A Brief Rally For Currencies & Metals

August 24, 2022

*OPEC’s Warning lights a fire… 

* Bad data in the U.S. means strong dollar… go figure… 

Good Day… And a Wonderful Wednesday to you! Another Chamber of Commerce Day here in my little river town yesterday. This year’s version of the dog days of summer, has been very pleasant… Last night as i sat outside watching my beloved Cardinals, it got chilly, and I ended up going back inside to watch the rest of the game. I just don’t recall an August with weather like this… My grandkids went back to school yesterday, along with the teachers, Dawn and Andrew.. Robert Palmer greets me this morning with his song: Put On Your Sailing Shoes… 

Well, we had a rally of sorts yesterday in the currencies and metals… The BBDXY lost 5 index points and fell back to finish the day at 1,288. The euro remained under 1, however, and even with the drop in the BBDXY, the currencies still look very sickly and in need of a medicine..  The dollar is very overbought at this point folks… And usually, the markets will correct an overbought position, but who knows what these boneheads are going to do now? 

Gold finally found a bid yesterday and ran with it, gaining $11.40 on the day to close at $1,748.30… This rally could be seen as the start of something, but I doubt that it will, as the strong dollar right now is smothering everything else around it, and it will take some time for all that to be removed…  Silver also found a bid yesterday, and gained 12-cents to close the day at $19.21

That warning I told you about yesterday, from the folks at OPEC regarding how they would Act if the markets didn’t iron out the hinky pricing of Oil, has resonated with traders, and the price of Oil gained another $2 yesterday, and ended the day trading with a $94 handle…  That’s an $8 gain in the last 4 trading days for the price of Oil, which last week at this time was sporting an $86 handle… 

The yield on the 10-year Treasury rose again and this time to a 3.05% yield yesterday…  This rise in the 10-year’s yield has got to be an answer to the light bulb going on in Traders’ heads that I talked about on Monday, that centered around traders finally getting the message that the Fed Heads are going to keep hiking rates. 

Speaking of the Fed Heads keeping their rate hike hats on…  I had been under the impression that the Fed Heads would opt to hike rates 50 Basis Points at the September meeting, instead of the 75 Basis Points that has been their level of choice the previous two meetings… But, the more I think about this, the more I’m inclined to say that the Fed Heads will keep their rate hike at the 75 Basis Points level…  

I say that because, in my heart of hearts, I have to think that the Fed Heads see their dilemma of being so far behind the inflation rate and that they need to play catch-up…  I do admit though, that my hope that they see their dilemma is overweighing my first thought that they are all a bunch of knuckleheads and if there’s a way to screw this up, they will find it… 

In the overnight markets last night, it was as I expected it to be, a giving back session… The dollar got bought overnight, and the BBDXY has gained back 3 index points of the 5 it lost yesterday. I’m still thinking that the dollar is overbought at this point, and something has to give soon… Apparently, yesterday was not the “soon” we were looking for! 

Gold starts the day down $4, and Silver down 18-cents… UGH! Of course, these are small numbers that could easily be overcome today, but that’s not the trend that we’ve seen lately, with the daily trading.  So, I’m not hopeful at this point of the morning. 

Well, it’s that time of year again, when all the elites in the financial world gather for a major boondoggle in Jackson Hole Wyoming… And this coming Friday, the Big Fed Head, Jerome Powell, will be speaking, and the markets will all be listening to see if he gives any hint as to how the Fed Heads will vote at the next FOMC. 

Powell’s speechwriters must be going bananas, because the Personal Consumption Expenditures (PCE) will print on Friday morning, just ahead of his talk… For, if the PCE shows that inflation has weakened, it could change his talk, and on the other side if the PCE remains strong, it could change his talk… What to do, what to do?  

The markets are ga-ga over what the Fed Heads have to say… C’mon wake up! The Fed Heads are not the panacea here… They are not going to save us from the evils of a debt ridden, inflation racked, everything bubble, economic mess!  Nope, it’s not going to happen folks..  And as soon as the markets finally get the memo on that, the dollar will continue to be overbought. 

The U.S. doesn’t have inflation cornered…. it’s soaring all over the globe, and in Europe it’s worse than it is here, that is if you use the stupid CPI that the BLS hedonically adjusts as a comparison.  The Eurozone PMI (manufacturing index) dropped below the line in the sand, 50 level last month… So, Europe not only has inflation soaring, they also have a recession on the way, just like the U.S. has seen… 

In the “old days”, I used to say that whatever goes on in the U.K. it comes on our shores a few months later… But that’s back when everything in the markets made sense, and things were different than they are today… 

I sit here each day for hours and try to figure out what the hell is happening with Gold, as inflation continues to be at the top of the list of articles that get printed…  Then I read this piece on Kitco. com that made sense… Check it out: “After falling 3% last week, gold was trading near three-week lows Monday as the strong U.S. dollar continued to pressure the metal. But there could also be another reason for gold’s poor price performance, according to Bloomberg Intelligence.

Year-to-date, gold is down 4.3% despite massive inflation concerns, which are still top of mind for central banks worldwide. And one potential explanation could be that the gold market has been looking for deflationary forces to win out in the long term.

“Gold’s poor performance despite the greatest inflation in 40 years may show that the metal, considered a store of value, has been anticipating enduring deflation and is resuming its propensity to outperform most commodities,” Bloomberg Intelligence senior commodity strategist Mike McGlone said in a note Monday.”

Chuck Again…  OK… I explained this to you before, but here goes again… When prices soar, as they have here in the U.S., consumers change their priorities in what they buy and don’t buy… So, let’s take widgets… As widgets get overpriced, consumers stop buying widgets, and that causes the prices to drop because no one is buying widgets…  deflation… 

I don’t know and it’s too early to tell for sure, if this deflation thing is going to come to fruition… We’ve got to get through the soaring inflation first, and I don’t see that happening any time soon.  but the metals traders are “looking ahead” apparently… ? 

The U.S. Data Cupboard yesterday had two very scary headlines: 

U.S. Services Sector Collapsed in Augus

U.S. New Home Sales Crashed in July       

And the dollar gets bought overnight? How on earth did those traders figure that the dollar needed to be bought after seeing those two data headlines?   I shake my head in disbelief, folks… 

Today’s Data Cupboard has the Durable Good Orders, and Capital Goods Orders for July… I don’t expect them to show any goodness in these data prints… But in the past few months, bad data in the U.S. is good for the dollar… Go figure!  I have a FWIW article for you today that will give you the willies, so stay tuned! Don’t touch that dial! 

To recap… The dollar backed off its recent domination of the currencies and metals yesterday, but only briefly, as the overnight markets returned to dollar buying. OPEC’s warning seems to have done the trick with the price of Oil gaining again, after OPEC warned traders about their trading of Oil and its hinky prices… Chuck talks about deflation, following inflation this morning, you won’t want to have missed that!

Before we head to the Big Finish today, I have a bone to pick… Well, I received word last night that the POTUS is getting set to announce that the US Govt will forgive student loans of $10,000… that’s just great! Who’s going to pay for that. Well, I am, and you are that’s who! And to think I was finished paying college tuitions after I paid in full for all three of my kids to attend college! Silly me! This news ticks me off to no end! 

For What It’s Worth…  Well, this is a good FWIW article in that it expressed fear about the situation in the U.S. and it can be found here: Can’t Pay Utility Bills? 20 Million US Homes Behind on Payments, Facing Shutoffs – Bloomberg

Or, here’s your snippet: “Adrienne Nice woke up early on the morning of July 25 to news she’d been dreading. The power company, Xcel Energy Inc., had shut off the electricity to the small Minneapolis apartment she shares with her teenage son, just as a heat wave was bearing down on the city.

Nice had been struggling financially ever since the pandemic hit, racking up more than $3,000 in past-due utility bills. The warnings she’d gotten on her monthly statement—“FINAL NOTICE” scrawled in big, bold letters—had prepared her to some degree, but it was still jarring to find the fridge dark and the air conditioner silent. With temperatures set to reach 95F (35C) in the coming days, she needed the power back on, and fast.

The Nice household is one of some 20 million across the country—about 1 in 6 American homes—that have fallen behind on their utility bills. It is, according to the National Energy Assistance Directors Association (Neada), the worst crisis the group has ever documented. Underpinning those numbers is a blistering surge in electricity prices, propelled by the soaring cost of natural gas.


The power bill crisis is even more acute in Europe, where the spike in natural gas prices has been far greater in the wake of Russia’s invasion of Ukraine. Policymakers there have sprung into action, throwing billions of euros in aid at struggling families to help them pay bills. There’s been no meaningful talk of doing anything on a similar scale in the US, where the hand-wringing has been dedicated, as always, to the gyrations of gasoline prices at the pump.

Utility shutoffs can have deadly consequences, though, a risk that’s becoming more palpable as summer heat shatters records. Already gut-punched by soaring prices for just about everything, more and more people are facing a choice among food, housing, and keeping the power on. “I expect a tsunami of shutoffs,” says Jean Su, a senior attorney at the Center for Biological Diversity, which tracks utility disconnections across the US.”

Chuck again… 20 Million homes can’t pay their utility bill?  And that’s just the start of it, I’m afraid… Recall I said above about how consumers have to decide what to spend money on these days and what not to spend money on…  Apparently 20 Million homes have decided that they wont’ pay their utility bill… 

Market Prices 8/24/2022: American Style: A$ .6898,  kiwi .6178,  C$ .7698, euro .9930, sterling 1.1786, Swiss $1.0313, European Style: rand 17.0380, krone 9.6946, SEK 10.6664,  forint 414.13,  zloty 4.8040,  koruna 24.7965, RUB 60.26, yen 136.73, sing 1.3954, HKD 7.8467, INR 79.81, China 6.8690, peso 19.95, BRL 5.1059,  BBDXY 1,291.21,  Dollar Index 108.92, Oil $94.53, 10-year 3.05%, Silver $19.03, Platinum $881.00, Palladium $2,006.00, Copper $3.65, and Gold… $1,745.60

That’s it for today… Well, my beloved Cardinals had to settle for a split in their doubleheader yesterday with the Cubs. I don’t believe the Cardinals’ bats arrived from Arizona until the second game yesterday… I got to see a former colleague and longtime friend at lunch yesterday. Ann Hopkins came to Fenton! Good friends, Duane and Mike joined me outside yesterday afternoon for the 1st game of the doubleheader, but then I sat outside by myself for the second game… Poor, poor pitiful me (Linda Ronstadt) HA!  The Counting Crows take us to the finish line today with their song: Round Here…  I hope you have a Wonderful Wednesday today, and please Be Good To Yourself!

Chuck Butler