A Global Flight To Gold & Treasuries Is Among Us!

February 24, 2020

* Gold soars on Friday and this morning!

* Dollar is still well bid VS most currencies… 

Good Day… and a Marvelous Monday… Next week, I’ll be on vacation, my annual spring vacation from writing, so this is just a warning! Well, Spring Training games finally began for me on Saturday. I had my annual emotional moment when I come up the stairs onto the concourse level and see the plush green field for the first time each year. I know in my heart of hearts that it’s only by the grace of God that I get to attend spring training each year, and so it was on Saturday, that I got to smell the hot dogs grilling, the popcorn popping and the beer guy selling his beer. And I thought to myself, Man, you are a lucky person, Chuck… My beloved Cardinals won their first spring training game VS the Mets, who back in the 80’s we referred to as “pond scum” And with that bit of history, The Killers greet me this morning with their song: Somebody Told Me…

Well, gold stole the show on Friday last week, soaring higher by $23 on the day, and  when I looked at the shiny metal, this morning, it was up another $37… So Gold has gapped higher by huge chunks in the past few days, folks… and trades this morning with a $1,681 handle… It’s all about the fears pf the Coronavirus spreading… Now there are reported death from the virus in Italy… It’s spreading folks… and the safe havens like Gold & Treasuries are the place to be… Gold is soaring and Treasury yields are dropping like flies… Just last week the 10-year’s yield was 1.56% and this morning it is 1.40%… Just a public service announcement here folks… that when bond yields go down, the price of the bond goes up, and vice versa… So with the yield on the 10-year dropping, that means that the price of the bond is soaring… just like Gold!

The currencies rebounded from last week’s selling on Friday, and the euro regained the 1.08 handle and beyond… I really, in my heart of hearts knew that last week’s selling of the euro was overdone, and the recovery proves that. The Safe haven currencies that used to be in play when things like this happened were yen, francs, euros. Gold and Treasuries have been changed to: Gold and Treasuries, and somewhat dollars… Although on Friday the dollar bugs got their rears ends handed to them! 

Why have euros, francs and yen all been omitted this time in safe haven buys? Well, they all three have negative deposit rates and yields, and last week Japan’s GDP got trashed! So… Gold and Treasuries are the picks to be the real safe havens right now, and why not? Gold doesn’t have yield, but it also doesn’t have negative yield, and Treasuries are in rally mode… So, what are you waiting for?

This is a “global flight to Gold and Treasuries” folks… and you will notice that I didn’t mention stocks… To me, the stock phenomenon has run its course, Yes, there are famous analysts out there that will tell you that as long as the Fed has the stock markets’ back then everything will be seashells and balloons…  But…. I disagree with them, this virus thing seems to be the black swan that has been hovering over the markets and economies like the Sword of Damocles for years, has finally swam into our lake… 

I hear you brother… Gold and Treasuries have taken off and now you feel it’s too late to back up the truck and buy them… Ahhh, grasshopper, all I’ll say to that is, if you read this letter, you’ve been warned for months, so I have no sympathy for your plight, but… I  do believe there’s more to go, in this global flight to Gold and Treasuries, so it’s not the absolute too late time, it’s just late, but like the old saying goes, “it’s better to be late than never”… I’m just saying.. 

The other currencies than the euro, have been taken down in the overnight markets, with the Canadian dollar/ loonie, and to a lesser extent, the  Russian ruble, have maintained their respective prices, but currencies like the Mexican peso, Hungarian forint, Czech koruna, and especially the Aussie dollar (A$) have lost a lot of ground to the dollar bugs…  So, in essence the dollar remains well bid, except against Gold… 

There’s not much in the way of real economic data in the U.S. Data Cupboard this week folks…  We’ll have to wait until Thursday before we see Durable and Capital Good Orders, which have been negative to poor performances for months now, and I don’t see them changing colors like a chameleon…   

On a sidebar, my good friend Dennis Miller sent me a note last week with some great sayings on them, and one of them said, “I’m as confused as a Chameleon in a bag of Skittles”    HAHAHAHAHAHA! 

OK, to recap, and yes, I know this is short, but I have my weekly visit to the St. Lucie wound center this morning, so this has got to get out the door with me following it to make it on time!  But the recap is simply that there’s a Global Flight to Gold & Treasuries that’s going on folks, and Gold and Treasuries are soaring higher! Gold is up $37 already today!  Chuck believes that the Coronavirus is the proverbial Black Swan for the markets and economies, that doesn’t bode well for anything other than Gold and Treasuries… 

For What It’s Worth…  OK, I forgot to mention in the U.S. Data Cupboard discussion that the Markit version of the PMI (manufacturing index) dropped like a rock in January to below 50!  and the folks at Zerohedge.com picked up the commentary on it, and that article can be found here: https://www.zerohedge.com/economics/treasury-yields-plunge-record-lows-us-pmi-collapses-contraction

Or, here’s your snippet: “Markit’s U.S. Manufacturing bucked the surprising surge in ISM Manufacturing in January and preliminary February data was expected to confirm this slowing trend (with Services steadily expanding).
• U.S. Feb. Services Flash PMI 49.4; Est. 53.4
• U.S. Feb. Flash Manufacturing PMI 50.8; Est 51.5
• U.S. Feb. Flash Composite PMI 49.6 vs 53.3

‘hard’ data – actual economic flows – has been weakening for 4 months, and February appears to have been catch-down time!  

New orders received by private sector firms fell for the first time since data collection began in October 2009. The fractional decline in new business stemmed from weak client demand across the service sector and the slowest rise in manufacturing new order volumes for nine months. Private sector companies continued to struggle to attract foreign client demand as new export orders fell for the second month running.

Finally, we note that the composite output at factories and service providers fell by 3.7 points to 49.6, the lowest level since October 2013, when the U.S. government shut down.”

Chuck Again… Well this poor performing data helped to send Treasury yields down, but the Global flight to Gold and Treasuries is what’s driving the yield drop… But poor PMI data doesn’t hurt, that’s for sure!

Currencies today 2/24/20 American Style: A$ .6606, kiwi .6327, C$ .7626, euro 1.0821, sterling 1.2903, Swiss $1.0201, European Style: rand 15.1282, krone 9.3672, SEK 9.7861, forint 312.34, zloty 3.9752,    koruna 23.2882, RUB 64.04, yen 111.33, sing 1.4017, HKD 7.7947, INR 72.00, China 7.0262, peso 19.12, BRL 4.3878, Dollar Index 99.57, Oil $51.25,    10-year 1.40%, Silver $18.81, Platinum $968.41, Palladium $2,670.65, and Gold… $1,681.16

That’s it for today…  Watched two baseball games this weekend, back in my favorite place to be Roger Dean Stadium for a day game!  Our Blues had a good game last night and now that’s 3 wins in row after their “rough spot”…   Can you believe that February is almost over? Next week is March, my fave month!  Friends all gathered around the pool here last night, and some great conversations were had… The good thing with my friends is that they never ask me my opinion about the markets or economies, for they know I would go into a rant that would leave them speechless! HA! OK, time to get going… Grand Funk Railroad takes us to the finish line today with their song: We’re An American Band…  I hope you have a Marvelous Monday and please be Gold To Yourself! 

Chuck Butler