The BOJ Sounds Hawkish, But Will There Be Follow Up?

December 20, 2022

* currencies & metals get bought in the overnight markets

* Is The COMEX out of physical Silver? 

Good Day… And a Tom Terrific Tuesday to you! I had to get my driver’s license renewed yesterday, and thought, oh my, I’ll be here all day… But it only took me a ½ hour, and I walked out with my temporary driver’s license… The last one I had was during my steroid years (doctor prescribed) and I had ballooned up to weights a man of my height should never see! So, when the girl at the DMV asked me if I still weighed X, I said, no! I now weigh Z… She giggled at me, and said, I would be proud of that too! The two pictures of me are a stark difference… Yesterday was my good friend, and former colleague, Ty Keough’s birthday! I knew it was coming up, and I forgot to say Happy Birthday here, to him yesterday, so, Ty, I hope your day was grand! Jack Jezzro and his holiday friends, greet me this morning with their version of the song: Home For The Holidays…

Well… the dollar selling that went on in the overnight markets Sunday night into Monday, stalled out in the U.S. session, and the BBDXY ended up losing only 1 index point yesterday. The euro remained above 1.06, and the rest of the little dogs came in right behind the Big Dog, euro. Gold never found a bid yesterday, and ended up down $5.50 to start the week, closing at 51,788.50. Silver lost a quarter (25-cents) yesterday to end up at $23.07… I have something on Gold in the FWIW section today, so you won’t want to have missed that! HA Don’t Touch That Dial!

The price of Oil bumped higher by $1 yesterday, and ended the day trading with a $76 handle. I would think that the with the opening up of the Chinese economy, that the demand for Oil will return eventually, and I think the Oil traders see that, and are just biding their time, waiting for confirmation of a return of demand.

The 10-year’s yield, rose to 3.58%, yesterday… Every time the yield on the 10-year Treasury begins to rise, it sees massive buying, and the yield falls once again. We talked about this yesterday, how China, Japan, and Russia have stopped buying Treasuries. So, the $64 question is: Who is doing this massive buying?

In  the overnight markets last night…  The dollar got sold, and this time not a fair-to-middling selling like Sunday night. The BBDXY has lost 8 index points overnight, and is looking like it could be in store for more losses once the U.S. traders arrive at their desks. Gold is up $11 in the early trading this morning, and Silver is up 60-cents!

So, here’s what’s going on in Silver… I think the COMEX could be out of physical Silver for delivery… Could this be a reality? Of course it could!  The reason I say this is because of some goings on at the COMEX… Apparently there is a large delivery of Silver that has to be made before year end, and there were no deliveries made yesterday, a day for deliveries… Uh-Oh! I may be going way out on a limb here, but that’s what I see right here, right now… And that’s the reason Silver is soaring this morning… Let’s hope the price manipulators stay out of Silver’s way!

Also in the overnight markets, the 10-year  Treasury’s yield ratcheted higher again, and this morning the 10-year trades at 3.66%… Are the bond boys finally on board with what Jerome Powell keeps banging the desktop about?  I’m surprised that the markets have been so bull-headed about this… Apparently, they aren’t buying what Powell is selling, and to me, that could be their mistake… Don’t fight the Fed… Is the saying that drilled into my head when I first became a bond guy…

The price of oil was steady Eddie overnight, and trades this morning with a $76 handle…  So, now, you’re all up to date with what happened yesterday, and overnight…So, let’s see what else is on Chuck’s mind this morning!

I keep reading reports about how these guys believe that the price of Copper is getting ready to explode higher… Their intuition comes from the idea that there’s not enough Copper that’s been mined to meet the demand of the number of Solar Panels that are being built.. .Silver also gets used in the production of Solar Panels… So, what’s good for the goose (Copper), is also good for the gander (Silver)…

The Asian Currencies just can’t seem to catch a strong bid… Of course I don’t know why they would be looking for one, given their collective monetary policies aren’t worth a plug nickel!  From China to Singapore, and all ports in-between, these countries need to get off their duffs and hike rates, to get out of negative deposits territory… Japan’s venture into negative deposit rates has been met with bad times for the Japanese yen… And now they get to import the U.S.’s inflation! The Eurozone’s inflation!, the U.K’s inflation and so on…

And Bust my buttons, the BOJ met last night and did sound hawkish! No, they didn’t raise rates, but they did move the range for their 10-year Gov’t bond to .25%, from zero. So… that’s something, a token hike if you will… Here’s Bloomberg with their take on the BOJ meeting: “The Bank of Japan’s unexpected hawkish shift sent shock waves through global markets as the developed world’s last holdout for rock-bottom interest rates inches toward policy normalization.

Japanese government bonds and Treasuries both slumped, while the yen surged after the BOJ raised its cap on benchmark 10-year yields to around 0.5% from 0.25%, surprising every economist surveyed by Bloomberg. The fallout touched everything from US stock-index futures to the Australian dollar and gold.”

Chuck again… Again, no rate hike, but they at least sounded like the BOJ is ready to hike rates soon, and that’s something! Yen was the biggest mover overnight, as investors bring their cash back into the country…  This is something that could cause some problems for a currency like the Aussie dollar (A$), as it has long been the trade to sell yen and buy A$’s… This trade could get reversed, and that would not be good for the A$… I’m just saying…

I’ve always been a fan of the Singapore dollar. (Sing) Their economy, their monetary authority, their leadership, etc. has all been not only different, but of use! But you see, the MAS (Monetary Authority of Singapore) has a tough game to play, as the Sing is placed in a range, and not allowed to trade outside of that range. In addition, Singapore is always in Competition with China for exports of things like Pharmaceuticals, and the MAS can’t allow the Sing to get to far out of line with the Chinese renminbi, so that they can remain competitive with China.

The Pan-Asian currencies of Australia and New Zealand, have seen their internal rates ratchet higher and higher this year, and New Zealand’s rate is competitive with that paid in the U.S. So, these currencies have rallied accordingly, thus leaving their Pacific Ocean neighbors in the their wake! But like I said above, there could be some rumblings in the A$’s price, as Japanese investors bring their cash home…

The U.S. Data Cupboard, as I said yesterday, is lacking until we get to Friday, this week. Yesterday, for instance we saw the Home Builder’s Index, and it had fallen 2 index points from the previous month… Now didn’t knowing that make your world a wonderful place? HAHAHAHAHA! Today’s Data Cupboard will have the two blockbuster prints (NOT!) of Building Permits and Housing Starts… OOOOOHHHH, those should put a rocket in the pants of the markets! NOT!

To recap… The dollar selling in the overnight markets the night before yesterday, abated, and the BBDXY only lost 1 index points on Monday. Gold lost $5.50, and Silver lost a quarter yesterday… Chuck goes to bat for the Asian Currencies, telling how to find a bid for their respective currencies… And there have been at a least a dozen articles written by different guys, that talk about how Copper is getting ready to explode higher in price… The overnight markets last night…The dollar got sold, and the BBDXY lost 8 index points!

For What It’s Worth… Well,  the year-end is nearing, and when that happens, the forecasts for what to expect or look for in the next year come out of the woodwork… This one is interesting because the writer is looking at the things that could move Gold to $3,000…  This article can be found here: Outrageous! This is what gets gold to $3,000 in 2023, says Saxo Bank | Kitco News

Or, here’s your snippet: “Global economic uncertainty and heightened geopolitical tensions will create a “worldwide war economy” that prioritizes domestic supplies and price caps, ensuring that inflation will remain persistently high through 2023.

Taken to its extreme, this scenario will be very good for gold, with Saxo Bank offering an “outrageous” forecast of $3,000 an ounce.

“2023 is the year that the market finally discovers that inflation is set to remain ablaze for the foreseeable future,” Ole Hansen, head of commodity strategy at the Danish bank, said in the report.

In an interview with Kitco News, Hansen added that his price target is not an official forecast, but more of a thought experiment on what happens if extreme scenarios in the global economy unfold.

“It’s not so much about being right but starting a discussion on the challenges the global economy faces and how that will impact gold,” he said. “Fundamentally, a war economy is inflationary and we expect investors to realize in 2023 that central banks are not going to be able to keep inflation under control.”

Hansen said that if inflation remains persistently high, investors will be forced to reevaluate breakeven rates. Any drop in real rate expectations should weaken the U.S. dollar.

Hansen added that gold has been lackluster through most of 2022 as investors continue to have faith that central banks will be able to bring inflation back to 2%. However, he added that 2023 is the year that faith could be shaken.

Hansen said that they see a few scenarios that continue to support higher-for-longer consumer prices, including further development of domestic supply chains, with a particular focus on the energy sector.

A second factor is an improvement in China’s economy, which would lead to broad-based demand for raw commodities.”

Chuck again… yes, I am in agreement that inflation is going to last much longer than the markets are pricing in, and when the Fed/ Cabal/ Cartel can’t get inflation back to 2%, the markets will finally be faced with the reality that it won’t be…  Got Gold?

Market Prices 12/20/2022: American Style: A$ .6667, kiwi .6340, C$ .7342, euro 1.0630, sterling 1.2157, Swiss $1.0785, European Style: rand 17.3528, krone 9.8795, SEK 10.4013, forint 380.20, zloty 4.4019, koruna 22.7489, RUB 68.83, yen 132.59, sing 1.3518, HKD 7.7825, INR 82.75, China 6.9689, peso 19.76, BRL 5.3162, BBDXY 1,255.76, Dollar Index 104.07, Oil $76.19, 10-year 3.66%, Silver $23.67, Platinum $996.00, Palladium $1,685.00, Copper $3.78, and Gold… $1,805.00

That’s it for today… Well, so much for warm winters… Shoot Rudy, it’s not even winter per se… But a icy, sub temperature cold front is coming our way with snow and blizzard-like conditions, allegedly… Around here, we don’t take what the weather people tell us too seriously… And all the time the temperature here is struggling to reach 7 on Friday, I’ll be dreaming of sitting on the beach in the Caribbean, the first 10 days of January! 4 more days until Santa comes! I can’t wait! Not that gift getting is in my cards any longer, but I love to watch the little kids get what they were asking for! I’ve got my books lined up for my upcoming trip, and they are very different! I’ve branched out, and not limiting my reading to just murder, mysteries, detective books… Who knows, maybe I’ll return a different person! HA! As If! Well, our Blues played in Vancouver last night, too late for me to watch them. But they continued their road success with a 5-1 win! The Chad Lawson Trio greets me this morning with their version of the song: Deck The Halls…  I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!


Chck Butler