Gold’s 8-Day Rally Ends…

Chuck Butler’s: A Pfennig For Your Thoughts   

January 4, 2018 

* Currencies fight back overnight!

* FOMC minutes say “go faster”

Good Day…  And a Tub Thumpin’ Thursday to you! I’ll hold off on the Tub Thumpin’ until I see the infectious disease doc this afternoon. If all goes well, then I’ll be Tub Thumpin’ into the night! My beloved Missouri Tigers got their SEC Conference Basketball schedule started on the right foot last night with a win in S. Carolina.. I forgot the game was on… UGH!  I was in 7th heaven though last night with the return to TV of the X Files… Before 24, there was the X Files show each Sunday that would hold my attention, imagination, and thinking for 1 hour… Last night didn’t miss a beat, after all these years being away…  The Killers greet me this morning with their song: Somebody Told Me…   

Another day, another day of the currencies losing some more ground that they had gained last week. It could have been the soaring ISM Index here in the U.S. but, in reality, shouldn’t that have been offset by the same kind of reports from the Eurozone and China? That’s logical which is how my mind works… And so it’s also logical that the powers that be, had seen to it that the dollar’s slide was halted… for now.

And Gold lost nearly $10 yesterday, after gaining more than $15 the day before. Two steps forward, one step back.. I guess that’s a dance that could be performed daily, but it’s not one that I would like to participate in. And it stopped Gold’s 8 day rally in its tracks… 8 days a week… it’s not enough to show Gold’s rally is for good! My apologies to the Beatles… 

But don’t panic! the overnight markets have brought us back to our Tom Terrific Tuesday’s levels, so in essence an overnight rally for the currencies has taken place. And the price of Oil moved to another handle in the past 24 hours, and now trades with a $61 handle.  But Gold is down in the early morning trading, $4.70… UGH!  This close… to having all three anti-dollar assets gaining against the dollar again. 

I was doing some reading yesterday, and came across some interesting data… Between the U.S. Fed and the European Central Bank (ECB) global bonds will be seeing a HUGE withdrawal of liquidity starting now, as both Central Banks begin to duel each other to see who can reduce their respective balance sheets the fastest…  The World’s economy has never been through something like this before, so how it reacts is a real unknown… 

There are those out there that think they know something that everyone else doesn’t know, but hear me now and listen to me later, they don’t know squat about what’s going to become of this dual Central Bank tapering…  They may end up having guessed correctly, but they sure didn’t know for certain that their guess would be right! 

The only thing I know is that buying bonds reduces yield, and selling bonds increases yield… These two Central Banks had been buying bonds for quite some time, which kept yields quite low on those bonds. But now the buying has stopped and in some cases selling will occur, that’s why I believe that ending the bond buying stimulus program, will see interest rates rise without the Fed doing the honors…  

The Fed’s FOMC Meeting Minutes from their last meeting printed yesterday afternoon, and the minutes revealed that a few Fed Heads were talking about increasing the rate at which they are hiking rates… In other words, more frequent rate hikes…  I saw that and thought to myself, well, the dollar fought back today, and now should have the ammo it needs to fight back even more in the overnight markets… But, when I turned on the screens this morning, that’s certainly not what happened, as I explained above!  

OK… I give you a year’s free subscription to the Pfennig if you can tell me without looking it up, which Asian currency outperformed the Asian currencies last year?  Spool up the Final Jeopardy music…  If you said the S. Korean won, then you are a winner, winner, Chicken dinner!  And that got me thinking… I few years ago, when I was still “something” I came up with an idea for a MarketSafe CD that included the emerging markets, and I purposely included S. Korean won, only to have to take it out because one of our affiliates thought that S. Korea was going to get bombed off the face of the earth. Fair point… but now I think about that decision to take it out…  oh well, hindsight is 20/20 vision, eh?   Not my worries any longer either!   

Gold saw 245,000 contracts traded in the shiny metal yesterday… I haven’t been reporting the # of contracts each day because, well… I believe the size of the totals were beginning to have that Comfortably Numb feeling with readers…  I was beginning to think that the paper Gold Traders were simply trying to outdo the previous day’s count each passing day.  Maybe, maybe I’m wrong… to go on singing, singing this song…  We’ll have to see, but just so you know, I see the numbers every morning, so if you really need them just ask… and you shall receive! 

The U.S. Data Cupboard will have the ADP Employment Report for us to see today, look for a number of around 190,000 jobs created in December…  Remember I’ve said this for a long time now… This ADP Report is what the markets should refer to instead of the stupid BLS jobs report…  ADP does the payroll for nearly every business in the U.S. So, if there’s layoffs, firings, and hirings, they should be the first to know!    

To recap…  The currencies had another day of selling yesterday, but the moves were small, but overnight the currencies have come back strongly…  The Fed’s FOMC Meeting Minutes revealed that some Fed Heads are wanting the Fed to go faster with rate hikes. That news sent Gold down for the day, and the early morning trading today.  The ADP Employment Report should hold the traders’ attention today, but will it?  

For What It’s Worth… I found this on Ed Steer’s letter this morning and he got it from Reuters. It’s about German Gold Buying and can be found he     

Or, here’s your snippet: “Germans are investing heavily in gold, Deutsche Boerse said on Wednesday, with holdings of a gold-backed security it offers rising almost 50 percent in 2017.

Gold is seen as a safe haven for investors during times of uncertainty. Spot gold prices gained about 14 percent during 2017.

Deutsche Boerse said its Xetra-Gold notes, which are backed by physical gold, rose in demand to a record 175.04 tonnes of gold at the end of 2017, up from 117.59 tonnes at the end of 2016. The total amount of assets invested in Xetra-Gold are worth €6.1 billion ($7.3 billion), Deutsche Boerse said.

“The increase is due above all to the high demand from institutional investors,” said Michael Koenig, managing director of Deutsche Boerse Commodities GmbH. “However, an increasing number of asset managers, family offices and retail investors are becoming interested in gold as an asset class.”    

Chuck Again… The Asians are doing it, the Indian people are doing it, the Russians are doing it, the Germans are doing it, but we are not doing it, and that is buying Gold as an store of wealth…  

Currencies today 1/4/18… American Style: A$ .7841, kiwi .7124, C$ .7985, euro 1.2065, sterling 1.3555, Swiss $1.0256, … European Style: rand 12.2929, krone 8.0856, SEK 8.1307, forint 255.78, zloty 3.4425, koruna 21.1180, RUB 57.36, yen 112.65, sing 1.3289, HKD 7.8176, INR 63.27, China 6.5001, peso 19.29, BRL 3.2508, Dollar Index 91.40, Oil $61.82, 10yr 2.47%, Silver $17.17, Platinum $953.30, Palladium $1,103.93, and Gold… $1,313.80

That’s  it for today… Longtime readers know how often I talk about the teachings my dad left me. Today was his birthday. We had a “thaw” yesterday as the temps rose to 24 degrees! But it’s back to the single digits today… UGH! Way to get the conference season started coach Martin, now keep those Tigers winning! 5 more days until I head south! It’s almost like waiting for Christmas again for me! I had a longtime friend send me a link to a YOU TUBE and it was former U.S. national soccer team player, Corbi Jones talking about how wrong it is to give kids trophies for participating…  He was preaching the choir! I’ve said that for years!   I think I’ll post the link to the website tomorrow…  Until then we have The Babys taking us to the finish line today with their song: Midnight Rendezvous…   I hope you are able to get out and do some Tub Thumpin’ today, and remember… Be Good To Yourself…  

Chuck Butler