This year has been very frustrating for precious metals equity investors with gold having risen 10% from the beginning of the year to its high in May while gold stocks (as measured by the Gold BUGS Index, HUI) have risen only 5% from the start of the year to their April high, underperforming gold by more than 20% year-to-date.
Conventional wisdom — backed up by years of observation — states that gold mining shares tend to outperform the underlying metal in good times because they’re “leveraged to the price of gold.” That is, their extraction costs are more-or-less fixed, so when gold rises, most of the increase flows directly a miner’s bottom line, increasing its earnings at a rate that exceeds the metal’s move.
The US consumer price index rose significantly to 3.44% in May from a year ago and 0.2% from its April level. The increase was bang on target with my estimate. However, I believe that May’s figure on a year-ago basis approached a plateau in the current cycle.
This perspective posting examines the recent history of U.S. debt expansion, bubble formation and bubble deflation, as narrated by the S&P500, and speculates on future economic conditions and the behaviour of asset prices.
U.S. DOLLAR gold bullion prices bounced to $1528 per ounce Friday morning London time – just below where they started the week – as commodities fell and US Treasuries dipped. Stock markets rallied, but were still on course for a loss on the week.
Month to date Federal withholding taxes as of June 15 were down 5.5% from last year, negating the monthly gain shown in May. That gain was primarily due to the calendar anomaly of a payment date for a biweekly and semimonthly pay period for many employees coming on June 1 last year.
Traders dealt with an abundance of inputs on Thursday. And while the news was definitely not positive across the board, it appears that the end result was. Thus, the argument can be made that when a market stops going down on bad news it means that those who wanted to sell have likely already done so.
Coal. It's the energy source we all love to hate for its acid rain, smog, and greenhouse-gas generation, and yet it provides 45% of the electricity that powers the United States.
Most people, provided they have a minimum of experience, know that taking a bone from a dog is a risky proposition. In terms of political power, few dogs are bigger than the American voting public. Taking away, or even threatening to take away, the major entitlements to which they have become accustomed could expose politicians to a mauling at election time.
It appears that there will be no Greek debt default for now. The deal with Germany and France means the can is kicked down the road. Kicking the can means adding subsidy and postponing reckoning. As long as large powers agree to do it, “can-kicking” may persist for a very long time.