Gold Continues To Ride The Roller Coaster!

July 22, 2019

* Currencies have been flat as a pancake this last week!

* The Fed meets this week… are you ready? 

Good Day… And a Marvelous Monday to you… Well, like all good plans of mice and men, my plan for a two-day simple procedure in the hospital turned into 4 days, with docs and nurses expressing concern for my cellulitis wound on my leg… Oh, and the simple procedure I went in for, it worked quite well, according to the docs… A wound specialist took a look at my leg, and had a cow! But we’ve got a program for healing it now, and hopefully her plan works, because the other plan wasn’t working! I came home Saturday afternoon, sick to my stomach from all the medicine they had given me, and then found I couldn’t hold anything down until Sunday evening… So… here I am… on this hot Monday morning, and King Crimson greets me this morning with their song: In The Court of the Crimson King… (a classic rock song, that’s about 8 minutes in length, and one that all who swear they love rock, should have in their collection!)

Well, well, well, look who finally got with the program…. Leading Indicators for June were negative, that’s right I said negative -0.3….. Guess I haven’t been off my rocker all these months saying that a recession was coming, eh?

And the Fed Heads who were out on the speaking circuit late last week (just before the cone of silence went over their heads) and sure were talking rate cuts… In fact, St. Louis Fed President, James Bullard said that he wanted a rate cut in June! Hmmm… I don’t recall seeing that in the Fed’s FOMC Meeting notes last week, do you? But it is what it is, and now he’s on record, saying that the Fed is behind… (notice I didn’t put an “a” in between is and behind? HA!)

So, the Consumer Confidence is soaring again, and it’s all based on rate cut talk… I wonder when the recession bells begin to ring, if these folks that are so confident remain as such…

I know, I know, I started today’s letter with a bunch of data, but in reality that’s about all that’s happened since I wrote you my surprise, surprise, surprise, Pfennig last Tuesday! The price of Gold got back on the roller coaster ride, but is still trading above $1,400. And Silver really took off last week… I told you all a month or so ago, about how Silver was really beat down, and with the supply problems and demand so strong, that I thought Silver would be taking off soon… Well, “soon” turned to a month or so, but it has come finally, to all those Silver holders that have been waiting patiently for this to happen…

The currencies, on the other hand, just aren’t performing well these days… The euro is lucky to be above 1.12, (when I checked it this morning it was 1.1222, basically the same price it held last Tuesday when I last wrote to you) The Chinese renminbi continues to weaken, as the Trade Talks continue, to no avail… So, the Chinese figure they’ll just keep weakening the renminbi to offset the current tariffs in place… The Aussie dollar (A$) is about the only currency to have eked out a gain VS the green/peachback since last Tuesday.  And has pulled kiwi along for the ride, so there two! Even the Brazilian real which had been a strong stealth-like move stronger, finally saw some weakness, along with the Russian ruble… So… given those two items, what do you think the price of Oil did in the past week? That’s right, it slid from a $59 handle to a $56 handle… OUCH! That’ll knock the stuffing out of the shale producers!

The price of Palladium finally saw a setback last week… On Tuesday last week it was soaring to the tune of $1,556.64, and this morning it’s $1,508… I read a piece last week, (the Good Lord knows I had ample time on my hands!) that said that Car Dealers are finding lots of inventory on their show room floors… Uh-Oh…

OK… so how about European Central Bank (ECB) President, Mario Draghi? He’s on his way out now folks… And guess who’s lined up to take his position as head of the ECB? Former IMF Chief, Christine LaGarde… Well, you can forget about any rate hikes coming to the Eurozone in the next, say, 2 years! And for all you who follow things like this, she’ll be the first female head of the ECB… Of course the ECB has only been around for about 20 years, it’s had Wim Duisenberg, Claude Trichet, and Mario Draghi… So, in my mind, she’ll be the 4th President of the ECB, with Wim Duisenberg still head and shoulders above the rest of them! Hey! I was here, I should know, right?

OK, it’s just my opinion, and I could be wrong, but… Wim brought stability to the ECB, when it was first open for business, and credibility in the ECB was what the euro needed to get off its derriere and get to rallying back in the day… Then came the issuance of coins and notes in the Eurozone, and Wim looked over that… Then along came a French banker named Claude Trichet, who saw the euro’s value rise to over 1.50 from around 1.10… He surprised me the most, as he also kept the programs of Duisenberg in place and the Eurozone flourished, and so did the currency… But… it was under his watch that the PIIGS (as they are known Portugal, Italy, Ireland, Greece and Spain) had their hidden debts revealed, and all hell broke loose when in 2011 after Mario Draghi came on board, that the markets took the euro to the woodshed for these debt ridden countries…

I will give Draghi a high five, and then use it to slap his forehead and ask him what he was thinking… First the high five, back in 2011, things looked bleak for the Eurozone and the euro, and it was falling like a rock, but Mario Draghi gave his, “We’re prepared to do anything to support the euro” speech, and the falling stopped on a dime…. But then every time the euro would reach a certain point, rising that is, he would speak and throw the euro under the bus… What was he thinking?

A currency is the stock of a country… And a strong currency means a strong country… Sure your exports take a hit, but only if the countries selling are selling cheap goods…. Just check out Germany’s export track record, they were still selling Beemers and Mercs, by the boatload to U.S. buyers when the euro was uber high….. Things that are quality made, manufactured, and sold, will always be in demand, in my opinion!

OK, will someone please stop this roller coaster? My stomach is in my throat and I’m going to hurl soon from all the drops, and twists, and then inclines… Where’s the Pepto?   All kidding aside, Gold is performing well, it’s just been subjected to lots of paper trading to keep the physical demand in check. I always say, that’s OK, buy the dip!   

I about fell out of my chair this weekend when I came across and read the latest email from the GATA folks… First let me set this up…. Ronan Manly is a reporter for Bullion Star the folks that also prints articles from one of my fave editors, Koos Jansen, of whom I used to quote all the time, but thought people had grown tired of hearing his views on manipulation… Well, Manly wrote a great article on Gold & Silver price manipulation, and someone by the name of Martin Wolf, who writes for the Financial Times (FT) had this to say… “Wolf replied derisively and dismissively: “This is a matter of absolutely no importance whatsoever. Who cares about the prices of useless metals?”

Are you kidding me Martin Wolf? What on earth are you smoking? Have you not been told of the history of these precious metals? Have you not been made aware that Silver is a key component of Solar Panels? Or any other industrial use? Have you never been told of how Gold is a Store of wealth? And that if you bought a suit of clothes 100 years ago, in 1919, you could do it with an ounce of Gold, and if you bought it now in 2019, you could still buy it with an ounce of Gold? What a dolt, what a twit, what a gooffus! I’m sorry mom, I know you always told me to not call people names, other than their own… But I just couldn’t help myself, this guy truly got under my skin!

The U.S. Data Cupboard  was busy since we last talked… And we saw the June prints of Retail Sales (0.4%), like the BHI said, not disappointing but not great. Industrial Production (0.0%) flat as a pancake… (Head East), Capacity Utilization (77.9%) was weaker than in May when it was 78.1%. I could go into a long dissertation about how Capacity Utilization is a very important piece of economic data, but I’ll spare you and just give you the Reader’s Digest version which is that it, along with leading indicators, (that we talked about above) are the really only forward looking pieces of data…  And with Capacity U. falling, and Leading Indicators in negative territory, these two are telling us to take cover folks… 

To Recap…  Nothing great has happened in the last week with the currencies, as the A$ and kiwi were the only two to gain VS the dollar. Gold got back on the roller coaster ride, and is making Chuck sick to his stomach, but it remains above $1,400 and looking like it wants to move higher.  And then there’s this knucklehead named Martin Wolf, that we have to talk about today… 

For What It’s Worth… Ok, I mentioned the Fed Heads out on the speaking circuit last week ahead of the Fed’s cone of silence being brought down on them, and this article talks about what they were saying, which is that a rate cut is needed, and it can be found here:

Or, here’s your snippet: “Two senior Federal Reserve officials stressed the need to act quickly if the U.S. economy looked likely to stumble, reinforcing bets the central bank could cut interest rates by as much as half a percentage point later this month.

Fed Vice Chairman Richard Clarida and New York Fed chief John Williams buoyed stocks with their dovish remarks Thursday afternoon, in some of the final comments from central bankers before they enter their blackout period ahead of a July 30-31 policy meeting.

Equities rose in Asia on Friday along with European futures, lifted by the prospect of a more aggressive policy move by the Fed. S&P 500 Index futures also gained, building on the U.S. gains seen late on Thursday, despite the New York Fed trying to walk back the comments from Williams.

U.S. money markets priced in 41 basis points of easing in July after the two men spoke. Traders later wound that back after a New York Fed spokeswoman said that Williams’s comments had been in the context of an academic speech and were not about potential upcoming policy actions. Clarida was discussing the current economic outlook in a television interview.

“You don’t need to wait until things get so bad to have a dramatic series of rate cuts,” Clarida told Fox Business Network, citing economic research. “We need to make a decision based on where we think the economy may be heading and, importantly, where the risks to the economy are lined up.”

While the U.S. economy is “in a good place,” Clarida said recent global economic data have been softer than expected. “We’ve had mixed data, but I do think the global data has been disappointing on the downside,” he said. “Disinflationary pressures, if anything, are more intense than I thought six weeks ago.”

Chuck again…  Yes, we’ll see the color of the Fed’s decision this week but I can tell you right now that it’ll be a 25 Basis Point rate cut, and their tone will be dovish, leading the markets to believe this isn’t going to be a one and done… 

That’s it for today, and for the next two weeks! I swear, I don’t know how you’ll get through the day without me! HAHAHAHAHAHA!  Yes, it’s that time of year, when Chuck takes his annual summer vacation… And tomorrow I’ll be flying to my place in the south. (Hey it’s not as hot there as it is here right now!)  My good friend, Dennis Miller, tells me that he has been able to swallow little bits, which is progress! Way to Go Dennis!  While I’m gone we’ll celebrate Alex’s friend, Grace, and her birthday!   And My darling granddaughter, Delaney Grace will turn 12! WOW! OK, so I’ll be back on August 5…   are you ready for my Cardinals to go on a tear and be back in the division race by then? I am, but I have my doubts, as that’s not been their MO this year…  But we’ll see, Hey! The Blues came from last place to win the Stanley Cup, anything can happen in sports!  Eddie Money takes us to the finish line today with a very appropriate song, given my traveling tomorrow… Two Tickets To Paradise…  I hope you have a Marvelous Monday, and Promise that you’ll Be Good To Yourself these next weeks …. Bye~

Chuck Butler