Why Gold Prices Are About To Skyrocket Even Higher 

Source: Yahoo Finance

“The gold bears have finally caved under the deafening barrage of fiscal and geopolitical catalysts, from Fed hints to intensely brewing conflict with Iran. But there is one key trend that stands to push gold up beyond $1,700 – regardless of the day’s news….In this perfect storm for gold prices, EuroSun Mining CEO Scott Moore says we’re overlooking a significant trend that will outlast the current geopolitical meltdown and even the Fed’s policies: It’s a global push for de-dollarization. ‘Government’s around the world are becoming increasingly wary of the dollar’s hegemony in international trade,’ says Moore. ‘And they’re doing their best to distance themselves from it by using their gold reserves to buy more gold instead.’ This process is already underway mainly in nations with strong anti-U.S. sentiment including Russia, China, Iran, Venezuela, Syria, Turkey, Qatar, India, Pakistan, Libya, Egypt and the Philippines among others….According to the World Gold Council, central banks purchased nearly 70 percent more gold during the first quarter of the year than they did during the previous year’s corresponding period. Billionaire Paul Tudor Jones says that gold ‘has everything going for it’, and sees it pushing to $1,700 an ounce ‘rather quickly’, as he noted in an interview with Bloomberg.”

 

Ex-Fed boss Greenspan says ‘there is no barrier’ to Treasury yields falling below zero

Source: Marketwatch

“There is some $15 trillion in government debt that now yields less than zero, and former Federal Reserve Chairman Alan Greenspan believes there’s no reason why U.S. government bond yields couldn’t join much of the developed world in the subzero world. Greenspan, during a phone interview with Bloomberg News on Tuesday, said ‘zero’ has no real meaning for the U.S. bond market and that a slide below that psychological level, already traversed by many others countries, wouldn’t be inconceivable for U.S. paper. The 93-year-old economist’s comments come as more Wall Street participants contemplate the very real possibility of negative Treasury rates….Current estimates hold that some $15 trillion in debt bears a negative yield, which means that investors get back less than their original investments for the privilege and perceived safety of owning government-backed debt. The negative-yield dynamic in the market has proliferated after more than a decade of monetary-policy unorthodoxy intended to juice stubbornly low inflation and anemic growth in Europe and parts of Asia….As of late Tuesday, 10-year U.S. benchmark debt was yielding 1.678%, not far from its lowest levels since 2016, with Wall Street anticipating nearly a 100% chance of a 25-basis-point cut in September.”

 

U.S. Mortgage Debt Hits Record, Eclipsing 2008 Peak 

Source: Wall Street Journal

“U.S. mortgage debt reached a record in the second quarter, exceeding its 2008 peak as the financial crisis unfolded. Mortgage balances rose by $162 billion in the second quarter to $9.406 trillion, surpassing the high of $9.294 trillion in the third quarter of 2008, the Federal Reserve Bank of New York said Tuesday. Mortgages are the largest component of household debt….Total household debt has been on the rise since mid-2013. It rose by 1.4% from the first quarter to $13.86 trillion, the 20th consecutive quarter of increase….Alongside higher home prices, a factor behind rising mortgage debt balances in the second quarter could be homeowners tapping into home equity for cash when they refinance. Refinancing accounted for about half of new mortgages in the second quarter, according to Guy Cecala, chief executive at Inside Mortgage Finance, an industry research group. That represents a ‘mini refinancing boom.'”

 

Hong Kong Activist Leader Calls For A Run On Chinese Banks Tomorrow 

Source: Zero Hedge

“Prominent Hong Kong pro-independence political activist Chen Haotian has called for a run on Chinese banks, asking that everyone withdraw their money on the same day. Haotian is a founding member and the convenor of the Hong Kong National Party. Arguing that large scale protests have only led to injuries and escalating police brutality, Haotian believes another method could be used to severely undermine China’s influence – a good old fashioned run on the bank. He suggested that another method could be used, namely, impacting the financial system,’ reports China Press. ‘He called on Friday (August 16) that Hong Kong citizens take out all bank deposits. The primary goal is Chinese banks, but he said other banks should also be targeted, otherwise Chinese banks can borrow money from other banks to solve problems.’ Hong Kong has been rocked by weeks of violent protests by pro-independence campaigners. Earlier this week, riot police stormed Hong Kong International Airport to clear them out…While China is unlikely to invade using PLA troops, experts have suggested that soldiers could be disguised as Hong Kong police.”

 

Trump just blinked, giving China a possible edge in trade war 

Source: CNBC

“In backing off on tariffs Tuesday, President Donald Trump showed just how much pain the U.S. could tolerate, key voices on Wall Street say – and China may use that to its advantage. Markets rallied on the the U.S. announcement that certain items were being removed from the new China tariff list, while tariffs on others would be delayed until December….Some investors took Tuesday’s announcement as a sign that the trade war was indeed hurting consumers. The products in the group exempt from tariffs include cell phones, some apparel, and video games – all of which are crucial to the U.S. consumer market. China meanwhile, has not publicly backed off. It announced last week that it would stop buying U.S. agricultural products as its latest weapon in the tariff battle and has retaliated with its own tariffs on U.S. goods. It also set off more worries about the trade war on Friday by letting its currency weaken….’The White House is now delaying the tariffs and removing some items. Did some acronym called the SPX cause someone to blink?,’ David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates, said in a tweet.”

 

Big Signals From Gold And Silver 

Source: Luongo/Zero Hedge

“Gold and silver are back. The global political picture is spinning out of control quickly. And the precious metals are here to tell us just how quickly….Markets hate chaos…And that’s why gold and silver put in weeks to remember….Gold is the peoples’ hedge against government run amok. At home we have Trump fighting with the Fed. Trump fighting with China, the EU, Venezuela, Iran, Russia while fending off domestic attacks built on a foundation made of equal parts fear, loathing and basic corruption. Every day more people pull back from this show and ask themselves, ‘What should I do now?’ That’s part of where this energy comes from. It’s been building for years. And enough people are saying to them the same thing, ‘Buy gold.’ And, slowly the worm turns….Chaos, once it’s unleashed, is impossible to control. When politicians talk and no one listens what do you think happens next?”

 

If China Is A ‘Currency Manipulator’, Then Every Country Is 

Source: Tamny/Forbes

“President Trump, Democrats like Sen. Chuck Schumer, along with countless other politicians, economists and pundits, believe that Chinese producers have gained a trade advantage by keeping the value of their currency (the yuan) artificially low. Supposedly this makes them more competitive. So if we ignore that the yuan has actually risen a fair amount against the dollar since 2005, it’s easy to see why the accusations against the Chinese don’t hold any water. They don’t because money is a veil. It can’t change the real price of anything….Chinese producers, like all producers, require voluminous imported inputs in order to manufacture the goods they aim to sell. If the Chinese are devaluing, any presumed competitive advantage gained by them is eroded by increased production costs….Not only is it naively asserted by the uninformed that the Chinese keep the value of the yuan artificially low, it’s also said that they ‘manipulate’ their currency. In truth, China does what just about every country in the world does: it strives to maintain a tight relationship between the yuan and the dollar. The why behind the above is simple: the dollar is the world’s currency….When the U.S. devalues the dollar, the tight relationship between the world’s currencies and the dollar means that a devaluation stateside is generally a global event. Applied to President Trump, presidents mostly get the dollar they want, and Trump has been busy of late communicating to the markets his desire for a weaker dollar. This has revealed itself through a soaring gold price. Unsettling about all this is that it could get worse. Talking to reporters recently about further devaluation, Trump made plain that ‘I could do that in two seconds if I wanted to.’ Ok, but a weak dollar is tantamount to a weakening of currencies around the world….With his talking down of the dollar President Trump is introducing corrupted, faked returns and contracts into the world that producers can’t fully protect themselves from, and the markets are responding. Devalued money is bad for investors, which means it’s bad for growth. Someone should alert Trump to this.”

 

Hedge Funds “All-In” On Gold As Fiat ‘Race To The Bottom’ Accelerates 

Source: Zero Hedge

“Gold is having its best year since 2016, soaring over 17% year-to-date, outpacing stocks, bonds, and the dollar. And Gold is strong and getting stronger. ‘We’re now going from trade wars almost into currency wars,’ said Whitney George, president of Sprott Inc., a precious metals-focused fund. ‘Gold is a currency, but it’s nobody’s obligation, so it will stand tallest when everyone else is trying to debase their currency to be competitive globally.’ Analysts are jumping on the bullion bull market bandwagon: Goldman has a six-month gold forecast of $1,600; Citi has said it will rise to the same $1600 level in 6 to 12 months; and, Bank of America Merrill Lynch sees prices climbing toward $2,000 within two years, topping the all-time record of $1,921.17 reached in the spot market in 2011….But its not just analysts that are piling in. Large speculators’ net positioning in gold is near record highs and silver positioning is also soaring. In other words, specs are largely all-in, and as the world shifts to an easing cycle, this sets the scene for more bullish gold pressure as negative-yielding global debt levels will inevitably rise.”

 

China Scoops Up More Gold for Reserves During Trade War 

Source: Bloomberg

“There’s a powerful constant amid the to-and-fro of the U.S.-China trade war as currency policy gets dragged into the standoff between the world’s two top economies: Beijing wants more gold in its reserves. China’s central bank expanded gold reserves again in July, pressing on with a run that stretches back to December…In tonnage terms, the inflow was close to 10 tons, following the addition of about 84 tons in the seven months to June. Gold has rallied in 2019 to a hit a six-year high as global growth stutters, central banks including the Federal Reserve eased policy, and the festering trade war all combined to bolster demand. ‘It is important for the country to diversify away from the U.S. dollar,’ Philip Klapwijk, managing director at consultant Precious Metals Insights Ltd., said….Central banks continued to load up on gold this year, helping push total bullion demand to a three-year high in the first half, according to the World Gold Council. That trend is expected to continue, with a survey of central banks showing 54% of respondents expect holdings to climb in the next 12 months.”

 

Investors Rushing to Gold And Bonds As Stock Market Continue Tumbling 

Source: Newsweek

“Investors are turning to gold and bonds as stock markets continue tumbling amid increased trade tension between the United States and China. Trump’s threat last week to impose tariffs on $300 billion more Chinese imports sparked investor fears. Beijing’s decision to let its currency fall below the symbolic ratio of seven yuan to one dollar, which the U.S. responded to by labeling China a currency manipulator, has further sparked fears about the escalating trade war. After stocks registered their worst week of year and the Dow Jones Industrial Average suffered its sixth-largest point drop in history on Monday, investors are spooked and looking for a safe investment haven. As the stock market has slid, the value of gold has risen sharply. Spot gold is now priced above $1,500 per ounce, up from about $1,440 per ounce last Thursday. Goldman Sachs predicted that the price of gold, a more stable but less profitable investment than stocks, could rise to $1,600 per ounce. The price of spot silver is also rising and reached a 13-month high of $17.01 per ounce.”

 

Loose Money, Big Deficits, and the Iceberg Ahead 

Source: Spectator

“Donald Trump accuses China of currency manipulation as he pressures the Federal Reserve to do the same thing. If you can’t beat ’em, join ’em. ‘Our problem is not China,’ the president tweeted on Wednesday. ‘We are stronger than ever, money is pouring into the U.S. while China is losing companies by the thousands to other countries, and their currency is under siege – Our problem is a Federal Reserve that is too proud to admit their mistake of acting too fast and tightening too much (and that I was right!). They must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW.’….The Fed, which just lowered interest rates, does not partake in quantitative tightening and has not done so for some time. It likely lowers rates further as the year progresses. Trump knows this, and the market expects this. So why continue carping on the Fed when it did, and likely continues to do, what you wish it to do (just not at the degree you wish it to)? Donald Trump faces a tight reelection bid next year….To squeeze whatever juice remains from the few undecideds who decide the race, the president requires the economy to move full speed ahead….An economy that booms does not require loose money and massive deficit spending. The fact that voices more extreme than the president’s on this matter call for another round of quantitative easing, the Fed gobbling up securities to prop up the economy, makes this economic silly season even more farcical. Gross domestic product continues to grow at a healthy clip, the unemployment rate remains below 4 percent, and the Dow, despite its rough week, registers about 8,000 points higher than it did on Election Day 2016. Yet paranoia encourages all manner of gimmicks to boost an economy not in the doldrums….It makes some sense to borrow, loosen the money supply, and perhaps engage in quantitative easing when recessions, particularly those along the lines of 2008 or 1929, hit. Doing all this during periods of prosperity not only makes no sense, but also makes it more difficult to rely on such remedies once the economy really needs it. We may not control whether an iceberg lies ahead. We can restrain ourselves from placing it there.”

 

Recession odds rise as economists cut growth estimates

Source: MSN/Bloomberg

“The likelihood of a U.S. recession in the next 12 months rose to 35% in an August survey of economists, from 31% forecast previously, as global trade tensions fuel economic uncertainty. Growth in the world’s biggest economy will average 2.3% this year, down from 2.5% seen in a July survey. Gross domestic product expansion is forecast to slow to a 1.8% annualized pace in the third quarter, from 3.1% in the first three months of the year and 2.1% in the second quarter. ‘Trade tensions are needlessly roiling financial markets, which could eventually destabilize a stable economy,’ Parul Jain, chief investment strategist at Macrofin Analytics LLC in Wayne, New Jersey, said in comments attached to her survey response….Economists moved up expectations for the next Fed interest-rate cut to September from December and now see a 25-basis-point reduction in the benchmark rate, to a range of 1.75% to 2%, at the next meeting, according to the poll. Global growth forecasts for 2019 were also cut, to 3.2% from 3.3%. Bloomberg’s survey was conducted Aug. 2 to Aug. 7.”

 

Now The Dollar Is Everyone’s Problem 

Source: Zero Hedge

“Investing is hard enough that there isn’t much room for unforced errors, yet many investors allow themselves to get distracted and miss important things. For long-term investors this mistake often manifests itself by getting caught up in day-to-day news stories and losing perspective on key structural factors. One such key factor is the global monetary system….Asset purchases by major central banks are especially powerful in boosting liquidity because they create base money from which even more money may be created through bank lending and other activities. As a result, asset purchases have a multiplier effect and can therefore be powerful tools for avoiding existential market risks due to lack of liquidity….Financial channels are driven by the US dollar as Martin Wolf points out in the FT, ‘One traditional issue is the reliance on the US dollar in the global monetary system.’ When dollars are easily available bubbles form, but when dollar liquidity dries up so too does associated economic activity. Wolf forecasts a continuation of negative trends….As a result, factors affecting dollar liquidity can pop up in lots of places. This presents a very different situation than in the early 1970s when Treasury Secretary John Connally famously (and arrogantly) told complaining European finance ministers, ‘The dollar is our currency, but your problem.’ Today, US dollar still reigns supreme relative to other fiat currencies (and therefor crucial for funding growth), but the US economy is a smaller part of the global total. At the same time, the Fed has considerably less control over US dollar liquidity which feeds back into lower global growth when it contracts. Now the dollar is everybody’s problem.”

 

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