Gold Climbs To $1,300!

Chuck Butler’s: A Pfennig For Your Thoughts  

 August 18, 2017 

* $1,300 and Chuck is scared…

* ECB looks for ideas to help them… 

* No overseas investments for you!


Good day… And a Happy Friday to one and all! Hey! I woke up this morning, and I don’t seem to be draggin’ the line! So, maybe this will turn out to be a Fantastico Friday! If not for me, I certainly hope for you! I usually open up the template to write the Pfennig with some thoughts about what I’m going to write about, but not today… UGH!  So, who knows where this will take us today!  Chicago greets me this morning with their song: Hard Habit To Break, which also happens to be my fave song by the group, followed closely by Beginnings…  

Well, looky there! Gold has traded to $1,300 this morning! I’ve made such a Big Deal about the $1,300 level that now that Gold is here, which is the first time it has visited $1,300 since November of last year, I’m getting scared… Scared of what? Those nasty “boys in the band”, that’s what! For the last time Gold climbed to a figure above $1,300, the “boys in the band” engineered a take down that was quite ugly for the price of Gold… 

So, which way will Gold go this time? Will it remain on the rally tracks and go higher, or will the “boys in the band” see to it that they derail Gold before it heads down the tracks? Yesterday, Gold gained $4.70 to close at $1,287.50, with a whopping 321,000 contracts traded.. That’s crazy volume folks… I just checked and we are still in the month of August. You know, when everyone goes on vacation, and the markets go stale for the month? The Dog Days of Summer and all that? 

I guess that if the U.S. wasn’t seemingly going from one crisis to the next, that the interest in Gold and the other precious metals would be lower on the scale, but that’s what we have, so we have to roll with the punches, right? Of course in this case, Gold is dolling out the punches!

The Big mover from yesterday morning is Palladium, which has hit a 16-year high, and has narrowed the spread to Platinum again to just $33… 

I read an article last night during the second rain delay of my beloved Cardinals game in Pittsburgh, that talked about how the European Central Bank (ECB) is looking for a way to unwind their stimulus without causing an overshoot of the euro…  This is where I put my tin foil hat on and act out a phone call from the ECB to the U.S. …   “hello, is anyone there? Yes, hello, we’re here! Good, because I have a problem that I think you can help me deal with. And that is, I’m afraid that the euro might take off for Neverland when we begin to unwind our stimulus, and I think you know what I’m going to ask for, right? What? We don’t have any idea what you’re going to ask for, but, for your information, we do have this Plunge Protection Team, and if the euro is soaring that means the dollar is getting sold like funnel cakes at the State Fair, and we’ll do whatever it takes to keep the dollar from falling off the cliff…  Do we understand each other?  Yes, of course and thank you…  OK, you can hang up now… No you hang up first, no you, OK, we’ll both hang up together on three… One, two, three… ” 

Alrighty then that sure was being silly, Chuck… What, me? Silly? I highly doubt that!  Ok, moving on… China was in the news last night, as they issued a order restricting domestic companies from investing in overseas property, hotels, entertainment and sports clubs, according to a State Council guideline posted on the government’s website. Companies will instead be encouraged to support the Belt and Road initiative linking the country across Asia and Europe.  I guess this is what happens when you are in a communist country, eh?   

The price of Oil has been range bound this week between $46 and $47, and no one really knows where it’s going next, except I like through my hat in the ring there and repeat what I said in my Dow Theory Letters ( article of a few weeks ago, which was that I thought the price of Oil would remain between $40 and $50, until something shakes out of the supply tree. 

And that means the countries with currencies that really depend on the price of Oil to determine their moves, are seeing their currencies move in tight ranges, up one day, down the next…  Countries like the Norwegian krone are very dependent on the moves in Oil, but they are also loosely tied to something else, which in this case is the euro, which means they get an added boost whenever the euro rallies.

And, although the rally has stalled, the euro has rallied in 2017… The euro began the year at 1.0484… And today is 1.1747… And just last week, we were looking at the 1.19 level for the single unit!  I’d call that a rally, wouldn’t you?  

From one crisis to another crisis has the safe haven assets whipping around, but just take  a look at Gold, yen, euro, and Treasury yields, and they’ll tell you if another crisis is taking place…  Gold is up, yen is stronger, the euro too, and the 10-year Treasury yield has fallen to 2.19%, when just earlier this week, when all the saber rattling had calmed down, was trading with a 2.28% yield..  Remember, bond pricing works like this, as the yield goes down the price of the bond goes up, and vice versa… So, when the yield is dropping, that means the price of the bond is going up from all the purchases. 

The U.S. Data Cupboard has two real economics prints for us yesterday, and one that’s just a tick below those two… Industrial Production was disappointing, and didn’t meet expectations (0.2% VS 0.3% exp.) and Capacity Utilization remained unchanged at 76.7%… And then leading Indicators were also disappointing, as they didn’t meet last month’s number (0.3% VS  0.6%)…  So, once again, the data came, and printed, and once again it revealed a weak economy…  

There’s really not much to today’s Data Cupboard.. The U. of Michigan Consumer Confidence index is about it, and of course it will print strong, because people are fooled easily… I’m just saying..   

To recap, Gold has finally made it back to $1,300 for the first times since Nov. 2016, overnight, and Chuck is scared… The ECB is looking for ways to keep the euro in check when they begin to unwind their stimulus, and China issued a restraining order on domestic companies to keep them from investing overseas, and preferably allocating their investment to China’s Belt & Road project. 

For What it’s Worth…  I’ve spent the better part of my life researching and preaching to people that they need to diversify their investment portfolios using assets that have a low correlation to the other asset in their portfolio, and to properly do that you need to add currencies and metals. Well, my good friend, the Retirementor, Dennis Miller, takes this one step further in this excellent piece on diversification that can be found here:  

Or, here’s your snippet: “Friend Courtenay W. referenced recent articles where Chuck Butler and I emphasized diversification. He made a great suggestion, “You should explain what you mean – diversification means different things to different people.”

I visited several mutual fund companies’ booths at The Money Show. Each company urged us to take our entire nest egg and invest it in their family of funds. By doing so, “We would be well diversified and safe.” Sorry, not diversified enough to suit my comfort level! defines the old saying, “Don’t put all your eggs in one basket”:
“Don’t concentrate all your prospects or resources in one thing or place, or you could lose everything.” (Emphasis mine)

While a fire is unlikely to happen, prudent homeowners buy insurance. Insurance does not alter the risk of a fire; it protects the homeowner from suffering catastrophic economic losses.”

Chuck again…  I sure hope that you all go and visit Dennis’s website, and sign up for his free weekly letter, for if you are retired, or thinking of retirement this letter is your bag, baby! 

Currencies today 8/18/17… American Style: A$ .7922, kiwi .7327, C$ .7902, euro 1.1747, sterling 1.2892, Swiss $.9616, … European Style: rand 13.2237, krone 7.9322, SEK 8.1145, HUF 258.24, zloty 3.6411, koruna 22.2197, RUB 59.24, yen 109.04, sing 1.3633, HKD 7.8221, INR 64.10, China 6.6746, peso 17.85, BRL 3.1592, Dollar Index 93.51, Oil $47.23, 10yr 2.19%, Silver $17.18, Platinum $966.45, Palladium $933.25, and Gold… $1,300.30  

That’s it for today… I just about turned the game off last night after the Cardinals fell behind 5-1, but I didn’t, and I was rewarded with a rally that gave them the game 11-7…  Well, one week after my infusion and I finally feel half human!  Just in time for a reunion later this afternoon with former colleagues… I’m scheduled for new scans next Wednesday, so I’ll know more about what’s going on inside of me when those results get printed. Fun stuff, eh?  My writing desk here at home has a ton of pictures pinned to it. One is a fave of mine… It’s a picture of me, my younger brother David, and my dad, sitting on our back porch. I’m probably 10, and David 3, that’s an OLD picture! Little Feat take us to the finish line today with their song: Dixie Chicken… And all the boys at the bar began to sing along.. If you’ll be my Dixie Chicken, I’ll be your Tennessee lamb… And with that, I hope you have a Fantastico Friday, and Be Good To Yourself!