India’s RBI… Going For Gold!….

September 4, 2018 

* Dollar rallies in the overnight trading!

* Trade Talks heat up… 

Good Day… And a Tom Terrific Tuesday to you! WOW! What a great Holiday Weekend for yours truly! Not so much for my beloved Cardinals, but for me personally… WOW! It all began last Thursday when I had lunch with former colleagues, Jennifer and Christine. Then Friday was consumed with cooking all day, but a trip to my fave watering hole for HAPPY Hour yielded visits from more former colleagues, Aaron, Danielle, and Peter! And then Saturday was just fantabulous! At one point I think there were about 70 people in my backyard! And the food was great, the company was great, and we did see our Missouri Tigers win their first game easily, as they should have! I absolutely love that weekend, because of our Annual Butler Labor Day BBQ & Pool Party… I love when people say, “That pulled pork, or Turkey breast was great!”

As I left you on Thursday morning, the euro was bumping up against the 1.17 figure, and Gold was $1,204… But on Friday, they both led their respective asset classes downward, as the Trade War talks kind of went in the background, and traders knew of no other thing to do but to go long dollars ahead of the 3-day weekend.

Yesterday, while the U.S. was on their last summer holiday, the currencies and metals kind of drifted, with no conviction by traders to go long or short, without their comrades in arms in the U.S. But in the overnight markets, the dollar was bought like it was the only currency on earth, and this morning we are seeing the currencies down by a large margin, and Gold following suit. 

The only anti-dollar asset that’s rallying is Oil. The price of Oil this morning is basically $71 because of a tropical storm that’s heading toward the Gulf that will disrupt Oil production. These types of rallies aren’t normally the kind that have lasting strength, but Oil has strength in price right now, and that’s all that matters to most traders. 

I have to say that the long weekend lent itself to lots of reading by me about what’s going on in the world… And most of what I read confirmed what I’ve been talking about on several fronts… Like how the U.S. is nearing a recession… and how the world is turning on the U.S…. And how none of this is good for the dollar!

So, first let’s talk about how not only guys like me, and the great economist, David Rosenberg, have been pointing out the cracks in the economies foundation and warning of a recession, but now the Fed itself is doing that too! Wait, What? Yessirree Bob! I read this past weekend that the Fed San Francisco had two economists put together a report, and well, the report pointed to a recession in the near future… Seriously, you don’t think I make this stuff up do you? Well if you do, then you need to check out this article that can be found here:

And then there was this… How the world is turning on the U.S. and the dollar… I’ll borrow this paragraph from the article I read so you get the whole gist of what I’m talking about. This was from “Trump’s America waging economic warfare against most of the world and 2 billion people with a combined GDP of more than $15 trillion
– Targeted nations include China, Russia, Iran, Venezuela, Pakistan, Turkey, Cuba, Sudan, Zimbabwe, Myanmar, the Democratic Republic of Congo, North Korea and others…“

So, basically, what they are talking about is that we as a country have targeted these countries with some kind of embargoes, economic sanctions, and anything else that can make their livelihood difficult, and their response is going to be to shun the dollar… Now, I’ve been writing about the different payments systems outside of the dollar, and when they’re all up and running, guess who’s going to first in line to use them? Any of the countries above, that’s who… And more will then follow, and the dollar will no longer be used by countries in the terms of trade, that is unless they are trading with the U.S. And since the Trade Deficit here in the U.S. is astronomical in size each month, you would have to think that the “net” trade balances won’t be to settle in dollars!

I’ve said this before, but longtime readers know that when I say something once, I’m going to probably repeat it like a broken record, over and over again until it reaches everyone! So, here goes… We did this to ourselves folks… decades of easy credit, led to an every growing National Debt, which is now 105% of GDP, and growing leaps and bounds each year going forward. We as a country didn’t have the intestinal fortitude to buckle down, and take some small hits… You don’t get reelected if you allow small hits during your watch! So, this is all our leaders fault… But, we as consumers with votes, allowed them to act so irresponsibly… And that’s all I’m saying about that!

So… What’s on your mind? I wish I could know, or hear about it, but the Pfennig Replies site is still not working, and I just don’t know what to do about it!

I’ve told you what’s on my mind, as usual that is…

Friday and yesterday, Gold was able to hold the line… love isn’t isn’t always on time… No wait! Gold held the line at $1,200 through Monday, but in the early trading this morning the shiny metal has dropped nearly $6, to bring Gold’s spot price to $1,195.56 as I write… UGH!  

Well, it’s September, a month that will bring us another Fed rate hike, according to just about everyone that follows these things. I do believe this to be true also, but… that leaves major risk for the Fed meeting. What if they don’t hike rates at this meeting, and further discuss their dovish stance at the Jackson Hole boondoggle? Now that would throw the markets for a loop!  So, that’s the risk of the meeting… But the smart money is on a rate hike, so we’ll have to go with that scenario, until we know for sure in a couple of weeks.  Yes, the Fed’s FOMC Meeting won’t take place until September 25 & 26… 

Which means we’re going to see nearly a month of hems and haws about rate hikes. The Trade talks with Canada are still going on, along with trade talks with China, so those hold some risk to the dollar’s rally… In fact, Trump’s additional Tariff to be placed on $200 Billion of Chinese exports to the U.S. could be announced this week! UGH! 

I don’t know if the Chinese know this or not, I’m assuming they do, because they make sure they know everything that’s going on in the world, but in case they don’t, they need to understand that Trump is using this $200 Billion in tariffs threat as his bargaining tool… He’s using it to put pressure on the Chinese Trade Talks… “if you don’t agree to these changes, I’ll smack you with $200 Billion in additional tariffs”… 

The U.S. Data Cupboard will be busy this week, starting today with the ISM for August. This is the manufacturing index, that all other countries call the PMI… Tomorrow we’ll see the Trade Deficit, for August. We’ll get to see if any of the first tariffs have reduced the Trade Deficit…  And then as the week goes along more data will print, leading to the Jobs Jamboree for August…  

To recap… The currencies and metals held the line on Friday of last week and through Monday’s holiday, but in the overnight markets last night, the currencies and metals got whacked! The only anti-dollar asset to rally was Oil, and Chuck’s not to hip on Oil’s ability to retain those gains after the Tropical Storm heading to the Gulf area ends.  There’s plenty of data in the U.S. Data Cupboard this week, and we have the Fed’s FOMC Meeting hanging over us like the Sword of Damocles! 

For What It’s Worth…  Well, I saw this article this weekend, and couldn’t believe what I was reading, well then, I take that back, I could believe it, but it was still shocking…  India is selling their Treasuries and buying Gold..  it’s all right here:

Or, here’s your snippet: “The Reserve Bank of India (RBI) has bought gold for the first time in nearly a decade, signalling that the metal could be in demand as a store of value when returns and capital values of fixed-income bonds are declining in a rising rate environment.

The RBI added 8.46 metric tonnes of gold to its stock of holdings during the financial year 2017-18 that ended June 30, taking the level of gold reserves to 566.23 metric tonnes, according to its latest annual report.

It last bought Gold in 2009… “

Chuck Again…  Yes, when the blue light special is flashing it’s supposed to be attracting buyers, and that’s exactly what happened here, with India stepping to the plate to buy Gold…  

Currencies today 9/4/18… American Style: A$ .7180, kiwi .6550, C$ .7606, euro 1.1560, sterling 1.2826, Swiss $1.0269, European Style: rand 15.2357, krone 8.4044, SEK 9.1378, forint 283.36, zloty 3.7265, koruna 22.2690, RUB 67.90, yen 111.35, sing 1.3760, HKD 7.8491, INR 71.51, China 6.8240, peso 19.42, BRL 4.0960, Dollar Index 95.57, Oil $70.99, 10-year 2.87%, Silver $14.27, Platinum $775.10, Palladium $963.66, and Gold… $1,195.56

That’s it for today… And well, tomorrow too… Tomorrow is a travel day with a very early flight for yours truly. So, I’ll pick this back up on Thursday… Well, my beloved Cardinals had a fabulous month of August, and since then it has seen the wheels fall off the bandwagon everyone was jumping on. I sure liked the way my Missouri Tigers looked on Saturday, things will get more difficult each week for them. Keep it Going Tigers!  Boy the heat sure ratcheted up this weekend, but that was better than a rainout! I’m heading south again tomorrow, and hope that the bad weather stays away while I’m there!  Supertramp takes us to the finish line this morning with their song: Even In The Quietest Moments… Which is kind of like the house when I begin to write each day!   I hope you have a Tom Terrific Tuesday, and remember to Be Good To Yourself! 

Chuck Butler