Rocktober 25, 2022
* Currencies & Metals get sold on Monday…
* Where have the fundamentals gone?
Good Day… And a Tom Terrific Tuesday to you! It’s raining outside this morning, and from what I heard last night on the weather report, it’s supposed to rain over 1 inch today. That’ll sure swell the streams, and creeks, like the one that runs behind my house. But, the weatherman told me last night that “we need the rain, as it has been quite dry here”… And he was right about that, as I keep getting fire an wind warnings on my phone… I used to sit outside at night, with a fire going in my chiminea… They were clay ones, and they kept cracking from the heat, so I bought a metal one, but, my sitting out with a fire has lost its appeal to me, as I was always sitting out there alone… ☹ Dire Straits greet me this morning with their song: Brothers In Arms… Mark Knopfler really shows his ability to pick his guitar in this song…
Well, Friday of last week, was the day in the sun, for the currencies and metals… They romped and rolled, and sent the dollar rumbling’, stumblin’, fumblin’ on the day, But that only lasted one day, and then it was back to buying dollars yesterday. The BBDXY gained 5 index points on the day. The euro actually gained a tiny amount on the day, while the Japanese yen got back to getting sold, after a day when the Bank of Japan (BOJ) tried its hand at solo intervention… It worked for one day, and the PFFT, the yen rally was over… Gold fought all day to get back to flat on the day yesterday, but fell short, after falling by $9 in the early trading on Monday, it ended the day down $8.20… There was a point in the day when it looked like Gold would get back to flat on the day, but that strong move was wiped out by the price manipulators, who were back in their places with bright shiny faces yesterday…
Gold ended the day at $1,650.70, and Silver was down 21-cents on the day, to end at $19.31… The price of Oil remains in the $84-$85 range, and bond saw the 10-year’s yield rise to 4.21%… The Treasury yield curve is still inverted folks… Just pointing that out…
The Good Folks at GATA sent me this note yesterday, here it is: ‘Bullion Star monetary metals analyst Ronan Manly writes today that silver inventories in the London Bullion Market Association system are at a record low, having fallen for 10 months straight, and that silver inventories at the New York Commodities Exchange are at a five-year low.”
Ok, if these were the “old days” of fundamentals ruling markets, you would take this information and run to the bullion dealer and back up the truck with Silver, right? An asset that is short, is in need of a price adjustment… My father taught me that many years ago, and it has stuck with me all these years… And while we always have to be aware that price manipulators (the wolf) are always at the door, this shortage in Silver could be the straw that breaks the wolf’s back… Physical demand could go viral and when / if that happens the price manipulators will be out of the markets, with no chance to step in and short the metal, due to the physical demand, and rising price of Silver…
In the overnight markets last night… there was little movement in the dollar trading. The BBDXY is flat this morning at 1,340, and all the currencies look like they did yesterday at the close. Gold, however, is down $6 in the early trading today, and Silver has lost the $19 handle, as it is down 39-cents already today. I read a piece this morning that talked about how Gold is likely to remain in a tight range ahead of the FOMC meeting next week. Hmmm… The price of Oil has slipped to an $83 handle this morning, and bonds gave back their yield increases last night, and the 10-year trades with 4.17% yield this morning.
Speaking of the FOMC meeting next week… I guess there are still some traders out there that still believe the Fed Heads won’t hike rates aggressively next week… I’ll tell you now, so you will hear me later, that these same traders/ economists, will keep saying the Fed Heads are going to pivot, until they actually do pivot and then they’ll say, “see I told you so!”…
It is my humble country boy opinion that the Fed Heads will hike rates 75 Basis Points next week, and then again at their meeting in 6 weeks before year end, which would bring their Fed Funds Rates to 4.75%… Still below the inflation rate of 8.25%… So, the interest rate isn’t going to make any headway in bringing inflation under control, but what it will do is smash the housing market bubble, the stock market bubble, and the , as Bill Bonner calls it, “the everything bubble”…
Who knew that the Fed Heads would turn out to be the “pin in the room” that the everything bubble was trying to find… But that’s what they will become by year end… Hey! It’s good to be known for “something”! right? All these increases in the Fed Funds Rate will continue to support the dollar, until it doesn’t…
Speaking of dollar strength… I don’t know how to file this one, as this guy has not been on my hit parade before… I’m talking about Jim Cramer, and yesterday he said that “his charts suggest the U.S. dollar could be peaking”… So, is that an omen to buy dollars based on what his track record is, or is that an omen to sell dollars? What’s it gonna be boy? (Meat Loaf)…
I mentioned above about how fundamentals ruled the markets in the old days… And last Friday, there was a piece of data that should have sent the dollar to the woodshed, for more than one day… but as we just talked about, the dollar rallied yesterday instead… The piece of data was Leading Indicators…
Well, looky here… The U.S. Manufacturing PMI fell below the line in the sand of 50 this month at 49.9, falling from 51.8 the previous month. I had warned you yesterday that this data had seen some small decreases in the index number, and that it was ready to go below 50. OK, I hear some of you saying, what’s the big deal with 50? Well, 50 is the line of demarcation between expansion and contraction. If the number falls below 50, the manufacturing sector is contracting, and that’s not a good sign for the U.S. economy… There will be a short quiz at the end of the lesson today, so make sure you take good notes! HA!
The headline story on CNBC.com reads, “Markets plagued by increasing economic uncertainty and geopolitical risk in fourth quarter”… Uncertainty… Longtime readers may recall me telling you many years ago, when these things mattered, that the markets do not like “unknowns”… And whenever there was an unknown in the markets, Gold would rally… So, if CNBC thinks there are uncertainties in the markets, then Gold should be rallying and not looking back.
I know, I know, I sound like an old fogy on the rocking chair on the porch, whittling my stick to sharpen it, and talking about the “good ole days”… And maybe my way of thinking about how markets should work, just doesn’t cut the mustard any longer, and never will again… If that’s so, then I’m hanging up my cleats, and taking my ball and bat and glove and going home! The mighty Casey has struck out…
The U.S. Data Cupboard today has the Case/ Shiller Home Price Index for August… I would think that what we’ve seen so far with housing that this index will reflect further price drops in houses… It is 2 months behind though, so what good is the data? We’ll also see the stupid Consumer Confidence Index for this month… This index is so strange, to me that is, that I don’t know what to make of it any longer. Oh well, it is what it is.. .
To recap… The dollar gained ground yesterday and tried to wipe out the losses it had on Friday. It made good progress but didn’t quite erase its losses. The BBDXY gained 5 index points yesterday, pushing the currencies back down, and Gold lost $8 on the day. There was little to no movement in the dollar overnight, so we start today, at the same place we ended yesterday, which is rare… The FOMC meets next week, and Chuck gave his views on the next two meetings…
For What It’s Worth… Since I was sound a lot like a broken record this morning, I thought I would add to it and get it over… this is an article that the good folks at GATA sent me about how Chinas once vast supply of Copper is gone.. and it can be found here: China’s Billion-Dollar Cash-for-Copper Trade Grinds to a Halt (yahoo.com)
Or, here’s your snippet: “Traders from London to Lima would obsess over the flows in and out of Shanghai’s huge bonded copper stockpile. It was the focal point for a multi-billion-dollar cash-for-copper trade, whereby Chinese companies would use metal as collateral for cheap financing. A cottage industry of analysts sprang up to estimate the size of what became the world’s largest cache of copper metal.
But now China’s bonded warehouses are all but empty. The once-frenetic flow of metal into the stockpile has come to a juddering halt as two dominant financiers of Chinese metals, JPMorgan Chase & Co. and ICBC Standard Bank Plc, have halted new business there. Numerous traders and bankers interviewed by Bloomberg said they believe the trade is dead for now, and some predicted the bonded stocks could drop to zero, or close to it.
The implications are being felt across the market, as the world’s largest copper consumer becomes more reliant on imports to meet its near-term needs at a time when global stocks are already at historically low levels. The Chinese copper market is at its tightest in more than a decade as traders pay massive premiums for immediate supplies.
For now, the miners, traders and financiers arriving in London this weekend for the annual LME Week jamboree are largely cautious on the near-term prospects for copper, given concerns about the global economy. But many in the market say they are braced for price spikes when the macroeconomic news eventually improves. And without its buffer of bonded stocks, any pickup in Chinese demand could have an explosive effect on the market.”
Chuck again… yes, here it is… Copper, which has wallowed in the mud for a month of Sundays, sits at the precipice of a price spike… It will be interesting to see if this comes to fruition, eh?
Market Prices 10/25/2022: American Stye: A$ .6312, kiwi .5684, C$ .7282, euro .9859, sterling 1.1319, Swiss $ .9974, European Style: rand 18.4827, krone 10.5577, SEK 11.1322, forint 418.00, zloty 4.8479, koruna 24.8184, RUB 61.78, yen 147.91, sing 1.4251, HKD 7.8499, INR 82.73, China 7.3087, peso 19.92, BRL 5.3036, BBDXY 1,340.89, Dollar Index 120.02, Oil $83.26, 10-year 4.17%, Silver $18.90, Platinum $915.00, Palladium $1,965.00, Copper $3.40, and Gold… $1,644.18
That’s it for today… Well, I knew it when I wrote it yesterday, that I should have not said anything about the Blues 3 game winning streak to start the season, I knew that I had just jinxed them, and it proved to be true when the Blues lost 4-0 last night! Oh well, the Blues come home after a 3-game road trip to Canada, with 4 of the possible 6 points… Still a good start to the season! Well, next Monday is Halloween… I know I’ve told you this before, but I love to give out the candy to the trick-or-treaters, especially the little ones! It’s all changed these days, when I was a kid, me and my sisters would be invited into the home, and we had to sing a song for the host house to get a treat… Oh, well, as long as it’s not a rainy night, I’ll have fun sitting out with a fire going, and handing out treats! The Doobie Brothers take us to the finish line today with their song: Long Train Running… I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!
Chuck Butler