5 percent. If that pace continues for the rest of the year, it will be the worst year for U.S. economic growth since the last recession.
#5 Restaurants are experiencing their toughest stretch since the last recession, and in March things continued to get even worse…
Foot traffic at chain restaurants in March dropped 3.4% from a year ago. Menu prices couldn’t be increased enough to make up for it, and same-store sales fell 1.1%. The least bad region was the Western US, where sales inched up 1.2% year-over-year and traffic fell only 1.7%, according to TDn2K’s Restaurant Industry Snapshot. The worst was the NY-NJ Region, where sales plunged 4.6% and foot traffic 6.3%.
This comes after a dismal February, when foot traffic had dropped 5% year-over-year, and same-store sales 3.7%.
#9 Nearly all of the big automakers reported disappointing sales in March, and dealer inventories have now risen to the highest level that we have seen since the last recession.
#11 At this point, most U.S. consumers are completely tapped out. According to CNN, almost six out of every ten Americans do not have enough money saved to even cover a $500 emergency expense.
In America alone, bad debt held by companies could reach $4 trillion, “or almost a quarter of corporate assets considered,” according to the IMF. That debt “could undermine financial stability” if mishandled, the IMF says.
The percentage of “weak,” “vulnerable” or “challenged” debt held as assets by US firms has almost arrived at the same level it was right before the 2008 crisis.
We are seeing so many parallels to the last financial crisis, and many are hoping that our politicians in Washington can fix things before it is too late.
On Monday, the most critical week of Trump’s young presidency begins. The administration will continue working on tax reform and a replacement for Obamacare, but of even greater importance is the fact that if a spending agreement is not passed by Friday a government shutdown will begin at the end of the week…
By attempting three massive political undertakings in one week, investors will have a sense of whether or not Trump will be able to deliver on pro-growth policies that would be beneficial for markets.
If Trump can pull off the trifecta, it could restore faith that policy proposals like tax cuts and infrastructure spending are on the way. If not, look out.
Members of Congress are returning from their extended two week spring vacation, and now they will only have four working days to get something done.
And I don’t believe that they will be able to rush something through in just four days. The Republicans in Congress, the Democrats in Congress, and the Trump administration all want different things, and ironing out all of those differences is not going to be easy.
For example, the Trump administration is insisting on funding for a border wall, and the Democrats are saying no way. The following comes from the Washington Post…
President Trump and his top aides applied new pressure Sunday on lawmakers to include money for a wall on the U.S.-Mexico border in a must-pass government funding bill, raising the possibility of a federal government shutdown this week.
In a pair of tweets, Trump attacked Democrats for opposing the wall and insisted that Mexico would pay for it “at a later date,” despite his repeated campaign promises not including that qualifier. And top administration officials appeared on Sunday morning news shows to press for wall funding, including White House budget director Mick Mulvaney, who said Trump might refuse to sign a spending bill that does not include any.
And of course the border wall is just one of a whole host of controversial issues that are standing in the way of an agreement. Those that are suggesting that all of these issues will be resolved in less than 100 hours are being completely unrealistic. And even though the Trump administration is putting on a brave face, the truth is that quiet preparations for a government shutdown have already begun.
The stage is being set for the kind of nightmare crisis that I portrayed in The Beginning Of The End. The stock market bubble is showing signs of being ready to burst, and an extended government shutdown would be more than enough to push things over the edge.
Let us hope that this government shutdown is only for a limited period of time, because an extended shutdown could potentially be catastrophic. In the end, either the Trump administration or the Democrats are going to have to give in on issues such as funding for Obamacare, the border wall, Planned Parenthood, defense spending increases, etc.
It will be a test of the wills, and it will be absolutely fascinating to see who buckles under the pressure first.
This was a holiday-shortened week, due to Good Friday, and we are posting this Monday evening due to today being a holiday in much of the world.
Gold and silver went up the dollar went down, +$33 and +$0.53 -64mg gold and -.05g silver. The prices of the metals in dollar terms are readily available, and the price of the dollar in terms of honest money can be easily calculated. The point of this Report is to look into the market to understand the fundamentals of supply and demand. This can’t necessarily tell you what the price will do tomorrow. However, it tells you where the price should be, if physical metal were to clear based on supply and demand.
Of course, two factors make this very interesting. One is that the speculators use leverage, and they can move the price around. At least for a while. The other is that the fundamentals change. There is no guarantee that the prices of the metals will reach the fundamental price of a given day. Think of the fundamentals as gravity, not the strongest force in the system but inexorable, tugging every day.
This week, the fundamentals of both metals moved, though not together. We will take a look at that below, but first, the price and ratio charts.
The Prices of Gold and Silver
Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. It didn’t move much this week.
The Ratio of the Gold Price to the Silver Price
For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.
Here is the gold graph.
The Gold Basis and Cobasis and the Dollar Price
The scarcity (i.e. the cobasis, the red line) is in a gentle rising trend for about six months. This week, the cobasis was down slightly. Not a surprise given the (relatively) big price move of +$33. Nor does it appear to break the trend.
Our calculated fundamental price of gold is at $1,301, just above the market price.
Now let’s look at silver.
The Silver Basis and Cobasis and the Dollar Price
In silver, it’s much harder to say that there is an uptrend in the cobasis. Our indicator of scarcity is at the same level it was in October. Back then, the price of silver was $17.60 and on Thursday it was just about 90 cents higher.
The fundamental price back then was just under $15. Now it’s just under $16.50. This happens to be down about 40 cents this week.
With the fundamental of gold rising, and that of silver falling, it’s not surprising that the fundamental gold-silver ratio is up to a bit over 79.
Those of you who voted for Trump as a vote not to elect Hillary have ended up with “Hillary.” Those of you voted for Hillary, and thought you lost, have ended up in many respects with a surrogate for Hillary. It took less than 12 weeks since the inauguration for Trump to adopt the stance of a true Washington politician. This is where the “elected” official pivots away from the public interest and toward the interests of the Deep State: Big oil, big defense, big healthcare and, of course, Too Big To Fail Wall Street. Congratulations Donald. You’ve passed the Beltway Test. Welcome to “The Club.” Of course, you are “blind” if you didn’t think this would happen once Trump took office and let Hillary, her gang of criminals and the Clinton Slush Fund Foundation off the hook after threatening her with prison during the election debates. Anti-gold apologists will attribute the remarkable move higher in the price of gold this week to the heightened geopolitical tensions between Russia and the U.S. over Syria plus the North Korea situation. While this might have had some influence on the price move in gold, the primary drivers are economic, financial and structural. By “structural” we mean the quiet implementation of a digital gold accumulation system between Shanghai, Dubai and Europe. In China, this system will let the public buy a “digital” form of gold in tiny increments and go into participating banks and take possession of that gold. Rory Hall has presented two important interviews on this topic on The Daily Coin that merit attention on this topic: Gold, China, Trump and Economic Collapse, with Ken Shortgen, and China Moves 30% More Funds Into Physical Gold, with Jeff Brown. While geopolitical and economic factors are pushing the price of gold higher, the extreme dislocation between the western Central Bank short position in gold via several different forms of paper gold and the amount of available physical gold to deliver into buyers’ hands is going to move gold in a way that will shock and awe everyone except maybe the hardiest gold “bugs.” The two interviews posted above will help explain why. Finally, as we presented here after Trump was elected, a newly implemented weak dollar policy will springboard the price of gold higher, which is what we witnessed yesterday after Trump affirmed that his administration favors taking the dollar lower in an inevitably failed attempt to revive the competitiveness of U.S. exports. - Source, Silver Doctors
Please note, many will argue that the p/e ratio on the S&P 500 was higher in 1999 than it is now. However, there’s two problems with the comparison. First, when there is no “e,” price does not matter. Many of the tech stocks in the SPX in 1999 did not have any earnings and never had a chance to produce earnings because many of them went out of business. However – and I’ve been saying this for quite some time and I’m finally seeing a few others make the same assertion – if you adjust the current earnings of the companies in SPX using the GAAP accounting standards in force in 1999, the current earnings in aggregate would likely be cut at least in half. And thus, the current p/e ratio expressed in 1999 earnings terms likely would be at least as high as the p/e ratio in 1999, if not higher. (Changes to GAAP have made it easier for companies to create non-cash earnings, reclassify and capitalize expenses, stretch out depreciation and pension funding costs, etc).
We talk about the tech bubble that fomented in the late 1990’s that resulted in an 85% (roughly) decline on the NASDAQ. Currently the five highest valued stocks by market cap are tech stocks: AAPL, GOOG, MSFT, AMZN and FB. Combined, these five stocks make-up nearly 10% of the total value of the entire stock market.
Money from the public poured into ETFs at record pace in February. The majority of it into S&P 500 ETFs which then have to put that money proportionately by market value into each of the S&P 500 stocks. Thus when cash pours into SPX funds like this, a large rise in the the top five stocks by market cap listed above becomes a self-fulfilling prophecy. The price rise in these stocks has nothing remotely to do with fundamentals. Take Microsoft, for example (MSFT). Last Friday the pom-poms were waving on Fox Business because MSFT hit an all-time high. This is in spite of the fact that MSFT’s revenues dropped 8.8% from 2015 to 2016 and its gross margin plunged 13.2%. So much for fundamentals.
In addition to the onslaught of retail cash moving blindly into stocks, margin debt on the NYSE hit an all-time high in February. Both the cash flow and margin debt statistics are flashing a big red warning signal, as this only occurs when the public becomes blind to risk and and bet that stocks can only go up. As I’ve said before, this is by far the most dangerous stock market in my professional lifetime (32 years, not including my high years spent reading my father’s Wall Street Journal everyday and playing penny stocks).
Perhaps the loudest bell ringing and signaling a top is the market’s valuation of Tesla. On Monday the market cap of Tesla ($49 billion) surpassed Ford’s market cap ($45 billion) despite the fact that Tesla deliver 79 thousand cars in 2016 while Ford delivered 2.6 million. “Electric Jeff” (as a good friend of mine calls Elon Musk, in reference to Jeff Bezos) was on Twitter Monday taunting short sellers. At best his behavior can be called “gauche.” Musk, similar to Bezos, is a masterful stock operator. Jordan Belfort (the “Wolf of Wall Street”) was a small-time dime store thief compared to Musk and Bezos.
Tesla has never made money and never will make money. Next to Amazon, it’s the biggest Ponzi scheme in U.S. history. Without the massive tax credits given to the first 200,000 buyers of Tesla vehicles, the Company would likely be out of business by now.
Once again the public has been seduced into throwing money blindly at anything that moves in the stock market, chasing dreams of risk-free wealth. 99% of them will never take money off the table and will lose everything when this bubble bursts. And only the biggest stock bubble in history is capable of enabling operators like Musk and Bezos to reap extraordinary wealth at the expense of the public. The bell is ringing, perhaps Musk unwittingly rang it on Monday with hubris. The only question that remains pertains to timing…
What would compel one of the largest banks in the world to give the advice that people should buy gold to protect themselves from the coming crash? What is the "Icarus Trade"? What is the "Great Fall"? - Source
