Category: Today’s top gold news and opinion

No relief in sight for emerging markets as rand leads sell-off

Bloomberg/Staff/9-5-2018

“The rout in emerging markets showed no sign of letting up, with most currencies weakening and an index of stocks nearing a bear market. South Africa’s rand led the sell-off, falling to the lowest level in more than two years, followed by Mexico’s peso. The MSCI Emerging Markets Index of shares dropped for a sixth day, set for its steepest slide in three weeks.”

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State Street Global: Gold likely to climb back to $1,350 an ounce by the end of 2018

Scrap Register/9-4-2018

“Investors will have to wait a few more weeks before the gold market is ready to shake off its summer lulls, according to one gold market analyst. In an exclusive interview with Kitco News, George Milling-Stanley, head of gold investments at State Street Global Advisors, said that he is expecting buying momentum to pick up by the end of September after the Federal Reserve raises interest rates for a third time this year and physical demand from important gold consumer nations increases in preparation for important holidays.”

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JP Morgan’s top quant warns next crisis to have flash crashes and social unrest not seen in 50 years

CNBC/Hugh Son/9-4-2018

“Sudden, severe stock sell-offs sparked by lightning-fast machines. Unprecedented actions by central banks to shore up asset prices. Social unrest not seen in the U.S. in half a century. That’s how J.P. Morgan Chase’s head quant, Marko Kolanovic, envisions the next financial crisis. The forces that have transformed markets in the last decade, namely the rise of computerized trading and passive investing, are setting up conditions for potentially violent moves once the current bull market ends, according to a report from Kolanovic sent to the bank’s clients on Tuesday.”

USAGOLD note: The madness of machines. . . .In case you missed it:

Gold – A reverse bubble in search of a pin
The victim could quickly find itself the beneficiary
[LINK]

 

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Gold and silver are acting like its 2008. They may be right.

GoldSeek/John Rubino/9-4-2018

“2008 has special significance for gold bugs, both because of the money they lost in August of the year and the money they made in the half-decade that followed. Today’s world is beginning to feel eerily similar.”

USAGOLD note:  The gold chart in 2008 just before the big move to all-time highs. . . . . .

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DMR–Gold turns sharply lowly on Chinese ambassador’s yuan comments over weekend

DAILY MARKET REPORT

Gold took a sharp turn below the $1200 mark in Asia overnight that carried over to early trading in New York. The metal is down $10 on the day at $1191. Silver followed suit – down 41¢ on the day at $14.08.  The bulk of the damage came from a drop in the yuan.

FOREX markets’ concerns about the yuan took a turn for the worse over the weekend.  Tui Tiankai, China’s ambassador to the United States gave a speech in which he stated that “On what to do next, for China it is very clear. I wish to advise people to give up the illusion that another Plaza Accord could be imposed on China. They should give up the illusion that China will ever give in to intimidation, coercion or groundless accusation.”

The Plaza Accord was an agreement among major industrial countries in 1985 to drive down the value of the dollar against other currencies, particularly the Japanese yen.  Cui’s comments were reported in Xinhua, China’s official press organ. The market reaction has been swift and gold is not the only casualty. The Dow is down 120. Bond yields are climbing and commodities across the boards, with the exception of oil, are taking a hit.

How much of this is posturing on the part of China and how strongly the Trump administration is likely to react to the statement are both open questions.  The president has already made it clear that he would like the Fed’s cooperation in driving the dollar lower, so there is no doubt that the currency situation is at the top of his agenda.

Quote of the Day
“If we are lucky, the next Fed-caused downturn will cause only a resurgence of 1970s-style stagflation. The more likely scenario is the type of widespread economic chaos not seen in America since the Great Depression. The growth of cultural Marxism, the widespread entitlement mentality, and the willingness of partisans of various sides to use force against their political opponents suggests that this economic crisis will result in civil unrest that will be used to justify new crackdowns on individual liberty. Those who understand the causes of, and cures for, our current predicament have two responsibilities. First, prepare a plan to protect your family when the crisis occurs. Second, do all you can to spread the truth in hopes the liberty movement reaches critical mass so it can force Congress to make the changes necessary to avert disaster. Since the crisis will result in a rejection of the dollar’s world reserve currency status, individuals should consider alternatives such as gold and other precious metals.” – Ron Paul, 8/27/2018

Chart of the Day

Chart note:   To learn why this chart is important to current and prospective gold owners, please see:  Gold: A reverse bubble in search of a pin – The victim could quickly find itself the beneficiary.

 

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Mint reports American Silver Eagle sales surge in August

Gold American Eagle sales double same month last year

(USAGOLD, 9-4-2018) – U.S. Mint sales of silver American Eagles in August jumped to their highest level since January registering a 73% gain over July and a 50% gain over August of last year. The surge in sales to 1,530,000 one-ounce silver coins for the month indicates investor demand for silver reawakening at currently low price levels. Mint sales of the gold American Eagle bullion coin for August were double the same month last year, but down about 40% from July. Low Mint sales in both metals over the past two years reflected inventory being sourced from the secondary markets following a string of record demand years prior to 2017. That secondary market supply suddenly dried-up in August channeling demand back to the Mint.

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We may be facing a textbook emerging-market crisis

Bloomberg/Satyajit Das/9-3-2108

“Argentina and Turkey look like outliers but the rot could spread fast. Emerging-market stresses have been building since at least 2013. Investors may have forgotten the effect of the ‘taper tantrum on the so-called Fragile Five – Brazil, India, Indonesia, Turkey and South Africa – a term coined by Morgan Stanley to describe their vulnerability to capital outflows.”

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Gold speculators trimmed their bearish net position

Gold Eagle/Zachary Storella/9-2-2018

“Large speculators cut back on their bearish net positions in the Gold futures markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday. The non-commercial futures contracts of Gold futures, traded by large speculators and hedge funds, totaled a net position of -3,063 contracts in the data reported through Tuesday August 28th. This was a weekly advance of 5,647 contracts from the previous week which had a total of -8,710 net contracts.”

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The contagion at the periphery will make its way to the core

Credit Bubble Bulletin/Doug Noland/9-1-2018

“I’ve been here before and, candidly, it’s not much fun. Lodged in my mind this week was the brilliant quote from the 19th century German philosopher Arthur Schopenhauer: ‘All truth passes through three stages: First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as self-evident.’  It’s fascinating how it all works. Looking back, there was definitely a Bubble in 1999. Clearly, 2007 was one huge Bubble. Everything is obvious in hindsight, and most look back now and contend it was pretty conspicuous even at the time. Having toiled through both prolonged Bubble periods – arguing against deeply embedded bullish conventional wisdom – I can attest to the fact that the Bubble viewpoint was violently opposed at the late stages of both cycles.”

USAGOLD note:  Noland argues through the prism of recent history that the “EM contagion at the ‘periphery will  make its way to the ‘core.'”

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Gold – A reverse bubble in search of a pin

_______________________________________________

The victim could quickly find itself the beneficiary

“The current COMEX short position in gold is a computer-driven market bubble blown to enormous proportions. Now at a record level, it is a different kind of bubble, though, from the type we usually associate with the term – a reverse bubble brought to life and nurtured through excessive selling rather than buying.  Nevertheless, it is just as deadly and opportunistic as the proverbial kind – a bubble in search of a pin.”

–– Full Article ––

_______________________________________________

 

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This emerging market selloff looks contagious

Bloomberg/Opinion/Marcus Ashworth/3-31-2018

“This looks like contagion. One emerging country’s problems have become other emerging countries’ problems, and it’s hard to see how to break the cycle. What’s really worrying is that this week’s gyrations don’t look to have been driven by dollar strength — on a trade-weighted basis, the greenback is lower on the week. Were a rising U.S. currency to be responsible, perhaps Federal Reserve Chairman Jerome Powell could be prevailed upon to slow the pace of interest-rate increases.”

USAGOLD note:  This article speaks to concerns we raised in this morning’s Chart of the Day about a possible emerging markets contagion.

 

 

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DMR-Gold pushes higher in Asia, backs off in London-New York on mixed news

DAILY MARKET REPORT

Gold pushed higher in overnight Asian markets reaching $1208 before backing off just after the London Fix. In the early New York trading it is priced at $1202, still up $2 on the day despite a sharp rally in the U.S. dollar. Silver is level at $14.57.  Supporting gold overnight were currency and debt problems in a host of emerging nation states with Argentina and Turkey the most visibly pressed. Argentina raised interest rates to 60% yesterday, a 15% rise. Keeping a lid on the gold price was news of U.S. intentions to impose tariffs on a another $200 billion in Chinese imports.

Quote of the Day
“The ‘threat’ is best seen through the emergence of exchange-traded funds (ETFs), which allow investors to get a proxy physical gold exposure through an investment via their stockbroker. In truth, these products are, in many cases, more expensive than trading and storing physical gold (especially for larger investors with a long-term investment time frame), have less trading flexibility, and are less secure than owning real physical gold.” – Jordan Eliseo, ABC Bullion/Australia

Chart of the Day

Chart courtesy of TradingEconomics.com

Chart note:  The Argentina peso and Turkish lira are the center of attention in foreign exchange markets today.  Both have roughly halved in value since the beginning of the year. Yesterday Argentina pushed interest rates to 60% – a 15% rise. Turkey’s interest rate is at 17.75%.  Wall Street investors are concerned about the potential for a contagion along the lines of the late 1990s Asian financial crisis that nearly resulted in a global economic meltdown. This time around the debts are much larger and the dangers much more widespread geographically. Though concern mounts among financial market participants with each passing day, the White House uncharacteristically has remained mum on the situation and the Federal Reserve has only made passing mention.

 

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Ahead of India’s festival season, gold sells at a premium

The Economic Times/Santanuka Ghosal/8-31-2018

“‘There is an expectation in the market that gold will touch Rupee 32,000 per 10 gm (without GST) by Diwali. So, people have started buying,’ said Surendra Mehta, national secretary of India Bullion & Jewellers Association. Bullion traders and jewellers expect festive season demand to be 5-10 per cent higher than last year’s despite prices moving up in the local market due to weakness in the rupee.”

USAGOLD note:  Demand for gold in emerging countries associated with currency and debt problems – and those problems are widespread – will likely push up premiums, particularly if prices generated in the global paper markets do not keep up with burgeoning physical demand.  Through premiums, the physical market adjusts to market realities. We pass along the Economic Times report on India as an example.

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Elliott Wave forecast for gold and silver hints at a shiny future

NASDAQ/Jeremy Wagner/8-3-2018

“I have been relatively silent on gold’s chart since we called the top back in January and February as the Elliott Wave pattern has a few options at hand. If you recall from our article on January 25  ‘Gold prices hit 17 month high’ (the day of the 2018 high) we forecasted a bearish reversal such that ‘in the coming months would be a correction down towards $1200’ . . . Now that the bearish targets are satisfied, we have seen enough evidence that a large rally may mount for the yellow metal.”

USAGOLD note:  It is not often that an analyst calls the high on the day it happens.  As for the future, Wagner’s suggests a “likely rally to above $1380.”  His analysis includes a couple supporting charts.

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Investors wading back into gold ETFs

Scrap Register/8-31-2018

“Investors are returning to gold exchange-traded funds, said BMO Capital Markets. Analysts cited Bloomberg data showing that global ETFs added some 225,000 ounces to holdings on Wednesday. This is the highest single-day inflow since mid-April.”

USAGOLD note:  Though the various problems with gold ETFs are well-known among Main Street gold investors, we still track them as an indicator of current hedge fund and institutional interest.

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How to choose a gold firm
A quick guideline for beginning investors

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The moral aspects of money

Forbes/Alejandro Chafuen/8-22-2018

“Oresme wrote that it is ‘disgraceful and everywhere foreign to the nobility of a prince to prohibit the circulation of good money in his country, and, for the sake of gain, to order and even compel his subjects to use his own which is poorer, as if to say that good is bad and his bad is good.’ He was flexible in case of emergencies, such as during periods of war, or to pay ransoms with ‘bad’ or debased money, or to help liberate a kidnapped king. But the bishop added, ‘If the community should in any way make such an alteration, the money ought to be restored to its proper basis as soon as possible, and the making of gain in that way should cease.’”

Dr. MoneyWise note: This essay cites notables on the subject of money – Aristotle, Thomas Aquinas and Copernicus – to name a few.  All had similar views.  It talks about what money ought to be – the right and wrong of it – and ends up with a couple words on Bitcoin…caveat emptor.  We academics do love our Latin.

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Brutal Argentina-Turkey selloff engulfs emerging-market peers

Bloomberg/Rita Nazareth and Ben Bartenstein/8-30-2018

“The peso tumbled to a record low, prompting Argentine policy makers to boost the nation’s interest rate to 60 percent in a bid to shore up confidence. In Turkey, a report that the central bank’s deputy governor was set to resign sank the lira. South Africa’s rand slumped, sending volatility to its highest since December 2016 amid a controversial land reform debate. Brazil’s real pared losses after the monetary authority extended its currency intervention.”

USAGOLD note: Contagion.  Where does it stop?

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DMR–Gold pushes through $1200 mark to downside as inflation heats-up (?)

DAILY MARKET REPORT

Gold pushed back through the $1200 mark to the downside this morning as the Fed’s favored PCE Index’ number for headline inflation came in over the target level at 2.3%.  Silver is down 21¢ at $14.55. The push to the downside is largely driven by computer algorithms that ignore gold’s role as an inflation hedge. Instead the machines are programmed to read any inflationary news as cause for the Fed to push harder on the interest rate accelerator.  Thus gold is down on the day when logic tells us that it should be up. The prices posted though will look very attractive to the citizenry of emerging countries, including China and India, beset by increasingly entrenched currency and debt problems. The historic comeuppance for artificially cheap prices is increased physical demand – demand that the real market will need to supply.

Quote of the Day
“What we have to reckon with now is that, contrary to the basic assumption of 2012-2013, the crisis was not in fact over. What we face is not repetition but mutation and metastasis. The financial and economic crisis of 2007-2012 morphed between 2013 and 2017 into a comprehensive political and geopolitical crisis of the post-cold war order.” – Eshe Nelson, reviewing Adam Tooze’s How a Decade of Crises Changed the World

Chart of the Day

The $74 Trillion Global Economy in One Chart

Courtesy of: Visual Capitalist

USAGOLD note:
  Numbers 1 and number 2 by a wide margin over the rest of the world are going at it head to head in the trade wars.  For China, trade with the United States has played a major role in its quick ascent to number two.  For the United States, cheap Chinese manufactured goods has played a major role in containing inflation.  Now both advantages have become endangered species.
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Back up the truck

Gold Eagle/Michael Ballanger/8-28-2018

“These are across-the-board synchronized correlations and as I wrote about last week, the computer-driven ‘algobots’ exacerbate and exaggerate every short-term trend in virtually all markets around the globe and since they never sleep, when Chicago shuts down, London picks up the reins and when London retires for the day, Tokyo carries the mantle such that over and over and over again, the pattern-recognition-driven algorithms implanted into the brains of the algobots feed upon themselves and overshoot their marks every single time, as happened on August 15 and 16 in (again) ALL markets. Now these pulse-less, robotic vermin are trapped and quite possibly, in deep trouble.”

Related: Historical Repetition in the Gold And Silver Arenas/Michael Ballanger/Gold Eagle

USAGOLD note:  Ballanger writes convincingly and definitively about computer-driven money management systems that dominant the markets these days including gold.  The two articles linked above are solid and fascinating representations of his thinking.  In conjunction with his advice to back-up the truck on precious metals, he says the bottom for gold is in at $1167 per ounce on August 16, 2018.

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Gold sales soar as rupiah depreciates

The Jakarta Post/News Desk/8-30-2018

“State-owned mining company PT Aneka Tambang (Antam) has said its gold sales jumped significantly in the first half of 2018 as a result of the weakening rupiah. . .“An impact of the dollar strengthening is that people are buying gold. Domestic demand has increased. . .”

USAGOLD note:  Indonesia joins a number of emerging countries experiencing greatly increased gold demand among citizens concerned about currency and debt problems. The list, in fact, grows longer by the day.

Chart courtesy of TradingEconomics.com

 

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Technical analysts queue up on gold

Gold price reversal gaining legitimacy/Christopher Vechio/DailyFX
“The daily 13-EMA, which had been resistance since mid-June, has survived tests as support yesterday and today, suggesting Gold may have indeed turned the corner.”

Has gold finally bottomed?/Phoenix Capital Research
“That’s a heck of a ‘tell/ from the markets. And it’s ‘telling’ us that we’re about to see a major inflationary move as the USD drops hard. This will be sending gold and other ‘weak-USD’ plays on a major bull run.

Gold rebounds after yesterday’s slide,/Matias Salord/FXStreet
“Gold moved all in a small range with a bullish bias.”

Gold: The rally accelerates/Stewart Thompson/Gold Eagle
“Gold’s impressive rally continues to accelerate. Key fundamental and technical price drivers are playing a bullish song with almost perfect harmony.”

Gold rebounds – What’s next?/FX Trading Revolution Team/FXStreet
“Technically, Gold made an important rebound which could be the end of the bearish trend that started in April.”

Short term chart . . . . .

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DMR–Gold attempts to regain footing amidst mixed signals

DAILY MARKET REPORT

Gold is attempting to regain its footing this morning after yesterday’s options-related sell-off.  It is up $2.50 on the day at $1205.50.  Silver is down 3¢ at $14.74.  Emerging country debt and currency problems are back on the financial pages this morning. Turkey’s lira is down 3% and Argentina’s peso and India’s rupee hit all-time lows overnight. The Fed will be looking to strike a balance between two extremes:  A warming domestic U.S. economy versus a cooling, even threatening, global economy fueled by a too-strong dollar.

Quote of the Day
“At the 1955 stock-market hearings, [economist John Kenneth] Galbraith was followed at the witness table by the aging speculator and ‘adviser to presidents’ Bernard M. Baruch. The committee wanted to know what the Wall Street legend thought of the learned economist. ‘I know nothing about him to his detriment,’ Baruch replied. ‘I think economists as a rule—and it is not personal to him—take for granted they know a lot of things. If they really knew so much, they would have all of the money, and we would have none.'” – James Grant, Wall Street Journal editorial (10-1-2010)

Chart of the Day

Chart courtesy of Advisor Perspectives

Chart note: There are a couple of things unsettling about this chart. First is the sheer amount of investor margin debt present in the current stock market – over $650 billion. Second is the correlation between the growth of that debt and ascent of the S&P 500. With that amount of leverage in the stock market and the influence it has on price levels, if and when the margin calls arrive, the tumble could be fast and extreme. FINRA (Financial Industry Regulatory Authority) warns that “many investors may underestimate the risks of trading on margin and misunderstand the operation of, and reason for, margin calls.” Shades of 1929.

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Almost half of Americans can’t pay for their basic needs

MoneyWatch/Aimee Picchi/8-28-2018

“Four in 10 Americans are struggling to pay for their basic needs such as groceries or housing, a problem even middle-class households confront, according to a new study from the Urban Institute. Despite the U.S. economy being near full employment, 39.4 percent of adults between 18 and 64 years old said they experienced at least one type of material hardship in 2017, according to the study, which surveyed more than 7,500 adults about whether they had trouble paying for housing, utilities, food or health care.”

USAGOLD note:  This articles states that researchers were surprised at these statistics.  They weren’t the only ones.

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India is set to overtake China as the top driver of global oil demand growth

CNBC/Weizhen Tan/8-29-2018

“India is set to overtake China as the biggest source of growth for oil demand by 2024, according to a forecast announced Monday by research and consultancy group Wood Mackenzie. . . India’s expanding middle class will be a key factor, as well as its growing need for mobility, according to Wood Mackenzie.”

USAGOLD note:  The rise of the middle class in both economies bodes well for future gold demand.

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Silver prices: Supply and demand disparity could result in huge returns

Lombardi Letter/Moe Zulfiqar/8-28-2018

“Silver prices have faced scrutiny over the past few weeks. The gray precious metal continues to slip lower, trading below $15.00 as of this writing. However, silver prices could be severely undervalued. And that means long-term investors could reap massive rewards. You see, there’s a basic problem in the silver market: supply is failing to meet demand.”

USAGOLD note:  As a practical matter, the current pricing for both gold and silver against the backdrop of rising global demand, in our opinion, makes them an attractive alternative in the present investment environment – particularly for investors with an eye to the long term.

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Indonesia’s currency is suffering, but that’s about to end, trade minister says

CNBC/Yen Nee Lee/8-29-2018

“The Indonesian rupiah should stabilize from here on out, the country’s trade minister, Enggartiasto Lukita, told CNBC. The rupiah is one of the worst-performing Asian currencies this year as investors flee emerging markets with current account and fiscal deficits. “

USAGOLD note:  A familiar refrain. . .and of the kind that these days inspires a reaction opposite of what is intended.

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Afternoon Update

(USAGOLD, 8-28-2018) – In the absence of any market altering news to speak of, it was surprising to see gold drop about $8 in the last two hours of trading, and silver 15¢.  Looking around for a good reason to explain the sell-off, our best guess is options-related selling. Today is options expiration day on the September contract for both gold and silver. Gold finished at the $1201 mark, down $10.50 on the day. Silver finished at $14.70, down19¢ on the day.

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DMR–Gold down on quiet news day thus far

DAILY MARKET REPORT

Gold is down $3 at $1208 – with nothing of earth-shaking importance having developed overnight or early in the New York market session. Aiding gold, China’s yuan is showing some strength today, as is the yen, while the rest of the currencies seem to be carried in their wake. Silver is down 5¢ thus far at $14.85.

Quote of the Day
“Speculators in gold price futures are short 670 tonnes – the biggest bearish position in 25 years. . .ANZ analysts Daniel Hynes and Soni Kumari say in the past, ‘such extreme levels of short positions have led to a rally in prices: 1999, short positions rose fivefold to hit a then record level of 80,000 contracts. Not long after, gold prices rallied 16% from USD250/oz to USD290/oz over the course of two months. Short positions spiked again in July 2005 and January 2016, with gold prices rallying 12% and 14% respectively over the subsequent three months. In both these cases, the net long position was extremely close to being negative. This raises the spectre of investors closing out their record level of short positions, and thus starting a short covering rally.” – Frik Els, Mining.com

Chart of the Day

Chart note: While commodities have held their own during this stage of the trade wars, gold has declined dramatically by comparison – a break in the long-term pattern of the two moving in the same direction. Some believe gold could play catch-up as we move into the last third of the year. Much of the downside for gold has been the result of the short position built to record levels on the commodities exchange – a position that will need to be covered in order for the speculators to claim their gains. In the past, as Frik Els points out in our Quote of the Day, covering those short positions has led to price rallies in 1999, 2005 and 2016. We might add there was a less pronounced example of short-covering in 2017 as well.

 

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Jay Powell and the Fed face ‘dollar doom loop’ dilemma

Financial Times/Joachim Fels/8-27-2018

“Damned if they keep raising, damned if they don’t. Federal Reserve chair Jay Powell and his colleagues face a difficult choice over the next few months — and it is one that could have unpleasant ramifications whatever they decide.”

USAGOLD note:  So raise or stay pat after September, that is the question.  As of Friday, Powell made it clear that he wants to keep the central bank’s options open, but that, in itself, was interpreted as a dovish tilt. This article does a good job of outlining what the Fed is up against with emphasis on the big build-up in emerging country debt since the financial crisis and the impact it is now having on Fed policy decisions. It also raises the possibility of a pause in raising rates after September.

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