WHY GOLD IS STILL HOLDING UP DESPITE STRONG US$

I've been trying to understand why gold is holding up well despite strength in US$. Here's what I found out and possible reasons to that effect:

1) Fed is talking up the US$ despite poor economic data. Atlanta Fed GDP Now slashed Q3 forecast by 50% (1.9% from 3.8%). Reason: Central banks have been dumping US Treasuries at the highest rate. Look at the chart below (Source: Zerohedge). I believe the talk about rate hike is to negate any fall in the value of the US$ caused by the dumping. Is the dumping a sign that central banks around the world are losing confidence in the US$ as the US becomes more and more heavily indebted? 

  

2) The bullion banks which took down gold during the last week of September and first week of October are massively covering their shorts because if central banks continue to dump US Treasuries the US$ will tank. Look at the trend on the US$ (Source: KWN, Sentiment Trader). Hedgers are unwinding their positions in US$ If this continues US$ could trend lower and gold will trend higher

3) Here's an interesting chart that overlays the 1970s bull market and the 2000-2016 current trend in price of gold (Source: KWN).

As news on the election intensify, coupled with more wikileaks, the atmosphere of uncertainty and nervousness will heighten. Even now, polls are indicating that majority of Americans are sick of corruption and the elitists and fearful of the election being rigged.

Gold could trend higher going into the election.

ATLANTA Q3 GDP NOW at 1.9% vs EARLIEST ESTIMATE AT 3.8%. SO WILL THE FED RAISE RATE?

During Q2, we have a lot of Fed member saying that June was live for a possible rate hike but that did not happen. Then we have a series of Fed speaks saying that the Q3 GDP could be more than 3% and September was live for a possible rate hike. Of course we all know the answer for the last two meetings. So after the most recent FOMC meeting in September, we have yet again another barrage of Fed speaks talking about hiking interest rates to talk up the US$.

For goodness sake, just like the freaking 0.25% and be done with instead of talking abut it quarter after quarter.

But will the Fed do so? The Atlanta GDP now is forecasting a misery 1.9% GDP vs an earlier estimate at 3.8%, that's shaving off 50% of the original forecast.

With Q4 being a weak quarter we could likely see the US GDP growing about 1% for the whole of 2016. And the Fed is saying everything is awesome with the economy to warrant yet another rate hike?

Just as they talk up the US$, China continue sot allow the Yuan to depreciate, in fact the most since September 2010 (source: Zerohedge). Since October 1 the USD/CNY has depreciated from 6.67 to 6.76. So China is sending a message to the Fed, you talk up the US$ up, we allow the CNY to go down further. We remember how it ended the last time in July 2015 and Janaury 2016 when the PBOC devalues the CNY.

Source: Zerohedge




I often see the retail indicators as the earliest sign of a recession because that's where people normally spend their extra income. Here's what we know:

1) Car manufacturers are reporting falling sales with Ford intending to idle 4 plants due to rising inventories

And by the way, ere's the truck sales report. It is in the level reminiscent of previous recessions.

Source: King World News


2) Major retailers are shutting hundreds of stores nationwide amidst deplorable sales revenue. I first wrote about this HERE

Since then the situation has gotten worse and more retailers have announced closing even more stores, including Gap (75 Navy and BP stores), American Eagle (150 stores over 3 years), Office Depot (400 stores) and many more. Aeropostale , too has recently declared bankruptcy.

3) Sales from restaurants are declining as more full time jobs are lost, more college grads unable to find jobs while being laden with debt.

Source: King World News




So recent consumer confidence has fallen, which means that the situation can only get worse. Indicators are pointing that we are heading towards a recession if we are not already there.

This time it will be worse than ever before due to the lack of tools by the Fed, but there's always a potential for a massive QE by the Fed in the horizon.

The above is just my opinion.

IS THE FED ALL DOVISH AGAIN?

A flurry of Fed talk from Yellen on Friday followed by Fischer on Monday seems to suggest that the Fed may tolerate low interest rate further even as inflation is trending up.
Here's what Yellen said on Friday. " If we assume the hysteresis is in fact present to some degree after deep recessions, the natural next question is to ask whether it might be possibleto reverse these adverse supply-side effects by temporarily running a 'high-pressure' economy."
Which many interpreted as Yellen may tolerate higher inflation before raising interest rate and thus as dovish as she could be without stating the obvious.
And here's what Fischer said on Monday. "It is not that simple for the Fed to coax interest rates higher in a world where, central bankers believe an aging population, weak demand and low investment may have undercut the country's and the world's economic potential"
So is the hawkish Fischer now sounding dovish? I can only zero in on the key words, such as aging population, weak demand, low investment. So the Fed is acknowledging the US and world economy is weakening but notice how he reword it as undercutting the potential?
So it comes as no surprise that gold and silver are trending up and US$ is trending down.
Meanwhile, about the retail sales which the government agencies touted as an improvement, especially in the auto sales and consumer spending, etc.
Here's one thing, If auto sales were good why are the motor vehicles sales falling as reported by the car manufacturers? And today Ford is reported to be idling 4 factories due to slowing car demand and rising inventories? (source: Zerohedge)
And about consumer spending, especially in the discretionary area like dining.... 8 restaurant companies representing 12 chains have filed for bankruptcy. According to the National Restaurant Association sales in August tumbled to its lowest since the financial crisis (source: Zerohedge).
Perhaps the Fed is finanlly waking up that everything has not been as awesome as they seem to be.
And if Yellen's game plan is to allow a pressure economy, we WILL have a hyperinflation.
Time to stack the precious metals and load the miners.

PPI UP BUT CONSUMER CONFIDENCE DOWN - EARLY SIGNS OF STAGFLATION?

Deutsche Bank announced another 10,000 layoffs. It seems it is drawing closer and closer to the brink.

Elsewhere, earnings from JP Morgan (-8% y-o-y), Wells Fargo (-3% y-o-y) and Citibank (-11% y-o-y) all beat expectations - as in lowered expectations to enable an easy beat. That is how Wall Street rig the game. So is not a surprise that the stock market rise with these "earnings beat".

The PPI (Producer Price Index) recorded an increase which was above expectations which saw the US$ moving higher as many liken it to an imminent rate hike.

However, consumer sentiment fell to 87.9 vs expectations of 92. It shows that consumers are withholding spending and this could have repercussions on the US economy further down the road.

Looking at the weak indicators, and rise in PPI, the US may already be in a stagflation which is every economist's nightmare. Commodities price are trending up led by oil.

This is what the central banks are likely to do. They will have all sorts Qs (QE, QQE, etc) to print more money to stimulate growth. But instead of spending many will be hoarding. Then there will be helicopter money direct to consumers. If this happens then the next phase would be a hyperinflation unlike anything we have seen before.

The Fed could already be behind the curve in terms of hiking interest rate as insurance premiums have doubled and medical costs have gone up.

When hyperinflation stamps its authority, many will be devastated.

The best defense is still physical gold and silver and hedging via inverse ETFs and miners.

The above is just my opinion. It is recommended you do your own research.

WHY THE FED IS WRONG ABOUT THE ECONOMY

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.

GOLD AND SILVER HAMMERED EVEN AS GLOBAL RISKS INCREASE

As expected, the bullion banks launched a massive take down on gold and silver, pushing gold down by 3% and silver 5%. Most of the bullion banks have been losing money when they shorted gold and silver heavily in support of REMAIN but BREXIT happened and gold shot up US$60 per oz. So yesterday's take down has helped these banks to recover their losses.
The take down has coincided with the options expiry last week and the Chinese Golden Week this week. I believe it has always been planned from the start.
Also what was missed by the mainstream media was the fact that the EU zone has a shortage of US$. This could have caused the bidding up of the US$ which the algos recognised and exacerbated the selling further.
Interestingly, according to KWN, almost US$13B or 1,000 tonnes of gold have been dumped at the COMEX. But it appeared that the PBOC was the one mopping up the sale.
According the silverdoctors.com, this gold take down has an uncanny resemblance to the gold take down in 2008 just before the global financial crisis. Will history repeat itself?
Is Deutsche Bank's demise imminent? The CDS for DB's 1 year and 5 year bonds has just reached >250 and >200 basis points respectively. That's form a low of less than 50 basis points in the years of 2013 - 2015. Almost a 500% increase!
DB's collapse will eat into the entire global financial system. And the worst thing is that it is sitting on top of a pool of financial derivatives that is more than 15x Germany's GDP.
Elsewhere, tension continues to increase between US and Russia. Today, a US general warns that US and Russia could go to war if the US is adamant in bombing the Assad's regime. Russia meanwhile has also send a strong warning to the US.
Presently, Russia is conducting a civil defense exercise involving 40 million of her citizens in major cities in the event of a nuclear or biological war. Now why would Russia do that?
Global uncertainties have never been greater and it is prudent that you hedge yourself against any eventful outcome by acquiring precious metals and miners stocks. The recent take down in gold and silver presents the ideal opportunity.

US ENDS FISCAL 2016 WITH US$1.4T DEBT

Fresh from the options expiry of gold and silver contracts, gold and silver continue to be under pressured in the absence of the arbitrage form the Shanghai Gold Exchange. Chinese markets are closed for one week holiday (Golden Week) and as such the bullion banks will have a field day pushing the price of precious metals lower.
The saving factor could be the jobs report which could report a jobs growth below expectations given the poor manufacturing an services data of late. On top of that construction sending continues to trend lower.
Today Zerohedge reported that the US closed its fiscal year with a US$1.4T debt. News like that should bring down the US$ but it seems to continue trending higher due to move to safe haven asset like Treasuries. However, the US could already be in recession and the next major move by the Fed could be another QE. JP Morgan and Larry Summers are backing the Fed's plan to buy stocks if the US faces another crisis.This means that there will be more money printing. In such a scenario, the value of the US$ will fall and boost the precious metals.
If you are long precious metals and miners, this week would be ideal to collect some units just before the Chinese come back from their holidays to buy more gold and silver next week.
I would meanwhile expect the situation at Deutsche bank to worsen.