Currencies Continue To See Their Gains Slip Sliding Away…

September 27, 2017

* Tax reform talk gives dollar another favor!

* Gold get whacked, with 346,000 contracts traded!

* Are we reaching Peak Gold?


Good day, and a Wonderful Wednesday to you! It’s the middle of the night, and I’m awake… So, I decided to read a little, and begin to put the Pfennig together. My beloved Cardinals hung on to win one last night, holding off the celebration of the Cubs. Apparently, the Cardinals gave up 4 late runs, after I had gone to bed! Loggins & Messina greet me this morning with their song: Your Momma Don’t Dance…  the song goes: Your momma don’t dance and your daddy don’t rock-n-roll… When darling daughter Dawn, was a little girl, she used to sing:  My momma does dance and my daddy does rock-n-roll!  Memories…  

Yesterday, I told you that the currencies had been seeing their recent gains slip sliding away, and our Tom Terrific Tuesday didn’t change any of that, as the currencies’ gains kept slip sliding away…  I also told you yesterday that all the saber rattling between the U.S. and N. Korea was adding to the dollar’s favors, with the first favor coming from the Fed’s statement last week about how the U.S. economy is strong and robust. Well, we can add a 3rd favor for the dollar now in the form of a the announced tax reform from the President.  

Even a comment from Fed Chair, Janet Yellen, that should have stopped the dollar in its tracks, was just treated like water off of a duck’s back… Yellen told reporters that, “the rate hike path is not set in stone”…  Now, if you were to ask me what my take on that statement was, I would tell you, no wait! I am telling you…  That this is the Fed’s way of laying words between the lines, as songwriters used to do.  This way, when December comes along and the Fed skips the rate hike again like they did last week, they’ll be able to point to that statement and say, “well, we gave you a hint 3 months ago”… 

So…  Saber rattling, exaggerations about the economy, and talk of tax reform, has the dollar firmly on the rally tracks with the Big Dog euro slip sliding down to 1.1750 this morning, and the yen giving back its so-called safe haven gains. Gold, which had gained back some of the previous day’s losses has run into a buzz saw in the early morning trading today, and is down $7 in the early trading.  Is this all the Plunge Protection Team (PPT) stepping in to the markets to keep the dollar from falling too low?  Or, is this simply the dollar rallying on the items I mentioned above?  

Well to be fair and balances, I’ve got to say that It’s a little bit me, and a little bit you, no wait!  Come on Chuck, people don’t want to read about Monkeys lyrics!  OK, I get it… but what I was trying to get at was that it’s probably a lot of the fundamentals causing traders to rethink their recent switch of sentiment away from the dollar, and some PPT trading sprinkled in just to smooth out the rough corners!  

And, let’s not forget the fact that political uncertainty in Germany couldn’t have come at a worst time for the euro… I’ve read that current German Chancellor Angela Merkel, is having difficulty negotiating a coalition government, and the longer this plays out the more the euro will suffer…   

The political uncertainty in New Zealand is much the same with regards to not getting anywhere, and here the task will be much more difficult, and could end up taking 3 or 4 weeks to finalize, and all that time kiwi will suffer, because I’ve told you dear readers that traders don’t like uncertainty, and New Zealand and Germany are poster children for uncertainty right now. 

There’s a good article on the Bloomberg this morning asking the question, Have we reached peak Gold?…  The head of the World Gold Council (WGC) was interviewed for the article and he talked about the unsustainable demands from countries like India and China, and how miners can’t keep up with the demand if it were continue. The WGC head also talked about the U.S. political uncertainties, and how when you add up all things going on right now that it “seems like very fertile ground for investors to get into Gold”   He also went on to talk about how he saw Gold’s price rising to $1,400 in the next year…

 I’ve always questioned the WGC’s reports on gold holdings but this guy seems to be “with it”, at least from what I read in the article!   Peak Gold… Hmmm, now that’s something to think about, eh?    When I was doing my reading earlier I came across two things that I think will eventually come to everyone’s attention and they’ll say, “how’d this happen so quickly?”  When in reality it took a long to time, they just weren’t paying attention…   

The first thing is a little ditty that I came across and it made me think of how it was pointed out to me when I was making such a big deal out of household debt rising that the population had increased and therefore the increase wasn’t to be worried about…  Well, in 2016, the U.S. population only grew 0.7%, the smallest annual increase in population in 80 years! So… I guess now we CAN worry about the increase in household debt, eh?

 And the second thing is all this talk of unwinding the Fed’s Balance Sheet has got a lot of people talking. But one person that I do listen to when he talks is Lacy Hunt, well respected investment analyst, and “go-to guy” for John Mauldin…  Lacy Hunt says that the unwinding of the balance sheet will only cause the yield curve to flatten out…  And then I look at the yield curve and I see it has already begun to flatten!

The spread between the 10-year and 2-year Treasury bonds  stood at 78 Basis Points yesterday which was the flattest the yield curve spread has been since the current expansion has begun, which was 2009!  The spread widened a bit to 82 Basis Point in the past 24 hours, but still you see what’s happening here, and once a yield curve is flat, it doesn’t take much for it to go negative, and when that happens, you might as well write down that the economy is in a recession, or will be in one soon! 

Gold got whacked good yesterday, after fighting in the early morning trading to rebound. But that was not to be, for long that is, and soon the short paper trades were swirling around the shiny metal and when all the dust settled there were 346,000 contracts traded yesterday, which pushed the price of Gold down $16.70 on the day.  In the early morning trading this morning Gold is getting off on the wrong foot again. UGH! 

And for those of you keeping score at home, the spread between Platinum and Palladium is just $9 this morning… Just $9, that’s what I said!  But getting back to Gold for a minute… I just keep thinking about James Rickards call for a price reset for Gold that will come around the time we change our calendars to a new year… I sure hope he’s bang on with that call!  

The U.S. Data Cupboard today finally gets some real economic data in Durable and Capital Goods Orders for August…  Like I said yesterday, I think it was, that Durable Goods Orders, which were a negative -6.8% in July are expected to print a positive number, but based on the previous month’s figure, which isn’t going to say much…    

Yesterdays Data Cupboard saw August New Home Sales drop from July’s print, and the same with Consumer Confidence, while the Case/ Shiller Home Price print ticked higher from 5.8% to 5.9% increase… Maybe that’s why New Home Sales dropped?   

To recap…   The gains the currencies have made keep slip sliding away, as now the dollar has another favor, which is the unveiling of the President’s tax reform plans… And the euro and kiwi continue to have to carry around political uncertainty like an albatross around their necks! The WGC mentions peak Gold.  But Gold gets whacked good on Tuesday, and is set for more losses today. The Platinum to Palladium spread is just $9 this morning! WOW!    

For What It’s Worth…  Since I talked about Gold in two different places in the Pfennig today, this makes sense to carry the Gold talk on with this article about how Gold is money, and can be found here:   

Or, here’s your snippet: “For millennia, people believed that the sun revolved around the earth, appearing, as it did, on the eastern horizon in the morning and setting on the western horizon in the evening.

Greek astronomer Aristarchus of Samos is generally credited with the concept that the universe is heliocentric, with all the planets revolving around the sun. Yet it took a further eighteen centuries before Nicolaus Copernicus came along and convinced people that this was the case.

So, we can be forgiven if we educated modern-day people sometimes have difficulty in understanding that gold is the monetary sun.

Even those of us who have been tracking gold’s progress for decades frequently give in to the ease of quoting gold’s value in terms of fiat currency—most commonly in US dollars.

And yet, we have it the wrong way round. Gold is in fact the centre of the economic universe, and all the fiat currencies (including cryptocurrencies) revolve around gold.”  

Chuck again… I think this is a very good article that all Gold holders should read, and even non Gold holders so that they might be moved to actually buy some Gold!   

Currencies today 9/27/17… American Style: A$ .7851, kiwi .7192, C$ .8075, euro 1.1750, sterling 1.3384, Swiss $.9738, … European Style: rand 13.4545, krone 7.9194, SEK 8.1410, forint 265.38, zloty 3.6610, koruna 22.1371, RUB 57.65, yen 112.74, sing 1.3586, HKD 7.8084, INR 65.84, China 6.6294, peso 18.04, BRL 3.1612, Dollar Index 93.37, Oil $52.13, Silver $16.87, Platinum $925.39, Palladium $915.89, and Gold… $1,294.70   

That’s it for today…  Well, I recovered from my Monday shut down enough yesterday to get my errands taken care of. memo to self… Don’t go to license bureau the last week of the month for ANYTHING! And today will be a special treat, as my longtime friend, and former boss, Frank Trotter and I are meeting for lunch! I can’t wait to hear about what he’s been up to, and what’s next for the smartest man I ever met. Boy I’m glad I went to bed before the Cubs nearly tied the game last night. I would have been fitted for a white suit if I had watched that! I’ve decided that I don’t care to watch another NFL football game again. I don’t have a team to root for, and now with all this going on, I just don’t need them any more. College football will be my main focus this year…  Yes, takes us to the finish line today with their song: Time And A Word…  And with that I hope you have a Wonderful Wednesday… and please Be Good to Yourself!