A Return To Safe Havens?

Rocktober 4, 2022

* Currencies & metals gain on Monday… 

* Oil production cuts have the price of Oil on the rebound… 

Good Day… And a Tom Terrific Tuesday to you! Another Chamber of Commerce Day here yesterday, had me sitting outside, reading for hours, until it was nap time! HA! I do get cranky around nap time! HAHAHAHA! Seriously, I still take chemo every night, sometimes I think to myself, how on earth do you do the things you do each without major problems? Now, granted I do have bad days, but they are further and further apart these days… YAHOO! I’m a true believer that one’s body tells them when they need to sleep, and I don’t ever argue with my body! John Lennon greets me this morning with his song: Mind Games…

Whew! What a day yesterday for Gold & Silver! But first let’s talk about what things might have had something to do with this huge rally yesterday… First off we had the Fed Heads in a “out of scheduled meeting” holding fort and the markets were on edge with what might be said at that meeting, but just like the one they held a few months ago “out of pocket” it was a Meh… But the markets didn’t know that until late in the day, when nothing came from the meeting.

Second up was the news that Credit Suisse might be having major troubles, because of derivatives… Found this on nymag.com yesterday regarding the Swiss Bank: “It has already seen serious trouble in the last 18 months, after the investment firm Archegos Capital collapsed, causing the Swiss bank to lose about $5.5 billion, close some of its major operations, and issue a mea culpa that laid out how it missed getting fleeced. As the global economy has slowed, traders have been making bets that it wouldn’t be able to make good on its debts, and its stock has fallen to its lowest point ever.”

And them the ISM Manufacturing Index fell to its lowest level in years, at 50.9% in Sept., from 52.8% in August… This index is now on the edge of the cliff, and in danger of falling below 50 this month! Below 50 means manufacturing is contracting… And when manufacturing contracts, the economy follows… I had told you yesterday that “I would think it would show a decrease in the number, given some of the regionals have shows some very weak numbers… But one never knows, does one?” – from A Pfennig For Your Thoughts 10/3/2022

And, finally the tally of things that could have pushed Gold & Silver so high yesterday, was the news that I gave you yesterday, regarding the announcement from our friends (NOT!) at OPEC, to cut production to help stabilize the price of Oil… I said yesterday that, “The price of Oil has slipped another buck overnight, as OPEC has announced another production cut… That should remedy Oil slipperiness…” And that was quite prophetic eh? Oil gained at one point during the day yesterday $5, but settled with a $3 gain as the day ended, thus trading with a $83 handle.

So, all those things individually could have been a reason for a metals rally, and then when you roll them all together on the first day of the new quarter… You have Gold gaining $39.50 to close the day at $1,701.60, and Silver gaining $1.68 to close at $20.80… While it was nice to see Gold back above $1,700 and Silver back above $20, I’m a little leery of them adding to their gains going forward, because the wolf (price manipulators) are always at the door…

The dollar saw another day of selling… nothing of great shakes, but selling nonetheless. The BBDXY lost 2 index points on the day and ended the day at 1,331.20… The euro climbed back above 98-cents on the day’s trading, and all the other “little dogs” (other currencies) followed the Big Dog euro down the street as it chased the dollar…

In the overnight markets last night…The dollar got sold a little bit more, with the BBDXY losing 4 index points, and the euro trading up toward 99-cents! Gold is up $3 in the early trading and Silver is down 6-cents to start the day… The ISM index yesterday really shocked the markets, who weren’t expecting to see this data come so close to falling below 50, and a return to safe havens was in store, and that continued throughout the night. It will be interesting to see if the markets have follow through today, or will it be a case of shrugging off the data one day later? 

The price of Oil is trading with a $84 handle this morning, ahead of the OPEC meeting, where it is expected that they will announce major production cuts. And Bonds… well, you can really tell thee was a flight to safety yesterday, not only in the Gold price, but in the trading of bonds, who saw their yields drop on the day. The 10-year’s yield dropped to 3.59%, which was a HUGE drop to say the least!   

I mentioned the other day that the Swiss Riksbank had hiked interest rates 100 Basis Points, or 1.00%. Can you imagine the interest the dollar would have received with an announce 100 Basis Points rate hike by the Fed Heads? It would have been an ugly day for the currencies for sure… So, how did the krona do after the announced rate hike? Well, it has rallied, but a very small rally, moving from 11.24 the day of the rate hike to 11.02 to close yesterday… So, things just aren’t the same for the other currencies not named “dollars”

This from the Financial Times yesterday: “Turkey’s official inflation rate climbed to a new 24-year high last month as the country reeled from President Recep Tayyip Erdoan’s unorthodox economic policy.

The consumer price index rose 83.45 per cent in September, according to data from the Turkish Statistical Institute, the highest level since July 1998 and up from 80.21 per cent the previous month.”

Chuck again… Argentina, Turkey, Sri Lanka, and others are suffering from years of bad policies, and now they get to try and dig themselves out of these gaping holes! These are all bad word/ countries… And those kinds of numbers couldn’t ever be seen in countries like the U.S. China, Eurozone, Russia, U.K., Japan, etc. could they? Well, let’s hope not!

While it appears to those wearing rose colored glasses that the problems of the U.K. have gone away, you know that I would not be one of those wearing the rose-colored glasses… For years, I’ve questioned the pound sterling’s strength, and pointed out that the Bank of England (BOE) were keeping interest rates too low for too long, and that the U.K. had mounting debt… Well, last week those two things rose to the top of the list of things that are hurting the U.K. when the currency began to get sold, along with gilts (bonds), and the U.K. teetered on the edge of the cliff… I said the next day that the BOE had saved the day (not really, but what the heck!) The BOE had reversed their call of not buying more bonds, and stepped into the bond market and bought bonds once again, and calmed things… for now…

You see the major problem outside of debt, in the country is with the pension system… The years of near zero interest rates, left the pensions with looking for other ways to make up the loss of interest, so that they could continue to pay out to pensioners… They turned to LDI… LDI: “A strategy used by pension funds to manage their assets to ensure they can meet future liabilities.” As a part of the LDI, U.K. pension companies turned to Wall Street for derivatives…And an introduction to Leverage! Uh-Oh! These derivatives worked as long as interest rates and bond yields didn’t rise… What has the BOE been doing lately? Hike rates to combat soaring inflation, and what is this going to do to the investments in these Pension accounts? Well, last week it was margin calls, which weren’t little ones due to the leverage that the Pension companies used…

This story has nowhere to go but down the drain, and leaving many tears folks… Again, I questioned the pound sterling’s strength over a year ago, based on my feeling that the BOE’s zirp, and their debt would come back to haunt them, and…. It has!

Longtime readers may recall me saying many times in the past that what happens in the U.K. comes to our shores within 6 months… Hmmm…. Got Gold?

For What It’s Worth… This is s special treat day, as I’ve got a piece from Ron Paul! In my humble opinion, we a s country need more Ron Paul’s in our Congress… But Mr. Paul is one of a kind, and it’s always great to hear what’s on his mind. Today, it’s a message about Federal Disaster Funds, etc. and it can be found here: The Ron Paul Institute for Peace and Prosperity : Americans Suffer from Natural and Government-Created Disasters

Or, here’s your snippet: “Last week Congress passed a continuing resolution and then adjourned until after the election. When Congress reconvenes, it will almost certainly pass a multi-billion dollars aid package for those impacted by Hurricane Ian. This spending will likely be labeled “emergency,” so Congress members will not even have to pretend they are offsetting the new spending with cuts in other, lower priority programs.

The failure of Congress to offset spending on disaster relief with cuts in other programs is one reason why I always voted against disaster aid when I was in Congress, even when the spending was for disasters that occurred in my district. Of course, I also opposed these bills because disaster relief is unconstitutional and immoral as are all other income redistribution programs.

When I voted against disaster relief, my office would receive angry calls from constituents. However, within several months many of those constituents would call back to say that after dealing with the Federal Emergency Management Agency (FEMA) they realized that disaster victims would be better off without federal “help.”

Federally managed disaster relief is neither efficient nor compassionate. My office often heard from frustrated individuals whose plans to rebuild were put on hold because of delays in getting federal assistance.

FEMA’s failures are the inevitable result of placing authority over disaster relief in a large, centralized bureaucracy. Therefore, the problem cannot be fixed by changing personnel or updating or streamlining FEMA’s procedures. Instead, FEMA should be abolished, and responsibility for disaster relief should be returned to individuals, local communities, and civic and charitable organizations. Individuals should be able to deduct from their income taxes 100 percent of the costs of recovering from a natural disaster. Businesses affected by a natural disaster should also be provided generous tax relief. Tax-free savings accounts could help Americans accumulate funds for use in the event of a natural disaster.

In 1900, a major hurricane devastated Galveston, Texas. Despite the fact that FEMA or other federal disaster relief programs did not then exist, the people of Galveston managed to rebuild their city. This proves that there is no justification for federal involvement in disaster recovery. The federal government should return responsibility for disaster relief to the people by shutting down FEMA. Congress should also ensure people have the resources to take care of themselves by ending the welfare-warfare state, repealing the 16th Amendment and the associated income tax, and auditing then ending the Federal Reserve.”

Chuck Again… I have nothing more to add to Mr. Paul’s thoughts here… I agree with him 100%, and that about sums it up!

Market Prices 10/3/2002: American Style: A$ .6457, kiwi .5694, C$ .7330, euro .9893, sterling 1.1337, Swiss 1.0121, European Style: rand 17.7575, krone 10.6079, SEK 10.6079, forint 422.22, zloty 4.8694, koruna 24.8101, RUB 59.11, yen 144.85, sing 1.4304, HKD 7.8499, INR 81.52, China 7.1159, peso 20.00, BRL 5.1402, BBDXY 1,327.51, Dollar Index 111.20, Oil $84.69, 10-year 3.59%, Silver $20.74,
Platinum $919.00, Palladium $2,296.00, Copper $3.44, and Gold… $1,704.77

That’s it for today, and this week… I’ll pick it up again next Monday, when I’m all set up in my Southern Home… My beloved Cardinals have won the Central Division, and that’s a good thing because they’ve lost two games in a row to the Pirates! UGH! It was announced yesterday that my beloved Mizzou Tigers will play a game in St. Louis next year! YAHOO! The Tigers used to open their season in St. Louis VS Illinois, but after about 6 consecutive years of Tigers winning, Illinois dropped us from their schedule… Sounded like “I’m taking my bat and ball and going home” right? Next year’s opponent in StL will be Memphis… I love when the Tigers play here in StL, because I don’t have to drive 2 hours down the road to see them play! OK… I’ll be traveling tomorrow, so you’re free of me for the rest of the week! Use your time wisely! HA! Elton John takes us to the finish line today with his great song: Mona Lisas and Mad Hatters… I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!

Chuck Butler