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PM Weekly Market Commentary – 7/27/2019

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Viewing 6 posts - 11 through 16 (of 16 total)
  • Tue, Jul 30, 2019 - 05:51am

    #11
    CrisisMode

    CrisisMode

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    Gold vs. Negative Interest Bonds

If you were European, and you had moved out of “market” assets, with cash to invest . . ..

and the choice was PMs or negative interest rate bonds . . .

who in their right mind would choose the bonds over gold?

Seems like that is exactly what is developing over there. Intelligent investors are amping up the PM percentage of their portfolios. Just look at the gold chart in euros over the past 12 months.

 

  • Tue, Jul 30, 2019 - 06:31am

    #12

    Chris Martenson

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    Negative rates and gold

who in their right mind would choose the bonds over gold?

Negative real rates are gold positive. There’s a good correlation there over time.

Negative nominal rates..well…we don’t have a lot of history to go on, but from a logical standpoint that seems to be gold supportive.

But negative nominal *and* real interest rates?  That should be a no-brainer positive for gold.

Now, what happens when we toss in the idea of counterparty risk?  That could be DB going belly up and forcing you into a bail-in, or it could be Italy defaulting on a bond.

Seems, again, like the monetary asset that is at least not negative, and not subject to counterparty risk is preferable.  But then again, I’m not a fancy-pants central banker.

  • Tue, Jul 30, 2019 - 07:33am   (Reply to #12)

    #13
    CrisisMode

    CrisisMode

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    re: Negative rates and gold

Absolutely.

If this is not the height of craziness — where today European junk bonds are sporting negative interest rates — JUNK bonds!!

You talk about huge counter party risk with a negative rate?!?!?

This is the definition of massive delusional bubble insanity.

 

  • Tue, Jul 30, 2019 - 08:24am

    #14

    Snydeman

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    Query

PM tracking and analysis isn’t my area of knowledge, but if I’m reading the broader message, if gold continues to climb despite efforts to keep it suppressed, that’s a good sign that things are spiraling outside central banks’ control, or?

  • Tue, Jul 30, 2019 - 09:45am

    #15

    davefairtex

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    money moves in anticipation of events

The ECB has had negative deposit rates for quite some time now, and gold languished.  But now, suddenly, gold is moving higher.  And yet the Fed has yet to cut, and the ECB has yet to cut.  Why the rally?

Armstrong’s operative theory is that money moves in anticipation of events.  I believe money is now doing exactly this.  Big Money sees that the ECB is trapped, and it will be forced to “do something” as the economy turns down – and “something” will most likely be really bad for bonds and cash long term.

How much will you have to pay the bank for your bank deposits?  Who can say.  Will cash even be available?  Will you be able to take your money out of the Zone?  Who can say.

And as a result, gold/Euros is looking fantastic.  I’m just guessing Europe is responsible for a good chunk of the gold trend change.  How much money is in Italian sovereign debt?  $2.7 trillion. And its yielding 1.59%.  Is this a good deal?  At 132% debt/GDP?  If things get bad, the ECB will need to buy all of it.  And then what happens to the Euro?  And where does the Big Money park?

Money moves in anticipation of events.

Snydeman-

The new gold bull market is why I haven’t been too wrapped around an axle about “manipulation.”  It works, right up until Big Money decides to make a move.  Then, “manipulation” just allows Big Money to buy the item at a discount, until the manipulators finally give up.

This is why Armstrong says that “pegs always fail.”  The manipulators eventually run out of money, simply because the market is bigger than they are.

You can play all kinds of games with the 800 pound gorilla as long as it is dozing.  Once it wakes up?  Good luck with that.

  • Tue, Jul 30, 2019 - 11:26am

    #16

    sand_puppy

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    Schiff: If You Understood What This Means, You Would Be Buying Gold

If You Understood What This Means, You Would Be Buying Gold as Fast as you Can.

Peter Schiff recently appeared on RT Boom Bust to explain why he believes this is the beginning of a much bigger long-term rise in the price of gold. And it’s not just because the Fed is cutting rates.

In fact, they are going to cut rates next week and this is going to be the first step on the road back to zero. And the Fed is also going to return to quantitative easing. But we just found out that Donald Trump is cutting a deal with a Democrats to basically throw out any progress Republicans made back in 2011, thanks to efforts of the Tea Party, to at least try to rein in the increase in government spending. So, they’re throwing caution to the windWe are going to see deficits going through the roof over the next several years, and that’s even without the recession, which I believe is coming and which is going to make them much, much worse.”

Consider that in the midst of what is supposed to be a strong economy, we’re already seeing record-setting deficits. As Peter pointed out, bigger deficits mean more money-printing and that means more inflation.

All of this is very bullish for gold … If you understood what all of this means, you would be buying gold as fast as you can.”

The host asked Peter where he sees the price going in the near future. He said he doesn’t see much resistance in the price of gold until you get up around $1,800 or $1,900 – the vicinity of the 2011 highs. Peter pointed out that gold came off that peak just as Congress was taking some steps to rein in deficit spending.

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