June 21, 2021
* Wed, Thurs, Fri, all saw dollar buying last week
* Gold & Silver attempt to comeback in the overnight markets
Good Day…. And a Marvelous Monday to you! Well, how was your Father’s Day Weekend? Mine was marvelous! We had little Evie here for Friday & Saturday, and she brought me such joy and laughter… Then on Sunday, all my kids and grandkids were here, and everyone except me, spent the day in the pool, because it was such a hot day… They keep me from getting in the pool because they don’t want the water level to rise! HA! Just kidding… I was watching my beloved Cardinals play the Braves… A free week for me, this week, with no doctor appts! The Allman Brothers greet me this morning with their song, and my favorite song from them: Melissa…
Well… Friday was no different than Wednesday and Thursday last week, which saw the currencies and metals get sold down the river, and the dollar climb up into its throne as the king currency once again. This was brought on by somewhat hawkish statements by Fed Chairman Jerome Powell on Wednesday, last week, when he mentioned that prices were rising faster than forecast, and that the Fed would be considering raising rates twice in 2023… That’s right I said in 2023, not next month, not next quarter, or even next year!
I asked myself on Friday morning, when I saw that the currencies and metals were getting sold again, “Why on earth did traders and market participants get their panties all bunched up about that statement? ” Did they even consider for one minute that ANYTHING can happen in 1 1/2 years? Wouldn’t it be better to trade on Knowns, not WHAT IFS?
So, the currencies tried to recover on Friday but were pushed down, the euro fell below 1.19, and all other currencies lost appreciable ground… The BBDXY rose to 1,144.82, and The Dollar Index rose to 92.22 to end the week, which was probably one of the worst weeks for the non-dollar asset classes that I had seen. Gold lost another $10.20 on Friday to close the week at $1,765.10, and Silver lost 10-cents to close the week at $25.90… Like I just said, that was one of the worst weeks I had seen… I just repeated that to emphasize what I’m trying to get across…
What that did, if you want to put a silver lining on all that selling is bring about some excellent buying opportunities… And that’s all I can say about last week that’s upbeat…
In the overnight markets last night, the dollar buying has stopped, for now… The BBDXY has slipped to 1,142, and the Dollar Index has slipped to 92.05… And Gold is up $19 in the early trading, with Silver gaining 20-cents today.
Long ago, and far away, I used to be a Foreign bond trader, and I would use a program on Bloomberg that measured Relative Strength, it was the RSI. Over the years, I never used it for currencies, I don’t know why, but I didn’t… So, it was interesting on Friday to read that an analyst was using the RSI on Gold, and saying that Gold was way oversold when you looked at it in the RSI (relative strength index)… That brought back some great memories for me, but also pointed out something that I was thinking, and that was that Gold was oversold by truckloads…
And then I read a research paper that talked about the Fed’s Dot plot… As you well know the Fed uses dots on a board to signal its outlook for the path of interest rates… And these dots are projecting a rate hike in 2023, but when have the dots signaled a rate hike that didn’t happen? Well, just recently… In Sept 2019, there were dots that projected a rate hike to 1.6275% for 2020… Well, we all know that didn’t happen, and it just shows to go you that Things Can Happen, with rate projections that far out…
Ok… Have you heard the news that Russia has developed their own payment system that they can use to complete trading with other countries, IF the U.S. bounces them out of SWIFT? SWIFT is the payment system that is used by all countries to complete trade. Here’s Russian Deputy Foreign Minister Alexander Pankin who was speaking at parliamentary hearings in the State Duma. Let’s listen in…
“Of course, we need to prepare for additional restrictive measures, we usually call sanctions. It is clear that it is impossible to prepare for everything, but already in the economic and financial departments, serious work has been launched related to the transfer of settlements into national currencies, the introduction of payment systems.”
I will be thinking of some dastardly things about SWIFT, if this new payment system cuts the mustard…
Well it wouldn’t be a Daily Pfennig without mentioning Inflation… For those of you keeping score at home, you’ll want to make sure you note that the price of Copper has fallen out of bed, and that the price of Lumber has fallen too… Is the inflation fear going to peter out like David Rosenberg said it would? Well, I’m from Missouri, so I’m going to have to be shown, because if memory serves me correct, inflation was beginning to ramp up pre March 2020, and so it was put on hold for a year.. . And now it’s picking up where it left off… I wouldn’t put too much stock in inflation fading just because the price of lumber came down… There was definitely a shortage of lumber, and now there isn’t… People just stopped buying new homes to build because the prices kept going higher… When the demand slips, so does the price… until… the demand returns, which it will, with mortgage rates in the 2’s…
But, what if James Rickards and David Rosenberg are correct and inflation doesn’t rule the day until 2022? What does that do to the Fed’s Dot plot? See? I’m just trying to show that the markets reaction to the Fed’s rate projections are misplaced… erroneous… just plain wrong! But a wise man once told me that “The markets are never wrong”… (Thanks Ed!) So, we have to pick up the pieces of our scattered dreams and attempt to put them back together again… This is not the end of the price gains for Gold… and weakness in the dollar…
The U.S. Data Cupboard is empty today, and will remain that way, pretty much that is, for the rest of the week… It sure seems to me these days, that traders don’t really pay attention to the data like they used to… But then that was when fundamentals ruled the day, and these days it’s all about trader sentiment… So, no data doesn’t mean what it used to, and busy data days don’t either… Makes no difference to the traders..
To Recap… Well, last week was one of the worst weeks for the non-dollar asset classes that Chuck had ever seen… Friday was no different from Wednesday and Thursday last week, with the currencies losing major ground, and Gold losing another $10, to make its weekly loss about $100… In the overnight markets Gold is up $19 and the BBDXY has slipped…
For What It’s Worth… So, last week it was announced that the ECB would issue a new bond offering for the first time in a while… And then it didn’t take long for the folks at www.wallstreetonparade.com, Pam and Russ Martens to find out that a couple of U.S. banks will not be allowed to participate in the bond offering… That story and more can be found here: JPMorgan, Citigroup and BofA Ruled Not “Fit” to Participate in Huge European Bond Offering Because of Past Crimes (wallstreetonparade.com)
Or, here’s your snippet: “How embarrassing it must be for Jerome Powell, Chairman of the Federal Reserve, that three of the largest banks in the U.S. that are supervised by the Fed, have been deemed not trustworthy enough by the European Commission that they were banned from participating in this week’s historic European Union bond offering.
It is also egg on the face of the U.S. Department of Justice, which has been handing out deferred prosecution agreements to these same banks for felony counts like it’s a meter maid doling out parking tickets.
JPMorgan Chase, Citigroup and Bank of America were banned along with seven non-U.S. banks from participating in this week’s European Union bond offering. The syndicated offering is part of what will grow over the next five years to be a $969 billion COVID-19 recovery fund for the European Union, part of the plan it’s calling NextGenerationEU.
The seven non-U.S. banks that were barred are: Barclays, Crédit Agricole, Deutsche Bank, Natixis, NatWest, Nomura and UniCredit.
Adding to the embarrassment of the three U.S. banks that have been banned is the fact that a much smaller U.S. bank in terms of assets, Morgan Stanley, snagged the position as one of the joint lead managers on the deal.
According to reporting in the Financial Times, the European Commission explained the ban this way: “The Commission implements a strict approach to ensuring that the entities with whom it works are fit to be a counterparty of the E.U.”
The banned banks are deemed unfit because they have been charged by the European Commission with engaging in cartel activity within the European Union. In the case of JPMorgan Chase and Citigroup, they settled with the European Commission in 2019 over charges of being part of a larger bank cartel rigging foreign currency markets. JPMorgan Chase and Citigroup were also charged and settled with the European Commission in 2013 for being part of a larger bank cartel rigging Yen interest rate derivatives.
Chuck again… serves them right! The past sins are not forgotten…
Market prices 6/21/2021: American Style: A$ .7514, kiwi .6970, C$ .8052, euro 1.1898, sterling 1.3880, Swiss $1.0858, European Style: rand 14.2268, krone 8.6443, SEK 8.5896, forint 297.27, zloty 3.8066, koruna 21.4755, RUB 72.75, yen 110.12, sing 1.3443, HKD 7.7639, INR 74.04, China 6.4480, peso 20.57, BRL 5.0883, BBDXY 1,142.57, Dollar Index 92.05, Oil $71.81, 10-year 1.43%, Silver $26.10, Platinum $1,042.00, Palladium $2,574.00, Copper $4.18, and Gold… $1,784.70
That’s it for today… Well, the official start of summer began yesterday, with the Summer Solstice… It’s now onto the 4th of July which will be in two weeks… I have to say that it sure is nice that people can get together again, and go to ballgames, etc. We ARE humans and We do NEED social interaction! So, little Evie helps me cool off my hot coffee in the morning, I ask her to blow on the coffee and she give it a little puff of air, and I say, Thank you, you cooled it off!” and she smiles with this smile that will melt your heart… I put an 11.5 lb pork but in the Big Green Egg on Saturday, and 13 hours later, I pulled it off and prepared it for pulled pork on Sunday… man was that tasty! OK… the late great Leon Russell takes us to the finish line today with his song: Stranger In A Strange Land… I hope you have a Marvelous Monday, and please Be Good To Yourself!
Chuck Butler