Gold Gets Whacked!

May 16, 2018    

* It’s all about the dollar again… 

* A$’s yield advantage is gone! 

Good Day… And a Wonderful Wednesday to you! Well, May is already one-half over. Time seems to fly by, and I have to really think a long time to figure out what I did to fill 16 hours yesterday… UGH!  My beloved Cardinals can’t hit the ball, and thus keep losing… They really didn’t hit in Spring Training, so I’m wondering what made Management think they would hit during the reg. season?  Day Game today in Minnesnowta…  I hope it’s nice an warm here to sit outside and watch the game…  Al Stewart greets me this morning with a perfect song to go with my initial thought about time slipping by this morning…  Al Stewart’s song: Time Passages…  

Well… The Big News this morning in the markets is that Gold got whacked badly yesterday… Gold finished the day down $22, and below the $1,300 figure. The total contracts traded were as Ed Steer put it, “past Jupiter”, with more than 400,000 contracts traded in Gold.  I had told you yesterday that Gold was down $9 in the early morning trading, and as I went to press, Gold was struggling to recover, but then the trap door sprung, and Gold went through it, along with its price… the price graph for the day is typical for these engineered takedowns, with a line drop that’s very pronounced and very evident, indicating that a flood of short Gold paper trades hit the floor… 

I shake my head in disgust that these engineered takedowns are allowed to go on…  but they are what they are, and I have no control over them. All I can do is write about them in hopes that one day a regulator or two gather up some intestinal fortitude and do something about it… Until then, we can hope for the supply of Gold to dwindle with all the Central Bank buying these days, but that will take a long time to come to pass, so, I guess the only other thing to do is to take advantage of these cheaper prices while you can.   

The euro’s success since the start of 2017, has come under fire, and it appears that traders are listening to the complaints of Eurozone Companies complaining about the euro’s stronger exchange rate, and blaming such on their inability to post higher profits in the 1st QTR of this year…  The euro had seen gains of 13% since the start of 2017, but has been seen on the slippery slope lately, with price handles falling daily. Today, for instance the 1.19 and 1.18 handles have been taken out, and the single unit trades with a 1.17 handle this morning. 

Not the kind of day I was expecting yesterday after U.S. Retail Sales printed a slower growth figure for April, just like I said it would. U.S. April Retail Sales grew at 0.3%, VS 0.6% in March… Recall I had pointed out that Easter was in March this year, and that’s why I figured April’s figure would not be as robust.  So much for that thought that was being bandied about on the Bloomberg, that the recent releases of Retail Sales had given the euro direction after printing… But that idea was thrown to the side of the road yesterday, and the euro just couldn’t find a bid…   

The European Central Bank (ECB) President, Mario Draghi, will be speaking today, and it will be interesting to see if he singles out the rise in the euro as the culprit behind the 1st QTR slowdown, or if he will throw the markets a bone with some hints of when bond buying is going to end.  I shake my head at these Central Bank leaders and their speeches… I think it would be far better to them to keep their collective heads down, and attempt to fly under the radar…    

The Aussie dollar (A$) is also getting whacked, as traders have taken the position that the Reserve Bank of Australia (RBA) isn’t going to hike rates any time soon, and with the U.S. Fed hiking rates, the spread between the A$ and U.S. dollar will widen…   I noticed something the other day that caught my eye, and I was taken aback that I hadn’t notice this before… But the positive yield spread in the 10 Gov’t. Bonds that Australia had held over the U.S. since 2000, is gone.. no more, and like Puff the Magic Dragon, Aussie 10-year Gov’t Bonds have cease their fearless roar… 

And to me, as an old bond trader, yield spread between countries is a Big Deal.. Well, it was back in the 90’s when I traded foreign bonds. And apparently it is still today, as the A$ is losing ground to the U.S. dollar, and while rate hikes in Australia may be evident they aren’t imminent with the RBA, and therefore the yield spread between the two countries will only grow wider, to the dollar’s advantage…  

That is IF the Fed is going to keep hiking rates, which Fed Chairman, Jerome Powell, seems hell bent and whiskey bound to do… The economy may has something to say about that though, and I’m still leaving the porch light on for a reversal at some point because the economy falters from the previous rate hikes.. 

With the Big Dog euro, and the A$ slip sliding their way down the slippery slope the rest of the currencies are all following their lead. The only currency that saw a rise, albeit a very small rise, yesterday was the Swiss franc… The rest of the currencies are taking on water and their bailing isn’t helping. The Dollar Index started the week at 92.34, and sits this morning at 93.48, more than 1 full figure rise in two days..  That’s moving at too quick of a pace in my opinion, and should see some profit taking soon… But will it be enough to turn the tide on this selling of the currencies and metals?   

The price of Oil is the only anti-dollar asset that’s seeing some bids. But a report yesterday that U.S. stockpiles of Oil have risen, kind of took Oil traders by surprise, and Black Gold, Texas Tea, lost a little bit, but still holds a $71 handle, which is more than double what the price was a couple of years ago. 

And that gets me thinking about the Eurozone companies complaining about the strength of the euro… I  would think they would be more concerned with the rise in the price of Oil… The Eurozone doesn’t produce Oil, per say, and needs to import it which has become quite a bit more expensive in the last year! 

The U.S. Data Cupboard has a couple of pieces of real economic data for us today, as the April showings of Industrial Production and Capacity Utilization both print. These two data prints disappointed in April, when the March readings both showed drops from February. I don’t expect any great shakes here today, a tick upward or downward won’t move the markets or the dollar.  

To recap….  It’s all about the dollar again, after a couple of days of rebound in the currencies and metals, it’s all about the dollar again. Gold got whacked by $22 yesterday, with over 400,000 contracts traded in Gold, which is ridiculously large and probably contains a huge amount of short Gold Paper trades.  Draghi speaks today, will he throw the euro under the bus?  The positive yield spread in 10 year Gov’t bonds that Australia held VS the U.S since 2000 is gone, and the A$ is seeing the results of this.. 

For What It’s Worth…  Thanks to longtime reader Bob, for sending this to me, it’s about a referendum in Switzerland that will take place on June 10, to correct a wrong in banking and it can be found here:

Or, here’s your snippet: “It’s called “Vollgeld Initiative” – in German, meaning more or less “Referendum for Sovereign Money”. What is “Sovereign Money”? – Its money produced only by the Central Bank, by the “Sovereign”, the government, represented by its central bank. Money created in accordance with the needs of the economy, as contrasted to the profit and greed motives of the banking oligarchy – wat it is today; money creation at will, by private banking.

The people of Switzerland are called to vote on 10 June 2018 whether they want to stop the unlimited, unrestrained money-making by the Swiss private banking system, and to return to the “olden days”, when money was made and controlled only by the Central Bank; and this not just in Switzerland, but in most countries around the globe. Switzerland is one of the few sovereign countries within the OECD, and possibly worldwide, that has the Right of Referendum written into her Constitution. With 100,000 valid signatures anybody can raise a referendum to amend or abolish a law, or to create a new one. – This is a huge privilege to Right a Wrong.

Most Swiss and probably most westerners in general don’t even know that the loan or mortgage they get from their bank is no longer backed by the bank’s capital and deposits. How could they? Instead of being told the truth, they are being lied to, even by their own party and politicians. And that in the case of Switzerland, by nobody less than the CEO of the UBS, the largest Swiss bank. Just watch this short video (in German and Italian – 2 min) .

Lying is a felony, hence Mr. Sergio Ermotti, CEO of UBS, should be prosecuted. Unlikely to happen, though. What Mr. Ermotti in essence says in this interview is that loans are backed by deposits. This is directly contradicted by the Swiss National Bank and the German Bundesbank (Central Bank). They say that “today about 90% of all the money is accounting money, created by loans the banks make to enterprises and private citizens. Pretending that banks use deposits to make loans, is not true.” The latter part was specifically expressed by the German Bundesbank. – So, how come Mr. Ermotti, CEO of UBS, wouldn’t know that?  

Chuck Again…  I have always liked the way the Swiss do their referendums, talk about a government that the people run!   

Currencies today 5/16/18… American Style: A$ .7485, kiwi .6878, C$ .7775, euro 1.1778, sterling 1.3480, Swiss $1.0015, … European Style: rand 12.54, krone 8.1265, SEK 8.7545, forint 269.35, zloty 3.6455, koruna 21.6883, RUB 62.10, yen 110.15, sing 1.3427, HKD 7.85, INR 67.95, China 6.3611, peso 19.76, BRL 3.6405, Dollar Index 93.48, Oil $71.18, 10-year 3.07%, Silver $16.27, Platinum $894.75, Palladium $980.81, and Gold… $1,290.10

That’s it for today… Went to lunch with good friend Duane yesterday, to our fave place for burgers… At EverBank in our old office, we would order lunches from this place regularly… but then we moved further away from the place and so now I go there with Duane about once a month! That is except when I’m in Florida! In Florida I have a place for burgers, the Brass Ring Pub, and boy are they yummy!  I forgot to tell you how Grandparents Day at Braden’s school went the other day… It was fun… except, they gave me a chair to sit on. The problem was it was a chair that 1st graders sit on. Well, getting down to sit on it was ok, but getting back up, was let’s just say not a pretty sight! The late great, Dan Fogelberg takes us to the finish line today with his song: Next Time..  I used to play this song.. I hope you have a Wonderful Wednesday, and remember to  Be Good To Yourself ! 

Chuck Butler