Chart Update
Big Moves in Silver
Last week, the prices of the metals fell further, with gold -$18 and silver -$0.73. On May 28, the price of silver hit its nadir, of $14.30. From the last three days of May through Sep 4, the price rose to $19.65. This was a gain of $5.35, or +37%. Congratulations to everyone who bought silver on May 28 and who sold it on September 4.
The recent move in silver [PT]
Paying a Premium for a Lack of Default Risk
The price action got pretty intense last week! The prices of the metals were up Monday, Tuesday, and Wednesday. But Thursday and Friday, there was a sharp reversal and the silver price ended the week below its close of the previous week.
The net speculative position in gold futures has become very large recently – the market was more than ripe for a shake-out. [PT]
A Case of Highway Robbery
What if the savings in your bank account lost 55 percent of its value over the last 12 months? Would you be somewhat peeved? Would you transfer some of your savings to another currency?
USD-ARS, weekly. For several years the Argentine Peso has followed a certain pattern: it declines mildly, but steadily, with little volatility for long time periods, and then spikes in crash waves whenever a crisis situation comes to a head. In early 2011, it took roughly four pesos to buy one US dollar – which was already an enormous loss of value relative to the 1:1 exchange rate that prevailed under Argentina’s currency board prior to the government default and banking system collapse of 2001. When Mr. Macri was elected president, it was widely held that his market reforms would finally repair Argentina’s economy, which had been ruined by almost two decades of economic mismanagement and inflation under the previous Peronist administration. Alas, Macri made a mistake no Argentine government that gains the trust of foreign investors seems able to resist: he embarked on a big borrowing spree, much of it denominated in USD, until it became clear that the government would no longer be able to defend the peso or service its debt. Then he exacerbated his mistake by borrowing even more money from the IMF – which should be filed under “a movie we have seen before”. And just as had happened in that earlier escapade, his government is now likely to default on its IMF loan as well. Not surprisingly, the peso has collapsed – and in well-worn fashion Macri is now trying to save the village by destroying it and has introduced capital controls. [PT]
Fiat Money Woes
Monday was Labor Day holiday in the US. The facts are that the euro lost another 1.4%, the pound another 1.1%, and the yuan another 0.9% last week.
Assorted foreign fiat confetti against the US dollar – we have added the Argentine peso as well, as it demonstrates what can happen when things really get out of hand. [PT]
Intense Price Action
The price action was pretty intense last week, most of it on Friday. The statement by President Trump, not to mention Fed Chairman Powell’s hint of further rate cuts, impelled people to buy gold and silver, whose prices went up $14 and $0.29.
10-year treasury note yield – plumbing new lows for the move… [PT]
An Era of Low Time Preference
Last week the price of gold moved up another $16, and the price of silver was up $0.14.
10-year treasury note yield since 1999 – it is almost back at the multi-decade low of 2016. The only other time in history when US treasury yields were this low was in 1944-1945, when the Fed was actively suppressing yields in order to provide cheap financing for the war effort. One year later (from mid 1946 to mid 1947) the CPI jumped to more than 17% per year. By 1951 it had reached 21%. At that point the Fed and the US Treasury finally agreed that the Fed should stop pegging long term treasury yields – which promptly proceeded to rise relentlessly for the next three decades. [PT]
Not Adding Up
One of the more disagreeable discrepancies of American life in the 21st century is the world according to Washington’s economic bureaus and the world as it actually is. In short, things don’t add up. What’s more, the propaganda is so far off the mark, it is downright insulting.
Coming down from the mountain with the latest data tablet… [PT]
Bad Hair Days Are Back
We recently discussed the many divergences between major US indexes, which led us to expect that a downturn in the stock market was close (see The Calm Before the Storm for details). Here is an update of the comparison chart we showed at the time:
The divergences between various indexes seem to be resolving as expected.
A Myriad of Reasons to Buy Gold – But Small Holders are Selling
Big moves occurred in the prices of the metals last week, with that of gold up $57 and silver $0.77. We have now reached a price of gold (if not silver) not seen since 2013, when it was on the way down. What is causing this sudden spike in price and renewed interest in gold?
A well-known depiction of investor emotions over a complete market cycle. Interestingly, it appears as though many retail gold holders who held on to their gold through the 2011-2015 bear market are now selling, just as the market has reached what is normally considered to be the “hope” stage. Ironically, this is actually good news from a contrarian perspective. [PT]
Anti-Vigilantes
We dimly remember when Japanese government debt traded at a negative yield to maturity for the very first time. This happened at some point in the late 1990s or early 2000ds in secondary market trading (it was probably a shorter maturity than the 10-year JGB) and was considered quite a curiosity. If memory serves, it happened on just one brief occasion and it was widely held at the time that the absurd situation of a bond buyer accepting a certain loss if the bonds were held to maturity was an outlier, never to be seen again. And this is what the world of bonds looks like today:
Sovereign debt with negative yields to maturity rises to a new record high of $15 trillion
A Record Amount of Bonds with Negative Yields to Maturity
Last week the price of gold went up $22, while the price of silver dropped ¢17. The big news last week was that the yield on all German government bond maturities is now negative. They are also all negative in Switzerland. And in Denmark, all maturities out to 20 years are negative. Interest rates are dropping rapidly in the US as well.
More than $14 trillion in bonds now trade at negative yields to maturity – with more than 25% of all “investment grade” bonds afflicted with this policy-induced malady. This is essentially ensuring accelerated capital consumption. As you can probably guess, prosperity is not going to increase as a result. [PT]
Spoofers vs. the Underlying Trend
The price of gold fell seven bucks, but the price of silver was up $0.16. In other words, the gold-silver ratio did a little more reverting to that long-forgotten mean.
Launceston Castle in Cornwall, an example of a motte and baley fortification. The castle was built in 1067-1071 AD, either by the Count of Mortain (the half-brother of William the Conqueror) or Brian of Brittany. [PT]
Photo credit: P. Vincent
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Realtime Charts
Gold in USD:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
Gold in EUR:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_euoz_2.gif)
Silver in USD:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
Platinum in USD:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/platinum/t24_pt_en_usoz_2.gif)
USD - Index:
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
