- Currencies get sold to start the month…
- Gold & Silver ignore the dollar strength and rally…
Good Day… And a Tom Terrific Tuesday to you! Well… I guess having flown back last week on a plane, or being around family this past weekend, didn’t do me any favors, as I’ve come down with a head cold… Geez, I dislike these things, or really just getting sick! I have enough health problems without having to deal with a cold! I’m not whining either, just stating a fact! I think I’m not in a good mood this morning, so if you’re part of the Gov’t, or Treasury, or Fed, you might want to hide! HA! The O’Jays greet me this morning with their song: Back Stabbers…
I’ve been stuck in the back in business once in my life… So, I identify with that song!
Well, the dollar bugs are still dancing in the street and the BBDXTY rose 3 index points yesterday, and the euro dropped further in the 1.07 handle. And the rest of the currencies not named Mexican pesos, look like they’re heading to the sick bay again… The one currency that I’ve noticed that has fallen out of bed, is the Chinese renminbi… I’ll talk about that more in a bit…
First though, Gold continued its climb higher to new all-time levels yesterday, in the first day of the new Quarter. Gold traded as high as $2,286 yesterday, and then it didn’t hold that all-time high… But did hold on to $20 of its gain to end the day at $2,258.10… Silver also saw higher levels than what it closed at, which was $25.15, up 21-cents on the day.
I think that the gold bugs have stopped thinking that the Fed Heads have rate cuts in their future, and instead are now looking at several things that will affect the dollar going forward, and investors, Central Banks, etc. are buying now, instead of in the future when all things go haywire! So, how about you? Got Gold?
The price of Oil bumped back over the $83 handle yesterday, and bonds continue to get sold, with the 10-year’s yield climbing to 4.30%, which is also helping the dollar to new heights…
In the overnight markets last night… The dollar continued its assault on the currencies, with the BBDXY gaining 3 index points overnight… The currencies, led by the euro, keep weakening in the face of this dollar strength, but not Gold (& Silver)… Gold was pushing the envelope toward $2,300 yesterday, as it climbed to $2,286 during the day… But remember what I told you yesterday that the wolf (short paper traders) is always at the door? Silver is up 49-cents in the early trading today, in its attempt to catch up with all the ground it has not gained lately, while Gold kicks some tail…
The price of Oil has bumped higher and trades with an $84 handle this morning… It wasn’t that long ago that the price of Oil was range trading and couldn’t find a bid that would break the range, and then it wasn’t range trading any longer and the price of Oil is marching higher!
Do you know how many products use Oil in their manufacturing process? I’ll just Tons!, and know that, you get the feeling that prices for tons of things in the U.S. are going to go higher again… I’m just saying…
Well, I gave you lots to think about yesterday… Bank bail ins, Banks balking at counting treasuries in their risk calcs, and other things… So, that’s a difficult task to follow… I’m just saying…
You know me, and how I don’t like to talk about economic data so early in the letter, but yesterday’s surprise (well, not really when you consider IT IS an election year) was how the ISM finally got to a 50 number, by the skin of its teeth, but at 50 nonetheless.. And that got the dollar bugs all lathered up, because that reading of the ISM (manufacturing index).
So… We start the 2nd QTR with the dollar in complete control… And kicking rear and taking names later, as they say in the dumpster business in NYC… Even the Mexican peso gave back a small amount to the dollar yesterday… I’m taking a list of all those calling for the dollar to rule supreme throughout the year… I’ll be calling them out when the dollar succumbs to all the pressures it is now building up…
Well, come to think of it, Chuck, you don’t want to be calling out people like that, unless, you want them to call you out on your wrong calls… Hmmm, seem fair to me… So, no list for me…
The Chinese renminbi has really fallen out of bed lately… And to me it appears that the Chinese have decided to play this currency war game with the dollar… The Chinese economy has faltered, and they need their exports to bring them out of this economic funk… And the best way to increase exports is to weaken your currency… So, that’s the Chinese renminbi’s outlook in a nutshell…
Now, one would think that if the exports are coming to the U.S. cheaper, then prices on those goods would be cheaper here in the U.S., right? Ahhh, grasshopper, it’s not that simple, or easy and it will take a long period of time before we see prices drop on Chinese imports… I’m just saying…
Ok… late last week’s data had the PCE inflation calc. and it showed an increase of .3% from Jan, in Feb, and 2.5% year on year… I’m wondering just how true those numbers are, aren’t you? I mean, C’Mon, I go to the grocery store, I buy clothes, etc. Food alone has seen increases of limited service meals (takeout only) rose 5.2% year-over-year, while full-service (sit-down restaurant) meals rose 3.8% year-over-year. And those are numbers from the Gov’t, who wouldn’t be fudging them any in an election year, now would they?
Bill Bonner had some thoughts on the funny numbers in inflation that the Gov’t keeps spewing out… Let’s let Bill have his say: “Former Secretary of the Treasury for President Clinton, Lawrence H. Summers, recently published a figure which showed that inflation had been and still was far higher than what the BLS had calculated…. Using the CPI as calculated before 1983, Summers estimated last year’s peak inflation at 18%. According to his methodology, interest rates would still be far too low. In other words, Bidenomics, with large fiscal deficits and negative real interest rates, would still be inflationary.
Are you thinking what we’re thinking?
If the inflation reading is false, so is the GDP rate. And so is the whole financial picture. ” Bill Bonner from his newsletter at bonnerprivateresearch@substack.com
Chuck again… here, here! Everybody rise, cause, here comes the judge! I’ve been pointing out the problems with the calcs in inflation, jobs and GDP for decades now, but when Bill Bonner calls them out, then millions of his readers get the message, as opposed to the small number of readers that I have…
And that got me thinking about how when David Galland was our marketing guru at EverBank, he promoted the Pfennig, and my readership numbers grew by leaps and bounds… But then he left, and the letter had no one to promote it any longer, and the numbers dropped, and then when I was shown the door by TIAA, and retired and ended up with the Aden Sisters, I still didn’t receive any marketing, and apparently word-of-mouth doesn’t quite do it any longer! So… I said all that to say, thank you Bill Bonner for spreading the word!
OK… still with me? great! Well, this seems to be a data dependent day so let’s keep with that thought and talk about how the US Interest is to Hit $1.6 Trillion By Year End, Making It The Largest US Government Outlay… And to think, that in the coming years it will be even larger! Oh my! What’s an investor to do? throw more money in the juggernaut of the stock market that’s nearing the cliff of being overbought? Buy bonds in a world of nothing but debt all around us, and the chances of default out there and nearing us? or… buy Gold (or Silver)?
The U.S. Data Cupboard yesterday had the aforementioned ISM and Construction Spending, which was negative for the month of Feb. Today’s Data Cupboard will have the Feb prints of: Factory Orders, and Auto Sales… with the Factory Orders the piece of real economic data…
To recap… Who’s counting the beans? Chuck shows that it’s not just him that questions the Gov’t reports, as Bill Bonner joins us this morning. Chuck also gets into what should people be looking to buy? And how the dollar is kicking rear and taking names later. And Chuck gives us his Pfennig or two on what’s going on with the Chinese renminbi…
For What It’s Worth… Well, this is James Rickards writing for the Daily Reckoning and talking about how Gold is the perfect hedge and it can be found here: “Goldilocks” Is Gonna Get It – The Daily Reckoning
Or, here’s your snippet: “In this analysis, gold is constant (by weight) and the dollar gets stronger or weaker relative to gold. All of the recent market action points to a weaker dollar/
This mode of analysis also solves another market riddle. Given huge U.S. budget deficits, unprecedented levels of U.S. national debt, slow growth, rising unemployment and persistent inflation, how is it possible that the dollar has been so “strong” lately?
The answer is that it’s only been strong relative to the euro, yen, sterling and some other reserve currencies and as measured by certain dollar indexes (DXY, Bloomberg, etc.) composed of baskets of currencies (but not gold).
But that’s often because those other currencies are issued by countries with debt and growth problems even worse than the U.S.’ Those currencies dropping against the dollar have the look and feel of a good old-fashioned currency war.
It’s only when you use gold as your metric that the real weakness in the dollar becomes apparent, as it should. In effect, certain currencies are weakening against each other but all currencies are weakening against gold.
Returning to the “higher gold price” frame, there are a number of reasons for this trend.
The first factor is simple supply and demand. Mining output and recycled gold have been about flat for the past eight years running between 1,100 metric tonnes and 1,250 metric tonnes per year.
At the same time, central bank demand for gold has surged from less than 100 metric tonnes in 2010 to 1,100 metric tonnes in 2022, a 1,000% increase in 12 years. Central bank gold demand remained strong in 2023 with 800 metric tonnes acquired through Sept. 30, 2023. That puts central bank gold demand on track for a new record in 2023. There’s no sign of that demand slowing in 2024.”
Chuck again… The article goes on for a further explanation of why Gold is the perfect hedge, and it you have the time, you should click the link above…
Market Prices 4/2/2024: American Style: A$.6503, kiwi .5957, C$ .7372, euro 1.0746, sterling 1.2565, Swiss $1.1005, European Style: rand 18.8371, krone 10.8949, SEK 10.7259, forint 368.22, zloty 3.9954, koruna 23.5990, RUB 92.57, yen 151.64, sing 1.3524, HKD 7.8284, INR 83.38, China 7.2359, peso 16.61, BRL 5.0383, BBDXY 1,248.58, Dollar Index 104.87, Oil $84.91, 10-year 4.37%, Silver $25.64, Platinum $936.00, Palladium $1,044.00, Copper $4.08, and Gold… $2,257.50
That’s it for today… I was able to sleep a lot yesterday, so I’m getting my resting in, while sick… I tried to stay up to watch my beloved Cardinals play in San Diego last night, but had to call it a night around the 7th inning… But when I checked this morning I saw that they had won. YAHOO! One of the Cardinals promo videos shows the Wizard, Ozzie Smith, making a signature play at shortstop… I loved watching him play shortstop, and I doubt there will ever be another Wizard! Bill Withers and Grover Washington, Jr, take us to the finish line today, with theirs song: Just The Two of Us… I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!
Chuck Butler