Trump To Meet With Yellen On Thursday…

Rocktober 17, 2017

* Dollar gets boost and takes off!
* NAFTA talks hurt loonies and pesos…
* Gold gets taken to the woodshed!

Good day…And a Tom Terrific Tuesday to you! I could write a book and title it: Sleepless in St. Louis… But, I won’t… About 10 years ago, a representative of a book publishing company contacted me and wanted me to write a book about trading currencies. I wanted it to be more about my survival from cancer… We never agreed, and after about a year of asking me, she finally gave up… The closest I ever got to writing a book, was writing the forward for a book! The Second edition of Addison Wiggin’s book: Demise of the Dollar… Check it out on Amazon, it’s pretty cool… The late great George Harrison greets me this morning with a live version of his song: While My Guitar Gently Weeps, which was recorded at Madison Square Garden back in the day…

Well, the currencies saw a choppy day yesterday. The euro traded up and through the 1.18 level, and then back below it, and then did a rinse and repeat. And the other currencies followed the Big Dog. But then late in the day and throughout the overnight markets the dollar has been the focus of traders and here’s the skinny on why that is as I know it to be…

Late yesterday afternoon, the President, met with John Taylor, an economist, for the Fed Chairman job, and is thought to have impressed the President, so much so, that the markets have already thrown the front runner for the job, Kevin Warsh, to the side of the road… Taylor is thought to be much more hawkish than the present crew at the helm of the Fed.

But there’s a problem here Houston.. A Hawk in Charge, when Trump is so dovish? That just doesn’t make any sense to me, given that Trump has the open roster of candidates to fill the job… Oh well, whatever it will be, it will be, right? Oh, and before I go on with the reasons for the dollar strength this morning, I just wanted to mention that current Fed Chair, Janet Yellen is going to meet with Trump on Thursday this week…

I wonder what that’s all about? Is it to let her know that he’s going to name a new Fed Chairman soon and she should step down? Or is it to let her know that he’s not a fan of a rate hike at this point, and request that the rate hike be delayed? Or something else? Man, to be a fly on the wall, eh?

OK, back to the dollar strength. The other thing helping the dollar this morning is the news that U.S. and N. Korean diplomats will meet next week in Moscow, thus giving hope to the idea that a diplomatic resolution can be ironed out, without any bombs flying around… This news especially was bad for Gold, which has lost over $11 in the early morning trading today.

So, just like that, we go from “all options are open” to “everything will be right on the night”? Now, don’t get me wrong, I do prefer the latter scenario, but I just don’t see how we got there in what seems like the flicking of a light switch. It’s all a little surreal to me, and that has my spider sense going bananas this morning…

And in other news overnight, reports are that the U.S. has come out in the NAFTA negotiations as the aggressors, and that has put the Canadian dollar/ loonie, and the Mexican peso on their back feet this morning… I read about this scenario this morning, and it was like the proverbial V-8 head slap moment for me… I had wondered the other day when the Mexican peso traded back above the 19 handle, what could be the cause of this move, but was too busy at the time to deal with the peso, which is not a fave currency of mine. And then BAM, there it was right before me! NAFTA talks!

Well, where were you 30 years ago? October 19, 1987, Black Monday… That’s the storyline of my Dow Theory Letters (www.dowtheoryletters.com) article this week. I just put the finishing touches on it yesterday afternoon, and so, it’s still on my mind, and thus I’m talking about it now! HA! But seriously, think about it, where were you when you heard the stock market was crashing? I know where I was, and it was in the trading office of the old Mark Twain Bank Brokerage, helping with order entry… I just shake my head in disbelief at those out there that think that can’t happen again… Hmmm…

Of course we did see other stock market problems in 2001 and 2008, but not a one-day drop of 508 points, or 22.6%, Which is still the largest one-day drop in Wall Street history… Oh well, so much for that, but that’s really a relatively long time, folks, 3o years, or 3 decades…

Things in Spain / Catalonia aren’t getting any better, as a Spanish judge ruled that two of the Catalonia leaders of the independence movement be put in jail on sedition charges. Did someone forget to tell the Spanish judge that the two entities are trying to negotiate an agreement right now, and doing something like this would damage those diplomatic negotiations?

And back to Gold for a minute… A couple of weeks ago, I wrote about the news that China was introducing an Oil future that would be tied to Gold. This was HUGE news as far as I was concerned… But now, Gold researcher, extraordinaire, Kook Jansen, is saying that there will no such thing… Let’s listen it to Koos as he explains his position on this… “China hasn’t announced anything but an oil-yuan futures contract. Gold has nothing to do with it.” Koos Jansen then goes on to explain how you can purchase Gold on the Shanghai Gold Exchange (SGE) with renminbi/ yuan so Oil producers could just take the renminbi they just received for the sale of their Oil and buy Gold at the SGE with it…

You may recall me telling you over a year ago, that that exact scenario is what the Russians were doing with the renminbi they were receiving from the sale of their Oil to China. If Koos is correct, and I have no reason to believe he isn’t correct, then it’s still all good for renminbi, and bad for the dollar… It’s just as good for Gold..

And speaking of China the news came out yesterday that China is interested in obtaining a 5% stake in Saudi Aramco Oil through a direct investment… Hmmm… Remember when China was going to buy the California Oil company and the media went bonkers? Yes, let’s go back to 2005… Chinese oil company Cnooc Ltd. withdrew its $18.5 billion takeover bid for California energy firm Unocal Corp., saying it would have increased its offer had the resistance not been so strong…. 12 years ago folks…

Today’s U.S. Data Cupboard has two pieces of real economic data for us to see today. Industrial Production (IP) and Capacity Utilization (CAPU) will print this morning for September… IP could come out of the red when it prints today, but that’s not saying much, and CAPU should remain steady Eddie. The current Home Builders Index will print this morning too, but it will take a back seat to the two real pieces of economic data…

To recap… After a mostly choppy day of trading yesterday, the news that a new leader for the Fed Chairman job, who is considered to be a hawk, came out, and the dollar took off for higher ground. That news and the news that the U.S. is the aggressor in the new NAFTA talks, sent Gold to the woodshed, and the other metals followed. Koos Jansen says there’s no such thing as a Gold backed Oil future.. But it’s all the same for the dollar…

For What It’s Worth… This is an interesting read on Gold, and I thought it to be FWIW worthy, since Ed Steer highlighted it in his letter! And it can be found here: http://tocqueville.com/tocqueville-gold-strategy-third-quarter-2017-investor-letter/ ;

Or, here’s your snippet:” Gold appears to have formed a solid base since bottoming at year-end 2015 at $1060.00/oz. Through 9/29/17, the metal’s price increased 11.10%, even after a sharp pullback from its early September 2017 high of $1355. As of September 30, 2017, the price stood at $1280.15, 20.75% above its low at year-end 2015.

In our view, gold and the precious-metals complex is in the early stages of a dynamic up cycle that will match or exceed the run from 2000 to 2011. Downside appears limited; the greatest challenge for investors will be to muster the necessary patience to hang on until the up-cycle becomes more assertive and evident.

Despite the four-year correction from $1,900/oz. to $1,060 at year-end 2015, gold has outperformed stocks and bonds since 2000, the dawn of radical monetary practices by the world’s central banks. We have shown the chart below in previous letters, and repeat it again here only to emphasize this under-recognized fact.

What we also know is that gold production is peaking out, and is likely to decline over the intermediate term even if gold prices rise substantially. Should investor demand reawaken, there is very little slack in supply to absorb it. The depletion of gold inventories in London and other Western vaults – a result of demand in Asia – is a finite process with measurable limits. There are many signs that those limits are being reached.

Finally, we know that the fiscal position of Western democracies is perilous and worsening. History teaches that resolution of fiscal impasses most often results in monetary debasement, which has invariably led to a rise in the nominal value and purchasing power of liquid assets that cannot be debased. Gold and silver constitute a short list of non-financial assets with monetary characteristics.”

Chuck again… As I said above this is a good article/ read, and it goes on to talk about fundamentals and everything else a Gold buyer or holder should know…

Currencies today 10/17/17… American Style: A$ .7855, kiwi .7183, C$ .7977, euro 1.1760, sterling 1.3255, Swiss $ .9773, … European Style: rand 13.3718, krone 7.9287, SEK 8.1412, forint 261.68, zloty 3.5983, koruna 21.9121, RUB 57.22, yen 112.15, sing 1.3560, HKD 7.8075, INR 64.94, China 6.5894, peso 19.05, BRL 3.1548, Dollar Index 93.45, Oil $52.16, 10year 2.31%, Silver $17.14, Platinum $930.77, Palladium $985.43, and Gold… $1,291.40

That’s it for today… Hmmm… Well, at least Baseball gets going again tonight! It’s been a long morning already for me… UGH! But I don’t have to go into an office, so I have that going for me! HA! At one point on Saturday night, I actually thought my beloved Mizzou Tigers could hang with the #3 Georgia Bulldogs, as the game was tied 21-21… But then the trap door, that’s always there for my Tigers, sprung, and soon it was a blowout for Georgia… UGH! And our Blues lost on Saturday night too. The only redeeming things, sports-wise, was that the Astros and Dodgers won their games that night! The Moody Blues take us to the finish line today with their song: Isn’t Life Strange, from the Seventh Sojourn album, one of my faves! OK, I’ve gone on long enough today, it’s time to go! I hope you have a Tom Terrific Tuesday, and Be Good To Yourself!

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

 

a) The Daily Pfennig is no longer published by EverBank and it is now published by Aden Research Group.

Chuck Butler recently joined the Aden Research Group, a research center led by writers and market analysts Pamela and Mary Anne Aden. The Aden Research Group publishes three newsletters:
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