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Gold Shines On Monday!

* CBR cuts internal rate 25 Basis Points.
* Euro gains 1 full cent on election thoughts.
* Russia continues to accumulate Gold!
* Bond Boys aren’t true believers.

And now. Today’s A Pfennig For Your Thoughts.

Good Day. And a Tom Terrific Tuesday to you! Well, another journey under the surgeon’s scalpel has turned out to be OK. As Frank told you yesterday, I transmitted a strong signal on Saturday morning, which was confirmed, and now I’m in recovery mode. I can’t lift my left arm past my heart for a month! The hospital Immobilized the arm for the surgery, and then sent me home that way, but I dropped that thing like a bad habit yesterday, so now it’s up to me to police my arm movement.. And I bet some of you astute readers are saying, but Chuck, weren’t you supposed to be on vacation this week? Yes, but since the operation threw a spanner into the works, my annual spring vacation, has been moved to next week. Foghat greets me this morning with their song: Take It Or Leave It.

I saw my primary doc yesterday for a semi-annual visit, and he continues to be amazed at my outlook on life given all the bean balls I’ve taken. He said, “you are poster child for Human Spirit” I told him he gets to see me on “good days”. He laughed, and we went our separate ways. But this Human Spirit comment gnawed at me all day, and came to embrace it. For it’s what is perception of me is, and perception is everything, right?

I started thinking about Human Spirit as economies. ( I know, I know, what a dolt, right?) But stay with me here. The Russian economy has to have Human Spirit, given all the shots it has taken in the past few years. I’ve got some more on Russia coming up. but first, I wanted to point out the economies of the world that seem to have that “Human Spirit”.. Economies like the ones in: The Eurozone.. Norway, Brazil, Canada, and there are a more, but you get the point I’m making here. The U.S. would qualify too, so don’t get your buttons all busted because I left them out!

Well, the dollar drifted a bit higher yesterday against most of the currencies, except the euro. the euro enjoyed one of its best performance days in a while, gaining about 1 full cent on the day, and then holding onto that gain through the overnight trading sessions, where there were many opportunities to sell and take profits. The euro’s moves higher were a direct result of a better performance by the euro-centrist candidate, Emmanuel Macron, in a debate on TV the night before. I’m talking about the French elections here, and any sign that the Nationalist Front, led by Marine Le Pen, who is anti-euro, could lose, is like manna from heaven for the euro.

Of course these kinds of gains are not fundamentally driven, and can easily be taken out, but so far so good for the single unit.

The Japanese yen, sure has seen a nice run recently, eh? Any time yen gets a wild hair and starts to rally, I cringe, because that is all just built on “Safe Haven Status”. There’s nothing, absolutely nothing, say it again! That would serve as a fundamental supporting yen’s rally. So, I tell you all this, as a way of saying be careful here, the recent rally may have curb appeal, but it has no legs to stand on.

The other “major currency” that’s seen a nice rally recently, is the pound sterling / sterling. And that’s all tied to the rising inflation in the U.K. that many believe will lead the Bank of England (BOE) to hike rates. Wait! What? Haven’t we seen this whole ACT of the play before? Yes, we have, and now, for Chuck’s statement on the U.K. that he always seems to be able to pull out of a hat, ala Bullwinkle! The U.K. has debt up to their eyeballs, and this debt is always going to cause problems for the U.K. economy, and therefore, I don’t see the rate hikes that has everyone all lathered up again here. Besides, as Chris pointed out yesterday, the invoking of Article 50 on BREXIT is hanging over sterling like the Sword of Damocles.

My friend, and the retirementor, Dennis Miller, of had another nice article last week, in which he interviewed a Swiss Money Manager, who was asked by Dennis, “if you were to pick one currency to own in 2017, what would it be and why?” His guest, Rob Vrijhof, President and Senior Partner of Weber Harman Vrijhof & Partners Ltd. Which is headquartered in Zurich. So, Rob responded, “Since we do expect a further retracement to the upside in commodities, we are currently having a very close look at the Australian Dollar, which started to retrace some of the losses we had been seeing accumulating during the past 2 years against the US Dollar.

We also strongly feel that because of the insecurities worldwide, be that political or economic, the Swiss Franc will be used as a safe haven currency.

While most Americans generally have their US accounts in dollars, we believe a diversified currency base provides an additional layer of safety.”

Chuck again.. I’ve said it before, and I’ll continue to say it. If you’re retired, recently or have been, or thinking about retiring, you should check out Dennis’s website and letter. And the link to the actual article mentioned above is:

In a surprise move to me and the markets, the Central Bank of Russia (CBR) cut their internal rate 25 Basis Points (1/4%) yesterday, to 9.75%… There were a lot of factors that led to this rate cut according to the CBR Gov. Nabiullina, who confirmed that the strength of the ruble was a main factor in this decision to cut rates. The other thing, could be found in the statement following the rate cut announcement, and that is the CBR has changed their outlook for the price of Oil. The now believe that the price of Oil will continue to fall, and reach $40, and so the CBR was being proactive in relieving some interest rate pressure for the economy. I told you last week that there was one Central Banker that I thought still was “worthy”. And Elvira Nabiullina is that “one”. So, I don’t question her move here, and she wouldn’t confirm that this rate cut starts a new rate cut cycle, but, and this is just me thinking here, if the price of Oil does continue to slide downward, I do see the CBR cutting rates at nearly all of their 6 remaining meetings this year, which would bring their internal rate to around 8.5% by year-end.

Speaking of Russia. I read on the website yesterday that official Gold reserves of Russia as held by the CBR rose 9.3 Tonnes (300,000 ounces) during February. The CBR is obviously continuing their addition of Gold reserves into 2017, which is a good thing for Gold and Gold holders! However, the February numbers pale in comparison to the January numbers, which saw Russia purchase 31.1 Tonnes of Gold (1,000,000 ounces). Add the two months together and you get over 40 Tonnes, which annualized would mean that Russia would add 240 Tonnes of physical Gold to their already expanding Gold reserves.

For those of you keeping score at home. That’s 177 Tonnes in 2014, 208 Tonnes in 2015, and 200 Tonnes in 2016, which is quite the accumulation of physical Gold, since the CBR decided to diversify their currency reserves with Gold..

And speaking of Gold. Another nice performance for the shiny metal yesterday as it closed at $1,253.80 up $10.90 from Friday’s close.. There were some funny (not funny, ha-ha) games played yesterday as the Gold rose above $1,261, it’s 50 day moving average, it saw a ton of paper trades selling the shiny metal. But as I’ve said before, as long as they leave a pound of fat for us, let them play their games. Gold is down in the early morning trading today though with about $5 bucks taken away, in what I would think was profit taking.

There’s just not much in the way of economic data in the U.S. Data Cupboard today, and usually when that happens, we look for Fed speakers, and looky there, we have none other than the Fed Chair herself, Janet Yellen scheduled to speak today. Once again the markets will be looking to see if she can put a 100 miles of desert between what she said after the last rate hike, and what the markets thought she said.. Recent trading sessions have seen these directionless days as days when the dollar drifted lower. I’m just saying.

Fed member, Charles Evans, did say yesterday that the Fed could hike 2-3, or 4 times this year, and Fed Member Kaplan, said that he supported more rate hikes this year, and that the “neutral fed funds rate” is likely around 2.75%… Sounds to me like more rate hikes are coming, whether we need them or not!

I can tell you that there’s one group that doesn’t believe in the rate hike scenarios put forth by the two Fed Members yesterday, and that’s the Bond Boys. The yield on the 10-year this morning is 2.38%… Recall a few weeks ago when it was 2.62%?

To recap. The markets remain directionless today as a result of no real economic data, but Janet Yellen will speak to us, as two Fed Members did yesterday, both talking about multiple rate hikes this year. The dollar got a bit of a boost from the Fed members’ comments yesterday, but the euro got the biggest boost, rising up over 1 full cent on the day. Gold rose nearly $11 on the day, and at one point in the day, was up significantly more, before the paper trades hit the market. The CBR cut their internal rate 25 Basis Points, and Chuck gives us some additional details on Russia..

For What It’s Worth. One of the most well respected analysts in the world, writes for the U.K. Telegraph, and I’ve quoted him many times through the years, Ambrose Evans-Pritchard. And he’s talking about the drop in Credit here in the U.S. and how people should be concerned with this. The article can be found here:

Or, here’s your snippet: “Credit strategists are increasingly disturbed by a sudden and rare contraction of US bank lending, fearing a synchronized slowdown in the US and China this year that could catch euphoric markets badly off guard.

One key measure of US corporate borrowing is falling at the fastest rate since the onset of the Lehman Brothers crisis. Money supply growth in the US has also slowed markedly. These monetary and credit signals tend to be leading indicators for the real economy.

Data from the US Federal Reserve shows that the $2 trillion market for commercial and industrial loans peaked in December. The sector has weakened abruptly as lenders tighten credit, especially for non-residential property. Over the last three months it has dropped at a rate of 5.4pc on annual basis, a pace of decline not seen since December 2008.

Credit experts at several big US banks have issued warnings over recent days, albeit sotto voce. “We’ve been surprised how little attention the slowdown in US bank lending has garnered,” said Matt King, global credit strategist at Citigroup.”

Chuck again. Even in the broader markets of loans and leases the deterioration can be seen with a 1.6% falling rate in the last 3 months! This whole world’s financial system is built on Credit folks. think about that.

Currencies today 3/28/17. American Style: A$ .7610, kiwi .7022, C$ .7465, euro 1.0860, sterling 1.2568, Swiss $1.0148, . European Style: rand 12.8720, krone 8.4980, SEK 8.7786, forint 284.70, zloty 3.9115, koruna 24.8772, RUB 56.93, yen 110.65, sing 1.3943, HKD 7.7673, INR 65, China 6.8675, peso 18.87, BRL 3.1147, Dollar Index 99.52, Oil $48.16, 10yr 2.38%, Silver $18.08, Platinum $963.85, Palladium $788.50, Gold $1,256, and SGE Gold. $1,269.62

That’s it for today. The last few days of March. And these last few that we’ve had have been ugly days, rain, cold, grey skies. More clouds today. I want sunshine! It looks like the first chance we’ll get to see the sun is Saturday. UGH! Hopefully I will be on a plane Saturday, heading south! I’ve had to cancel 3 previous trips south due to curveballs the doctors threw at me, so before I agreed to the pacemaker operation, I had the doc assure me that, as long as there are no problems, I can travel on Saturday. Well, our Blues, who lost an ugly game in OT on Saturday, bounced back last night with a 4-1 win VS Phoenix. They had a nice win streak broken on Saturday, so it was good to see them bounce back. The regular season is almost over now, and the playoffs will begin, that’s when hockey really gets interesting! In a game at the brand spanking new, Ballpark at the Palm Beaches, the Cards took on the Astros in a rare Spring Training night game last night. I was supposed to
be there for that game! The late Great, Leon Russell takes us to the finish line today with his song: Stranger In A Strange Land. And with that, it’s time to go. I hope you have a Tom Terrific Tuesday. And Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts

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