I have to ask if any of the trends I’m betting on have changed…
My answer is no.
In part, this is because the US could reverse itself in a heartbeat and slap the new tariffs on China after all. The stay of execution is good, but it may not last. The hope that the trade war will end soon is too optimistic. A bit of a reprieve is not a game-changer. An actual deal with China will take time, and the trade war could easily take a turn for the worse—potentially much worse.
Meanwhile, the fragility of the US recovery and the deteriorating global economy are still with us.
This all makes the Fed—by far—the more important factor.
The next FOMC meeting isn’t until the end of the month. Investors may not have forgotten the Fed, but the expected rate cut was less imminent than the expected tariff increase. This seems to have Mr. Market focused more on the trade war for now, but what the Fed does is ultimately more impactful. As the Fed decision gets closer, I expect the “good news is bad news and bad news is good news” trading pattern to resume and strengthen.
The bottom line here is that nothing fundamental has changed in the world or in global markets.
I therefore remain extremely bullish on precious metals and neither surprised nor alarmed by this correction.
I warned that some form of correction after gold’s rapid rise was likely. Nothing goes up in a straight line. I was right.
Slowly but surely the ship sinks. Gold bear phase over.
The Dollars will come home one day.
Russia, China Sign Agreement on Payments in National Currencies in Blow to Dollar – Reports
MOSCOW (Sputnik) – Russian Finance Minister Anton Siluanov and Chinese People’s Bank Governor Yi Gang signed on 5 June an intergovernmental agreement to switch to national currencies in mutual payments, the Izvestiya newspaper reported on Friday, citing a letter from the Russian Finance Ministry.
According to the newspaper, the information about the accord is contained in the letter of Deputy Finance Minister Sergey Storchak to the chairman of the Russian lower house’s Committee on Financial Market, Anatoly Aksakov. The letter was a reply to Aksakov’s inquiry about the ministry’s efforts to intensify work on settlements with economic partners in national currencies and thereby “strengthen the country’s economic security.”
The letter also notes that new mechanisms for payments in national currencies between Russia and Chinese businesses were already under development.
Aksakov, in turn, told the newspaper that one of the options could be creating “gateways” between the Russian and Chinese analogues of the SWIFT payment system. An increase in payments in national currencies however will also require creating a market of ruble and yuan financial instruments, the senior lawmaker stressed. This, according to Aksakov, will let the two nations hedge risks of exchange rate fluctuations in bilateral trade. As a result, the share of ruble payments with China may rise from the current 10 percent to 50 percent in the coming years, the lawmaker estimated.
Friday’sprice action certainly took some steam out of the current rally in gold -- and in silver as well...such as it was. It remains to be seen where prices are headed from here. Certainly up as the year progresses, but in the short term now, it's hard to say. However, the bearish flags are flying for gold now.
The next FOMC meeting is a bit over a month away -- and the consensus on Wall Street is that the Fed will cut interest rates by 50 basis points at that meeting. The continuing decline in economic activity in the U.S...plus interest rates abroad...certainly indicates that this is what the Fed will do. But I suspect that they'll keep the markets guessing right up until the big announcement on Wednesday, July 31. So, in the interim, what happens in the precious metals world until then, is a big unknown -- and I'm certainly not about to speculate.
It was the second time this past week that a major rally in gold [and silver] in morning trading in the Far East was snuffed out by JPMorgan et al before it could develop into something far more serious...which it certainly would have done if left to its own devices.
Silver is still lagging -- and it's certainly doing that because 'da boyz' aren't allowing it to go anywhere in the COMEX futures market, where the prices of all of the Big 6 commodities, plus others are set. They're set by the dos-à-dos between the Managed Money traders on one side -- and the commercial traders on the other. And in the case of the precious metals, it's '4 or less' U.S. banks that have them on that proverbial short leash.
As to when that situation might change, I don't know. But as Ted pointed out on the phone yesterday, those charges brought against Merrill and the Bank of America, were certainly a pointed warning to JPMorgan et al. Whether or not that makes in any difference in the short or long term, remains to be seen.
The ongoing sniping between President Trump and Jay Powell over at the Fed is getting more serious and obvious with each passing exchange.
At some point the U.S. dollar will become a casualty in all this...
whether by Trump's doing, or that 50 basis points rate cut that Wall Street and all say is coming at the end of the next FOMC meeting. And if not then, then certainly long before the year is out.
As far as I'm concerned, the dollar is already a dead man walking -- and has been for some time.
If you follow my daily comments on the U.S. dollar index, you'll note the increasing frequency in the appearance of the usual 'gentle hands' that keep preventing it from seeking its intrinsic value. What its true value is, isn't known -- and the powers-that-be are ever vigilant in ensuring that free market forces never are allowed to discover it...just like in the precious metals. Right now it's the cleanest dirty shirt in the laundry hamper. But that won't last.
As far as the current price management scheme in the precious metals is concerned, that fact is known far an wide, not only by us investors, but the miners themselves -- and world governments. That knowledge now permeates the trading in the COMEX futures market, because as Ted pointed out on the phone yesterday, spoofing has vanished from the scene. So it's obvious that the conviction of that JPMorgan trader -- and now the deferred judgement against Merrill/BAC for the same practice, has had the desired effect.
Of course, if all convicted parties are cooperating as they say they are to avoid jail or fines...or both...then all fingers will be pointing at JPMorgan. Then one has to wonder if the DoJ is now nosing around the trading records of Citigroup, plus others as well.
When it all ends, it will be obvious in the price -- and as Ted stated in his closing paragraphs of his now-public essay "
Stranger Than Fiction
Ed’s Critical Reads
Money manager Peter Schiff says all the money printing and debt explosion since the Great Recession comes with a huge downside. Schiff says, "All sorts of bad policies basically took place thanks to the monetary excesses applied by the world central banks, but now we are at a point where all these inflation chickens are going to come home to roost. It will not be in stock prices or real estate prices or bond prices, but in good old fashion consumer prices. Food, energy and all the things that we need to live are going to get a lot more expensive."
Schiff says the Fed is overlooking some big problems coming. Schiff says, "They (Fed) did not stress an environment where we have more inflation or where we have stagflation, where we not only have a rise in unemployment and a recession, but consumer prices and long term interest rates that go up at the same time. They (Fed) are not even thinking that's possible, but that's actually probable. The real problem is when real inflation rears its head, there is nothing the central bankers can do about it. If they try to fight the inflation by tightening up on monetary policy, it's like slamming on the brakes. They are going to have to jack interest rates very high, and everything is going to start imploding. The whole credit bubble is going to collapse. We are going to see stock markets tumble. Bonds are going to go into default. There will be bankruptcies, layoffs, bank failures and the governments will have to start defaulting on their obligations and payments on social programs, or even interest on principal. You have a massive crisis coming if the Fed fights inflation, but you have an even worse crisis if they don't. I am betting on this initially. As inflation gets worse and worse, the central bankers are going to say it is a good thing."
Schiff predicts, "Inflation is going to run out of control...This is why people need to buy gold. Paper currencies are going to lose a tremendous amount of value. So, if you want to preserve your purchasing power of your savings, you better be saving real money and not all this funny money the central banks create....Once the market perceives that there is no light at the end of the tunnel, that we are never going back to normal, that interest rates are going to stay negative in real terms forever, that the Fed has no ability to raise rates, that all the new money that has been created will never be destroyed, that the Fed balance sheet will grow in perpetuity so liquidity will never be removed, then the dollar will fall through the floor. Then we are going to get all that inflation."
This 35-minute video interview with host Greg Hunter, showed up on the
Internet site on Wednesday sometime -- and I thank Brad Robertson for sending it our way. I listened to the whole thing -- and Peter really gets wound up in the last half of the interview. Another link to it is
Instead of revisiting the peak, yesterday, the Dow took a few steps back down the mountain. What happens next is anybody's guess.
But the picture we've been sketching out is a doozy. It shows that no matter what the Dow does... no matter what the headlines or the pollsters tell us... the deeper cycle is on a downward slope. It has been since 1999.
And it will probably continue until it finally reaches its rendezvous with destiny. That's when fear reigns supreme... and hope, optimism, and faith in the future have been crushed down to historic lows.
We'll know when that moment comes by watching our Greed/Fear gauge, which measures the relationship between stock prices and gold. People invest in stocks when they think everything is hunky dory (greed). They go for gold when they worry that things aren't so hunky or so dory (fear).
When the Greed/Fear gauge goes below five (when you can buy all the Dow stocks for less than five ounces of gold)... the point of maximum anxiety - Peak Fear - will be at hand.
Then, you'll be able to buy almost any stock you want for only about a quarter (we're talking in real money terms... measured in gold) of what you would pay now.
Houses, too, should be only about half what they cost today. And bonds? Don't be surprised to find that most of them will be worthless by then.
That's what inflation does to bonds. It wreaks havoc.
commentary from Bill, filed from
in Ireland, put in an appearance on the
Internet site early on Wednesday morning EDT -- and another link to it is
President Donald Trump wants a weaker dollar to help boost exports, and is counting on the Federal Reserve to help make that happen. But the central bank's chairman, Jerome Powell, has made clear it's not his job.
It's a new twist in the broader pressure campaign the president has brought to bear on Powell to cut interest rates to energize the stock market and fuel growth.
Trump's focus on the dollar surfaced last week after the European Central Bank said it might ease policy, prompting the euro to drop against the dollar. Trump seized on the move to say on June 18 that the Fed's failure to lower rates was putting U.S. exporters at a competitive disadvantage. He later mused on June 26 he'd rather have ECB President Mario Draghi running the Fed.
Powell, once again, is finding himself on the defensive, trying to shield the Fed from political influence. He deflected Trump's calls back at the administration.
"The Treasury Department -- the administration -- is responsible for exchange rate policy -- full stop," Powell said June 25 in response to a question from the audience after a speech in New York. "We don't comment on the level of the dollar. We certainly don't target the level of the dollar. We target domestic economic and financial conditions as other central banks do."
The feud between Trump and the Fed is getting nastier by the day. But Powell will find out in a hurry who really controls the value of the U.S. dollar if they cut interest rates by 50 basis points at the next FOMC meeting. But he knows that already. This
article showed up on their Internet site at 1:00 a.m. Pacific Daylight Time on Friday morning -- and I found it embedded in a
dispatch. Another link to it is
. A parallel story to this is this
article from Thursday headlined "
U.S. Is Heading to a Future of Zero Interest Rates Forever
" -- and I thank Jim Gullo for that one.