MULTIPLE EVENTS TO PONDER IN THE COMING WEEKS AND MONTHS

Here's some news to ponder on:

1) Gold withdrawal from the NY Fed vault has hit 388 tonnes since 2014. Chief among those who withdrew - Germany and the Netherlands for a total of 242 tonnes. Incidentally, Austria too has withdrew its gold held in London's depository. A clear sign that global financial system is entering a breaking point or a monetary reset where gold would play a crucial role? The coming months could shed some light; ie: The coming G-20 meeting in Beijing, the popularity of the adoption of SDR bonds, the change in the LIBOR rate which could raise the borrowing costs between banks.

2) Consumer confidence rose above 100 points which caused the Dollar to spike, hitting gold and silver. More jawboning by the Fed continue to suppress the price of gold and silver.

On top of the Fed comments we have the options expiry on the COMEX last week and today the options expiry for the LBMA. Most of the shorts were in the US$1,320 - US$1,340 per oz range (Source: King World News), therefore it is of the interest of the shorts to bring it below US$13,20 per oz.

I would expect the data manipulation to continue, including this week's Jobs Report. So we could likely see gold and silver pushing below US$1,300 per oz going into the Fed meeting in September which the outcome would be:

Interest rate hike - Dollar up, stock markets fall, demand for precious metals up (During the hyperinflation period of 1970s - 1980, gold went up 325% when interest rate was 15%).

No interest rate hike - Dollar down, stock markets up, and demand for precious metals up.

So it is my opinion that the next few weeks the Fed and bullion banks could work in unison to manage the fall in the price of gold and silver so that whatever the outcome, the rebound in price would put us where we were some weeks ago instead of shooting past US$1,400 per oz. However, this could change if the coming G-20 meeting alters the narrative for gold or the Dollar.

Any pullback in gold and silver will be an opportune time to buy the precious metals and miners shares.

3) Interestingly, Germans are buying safety boxes to put their money instead of putting it in the banks (source: Zerohedge). Will this cause a bank run as the global economy picture worsens with deeper interest rate cuts?

4) In the political front the US is increasingly worried of a Turkey-Iran-Russia coalition in the Middle East, Turkey signaling to the EU that it could not hold back the refugees and migrants if the EU cannot honour its end of the bargain. Meanwhile, Hungary will be having a referendum on immigrants which could see Hungary closing its doors on migrants. In Austria, the right wing, anti-migrant party is gaining momentum in the election after the earlier election was declared a fraud. Italy too would be having its own referendum. Also on the top of the list is the standoff between Ukraine and Russia. All these could damage the Euro further so it is best to avoid holding this currency. Any further deterioration should boost the price of gold and silver.

5) And finally there are now more calls from Goldman Sachs, JP Morgan, Morgan Stanley, Citibank, UBS and Deutsche bank that market risks have increased to dangerous levels. Here's a chart from Deutsche bank which shows why the Fed may not increase interest rate at all.

Normally it is the Earnings Growth (blue) which drives stock market prices (see the period from 2003 - 2007). In the period from 2012 - 2016, 92% of the increase in the S&P was driven by compression of Equity Risk Premium (low interest rates) which is equivalent to approximately 800 points.Now imagine what would happen should interest rate increase and the compressed ERP is decompressed. We could see a huge correction in the S&P.

Would the Fed risks markets turmoil which could see the S&P and global indices tumble with a rate hike? Only the Fed has the answer, but we at least know that the safest assets to own irregardless of the outcome are still the precious metals and miners shares.