While Janet Yellen keeps hinting at a “possible” US interest rate hike – something Peter Schiff has argued for months is highly unlikely – it appears the European Central Bank (ECB) will soon take rates deeper into negative territory. Americans should take note of what is happening across the pond, because it may eventually happen here.
According to a Reuters report, a consensus is forming at the ECB to drop the interest rate it charges banks in December:
On Monday, the United States national debt increased $339 billion.
In one day. Just like that.
What caused the sudden spike?
That same day, President Obama signed a bill into law suspending the debt ceiling until March 15, 2017. That allows the government to once again borrow, free from the constraints of an $18.1 trillion ceiling.
One of America’s largest online retailers has prepared for a financial crisis. Have you?
During a recent speech (see video below) at the United Precious Metals Association, Overstock.com Chairman Jonathan Johnson said the company has stockpiled $10 million in gold and silver outside of the banking system. He said most of the gold is in the form of “button coins” suitable for payroll:
We want to be able to keep our employees paid, safe, and our site up and running during a time of financial crisis.”
Sales of American Silver Eagle bullion coins shot through the roof over the past several months and will likely break a record in 2015.
According to a Newsmax Finance report, 2015 sales year-to-date are ahead of last year’s pace. Through the third week in October, sales stood at 38,986,000 ounces. That compares to last year’s 38,121,000 ounces. If this trend continues, 2015 sales will exceed last year’s record of 44,006,000 ounces.
Swedes are reportedly hiding money in microwave ovens in a desperate attempt shield it from the negative effects their central bank’s “war on cash.”
As Business Insider puts it, the Nordic country is “shaping up to be the first country to plunge its citizens into a fascinating — and terrifying — economic experiment: negative interest rates in a cashless society.”
The Swedish central bank, the Sveriges Riksbank, on Wednesday held its benchmark interest rate at -0.35%, the level it has been at since July. Though retail banks have yet to pass that negative rate on to Swedish consumers, they face increased pressure to do so as long as the rates remain where they are. That’s a problem, because Sweden is the closest country on the planet to becoming an all-electronic cashless society.”
Gold-backed exchange-traded funds (ETFs) generally follow the price of gold. As a result, they have been underperforming relative to the general stock market this year.
For instance, SPDR Gold Trust (GLD) lost about 28.3% of its value in 2013, fell another 2.2% in 2014 and yet another 3.8% so far this year. It was recently trading at $109.72 per share.
ETFs are backed by physical gold held by the issuer, and are traded on the market like stocks. They allow investors to play gold without having to buy full ounces of gold at spot price. Since their purchase is just a number in a computer, they can trade their investment into another stock or cash pretty much whenever they want, even multiple times in the same day. Many speculative investors appreciate this liquidity.
There are also gold mining ETFs that track the value of gold mining companies and also generally follow the price of gold. These are very popular with speculative commodity investors and some of the most popular hit record lows this past summer, like the Market Vectors Gold Miners ETF (GDX).
With gold ETF prices being so low, many of Peter Schiff’s clients have asked if they should be investing in these ETFs.
Investors and central banks around the world are buying gold.
Overall worldwide demand for the yellow metal surged during the third quarter. According to a Reuters report, demand for gold coins and gold bars, along with buying by central banks, drove a 7% Q3 increase.
Demand for gold coins and bars jumped by 26% year-on-year in the last quarter, GFMS analysts at Thomson Reuters reported in the Q3 update of their Gold Survey 2015. Retail investment surged in top consumers India, China and Germany, with buying rising 30%, 26% and 19% respectively. Those three markets alone accounted for an additional 26 tons of retail buying.”
It appears likely the yuan will join the International Monetary Fund benchmark currency basket this year, according to sources close to the process.
Reuters reports IMF staff plan to give the all-clear for yuan inclusion, laying the groundwork for a favorable decision by policymakers. Three people briefed on IMF discussions said a draft report from the staff reached a favorable conclusion on including the Chinese currency. One officer said the path forward appears clear:
Everything is on course technically and there is no obvious political obstacle. The report leans clearly towards including the RMB in the (basket) but leaves the decision for the board.”
Russia and other countries formerly part of the Soviet Union continue to increase gold reserves at a steady pace.
Russia added another 34.2 tons of the precious metal in September. This follows on the heels of a 1 million ounce increase in Russian gold reserves in August, and continues a steady buying spree by the world’s seventh largest holder of gold.
Since the global financial crisis, Russia has increased its gold reserves at an average pace of about 300,000 ounces per month.
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