The Sharks Smell Blood In The Water…

July 18, 2018  

* Gold gets whacked badly!

* Currencies get sold again!

Good Day… and a Wonderful Wednesday to you! I had a great time with my grandson, Braden, yesterday, and at the end of the day he said I was his BFF! Well, I can tell you this right here, right now, that the title BFF wouldn’t last 2 minutes if I refused to let him swim in the pool! But for now, I’m beaming like a proud BFF… The All-Star Game last night, was pretty light on highlights, and after about 4 innings, it no longer held my attention! And no I’m not ADHD! Or whatever the letters that are used to describe someone with no ability to focus and sit tight! I did see this morning though that 10 home runs were hit in the game that ended up 8-6 AL… Bob Marley greets me this morning with his song: 3 Little Birds… Don’t worry, cause every little thing is gonna be alright…

My Monday Pfennig was titled: Could We All Just Get Along? And after the Helsinki summit where President Trump met Russian President Putin, I need to repeat that over and over again… How in the world can Trump’s detractors rail on him for meeting with Putin? I shake my head in disbelief! Oh, and before you think this letter has gone political, I’ll just point out that I’m no fan of the Trump tariffs, I’ve said it, defended it, and will do it again!

Well, Monday’s “nothing day” when the currencies and metals were stuck in the mud ended when the beginning of Tuesday morning’s trading began… Once again, the currency rally of Friday last week,, was wiped out with dollar buying on Tuesday. So it was a turnaround Tuesday for the dollar… I have no idea why, other than the stuff that came out of the U.S. Data Cupboard, which you could have had a positive knee-jerk reaction to, but real traders would have looked at last month’s negative -0.5% print, and then compared this month’s (June print) 0.6% gain, and call it basically a wash… But I’m sure some boy-genius, said that this is the start of a trend, and bought dollars…

The euro lost the 1.17 handle, and all the other currencies followed the Big Dog, and were sold too… And Gold? It got sold like funnel cakes at a State Fair, and most of it was paper trades.  But they get to drive the price of Gold down, and since there are more of them than the physical trades, guess who wins? The short Gold paper trades totaled 268,000 yesterday, quite a bit more than usual for a summer day…  As of last Saturday, Ed Steer ( showed that it would take 60 days of Gold production to cover the amount of ounces sold short in the paper trades. And yesterday’s trading showed trades were entered for Gold, with the probability of a large number of those being short Gold paper trades, being very high! 

The selling in Gold s live leaving blood in the ocean for the sharks to come in a take a bite out of what’s left, and that’s what going on this morning, as Gold is down another $5 in the early morning trading today… 

Speaking of short paper trades… the number of days of production that’s needed to cover the total ounces sold short in Silver is… are you ready for this? … . 216 days, which is a bit over 7 months of world silver production…

The GATA folks sent me this email last night, check it out… “Craig Hemke of the TF Metals Report, writing at Sprott Money, reports tonight that in recent months India’s demand for silver has been running at record levels. But Hemke adds that paper silver traded on the New York Commodities Exchange trades every two days more silver than the world produces in a year.

“Led by India,” Hemke writes, “the world is on pace to consume all the silver produced in 2018, yet the dollar price of silver is now down over 10 percent year to date. That’s a dichotomy that must soon rectify itself. Either physical silver demand will crash before year-end or the paper price will be forced to respond as it did in 2016.”

I shake my head in disgust that this continues to be allowed to go on…  

The price of Oil also saw selling once again, and what for a fleeting moment about 10 days ago, looked like the Price of Oil was heading to $80 and higher?, has been wiped out… And the price of Oil is trading with a $67 handle this morning… I alluded to the ideal of some price shenanigans with Oil yesterday, and I truly believe it to be true, that there’s something else at work here… And it’s not just the increased production from the Saudis that have caused the price of Oil to drop like a rock in the past 10 days!

In The U.K. this morning, they posted their latest CPI (consumer inflation) and it fell… Core CPI dropped to 1.9%, a 15 month low, and out the window went any remaining hopes of a rate hike soon here… And Bank of England (BOE) Gov. Mark Carney? He was nowhere to be found, because he’s hoping that if he stays out of sight, it will be a out of sight out of mind experience for him, and he has egg all over his face right now…  I shake my head in disbelief that the markets were fooled once again by this man’s bag full of promises to hike rates… Tsk, Tsk Tsk.. 

I’m doing a lot of shaking of my head this morning, so I had better wrap this up soon, or I’ll be getting dizzy!  I already talked about the outcomes in the U.S. Data Cupboard yesterday, but we did also have the first of two testimonies by Fed Chairman Jerome Powell to lawmakers. And like I said yesterday, he didn’t tell us anything new, it was the same old yadda, yadda, yadda…   But I did pull this from his speech, and while reading it I bet you’ll be able to tell me why I highlighted this section…  Ok… here we go… 

“Powell said the unemployment rate is expected to fall further and the Fed’s challenge will be to keep inflation close to 2%. Key unknowns are the outcome of the ongoing trade disputes and the impact of the Trump tax cuts and boost in federal spending, he said. “Overall, we see the risk of the economy unexpectedly weakening as roughly balanced with the possibility of the economy growing faster than we currently anticipate.” 

Yes, just like a two handed economist right? on one hand we could see this, and on the other hand we could see this…  And why did he come out with that two handed statement about risk to the economy weakening as balanced with the possibility the economy could grow faster?  Because he’s greasing the tracks for whatever outcome comes about, and he be able to say, “see I told you”…  

There’s not much in the U.S. Data Cupboard today except some Housing Data, that I just don’t see as market moving at this point.  Powell will makes the second of his two testimonies today, and I expect today to be a mirror image of yesterday’s speech.  

To recap… Gold got whacked badly yesterday, and the sharks are circling the blood stained waters this morning and Gold is already down $5 in the early morning trading today. The currencies also got whacked yesterday, the euro lost 1-cent, Oil lost another buck in its price, and the dollar is for some unknown reason pounding its chest… Chuck goes through some numbers on data, and short paper trades in Gold & Silver.. 

For What It’s Worth… Well, I told you last month that Russia had sold 1/2 of their Treasuries they held in reserves. According to the folks at Russia has sold their remaining Treasuries now… this is all detailed with graphs and is a good write up that can be found here:

Or, here’s your snippet: “Readers may recall that last month we first reported that for all the confusion about sharply higher yields in April, the explanation was simple: it was Vladimir Putin who liquidated a whopping half of Russia’s Treasury holdings, which declined by $47.4BN to just $48.7BN – the lowest since 2008 – from $96BN in March.

But wait, it gets better, because as Trump continued to jawbone about more sanctions targeting Russia, Putin did not stop and in May he continued what was an outright liquidation of Russia’s TSY holdings, which plunged by another $40BN, or 82%, from $48.7BN to just $9BN in May. Keep in mind this was over $100BN at the start of the year.

It appears that When Putin warned he would diversify Russia’s state reserves out of Treasuries – he was serious.”

Chuck again…  Recall that I said that I thought that Russia’s first sale of Treasuries was a test for China to see the reaction of the markets and the U.S.? The next big seller will be China… well, that’s how I see this all unfolding, folks… I sure hope I’m wrong on this!

Currencies today 7/18/18… American Style: A$ .7355, kiwi .6765, C$ .7673, euro 1.1620, sterling 1.3035, Swiss $1.00, European Style: rand 13.3208, krone 8.1728, SEK 8.8645, forint 278.60, zloty 3.7090, koruna 22.2380, RUB 62.44, yen 113, sing 1.3682, HKD 7.8493, INR 68.44, China 6.6900, peso 18.96, BRL 3.8549, Dollar Index 18.96, Oil $67.62, 10-year 2.85%, Silver $15.44, Platinum $806.34, Palladium $907.79, and Gold… $1,222.75

That’s it for today…  I need to get my eyesight checked today, they make sure that my remaining eye remains in good health… And then I’ll be off to the Muny, St. Louis’ outdoor theater, that’s been around for 100 years! My darling granddaughter, Delaney Grace is an orphan kid in the presentation of Annie tonight!  I’ll be smiling from ear to ear when I see her up on that huge stage! Kathy got home yesterday, just in time for Delaney’s Muny debut! So, someone’s moving around upstairs, and it startled me at first because I’m use to being alone here!   The Steve Miller Bank takes us to the finish line today with his song: Serenade…  Stevie Guitar Miller on the iPod this morning! I hope you have a Wonderful Wednesday and remember to Be Good To Yourself!

Chuck Butler