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"Sniff Of Fear" Returns - Commodities Crack Under USD Strength
While the extreme volatility associated with the 8amET hour in Gold and Silver trading is no surprise, the strength of the USD (helped by JPY weakness along with pretty much every other major) is slamming WTI crude, Gold, and Silver lower this morning. The Dollar Index move in the last two days is the largest in 16 months; Gold's 2-day drop is the biggest (ex-the crash) in 10 months.
And Southwest Securities' Mark Grant sums it up best:
On February 12, 2013 I said in Out of the Box:
"The engagement is just beginning. It will be one of the most significant events of this year and the various skirmishes may lead us into some sort of planetary Battle Royale. It is not Star Wars but “Currency Wars” and you too can engage in the action."
On the same day the yen was 93.47 to the Dollar. This morning it is 101.40 to the Dollar. That is an 8% shift in three months which is a significant move in that period of time. Japan, with a nod from both the Fed and the EU, has actively begun to devalue their currency and to increase inflation before they enter some viral space that they cannot leave without more severe measures. What is happening, however, will cause further dislocations in my opinion and may well cause Europe to react and send the Euro towards 120 to the Dollar. As a matter of fact I think the major central banks are all engaged in a world-wide devaluation of currencies where they all will be worth less and then the relative valuations will all be lower as a result. The small blue and green pieces of paper will be smaller still and goods and services will be more costly.
As the "Currency Wars" go from skirmish to battle we are also faced with a great paradox in the gold markets. The price of paper gold is down, this is gold in any other form than physical delivery, while the demand for physical delivery skyrockets. There is a portent here I am afraid and an unsettling one.
Recently JP Morgan's inventory of gold at the COMEX fell from 2.4 million ounces to 160,000 ounces and we should all note what is happening. Also, recently, ABN Amro said it could not settle its gold contracts with gold and that settlements would have to be made in cash. It has also been reported that the LBMA is having trouble settling their contracts in actual bullion so that it is becoming apparent that something is amiss in the gold markets. China reported in March that their imports hit an all-time high of 223.5 tons. I would guess that April will overshadow March. While there is no apparent economic crisis the demand for physical gold and the vibrations in this market gives me pause that some game might be afoot.
If you consider what is happening in the currency markets and then factor in the demand for the physical delivery of gold there should be some additional note of caution in your evaluation of the markets. Smart money always moves first while dumb money lingers and is baited by those that take advantage of it. A sniff of Fear has returned to the marketplace and Greed may be in the process of giving way. Watch your backs!
Charts:Bloomberg
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I'm picking 'a'...!!
Sure, you can say it, I know you can.
Man Ip You Lay Shun ...
Go G7 go!
So the dollar is the strongest link in a defective chain. I wonder where that will lead?
@BoNesxx:
Gee...What a great idea - Lets go buy some precious today @ 1430 + a 90.00 premium (because of lack of supply). while Ben continues unabated to convince the world that physical is worth...oh..lets say; $875. an OZ...By July.
It don't have to make sense - But it gets done anyway! So, mail me certified funds and I'll sell you all the physical you can stack at these on sale prices. Tourist!!
Oh, ok now I get it, Gold is a commodity and paper dollars are money? Sounds like Bernanke talking except that it is in direct contradition to history!
See, man, it's just like the buildup in TLOTR: First, just a quick hit in Bree. Then, minor skirmish at Weathertop. The opponents then appear in broad daylight, but in small numbers, in the pursuit into Rivendell. After a clearly larger encounter, but in a known enemy lair in Moria, a fairly major skirmish, spread out over terrain and with seperated knots of fighting, breaks out as the Fellowship is seperated. Then it's in the open: Rohirrim intercept Uruk-Hai columns, mounted units conflict on the run, leading to open war.
This is just like that. Only it's our ability to buy bread and gas and our children's futures that's being thrown into the fire, and the global elites are Sauron's minions. Oh, and us regular folk have no allied races or magical forces to help us. So that sucks.
Otherwise, same-same.
Smart money always moves first while dumb money lingers and is baited by those that take advantage of it
******************
Smart money remains net long gold- even through the crash... looks to me like it was the weak goldbugs that puked it up-
http://tinyurl.com/d6bzp7f
I think you are corrrect. I'm long and strong. I'll see you in a decade.
Larry Summers said, 'the only way out of this recession is through a weaker dollar to stimulate exports."
Stronger dollar may look good on paper but will be tough on exporters.
I believe that the strong dollar/weak dollar argument with regards to exports is a red herring. A stong dollar lowers the cost of all inputs - with the exception of labour. The end result is a wash.
Its Friday right before a g7 weekend finance meeting. London called the meeting. Something is up.
Can someone explain how Gold is down when naked shorting is illegal? They cliam that much of the Comex Gold is gone so how does this sytem now work?
Um, WTI is a domestic product. What's OPEC Oil doing relative to the dollar? Rising?
Can someone explain to me why UST rates are rising with a strenthening dollar?
One could spend the time trying to rationalise the totally irrational, or think on this period, this moment as the opportune summer of our lives to protect ourselves from the lean winter around the corner. Yes it's weird that we can still get stuff for a reasonable price, yes it's weird that the items we might need the most have not been snapped up by the uber-rich. I am not going to look a gift horse in the mouth and question such largesse or stupidity of tptb. We all know wealth does not necessarily equate to prudence or intelligence. So when I can, I'll be stacking until a better plan comes along.
It's Friday again when Asian markets closed, good job! PMs on weekend special!
http://www.safehaven.com/article/29772/the-us-indices-the-reality
Since the financial crash of 2008 the western economies (US, Euro zone and Japan) have been using quantitative easing (QE). QE is not new. It was also used extensively in the 1930's. Japan has been using forms of QE for over a decade. But when one looks at the velocity of money and the money multiplier the money is not getting into the broader economy. But it is getting into the stock markets largely through the large money center banks that are the major beneficiaries of QE. Rising stock market valuations help the money center banks balance sheets. It is believed for the US at least that QE is primarily to help prop up the banking systems in the US, the Euro zone and Japan. The banking system remains saddled with huge amounts of debt that is either toxic or uncollectable.
Horrific gold and silver charts ... both looking like taking out their paper lows of last month ... all I can trade is the paper and I won't short it, so aside I stand ... these are really times to test one's trading mettle if not trading sanity ...
Bernanke is just trying to get his picture on the US One Hundred Trillion Dollar Bill.