Great and Wonderful Thursday Morning Folks,
Gold is higher in the early morning trade report with the price now at $1,315.20, up $13.50 from the Comex close which happened before yesterday’s FOMC report with the high so far at $1,320.20 and the low at $1,312.50. Silver is up as well (not sure who is leading here Ag or Au) with the trade at $15.555, up 23.7 cents with the high at $15.65 and the low at $15.48. The US Dollar took a hit after the data release but has recovered (against Trumps weaker dollar demand) with the trade at 95.675, up 47.4 points inside a trading range between 95.705 and 95.295. Of course, all of this was done while we’re not trading and before the Comex sleepy time open. As expected, when Gold rises in the US Dollar, it rises even more in the secondary’s (emerging markets) with the Venezuelan Bolivar price at 13,135.56, gaining 99.87 Bolivar in a 24 hour period. Silver’s price gained 2.248 cents (HUGE!!!) with its price at 155.356 Bolivar. In Argentina, another country going into massive convulsions because of the exchange rate, Gold’s price before the FOMC was 53,322.03, now it’s priced at 53,730.56 gaining 408.53 Argentinian Pesos over night with Silver gaining 9.192 Argentinian Pesos at 635.484. These are very big gains brought on because of the swings caused by a major currency and not their own, wait till this hits under the US Dollar. No one’s seen anything yet!
The March Silver deliveries had a major jump in demand BEFORE yesterday’s FOMC data release with the count now at 101 Demands for Physical as buyers came in with needs proving a gain of only 17 contracts. However, yesterday’s Volume in March Silver totaled 94 swaps with the last purchase made at 8:57 am pst. Did someone jump in and get their requirements ahead of those already in cue? Watch Harvey’s count here because there may be some EFPS being passed over to the city in chaos or the purchases got stopped here draining more from COMEX, as less is getting pulled out of the ground globally. The Overall Open Interest in Silver is still gaining with the count now at 190,624 Overnighters proving 1,314 more shorts had to be placed in trade to stay the price from the buyers but not stopping the demands for physical at all.
The world’s (leading) economy hit a snag (more like stopped in its tracks) and the FOMC numbers being looked at proved it with the real shock showing no further hikes this year and only one hike in 2020 with the Fed balance sheet unwind starting in May and be completed by the end of September…. Giving us more reasons to hold precious metals by adding … “the Fed doubled down on patience and a strong desire to allow inflation to run "hot" and above the 2.0% target (it remains unclear just which inflation the Fed is targeting as tuition, medical, rent and food inflation, not to mention assets of all shapes and sizes, are already increasing at a far greater pace than 2% annually). Ultimately, as Powell said in his opening remarks, the Fed's overarching goal is to sustain the economic expansion.” I’m curious how much lower housing prices will drop, once we get the MBS held under the Fed, swapped around? Here’s some reasons why I ask.
- End the securities portfolio unwind at end Sept '19.
- Taper the Treasury unwind by reducing the cap on monthly redemptions from the current level of $30 billion to $15 billion beginning in May '19.
- Reinvest maturing MBS across the UST curve, not towards the front end as we expected.
- Cap MBS redemptions at $20 bn/month; Prepayments above this amount would be reinvested into MBS.
- Hold their aggregate securities holdings constant for a time and allow for a continued shrinking of reserves via non-reserve liability growth (i.e. currency in circulation).
- In October, the Fed will purchase enough Treasuries to offset the reduction in MBS holdings. The aggregate portfolio will be unchanged starting in October
While all this is going on here, Gold is being moved around to offset the “not mentioned” default loses with Citigroup planning to sell several tons of gold placed as collateral by Venezuela’s central bank on a $1.6 billion loan after the deadline for repurchasing them expired this month.
We need to slice thru the day’s commotions and wait to see what else is happening. But for now, there should be an upward trend for precious metals as the debt crisis has proven itself, with everything in shipping either being slowed or stopped. This can only happen when the public is no longer purchasing. People stop buying when they have overreaching debt and not enough income. That my friends, is the old school inflation, pure and simple. People are now tapped out and the numbers, even those that the Fed looks at, can no longer hide the point, our dollar is going to fall! So keep your metals close, have a positive attitude no matter what, and as always …