March 9, 2021
*Currencies & metals rally overnight…
* Asian retail Gold buyers return!
Good Day… And a Tom Terrific Tuesday to you! Another tie for my beloved Cardinals yesterday. I believe that I’ve seen more ties (3) so far this year, than I’ve seen total through the years! During the game, that I attended with youngest son Alex, there were probably at least 4 weather fronts that moved through… I had a light pull over that I kept putting on and taking off! No more games for me this week until Friday. And Friday’s game will be a night game… Something rare for the Cardinals at Roger Dean Stadium. Maybe I’ll be able to get back to my regular morning routine this week… We’ll have to see, eh? Oh, my oncologist sent me a message yesterday telling me that my bloodwork looked normal and that everything is good… The late great, Leon Russell greets me this morning with his song: Delta Lady…
Well… after the onslaught of dollar buying that began last Friday and carried through to the overnight session of Sun/ Mon. Things calmed down a bit on Monday… And while the dollar buying continued it was more muted buying than what we saw in the previous two sessions. The Dollar Index on Monday closed the day at 92.31. Gold got whacked again, losing $17.20 on the day to close at $1,683.90, and Silver lost 11-cents to close at $25.20…
The GATA folks sent me a link to an article by Jan Nieuwenhuijs, formerly known as Koos Jensen… Koos was his writing name, and now he’s just going with his given name of Jan Nieuwenhuijs… In the article, Jan attempts to explain why Gold keeps getting whacked… Let me see if I’ve got this straight… The 10-year Treasury TIPS (Treasury inflation protection) is seeing a rise in the yield, and a rise in the inflation fears, So… what you do with a TIPs bond is you take the given or bought yield, and add in the the current inflation rate to the stated yield… So, if a TIPS buyer gets his bond at 1% yield, he then can add what ever inflation is running to that stated yield… For example… if you own a TIPS at 1% yield, and inflation is running at 3%, the TIPS owner gets 4% total…
Now, yesterday, I went out on a big fat limb, and said that I thought that the Fed would soon implement a new round of Operation Twist, where they sell the 2&3 and maybe the 5 -year Treasuries and buy the 10-year Treasury bond… This would bring about a flood of buying which would drive the price of the bond up, and the yield down… So, if this plays out the way I see it playing out, then the yield on the 10-year Treasury will be brought down, and thus remove the buying of the bond, and bring back a bid for Gold…
Just about 10 days ago, the Treasury held an auction on the 7-year Treasury note… And the interest in the bond was very, very weak… Normally, the primary dealers are left with about 30% of an issue to buy… But the foreign interest was so weak for this bond, that the primary dealers were left with over 65% of the issue to buy… Uh-oh… For you may remember me telling you a couple of weeks ago that the primary dealers had already told the Fed and Treasury, no mas on buying more Treasuries…
This means that the Fed is buying the bonds… Demonetizing them…. SHHHHHH, don’t say that out loud, for if the markets get wind of the Fed demonetizing the debt, there will be hell to pay…
OK, in the overnight markets last night… There was no dollar buying overnight, and the currencies rallied, along with Gold, which is up $25 in the early trading today… I wanted also to point out something that I think is relevant… A couple of years ago, the Swedish krona passed the Norwegian krone and has remained the stronger of the two currencies since… Until now… The krone has passed the krona once again, and things are back to normal… I just never got the idea that the krona was more valuable than the krone…
Of course, the krone has the double dose of support, from the euro and the price of Oil… And with Oil rising, this all makes sense once again for the krone.
The price of Oil, which late last week, soared higher, has seen that lofty price of $67 at the close of business on Friday, get eaten away and this morning it is trading with a $65 handle… The 10-year Treasury yield also saw some slippage and came back from a 1.6% high, to 1.53%… Has the new Operation Twist began without any public notice? Ahhh grasshopper, one never knows for sure, and we may not know for sure until the Fed is finished and they then want you to know that they saved mankind and the life of wine and roses…
I have to tell you this because it’s important to know… I had a dear reader ask me if yields continue to rise will they be the death knell for Gold… And I replied, “Well, if rates are rising because the economy is running on all 8 cylinders, then Gold could suffer… But if rates are rising in reaction to rising inflation, ala the 70’s, then Gold should bask in the sun with a plethora of buying… Whenever someone tells me that Gold can’t survive in a high interest rate environment, I point out the 1970’s… Treasury yields were north of 15%, and inflation was running very high, and Gold… it had one of its best decades in its history… So, don’t even begin to tell me that interest rates along can hurt the price of Gold…
I recall the days of high interest rates fondly, for I was brought along to the Mark Twain Bond Dept., to trade short term instruments, CD’s BA’s, T-Bills, etc. I recall making clients very happy with T-Bill yields above 12%… I also ran a repo book… and the rates on those short term repos were something to write home about! Sure inflation was eating away at my earnings, but I was young then, and figured that things would all balance out… They didn’t of course…
I remember years later, talking with a former colleague, Neil, about how Germany could use some inflation, and he vehemently opposed me saying that… But it was true, a country needs to have a small dose of inflation to keep things moving along… Deflation shuts everything down, so to speak… It’s a fine line between a small dose of inflation and large does of inflation… Our Fed, and all their genius economists they employ, are shooting for a large does of inflation… And once it begins, I don’t think the Fed has the arrows in the quiver to stop inflation from running away…
Our friends (NOT!) at OPEC seem to be confused as to what it is they are attempting to achieve with the price of Oil… So, whenever it is that these guys get their acts together, then we will see a real direction of the price of Oil…
With the price of Oil higher these days, it does bring back some of the fracking / shale Oil producers as they can book a nice profit from this rise of the price of Oil. Oh wait! The new administration is against fracking! So, the administration is telling all you shale Oil Producers, take your rigs and go home… don’t go away mad, just go away!
As I told you yesterday, the U.S. Data Cupboard was lacking at best for economic data yesterday, and today’s docket also… Today’s Data Cupboard has the Small Business Index, something we’ve never followed, and probably won’t begin to either!
To recap… The onslaught of dollar buying the previous two sessions, finally backed off some. The dollar was still getting bought, but not by the truck load as before… Gold got whacked again, and one of Chuck’s fave writers attempts to explain why this is happening to Gold right now… The overnight markets have turned the tables on the dollar and it began to get sold again. Gold is up $25 this morning, and the Dollar Index has fallen back to 91.99… So, it’s a Turnaround Tuesday!
For What It’s Worth… With the price of Gold much lower than it was a couple of months ago, the word on the street is that the Indian and Chinese retail buyers have flocked to coin dealers to buy Gold at these suppressed prices… And this morning this article talks about the Indian Gold buying and it can be found here: Indian Gold Buyers Pile in as Prices Dip to One-year Low (news18.com)
Or, here’s your snippet: “Retail consumers in India continued to buy up physical gold this week as prices retreated to a near one-year low, while lower rates also injected fresh activity in other hubs, especially Singapore.
Dealers charged up to $5 an ounce over official domestic prices, inclusive of 12.5% import and 3% sales levies, compared with last week’s premium of $4.
“Demand has significantly improved in the past few days. Retail buyers are making purchases, especially for weddings,” said Mangesh Devi, a jeweller based in Satara in the western state of Maharashtra.
On Friday, local gold futures fell to 44,217 rupees per 10 grams, a trough since April 7.
Jewelers were also making healthy purchases in the first half of the week, but now a few of them have paused expecting further fall in prices, said a Mumbai-based dealer with a bullion importing bank.
“Jewelers don’t want to get stuck with high cost inventory,” the dealer said.
In Singapore, premiums of $1.60-$2 an ounce were charged, with strong demand arising from low local prices.
“We’ve seen an increase in demand, in particular from retail clients, for both gold and silver, as prices have come down a bit,” said Brian Lan, managing director at dealer GoldSilver Central, adding that wholesalers are also covering their short positions.”
Chuck again… Well it sure is nice to see the Asian retail buyers stepping back to the Gold window to buy Gold once again! U.S. investors should take this Asian buying as a clue, and get out and buy their own stash of Physical Gold ASAP!
Market Prices 3/9/2021: American Style: A$ .7702, kiwi .7166, C$ .7936, euro 1.1900, sterling 1.3877, Swiss $1.0740, European Style: rand 15.3609, krone 8.4796, SEK 8.5255, forint 308.37, zloty 3.8553, koruna 22.0726, RUB 74.37, yen 108.81, sing 1.3457, HKD 7.7630, INR 72.91, China 6.5166, peso 21.23, BRL 5.7323, Dollar Index 91.99, Oil $65.73, 10-year 1.53%, Silver $25.82, Platinum $1,174.00, Palladium $2,390.00, Copper $4.05, and Gold… $1,709.20
That’s it for today… Well, I tried to stay awake for the Blues game again last night, but fell asleep in my recliner, and then woke up at 3 am… UGH! The Blues lost for a second consecutive game in overtime…. double UGH! The Blues finished a long road trip last night, a very successful road trip I must say! Alex and Grace left for the airport this morning, and now we will not have any guests until the 20th, when daughter Dawn and her family will arrive for a week… I was walking into the condo yesterday, and I heard, and felt a pop in my right knee… about 10 days ago, it did the same thing and hurt like hell for a couple of days… Then it was better, until… it wasn’t! UGH! 9 days until my annual spring vacation begins… It’s getting close.. ” I have to say that going to the baseball games this year is very strange, in that there’s only 1,400 people in the stands that seats 6,700, and another 1,000 in standing room… But there are no lines at the concession stands… no lines in the bathrooms…. No lines to get into the stadium… But… I would much rather have it like this than to not be in the stadium at all! Nazareth takes us to the finish line today with their song: Holiday… “ Mamma, mamma please, no my face lifts, I don’t know which one you is” I hope you have a Tom Terrific Tuesday, and will continue to Be Good To Yourself!
Chuck Butler