Blog Archives

The Ball Is In The Fed’s Court: Will The Empire Strike Back?

Here’s the perfect example of the difficulty in understanding President Trump when it comes to him being either pure genius or just having dumb luck.

Last week, we all know what the President said – I think I wrote up three articles on it because I felt it was that important.

For those who don’t know what he said, the President said, two days in a row, that he is not pleased with a strong dollar or the Fed raising interest rates.

In other words, he is publicly calling for a weak dollar policy, and he is telling the Fed not to raise rates.

Here’s where that difficulty in interpreting the President comes in – The Fed can’t strike back this week.

Why?

Radio silence.

You see, traditionally, the Fed will maintain what is essentially “radio silence” the week before an FOMC meeting week, and that means they’re not parading the various Fed Heads around in speeches and television interviews to ‘jawbone’ the markets.

The next FOMC meeting is next Tuesday and Wednesday, with the statement and rate hike decision being released at 2:00 p.m. EST on Wednesday, August 1st. There is no press conference next week, and as such, most people are expecting the Fed to hold on interest rates (CME Group shows a probability of only 3.5% for a rate hike next week).

So I ask if the President is pure genius or if he just got lucky?

If he is pure genius, then he knew

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Gold And Silver Take A Back Seat To The Dollar This Week (That’s Not A Good Sign For The Metals)

Monday through Wednesday are going to be busy:

There’s market moving data in Retail Sales, Industrial Production and Housing Starts.

Additionally, twice a year the Fed Chair goes before congress in what is called the Humphrey-Hawkins Testimony, so on Tuesday Powell gets to play tee-ball with the Senate, and on Wednesday he will also be playing tee-ball with the House.

On the economic calendar, the week ends with much less action:

Geo-politically, today is the Trump-Putin Summit.

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Storm Clouds Are Gathering Over Gold & Silver But Right Now It’s The Calm Before The Storm

There is a flurry of activity on the events calendar this week.

We start the week with some housing data and Fed speeches:

Granted, those are lesser of the Fed Heads.

But come Wednesday, the data really starts getting important with the hot topic of the year – trade. Of course, there will be no trade surplus.

The question on everybody’s mind: Is the trade deficit shrinking, growing, or staying the same?

I think Wednesday’s trade data will be more important than most, especially since the trade wars have been such an intense issue in 2018.

Understand this caveat: With all the statistics, we have seen trends where the numbers are massaged to paint a rosier picture than what should be, and that’s giving them the benefit of this doubt. Many would argue the official statistics are outright statistical lies.

That will be something to think about when the Bureau of Economic Lies Analysis releases the May 2018 PCE report on Friday: (more…)

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Winds Of Change: Recent Dollar, Gold & Silver Trends Are Changing As Prevailing Winds Shift

On the events calendar, we see two important pieces of data mid-week:

Retail Sales comes out on Tuesday and Industrial Production comes out on Wednesday.

Retail sales are important because we live in what is often labeled as a “70% consumption based” economy. The number tomorrow will help us get a sense of just how tapped-out the American consumer is. Industrial Production is important because that is a measure of how much stuff is manufactured in the economy, as well as how much stuff is mined out of the earth, and how much electricity and gas are used. In other words, if we want to MAGA, we’re going to need industrial production to start picking up in a meaningful way.

We’ve got a regular volley of Fed Head speeches this week – not shown is Thursday and Friday, but rest assured, they’re on the calendar.

If there was a theme for this week, I would call it “winds of change”.

For example, check out the dollar:

Did the dollar top out at my 93 target? (more…)

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Gold & Silver Looking To Rally As The World Moves From “Inflation Expectations” To Plain Old “Inflation”

I’d like to direct your attention to Wednesday and Thursday of this week’s economic events calendar:

On Wednesday we get PPI data and on Thursday we get CPI data.

PPI is the Producers Price Index. That is the change in price of what it costs to produce goods and services. Buying aluminum and turning them into cans would be a good example of the PPI seeing as how the whole “trade wars” mantra is a hot topic right now, even if so far it has been nothing but talk. The point is if the cost of raw aluminum goes up, then the cost to the producer in making those cans is going up too.

CPI data is the Consumer Price Index. That is the change in price of the good and services we as the consumer. In our aluminum example, we don’t particularly care about the cost of aluminum. What we care about is how much a 12 pack of Coca-Cola costs. In other words, the CPI is what we pay for finished goods and services.

Besides, there’s more than aluminum that goes into the cost of a 12 pack of Coca-Cola. There’s the cost of the sugar, the super secret formula, the caffeine, the diesel to transport it to the store, the cost of the card board, the cost of the marketing, etc.

But it all comes down to one word: Inflation.

That’s the topic. (more…)

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The Stage Is Set For A MASSIVE PRICE SMASH Or An EPIC SHORT SQUEEZE In Gold & Silver

Fundamentally speaking, this is one week is perfect for anybody looking to smash the prices of gold & silver. By Wednesday, we will have the closed door FOMC with no press conference.

There will be a statement release at 2:00 p.m. EST:

Interestingly, the CME Group is only showing about a 1% chance of a rate hike:

And every MSM pundit is fully expecting the Fed to “hold” on 100-125 basis points.

But moving out to December is a whole different story:

Again, looking at CME Group’s probability, it seems there is 100% certainty of a rate “hike” in December. Not only that, but 4.3% even think we could be 50 basis points higher than where we are today on the Fed Funds Rate.

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The Demise of the Dollar: Don’t Hold Your Breath

The demise of the U.S. dollar has been a staple of the financial media for decades. The latest buzzword making the rounds is de-dollarization, which describes the move away from USD in global payments.

De-dollarization is often equated with the demise of the dollar, but this reflects a fundamental misunderstanding of the currency markets.

Look, I get it: the U.S. dollar arouses emotions because it’s widely seen as one of the more potent tools of U.S. hegemony. Lots of people are hoping for the demise of the dollar, for all sorts of reasons that have nothing to do with the actual flow of currencies or the role of currencies in the global economy and foreign exchange (FX) markets.

So there is a large built-in audience for any claim that the dollar is on its deathbed.

I understand the emotional appeal of this, but investors and traders can’t afford to make decisions on the emotional appeal of superficial claims–not just in the FX markets, but in any markets.

So let’s ground the discussion of the demise of the USD in some basic fundamentals. Now would be a good time to refill your beverage/drip-bag because we’re going to cover some dynamics that require both emotional detachment and focus.

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Weekly Outlook: Gold & Silver Earn Top Scores in Breakout as the Dollar Clings to Life Support

As we transition from August to September within the course of this trading week, we very well could have just experienced the Black Swan event over the weekend, and its name is Harvey. Gold & silver are breaking out right now, and the dollar, well, look out below…

After spending last week in “consolidation”, the metals are already making their moves.

We have been saying a move is imminent for weeks now, and while we have not seen the rises we have seen set up on the charts, we have not seen the big drops either, and this consolidation looks exhausted considering the lack of any on the year.

The smashing of late have had little effect on the gold price and silver price in the short term. Yes, they have been able to knock down prices, as evidenced by last Friday, but the prices have not stayed down for long.

On the daily, gold looks to be holding up and ready to punch through the stout resistance:

 

 

$1300 has acted as resistance, or the line in the sand, three times so far in 2017. The battle is not finished there, however. Going back a year, we can see that gold could have some more trouble in the $1310 – $1315 range. What we should really be hoping for is a break-out through that level, then coming back to bounce off it if we must. For this week, however, I guess we could settle for a close above $1300, but at this point, we should really be expecting more, unless the smashing will continue. There was calm overnight and no sneak attacks.

Silver is fighting resistance of its own:

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Why Is the US Dollar Rising?

On October 3rd I asked Is the U.S. Dollar Set to Soar? It seems the answer was yes. Here’s the weekly chart of the USD I posted on October 3rd:

And here’s the current weekly chart of the USD:

Note the apparent breakout above 100 and the constructive similarities to the 2014 breakout that was followed by a 20% increase in the purchasing power of the USD relative to other currencies.

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Dollar Demand = Global Economy Has Skidded Over the Cliff

Borrowing in USD was risk-on; buying USD is risk-off.

There is a lively debate about the global demand for U.S. dollars:

Global finance faces $9 trillion stress test as dollar soars (Telegraph.co.uk)

Is There a US$ Shortage? Will it Sink the Global Economy? Again? (Mish)

The Dollar Squeeze – How Problematic Is It? (Acting Man)

The Global Dollar Funding Shortage Is Back With A Vengeance And “This Time It’s Different” (Zero Hedge), which references a Bank for International Settlements (BIS) paper: Global dollar credit: links to US monetary policy and leverage.

Correspondent Mark G. went through the BIS report and offered these insightful comments:

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Prepare for House Prices to Fall Globally

Prepare for House Prices to Fall Globally

At the start of the New Year, there are increasing signs that the recovery seen in property prices in many cities in western countries – namely Dublin, London and other UK cities and New York and other U.S. cities is beginning to peter out.

Many cities have seen speculative frenzies return in recent months which led to price surges which would appear to be unsustainable – especially given the uncertain and poor geopolitical and economic backdrop.

This has been the case in the UK and Ireland, the U.S. and indeed in Canada, Australia, New Zealand and a few other markets.

The question at the start of 2015, is whether we are likely to see continued price gains or falls. There are all the hallmarks of an echo bubble akin to the one that burst so painfully in the ‘noughties’.

In the UK, the respected Centre for Economic and Business Research (CEBR) has predicted a decline in British property prices this year. Prices rose 8.8%, on average, in 2014 with prices in London ballooning another whopping 20%.

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Perth Mint’s Gold Coins and Bars Sales Highest In Year On Safe Haven Demand

Also underpinning bullion was a weaker U.S. dollar and sharp falls in global stocks on concerns of a new global financial crisis. Sharply lower airlines and transport-related shares after the first diagnosis of Ebola in the United States also helped send the S&P 500 index down more than 1%.  Nouriel Roubini warned that the world is vulnerable to a new global financial crisis and markets are very complacent again.  The Perth Mint’s sales of gold coins and bars hit their highest in nearly a year in September as a fall in U.S. dollar denominated gold led to some buyers to accumulate bullion on the dip and the risks of terrorism and war led to safe haven demand.

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