This Week's Golden Nuggets

This Week’s Golden Nuggets

August 3, 2018

As it’s Friday we are bringing you a selection of some of the precious metals articles, graphs and videos that caught our eye this week.

We are also giving you a link to our most recent episode of the Goldnomics Podcast – Trump’s War with China. We have been getting some great feedback on this and our previous episodes of the Goldnomics Podcast, so why not check out one or two episode this weekend!

This Week’s Featured Article

Here’s Where the Next Crisis Starts

By Jim Rickards courtesy of the Daily Reckoning

So many credit crises are brewing, it’s hard to keep track without a scorecard.

The mother of all credit crises is coming to China with over a quarter-trillion dollars owed by insolvent banks and state-owned enterprises, not to mention off-the-books liabilities of provincial governments, wealth management products and developers of white elephant infrastructure projects.

Then there’s the emerging-markets credit crisis, with Turkey and Argentina leading a parade of potentially bankrupt borrowers vulnerable to hot money capital outflows and a slowdown of growth in developing economies.

Close on their heels is the U.S. student loan debacle, with over $1.5 trillion in outstanding debts and default rates approaching 20%.

Now we’re facing a devastating wave of junk bond defaults. The next financial collapse, already on our radar screen, will quite possibly come from junk bonds.

Let’s unpack this…

Since the great financial crisis, extremely low interest rates allowed the total number of highly speculative corporate bonds, or “junk bonds,” to rise 58% — a record high.

Many businesses became highly leveraged as a result. There’s currently a total of about $3.7 trillion of junk bonds outstanding.

And when the next downturn comes, many corporations will be unable to service their debt. Defaults will spread throughout the system like a deadly contagion, and the damage will be enormous.

This is from a report by Mariarosa Verde, Moody’s senior credit officer:

This extended period of benign credit conditions has helped many weak, highly leveraged companies to avoid default… A number of very weak issuers are living on borrowed time while benign conditions last… These companies are poised to default when credit conditions eventually become more difficult… The record number of highly leveraged companies has set the stage for a particularly large wave of defaults when the next period of broad economic stress eventually arrives.

Many investors will be caught completely unprepared.

Each credit and liquidity crisis starts out differently and ends up the same. Each crisis begins with distress in a particular overborrowed sector and then spreads from sector to sector until the whole world is screaming, “I want my money back!”

The problem is that regulators are like generals fighting the last war. In 2008, the global financial crisis started in the U.S. mortgage market and spread quickly to the overleveraged banking sector.

Since then, mortgage lending standards have been tightened considerably and bank capital requirements have been raised steeply. Banks and mortgage lenders may be safer today, but the system is not.

Meanwhile the Fed is raising interest. It’s undertaking QE in reverse by reducing its balance sheet and contracting the base money supply. This is called quantitative tightening, or QT.

Credit conditions are already starting to affect the real economy. New cracks are appearing in emerging markets, as I mentioned. I also mentioned that student loan losses are skyrocketing. That stands in the way of household formation and geographic mobility for recent graduates.

Losses are also soaring on subprime auto loans, which has put a lid on new car sales. As these losses ripple through the economy, mortgages and credit cards will be the next to feel the pinch.

It doesn’t matter where the crisis begins. Once the tsunami hits, no one will be spared.

The stock market is going to correct in the face of rising credit losses and tightening credit conditions.

No one knows exactly when it’ll happen, but the time to prepare is now. Once the market corrects, it’ll be too late to act.

That’s why the time to buy gold is now, while it’s cheap. When you need it most, once the crisis hits, it’ll cost a fortune.

Regards,

Jim Rickards
for The Daily Reckoning

Videos of the Week

Charts of the Week

Today’s News and Commentary

Gold and Silver Fall Again (Silverseek.com)

Gold holds steady near 1-year low (Reuters.com)

Gold demand in India down around 7% in Q1 to 187 tonnes, says WGC (Business-Standard.com)

Platinum Price Jumps as Nymex Bears Wake Up to Mining Output Cut(24HGold.com.com)

Iran’s Gold Demand at Four-Year High Days Before Sanctions (Bloomberg.com)

Source: GoldSeek.com

Warren Buffet’s Favorite Stock Market Metric Is Signaling Huge Downside Ahead (Zerohedge.com)

In socialist Venezuela, the U.S. dollar becomes king(WashingtonPost.com)

New Hope For Higher Silver Prices (Silverseek.com)

THE NUMISMATIC NUANCE: Why Hunter Riley III is Breaking His Own Rule and Buying Collectible Gold Coins in 2018 (24HGold.com)

Is China hiding its gold shorts among the speculators? (GATA.org)

Listen on SoundCloud , Blubrry & iTunes. Watch on YouTube below

Gold Prices (LBMA AM)

02 Aug: USD 1,217.60, GBP 931.22 & EUR 1,048.23 per ounce
01 Aug: USD 1,222.75, GBP 932.47 & EUR 1,046.55 per ounce
31 Jul: USD 1,219.20, GBP 926.71 & EUR 1,039.86 per ounce
30 Jul: USD 1,222.05, GBP 931.20 & EUR 1,045.95 per ounce
27 Jul: USD 1,219.15, GBP 931.06 & EUR 1,048.10 per ounce
26 Jul: USD 1,228.35, GBP 931.46 & EUR 1,049.13 per ounce
25 Jul: USD 1,230.55, GBP 935.09 & EUR 1,051.75 per ounce

Silver Prices (LBMA)

02 Aug: USD 15.45, GBP 11.78 & EUR 13.29 per ounce
01 Aug: USD 15.48, GBP 11.79 & EUR 13.24 per ounce
31 Jul: USD 15.43, GBP 11.72 & EUR 13.15 per ounce
30 Jul: USD 15.49, GBP 11.81 & EUR 13.25 per ounce
27 Jul: USD 15.36, GBP 11.72 & EUR 13.20 per ounce
26 Jul: USD 15.54, GBP 11.79 & EUR 13.27 per ounce
25 Jul: USD 15.57, GBP 11.83 & EUR 13.31 per ounce

Recent Market Updates

– Gold to Enter New Bull Market – Charles Nenner
– Here’s Where the Next Crisis Starts
– House prices aren’t just slipping in the UK – this is global
– Russia Sells 80% Of Its US Treasuries
– Are China’s Gold Reserves Slowly Rising?
– Gold Outlook In H2 2018
– Gold Production In South Africa Continues To Collapse – Plummets 85% From Peak In 1970 (VIDEO)
– Physical Gold Is The “Best Defence” Against “Escalating Currency Wars”
– Trump and War With China? Goldnomics Podcast
– Weekly Digest – News, Market Updates and Videos You May Have Missed
– Financial Terrorism In The UK – Collusion between Government, Regulators & Two Bailed-Out UK Banks
– “Biggest Bubble in the History of Mankind” Is “Going To Burst” – Ron Paul
– Global Debt Time Bomb Surges To Nearly $250,000,000,000,000 – GoldCore Video
– Trump, Russia, Brexit and the Demand For Gold and Silver – GoldCore Video Interview
– Trump Is Serious About A Global Trade War
– Ponzi Economy Will Lead To Next Global Financial Crisis
– World Cup Is 200 Ounces Of Gold Worth £140,000 – 30% Less Than Harry Kane’s Weekly Wage

Mark O'Byrne

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