January 18, 2023
* currencies and metals rally in the overnight markets
* Is the end of the BOJ’s monetary policies coming to an end?
Good Day.. And a Wonderful Wednesday to you! Another glorious day down south yesterday… I always count my lucky stars that I am able to enjoy my winters in the warmth of S. Florida sunshine… Who would have thought that a poor kid from S. St. Louis, from a family of 7, would carve out a life that would lead to this? I am lucky… Now, let’s review what I’m going to talk about today… Wait!, What? That remains to be seen, so sit back, grab some coffee, or tea, or V8 juice, whatever floats your boat, and let’s get to today’s Pfennig! Steely Dan greets me this morning with their song: Reelin’ In The Years…
Well, if yesterday isn’t proof that I need to go away and stay away from commenting on the markets, then I don’t know what is… All the time I was gone, the dollar got sold… The day I come back and write, the dollar gets bought… Go figure! One day does not make a trend, just like one swallow doesn’t make a summer, but… I don’t like it when I come back and talk about how the dollar seems to have given up its long in the tooth, strong trend, only to have it slammed in my face!
So, as I just said, the dollar got bought yesterday, not by the bushelful, but still bought, nonetheless. The BBDXY gained about a point on the day, the dollar index gained about 50 bips, and the euro fell back below 1.08… Gold tried to fight back from its early morning loss, but every time it appeared it was ready to break out to the upside, it got sent to the woodshed… Typical, boys in the band, price manipulation is how it appeared to me… Gold ended the day down $7, to close at $1,909.70, and Silver lost 35-cents on the day to close at $24.01…
Leave it to Kitco, to put a spin on the Gold & Silver selling yesterday, that never even touches on price manipulation… They just can’t get themselves to talk about that… So, Kitco said, “Gold and silver prices are weaker in midday U.S. trading Tuesday, after gold scored a nine-month high overnight. Normal downside price corrections, in existing uptrends, were featured in the two metals markets. Profit taking from the shorter-term futures traders was also seen.
“normal downside corrections, my wait! Chuck you can’t say that! Well, anyway, I’m sure most people can fill in the blanks!
I still believe that it’s not too late to buy Gold at what I believe will be cheaper prices than will be available as the year goes on. I was reading an article from Nomi Prins, who used to be a big shot at Goldman Sachs, and has been warning people about things for years now, said it the other day, and it makes abundant sense, “Now is a good time to have an allocation of Gold & Silver in one’s portfolio”…
The price of Oil and the 10-year Treasury didn’t really move yesterday, with Oil remaining trading with an $80 handle, and the 10-year at 3.55%…
I do want to point out something that author and newsletter guru, Bill Bonner keeps pointing out that this that the Bond market rally that began over 20 years ago, has already signaled, and confirmed, a major change. The benchmark 10-year Treasury yield has gone from less than 6/10th of one percent…to over 3.6% now.” – Bill Bonner
Last year was a bad year for the traditional portfolio mix of stocks and bonds… The Dow lost 8.8%, The S&P lost 19.1%, and the NASDAW lost 33% in 2022, while the total bond index lost 13% in 2022… While Gold lost a whopping $5… I’m just saying…
In the overnight markets last night…. Well, the dollar selling returned… C’mon boys, make up your collective minds! That’s crazy stuff, to buy one day and sell the next, C’mon pick a lane! The BBDXY lost 3 index points overnight, and the euro climbed back above 1.08. Gold is up $7 in the early trading today, and Silver has added 23-cents. The price of Oil has risen a buck and trades this morning with an $81 handle, while bonds got bought again… I really don’t get these bond buyers right now… They just won’t read the writing on the wall, that says, that interest rates are going higher… Oh, well, it is what it is…
The Aussie dollar, (A$) has been stealth-like in its rise but suddenly, it is trading over 70-cents, and looking pretty fit… Long time reader, Bob, sent me a note the other day about an article he read that said that Australia has moved past the U.S. as the top country for “the land of Opportunity”… Well, that has to mean something! Long time readers know of my affection for the A$, kiwi, and C$’s… I’m just saying that these three are really sneaking higher and higher…
OK… so what to talk about now? Ooh, ooh, call on me Mr. Kotter! Well, it has seemed that Japan would be insulated from the inflation problem that the rest of the world has, thus allowing the Bank of Japan to continue their ZIRP and bond buying policy… Not so fast there Tim! Did you hear what Japan just printed for Producer Price data? Japanese PPI hit a 42-year high of 10.2% in December… Now, we all know what that means for consumer inflation going forward, right? Well, it means that consumer inflation will soon see rises that reflect the huge increase in PPI… And that could mean that the BOJ will have to abandon their dual policy of ZIRP And bond buying, and that thought has certainly been a major reason the Japanese yen has been in rally mode lately. Of course the dollar being much weaker so far this year hasn’t hurt the yen’s rally…
And in the good news section of today’s letter, which I might add is a rare occasion, but nonetheless, here it is from www.moneymetals.com “Lawmakers in Jackson have just introduced legislation to exempt gold and silver coins, bars, and rounds from the Mississippi’s state sales tax. Rep. Jill Ford has reintroduced House Bill 508 at the beginning of the 2023 session.
This year’s legislative effort seeks to build on last year’s momentum. Last year, Rep. Ford’s sales tax exemption bill passed out of the Mississippi House of Representatives overwhelmingly but it missed a deadline in the Senate needed to receive a hearing.
Two similar Mississippi bills have already been introduced this session (HB 23 & SB 2019).
Imposing taxes on the exchange of Federal Reserve notes for monetary metals (i.e. gold and silver) has become an unusual and outmoded practice in the United States… only 8 states still engage in it.
Most recently, Alabama, Tennessee, and Virginia last year passed legislation to exempt or extend current sales tax exemptions on the precious metals. With 42 states now having eliminated sales taxes on purchases of gold and silver, Mississippi may be the next state to do so.”
Chuck again… Good for Mississippi!
OK… onto other things that are on my mind… Davos is on my mind… I wish it weren’t, but somehow it creeps up on me… This from the Wall Street Journal: “Business leaders and economists gathered here this week for the World Economic Forum’s annual event say they see the world buffeted by inflation and the high interest rates that central banks have pushed through to combat it — and the threat of recession as those rates choke at least some demand. That is leading some of the world’s biggest companies to hold their breath — and their spending — ahead of an uncertain year.”
Chuck again… This is just what we need (NOT!) these self proclaimed kings, telling us how to live our lives… I despise all that attend Davos, and what they will spew out at the end… I’m just saying…
And finally, there was a good report out of Russia yesterday… here’s Reuters to tell us about it: “Russia’s current account surplus hit a record high in 2022, the central bank said on Tuesday, as a fall in imports and robust oil and gas exports kept foreign money flowing in despite Western efforts to isolate the Russian economy.
Russia’s current account – a measure of the difference between all money coming into a country through trade, investment and transfers, and what flows back out – came in at $227.4 billion, up 86% from 2021.”
Chuck again… You see, when a country can adapt, improvise, change, on a dime, they can become a real power to deal with… And Russia’s lost revenue of oil and gas shipments to Europe, were replaced with shipments of Oil and Gas to China, Iran, Turkey, etc. I’d say they pivoted and won…
The U.S. Data Cupboard yesterday has the Empire State Manufacturing Index for this month, and it fell out of bed, falling 32.9% VS -11% in December… I normally don’t get to interested by these regional reports, because they never seem to add up to the National Manufacturing report (ISM) , but this drop was so strong, and I think shows the true picture of what the economy is looking like…
Today’s Data Cupboard has the December Retail Sales, Industrial Production and Capacity Utilization reports… I told you yesterday that the BHI indicated that the Retail Sales report will be soft to negative, and Industrial Production will remain in negative territory. Remember the Retail Sales report included Christmas shopping… So when it prints negative, you’ll be like me and scratching your heads and wondering how that happened during Christmas shopping season!
To recap… The day Chuck returns, the dollar gets bought, after getting sold all the while he was gone! Chuck’s offer is still out there for any takers, or group of takers… Gold & Silver suffered losses on Tuesday, that Chuck says was magnified by price manipulators, but Kitco says it was a normal correction… Who you gonna believe? Japan’s PPI shot through to the moon in December, and pretty much puts the kyboshes on the BOJ continuing their ZIRP and Bond Buying. And Mississippi is joining other states in not taxing Gold & Silver sales…
For What It’s Worth… Well, here’s another article that I borrowed from Ed Steer’s letter this morning, and it is about how China is weaponizing their Gold horde, and it can be found here: Move over cryptocurrency, gold could have the last laugh this year | South China Morning Post (scmp.com)
Or, here’s your snippet: “There has been considerable excitement in the gold market lately with the price touching US$1,900 an ounce last year and appearing likely to breach US$2,000 before long. But what is happening below the radar with the huge build-up of central bank gold holdings is of greater interest.
The People’s Bank of China and Russia’s central bank have been buying heavily, and while this may appear to be little more than shrewd, given that inflation is set to continue rising (even if at a slowing pace), these purchases have wider monetary and strategic significance.
They signify further challenges to the global financial and monetary order in 2023 as China and Russia seek, for their own separate reasons, to counter what has in effect become a tyranny of dollar domination. And they point to growing distrust and geopolitical tension between major economic powers.
Central banks as a whole are estimated to have bought more gold (399 tonnes) in the third quarter of 2022 than ever before, according to the World Gold Council, a London-based organisation backed by gold mining companies.
The gold market is full of mysteries about who is buying and when, why and where. Hence, last year’s buying surge has gone largely unnoticed. And why, if gold has been so much in demand, has the price not crossed the US$2,000 level?
Russia and China rank fifth and sixth respectively in the world in terms of gold reserves held. However, China and Russia are also respectively the world’s largest and third largest producers of gold, with Australia occupying the second slot. When their central banks begin buying a larger proportion of that output, it does not show up as an international market transaction.
Nor do all central banks report their gold holdings to the International Monetary Fund each month. According to online bullion investment service BullionVault, China’s central bank reports gold purchases “sporadically” while the Bank of Russia ceased reporting gold stockpiles soon after the invasion of Ukraine when it became locked out of bullion markets.”
Chuck again… this report is correct in that China hasn’t told authorities how much physical Gold they do have for over a decade now… And with all the buying why isn’t Gold already at $2,000? We all know why, now don’t we?
Market Prices 1/18/2023: American Style: A$ .7022, kiwi .6487, C$ .7478, euro 1.0825, sterling 1.2370, Swiss $1.0944, European Style: rand 17.0127, krone 9.8393, SEK 10.3173, forint 366.26, zloty 4.3436, koruna 22.1429, RUB 68.80, yen 129.09, sing 1.3182, HKD 7.8263, INR 81.24, China 6.7532, peso 18.62, BRL 5.0747, BBDXY 1,222.61, Dollar Index 102.12, Oil $81.75, 10-year 3.47%, Silver $24.24, Platinum, $1,055.00, Palladium $1,753.00, Copper $4.20, and Gold… $1,916.47
That’s it for today… I liked going on that 10-day cruise to start the New Year, that means that January is about ½ over by the time I get back to writing! Thanks to all the dear readers who sent me a “welcome back” note yesterday… I truly appreciate each and every dear reader that shows that they don’t have to get nasty with me to get a point across! So, have you read about the next Polar Vortex? It’s coming to America, not the Neil Diamond song, but coming over the top of the earth from Siberia, and it will bring the coldest weather to parts of the country by the end of next week… Not that I’m a weatherman or play one on TV, just a public service announcement! Time to move along… The Strawbs take us to the finish line today with their song: Autumn… “ Hold on to me, I’ll hold onto you, I will be the one, that will always see you through”, yeah that song… I hope you have a Wonderful Wednesday today, and please remember to Be Good To Yourself!
Chuck Butler