Someone Is Betting On $4,000 Gold….

A Pfennig For Your Thoughts

December 2, 2019

* Currencies succumb to the dollar’s strength
* We may, after all, find out who needs repo money….

Good Day… And a Marvelous Monday to you! And Welcome to December! I hope you all had a very Blessed Thanksgiving, with family, friends, whomever, and that you took the time to hug someone and tell them you love them and that you’re thankful they’re in your life… I got to hold my darling granddaughter, Evie, once again on Thursday… I sang to her, she was happy, and not fidgety for me… By the time everyone ate, there was very little but scraps and legs of the two turkeys we cooked, left… And Alex wasn’t even here! I guess next year, I’ll need to cook a third one on the Big Green Egg! My Mizzou Tigers won their last game of the year on Friday, beating rival Arkansas… And then they fired the head coach the next day… So, now we’re looking for a head coach once again… UGH! Procol Harum greets me this morning with their iconic rock classic song: A Whiter Shade of Pale…

Man, did I listen to a lot of Pandora’s Smooth Jazz Christmas station this past weekend! The house is beginning to get dressed up… It’s my fave time of year, too bad it’s cold outside! Oh well, it is what it is…

The currencies lost a little ground as they went into the weekend. There wasn’t much going on with the U.S. on holiday on Thursday, but in reality, from about noon on Wednesday thru to Saturday, there was a holiday especially by traders, and market participants… So, the euro, for instance was 1.1050 on Wednesday morning, and ended the week 1.2025… No biggie, just a small downward movement, as witnessed by the Dollar Index which on Wednesday was 98.34 and on Friday to close the week it was 98.37…

Gold got an opportunity to trade without the price manipulators breathing down Gold’s rise… And so the shiny metal, even with little volume, found a way to end the week up about $10 from where I last talked to you last Tuesday… I would have like to have seen Gold’s move be greater in numbers without the price manipulators, but I’ll take $10 and be a happy camper! But guess who’s back at their desks today? And from the looks of it, they are already catching up, as Gold is down $6.40 in the early trading this morning…

Speaking of Gold… Jared Dillian of the 10th Man newsletter recently ran a survey, and among the questions he asked, was this one: What do you think the best medium term investment is with a time horizon of 4 years? Of individual stocks, mutual funds/ index funds, real estate, bonds, savings/cd’s, and Gold, guess which one was the leader? That’s right Gold! Gold beat individual stocks! Now that was a survey of 10,000 responses… I guess he asked the right people, because, from my view in the cheap seats, I would think the average joe six pack would say individual stocks, and not Gold…

And here’s another ditty about Gold… I got this from the good folks at GATA… “The gold options market today saw $1.75 million in block trades betting the precious metal could almost triple in more than a year, surpassing the record.

Around noon in New York, 5,000 lots for a gold option giving the holder the right to buy the precious metal at $4,000 an ounce in June 2021 changed hands. The bets were sold at $3.50 an ounce.”

Chuck again…. Seems to me, that whomever it was that bought the $4,000 / oz. Gold options knows something that we don’t… And may I throw an idea out there? Of course I can, it’s my letter! HA! Here’s my thought… if this person (s) want to buy Gold @$4,000 then they must believe that Gold will be much higher than that price… Therefore they must know something we don’t… And I’ll only throw this out there for everyone to take shots at, but my spider sense was tingling when I read that… So, it’s either a hoax, and the trades will be pulled back…. Or, the great price reset for Gold is coming… Got Gold?

Palladium continues to move higher and higher with each trading day, and late last week it traded over $1,800! They say that there’s a shortage in Palladium and that’s the reason for the moonshot price… Well, as I’ve said before, if that’s good for Palladium it should be the same for Silver!

OK… There was a horrible attack on citizens in the U.K. this past week, and the focus was taken away from the BREXIT negotiations, although I did read that the two opposing sides were blaming each other for the attacks… Dolts, all of them! Here’s my memo to them… Just focus on getting the BREXIT agreement put to bed, so life can go on in the U.K. and they can get back to spending money they don’t have…

I say that last part with a bit of cynicism because everyone is spending money they don’t have… Debt is growing by leaps and bounds everywhere… And especially here where we live… I read this weekend that it was a record spending weekend for Christmas shoppers. The caveat was that the stores weren’t crowded, that most of the sales were done online… Oh, and the last report on Consumer Income and Spending showed the income was flat, while spending was up 0.3%, which means we’re spending more than we have…

On a sidebar, do you ever wonder if there will come a time, when you won’t be able to find a bricks and mortar store around, and that the only business will be done online? First it was the Catalog business going to the curb, next it will be the bricks and mortar businesses going to the curb… I’m just saying… it sure seems like where this is heading…

Speaking of spending what we don’t have… I read a report on Bloomberg.com this weekend that talked about the ways to get out from all this debt… It’s common knowledge that economic growth would certainly help, but since that’s not coming, and hasn’t been around for nearly a decade, that is unless you count 2.1% per annum growth…

There was not one mention of austerity measures… Wait! What? Are you kidding me, they got all these economists in a room and the two things they talked about was 1. The need for economic growth, and 2. That the only thing to do now is to spend more… They pointed out that the rate structure being what it is, does help the debt burden, but come on…. So, they had all these economists together, and best they could do was to tell us not to worry about the debt hole we’ve dug for ourselves, and to keep digging?

OK… enough of that! Gov’ts are going to keep spending because that’s all they know to do! And the U.S. is no different, even though we should be better than all other gov’ts… And there’s nothing I can do about all this debt spending…

Remember a week or so ago when I told you that the GATA folks had been told by the Fed NY that it would be two years before they would reveal the banks that needed assistance? Well, there’s been some developments there in the meantime. The GATA request asked for “all loans” for this year, and the Fed ducked under the Dodd Frank rule of not having to reveal receivers of funds at the Discount Window… So, if GATA or anyone else is looking for the banks that need repo money, then they’ll have to request that specifically… I’m sure the will, so there’s more to this story that will come to us as the days go by…

As I look across the globe for things that might markets, I find the news that the dollar is at a 6-month high VS Japanese yen… Which makes sense given the selling of Gold. I talked last week about how it seemed there was this feeling in the markets that a save haven was no longer needed… And while I would argue with whomever, until the cows came home that yen was not a Safe Haven, it sure gets treated like one these days, so if Gold is no longer needed, neither is yen…

That’s all hogwash to me folks… No need for a safe haven! It’s as if the markets have lost their marbles… They’re acting like Tootles in Peter Pan!
OK, in the U.K. they will have an election on Dec. 12th, and right now there are fears that the result will be a hung parliament… So, the U.K. has that going for them!

In China over the weekend, the private print of the CAIXIN Manufacturing Index showed there was still life in the Chinese economy, as the index number rose from 50.2 in the previous month to 51.8, thus giving the global growth currencies a little room to bask in the sun, at least until the sun goes down!

The price of Oil dropped in the past 5 days by over $2… I guess the Thanksgiving driving wasn’t what it once was? I hear that our friends at OPEC (NOT!) are talking about more production cuts… I also read that OPEC is making a bet that the U.S.’s golden shale age is coming to an end… I would be the one driving the car on that bet if I were a Chinese OPEC member, as I’ve talked a lot about how the Shale business is waning…

So, the price of Oil being what it is right now, is of no help to the Petrol Currencies, and the likes of Russian rubles, Norwegian krone, Brazilian real, and Canadian loonies, can’t seem to find a bid right now… UGH!

The U.S. Data Cupboard has a boat load of data prints for us this week, starting today and ending Friday with the November Jobs Jamboree. The real economic data prints this week will include: Factory Orders scheduled for later in the week, and the ISM Manufacturing Index that will print today. Recall that the ISM slipped below 50 a couple of months ago, and didn’t recover, but instead, it slipped lower in the following month… So, for Rocktober it was 48.3…. The forecasters say that we’ll see some healing in this index number for November… I say, I’m from Missouri, you’ll have to show me!

To recap… The U.S. was basically on holiday for 3 days last week, and so the trade volume was thin, and the currencies didn’t move much, while Gold gained $10 during the holidays… Gold is down more than $6 in early trading today, and the dollar looks like its ready to kick some butt and take names later… Debt is everywhere, but more importantly it’s here, in the U.S. and there’s nothing anyone can figure out what to do with, so economists think that we should strap on the feed bags and create dollars until the sun don’t shine any more…

For What It’s Worth…. Geez, you know, there are sometimes I wish I could just be like most people and believe everything the media, Gov’t, Fed, and Treasury tell us… It sure would make things easier for me, I could print the Polly Anna, lollipops and rainbows that I have to sift through every day … But then I thank God that I’m not like most people! For who would have the gumption to report the things I talk about to you? It sure wouldn’t be Paul Krugman, or any other gov’t economist! Well, with all that in mind here’s today’s FWIW article. This article come to me from longtime reader Bob, and it’s about subprime loans defaulting again, and it can be found here: https://wolfstreet.com/2019/11/28/whats-behind-the-subprime-consumer-loan-implosion/

Or, here’s your snippet: “OK, we’ve got a situation in subprime consumer loans. The delinquency rate on credit-card loan balances at the nearly 5,000 smaller commercial banks in the United States – this means all banks except the largest 100 – is blowing out, according to Federal Reserve data. In the third quarter, the delinquency rate at these banks rose to 6.25%. That’s higher even than during the peak of the Financial Crisis.

Back in 2016, the credit-card delinquency rate at these banks was in the 3% range. It has more than doubled in two years.

Credit card balances are considered delinquent when they’re 30 days or more past due. This delinquency rate means that out of the banks total credit card balances, 6.25% are 30 days or more past due. This is a disturbingly large rate.

But delinquencies are a flow. Balances are removed from the delinquency basket either when the customer cures the delinquency, such as catching up with past-due payments, or when the bank “charges off” the delinquent balance against its loan loss reserves. But as these delinquent balances were taken out of the delinquency basket, even more new delinquencies fell into the basket, and the delinquency rate rose.

Subprime auto loans have also been blowing out. In the third quarter, the serious delinquency rate of the $1.3 trillion in auto loans has risen to 4.71%, the highest since the worst months of the Financial Crisis, when the auto industry collapsed, and when the US was facing the worst unemployment crisis since the Great Depression. In the third quarter, about 21% of all subprime auto loans were seriously delinquent – meaning 90 days past due.”

Chuck again… yes… Hello Houston, we’ve got a problem kept coming to my mind when I read this article… And then we can circle back to the top today when I talked about all the online purchases… those are made with credit cards, folks… And when the bills come in, guess what will happen then….

Currencies today 12/2/19 American Style: A$ .6785, kiwi .6473, C$ .7520, euro 1.1017, sterling 1.2933, Swiss $1.0023, European Style: rand 14.6590, krone 9.1938, SEK 9.5683, forint 302.08, zloty 3.9020, koruna 23.1688, RUB 64.31, yen 109.55, sing 1.3685, HKD 7.8285, INR 71.54, China 7.0316, peso 19.54, BRL 4.2350, Dollar Index 98.32, Oil $56.36, 10-year 1.83%, Silver $16.88, Platinum $891.83, Palladium $1,857.55, and Gold… $1,457.59

That’s it for today… Well… let’s see, there are a few birthdays this month in addition to Christmas, so it will be a month of parties, get togethers, and good cheer… I think I remember that former colleagues, Jennifer, and Ty will celebrate birthdays this month. My wife’s birthday is the day after Christmas… (please don’t tell her I mentioned her!) My sister, Terri, will celebrate a birthday, and there are probably more that I’ve forgotten about. UGH! It was quite the cold weekend, with no sunshine… Typical for November… I’m sure glad that’s over with! We’re supposed to warm up a bit for a couple days this week with sunshine, that will sure be welcomed! Well, did you overeat on Thanksgiving? I didn’t… I don’t know what was wrong with me that day, but I just wasn’t into eating! I was more interested in the pies! And with that… The Beautiful Dusty Springfield takes us to the finish line today with her song: Wishin’ and Hopin’ …. I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts