Hedge Funds Say Gold Will Exit $1,900 Cage Soon!

A Pfennig For Your Thoughts
 
October 26, 2020
 
* Currencies rally on Friday, but turn around overnight… 
* Gold gets old on Friday, but turns around this morning… 
 
Good Day… And a Marvelous Monday to you… Well… In case you’re wondering… It was a gloomy weekend here, very chilly, and a good 20 degrees below normal… But the gloomy day didn’t stop my beloved Mizzou Tigers from upsetting Kentucky on Saturday! Their second win VS a team that my Tigers were forecast to lose to… And then to follow up the joy of a Saturday victory for my Tigers, the Rays made a ninth inning rally to comeback and beat the Dodgers… That was tense, and I didn’t even have a dog in that fight! All four grandkids were here Saturday night, and 3 stayed over… My little Evie is walking steady now, and so darn cute! Delaney Grace was here to help. I still can’t believe she’s 13 now! Saturday was also the wedding of our former neighbor’s son… So, good luck Drew & Chloe! It was strange being in church with a face mask on… I’m just saying…
 
I’m also just saying that I’ve had it with all this tip toeing around each other, and not being able to live our lives… The way I see it, is this… We all know that tomorrow is not promised to any of us… And that pre-pandemic, we also knew that there was risk every day… You may just be going across town to the store, in your car, but you never know, right?  I’ve said this before, and quite frankly I don’t want to hear a lot of naysayers in the response box regarding this… But we should have never locked down the country and the economy… We should have taken the steps to insure those “at higher risk” were kept safe, but the rest of the economy should have been open, period.  I read where the “cases” are soaring again in Missouri… But… did you know that the test that they use to determine for them, positive or negative, wasn’t developed to do that? So, we get a positive test, but if they multiplied it more times, it would be negative… This “cases thing” has gotten out of control… 
 
OK… I’m off my soap box now… aren’t you glad? Because I know you didn’t open up my letter today to hear my views on the virus testing…. So, with that in mind… The currencies had a good day on Friday, with the euro pushing higher into the 1.18 handle once again… There seems to be more and more articles out there talking about the digitization of our economy… If they had just read my Pfennig from a couple of months ago, they could have saved themselves some time to write about something else… And for all those people that needed to get the news from elsewhere, shame on them! They should be Pfennig readers! HA!
 
But when I turned on the light over my laptop this morning, I saw that the overnight markets have reversed the Friday gains in the euro… Gold is up $4 in the early trading, but Silver, Platinum and Palladium are all on the selling blocks this morning… So, it’s a strange day to begin the week, the final week before the national election…  
 
And in a case of believe or don’t… The stimulus negotiators are still talking… I know one thing, that when they are old and losing their breath, they’ll wish that they hadn’t wasted so much breath on these negotiations! Everybody is talking… talk, talk, talk… 
 
So, all this talk has gotten the sentiment swaying toward selling dollars… . It’s not an all-out change of sentiment, but… more and more the dollar gets pushed to the edge, and then gets saved, and then it gets pushed to the edge again, and then saved… Pretty soon the dollar will get pushed to close to the edge to be saved… I’m just saying…
 
And, don’t blame me when it gets shoved over the edge… I’ve warned you for some time now that this was coming… Too much Debt… too much currency printing… too much division in the country… too much keeping rates near zero… and…. The current strong dollar trend is too long in the tooth…
 
Well, Gold & Sliver didn’t have a good day like the currencies did on Friday… But… Gold at one point in the day was down big… and came back during the day to close down just $3.80, to $1,902.30. Silver followed the fortunes of Gold and ended down just 12-cents to $24.68… Not a good two days altogether for the metals… But… I would think that this week will be different, as the rumors of a stimulus bill have abated… All talk and no walk… That’s our Congress! Everybody wants their 2-cents in the bill and when it finally gets finished, it has so much crap in it, that you wouldn’t know it was supposed to be helping the citizens of the country!  I’ve said this before, but, my dad used to say, “Money talks, and B.S. walks”…. 
 
I mentioned too much debt above… It was just a couple of weeks ago that I told you that the Current Debt had reached $27 Trillion… In that short period of time, the debt has already risen $132 Billion!  That averages out to about $10 Billion per day… Which if you averaged it out a year, would equal $3.65 Trillion…  And that doesn’t take into consideration, when stimulus bills get passed, and the hit to the deficit is a one-time amount!  Too much debt… too much debt… I need to pound this into the heads of traders…
 
Things around the world aren’t getting any better folks… But as I’ve explained before… The U.S. is supposed to be better than the everyone else. They have the reserve currency of the world, and is supposed to be taking care of the reserve currency in the world, but are doing a very poor job of that!
 
I had a dear reader send me a note last week, from someone that used to live here in the U.S. but moved to New Zealand, and he gave his viewpoint on how we got into this mess… And while reading his note, I was reminded of how I made such a HUGE fuss over what he was talking about back in the day when it was all going down…. I’m talking about how the U.S. allowed Manufacturers to move their businesses abroad for cheaper labor and more profits… I know, I know, it’s a free country, blah, blah, blah, but…. The Gov’t should have levied huge fines for even thinking about moving their business abroad, and should have made them repatriate their profits and then taxed the hell out of them then… But noooooo… We allowed them to close shop here, put workers out the door, and move their businesses abroad, and then to make matters worse, on two occasions the mental giants that run our country, gave tax amnesty to repatriated funds! They should have taxed them to the max for leaving!
 
We used to be a country that made things…. And what we made was good! But through the years, we turned into a services country… And our service stinks! But you have to learn how to make lemonade out of lemons, right? So… where are all the leaders that allowed this to happen under their watch? Probably sitting out on their ocean view veranda with umbrella cocktails and eating chocolate bon bons…
 
OK… Boy I’ve stepped up on the soap box a couple of times this morning.. . I had better be careful stepping back down, I lose my balance easily! 
 
Gold should be heading toward $2,500 by now, given it reached $2,000 back in August… But it’s not, the fault of Gold buyers, they continue to demand Gold & Silver, but the price manipulators won’t back off…. 
 
Because, as I’ve said before, the Gov’t can NOT have Gold & Silver in foreign Central Banks’s vaults replacing the dollars they hold…. That’s why the practice of having more short contracts on the books representing more ounces of Gold or Silver than is currently above ground, is not investigated, and shut down…. Oh, and one more thing on Debt… Did you know that the total of student debt in this country is $1.64 Trillion? And that about a third of that total is in arrears? 
 
But Gold will get there and beyond one of these days, because, the dollar is going bye-bye… So long, farewell, auf Wiedersehen, good night! And when the weight of the debt becomes too much even for the almighty dollar to carry…. Gold will take over…. I’m just saying…
 
The U.S. Data Cupboard gets back into the business of yielding economic data this week, after spending last week on hiatus! We’ll see prints like Durable Goods and Capital Goods Orders, The first 3rd QTR GDP print, Personal Income and Spending, and the Employment Cost Index (ECI) for the 3rd QTR, which is a very watched print by the Cartel, I mean the Fed Heads… 
 
To recap… Friday saw the currencies rally in the face of a Gold & Silver selling. And just like all the other times the euro gets close to 1.19, it sees selling, which is happening this morning… Gold is bouncing back this morning, but Silver, Platinum and Palladium are all getting sold… Chuck thinks that this represents a strange way to start the week… Chuck gets on his soapbox to yell about virus testing, and what was the thing that started the mess we’re in… And I bet you’re thinking that it’s Richard Nixon’s exit from the Bretton Woods Agreement, but that’s too easy of a target, I went with this something else! 
 
For What It’s Worth… Well, I talked a lot about Gold this morning, so to keep that frame of mind going, here’s an article that was in the Daily Reckoning by James Rickards on what’s moving the Gold price higher, and it can be found here: https://dailyreckoning.com/central-banks-golds-greatest-ally-2/ 
 
Or, here’s your snippet: “What’s driving this bull market in gold?
It’s not retail investors (apart from a small number who understand the dynamics), and it’s not institutional investors (institutional portfolio allocations to gold are typically about 1-2%).
 
Instead, the steady buying is coming from central banks (especially Russia and China) and from the super-rich, who typically store their gold in private non-bank vaults in Switzerland and other good, rule-of-law jurisdictions.
 
The drive toward larger portfolio allocations to gold (in some cases up to 10%) is coming not just from the rich themselves but from their wealth managers and portfolio advisers.
 
This is a sea change.
 
For decades, wealth managers have rejected gold and pushed their clients into stocks, corporate credit and alternative investments, including private equity. All of those portfolio allocations backfired when the coronavirus came along. Equity markets have since recovered, due in no small part to massive intervention by the Fed.
 
The Fed doesn’t entirely explain the rally, but it’s certainly played a critical part. The market is nonetheless set up for another fall. The upcoming election is just one catalyst.
 
Not only will uncertainty reign until Election Day. It will continue to reign after Election Day.
 
If Trump wins, the Resistance will not take it well. They will challenge the outcome in court, deny the legitimacy of a Trump victory, and extreme elements in the Resistance will burn American cities.”
 
Chuck again… To add to Jim’s view… A dear reader sent me a note that talked about how Hedge Funds Say Gold Is Set to Depart $1,900 Cage Soon… Well… as always, I would prefer that they are correct! 
 
Market Prices 10/26/20: American Style: A$ .7132, kiwi .6693, C$ .7583, euro 1.1820, sterling 1.3047, Swiss $1.1031, European Style: rand 16.2495, krone 9.2497, SEK 8.7441, forint 308.54, zloty 3.8737,  koruna 23.0756, RUB 75.79, yen 104.83, sing 1.3607, HKD 7.7498, INR 73.96, China 6.6768, peso 21.05, BRL 5.6181, Dollar Index 93.00, Oil $38.84, 10-year .81%, Silver $24.39, Platinum $881.00, Palladium $2,413.00, and Gold… $1,906.60
 
That’s it for today… Like I said above, no debating what I said about the virus this morning, you won’t change my mind on iota! Well, this coming Saturday will be Halloween! Boo! For now, I’ve given up on the sweets, something I should have done years ago, but… I just love them! So, I won’t be helping myself to the candy bars in the dish I use to distribute treats to the trick-or-treaters… UGH! And Saturday will also be a Blue Moon! And it’s supposed to be clear so we can see it! I sure hope so… Halloween with a full moon… The werewolves will be out! Badfinger takes us to the finish line today with their song: Come And Get It…  I hope you have a Marvelous Monday today, and will Be Good To Yourself! 
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts