Fresh from the FOMC meeting, we have a parade of Fed speakers saying the same thing for years: The economy is strengthening and there's a possibility of a rate hike.
We see the US$ spiking once again. In conjunction with the parade of Fed speakers we had the options expiry for gold and silver, and China's Golden Week which took any arbitrage from the Shanghai Gold Exchange off the table. So we had a massive short on gold and silver for the most of the last two weeks, with gold falling almost 5% and silver 10% respectively.
Then yesterday, just as a weaker than expected jobs report, we saw another dump of US$2.2B in gold contracts to bring the price of gold below US$1,250. But gold ended higher at US$1,258.
So the last week alone we had seen several massive dumps amounting to more than US$15B on the market. It shows the sheer desperation of the central banks to prevent gold and silver price discovery. Thus, we have the bullion banks and BIS acting in unison to undermine gold.
Gold is the Achilles heel of central banks. It's appreciation in price will undermine fiat currencies. But the signs are there that central banks are losing control of the global economy.
Next week, we could see some the Chinese traders buying gold due to the attractiveness in price. The US$15B dumped over the past week will have to cover eventually, and we could see gold trending higher. Once again, the bullion banks had been caught shorting in expectation of the jobs report exceeding expectation. That was the reason for the dump post the jobs report to cause panic selling but it did not happen.
The Fed has always been talking up the US$ by stating the US economy is strengthening. Now these are the facts:
1) The Fed has been talking about a rate hike since 2014. But in the 2 years since, there's only been a measly 0.25% hike. Because as soon as the rate hike ensued, the stock market tanked 10%. Now with all the jawboning, the stock market is once again telling the Fed not to raise rate. The Dow, S&P and NASDAQ are all in the red.
The Fed says normalisation is in their plan. When the US government debt is at U$20T? Consumer debt at US$1T? Auto and student loans each at US$1T? Corporate debt which doubled since 2008? Indebted shale oil producers, a majority of which are using 80% of their operating cash flow to service debts? Who is the Fed kidding?
2) The US economy is expected to grow less than 2% this year, with the IMF projecting 1.6% growth. The US growth in 2014 and 2015 was 2.43%. So at 1.6% from 2.43%, the Fed is saying that the US economy is strengthening? Who is the Fed kidding?
The withholding tax from corporations has fallen in recent months. If the economy is so awesome, why are companies' earnings falling. The S&P 500 companies have had 5 consecutive quarters of falling incomes.
3) The myth behind the awesome jobs growth. The jobs growth has been fueled by increase in minimum wage jobs.The withholding tax for personal income has fallen. In the most recent research, US middle class has dropped an astounding 10%!
According to Zerohedge, 7.86M people are holding multiple jobs, the highest since the global financial crisis! While the Fed use number of jobs to showcase the "recovery", the "recovery" means little to the people who hold multiple jobs with minimum wage. So if we consider the number of people employed, the scenario is much worse. Labour participation rate remains below 63% vs the peak below 68% in the early 2000s. Heck, it is even below the rate before the global financial crisis. So this is a recovery? Utter nonsense!
More than 90M Americans of employable age are still not working. According to Shadow Stats, the BLS has tweaked the format of reporting unemployment so many times just to reflect a good figure. If the BLS had used the same metrics as the 1980s, the unemployment rate could well be more than 20%.
4) When the Fed indicated they would raise interest rate in December 2015 and another 4 hikes in 2016, the value of the US$ spiked closed to 100. So with the continuous jawboning this time, the US$ value only touched 96.5. If anything, it is an indication that the Fed is losing credibility.
Next up, we have the EU banking and immigrant crisis, US Presidential Elections, Italian Constitution Referendum which could pave the way for the populist "Leave EU" party to come into power, Germany and France elections in 2017, and rising tension between US and Russia, the reason to own gold and silver has never been more compelling.
Miners and ETFs that are inverse to the indices could be a good hedge amidst all the uncertainties and increased global risks.
The above are just my opinion. You are encouraged to do your own research.
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