Silver Begins To Show Signs of a Shortage

And now… today’s Penning for your thoughts…

Good day, and a tub thumpin’ Thursday to you!

Front and center this morning, the price of oil has risen to $48.  So, that means the usual suspects like Brazil, Russia, Canada, and Norway are all seeing their currencies rally again today.

I say why not? These “petrol currencies” got whacked and whacked again as the price of oil plunged last year, so any kind of gains in Black Gold, Texas Tea, SHOULD garner currency gains for these beaten and beleaguered currencies.

And when I came in this morning, the euro was trading above 1.13.  It has slipped back below 1.13, right now, as I’m sure there are traders arriving and seeing an opportunity to take a profit, and not missing that opportunity. Darn traders, quite the fickle lot they are. One group sees to it that the currency moves higher, and the other group takes profits.

Hey! You don’t think that. Nah, that couldn’t happen in today’s world of transparent markets, right?  HeHeHe.

The Aussie dollar (A$) and New Zealand dollar/kiwi, are taking a break from their week-long rally.  The IMF had a lot to do with causing this break in the rally, as the IMF issued a report yesterday, that lowered their outlook for growth. And, if I’ve taught you one thing through the years, it would be that the A$ is the proxy for Global Growth.

So, with the IMF putting down in print what most people have been saying, and that is, that Global Growth has problems, it stands to reason that the A$ back off the rally tracks, and take kiwi with it.

The Bank of England (BOE) is meeting as I type away here with my fat fingers. And once again pound sterling traders are wishing, and hoping and thinking and praying that BOE Gov. Mark Carney pulls a rabbit out of his bag o’ promises, and hikes rates. I can’t believe these guys and gals hang on to their thoughts about a rate hike like they do. It doesn’t do them any good to go and get all lathered up for a BOE meeting, and then be disappointed again and again.

You, know, now that I just said that, it appears to me that this is the same scenario we have going on here in the U.S.   Why do you build me up, buttercup, baby,  just to let me down?   And mess me around?  That’s got to be the theme song for these traders that live for any sign that their respective Central Bank will throw them a bone or hint about when they are going to hike rates.

And of course, here’s Chuck’s memo to these traders.  FORGETABOUTIT! You are wasting your time and money, and probably other people’s money too!  Speaking of Other People’s Money, remember that movie? Larry The Liquidator? One of my old colleagues at Mark Twain Bank , Neil George, loved that movie, and talked about it all the time!

I’m so tired of talking about this stuff that I’m about to talk about. I feel like Big Lee Smith when he would come in from the bullpen, dragging, and looking like he was “so tired”.  But here we go anyway…

I keep hearing the Fed members out doing their talks saying things like the decision to not raise rates last month was a “close call”, like that means something to us, or that we should be scared, very scared that they might come around to hiking rates.  I hate to have to say this, but these Fed members are losing credibility the more they talk about rate hikes, and then fail to deliver them. The Boy Who Cried Wolf?  Does that apply here?  Sure does!

And we won’t get any relief from this “talk” because the FOMC Meeting Minutes from the last meeting will print this afternoon, and I’m sure there will be lots of talk about hiking rates, but remember, in the end, they did NOT hike rates, so why spend so much time and effort talking about how “we talked about hiking rates”?

Shoot Rudy, I learned many years ago, that me talking about being a multi-millionaire and living high on the hog, wasn’t going to make that come true! It’s time someone else learned that lesson I do believe.

So, yesterday, I was talking about how wrong I was, (along with many others I must say!) that thought that when the Fed implemented QE that it would produce higher inflation. Several readers brought me back away from the ledge, and reminded me of what I’ve always said about inflation, and that is that inflation is really measured by each individual.

Because inflation in tuitions, certainly isn’t going to bother people that don’t have kids in college. And inflation in health care isn’t going to bother people that don’t have health problems, and so on. And then there’s also the way that the food companies have made the boxes, jars, and other containers that carry food, smaller but kept prices the same, is stealth inflation.

So. I wasn’t completely wrong, but I do admit to being somewhat wrong, because I thought by now, the Fed would be in a very difficult place with a slow economy, but soaring inflation.

Who knows? We could very well be there right now! But with all the shenanigans that goes on in data accumulation, and the rhetoric from the country’s leaders, you would think that everything was just peachy, here.  Hmmm… And on the other side of the coin, maybe things are just peachy here.  Let me think about that for a minute. OK, I’m back now, and I say hogwash to that thought!

Well, the Chinese finally ended their week long National holiday.  Recall me saying last week that I was interested in seeing what the Chinese did with the renminbi after they came back from their holiday, given all the currency strength in the past week.

I said that I thought that the renminbi had some catching up to do.  And looky there! That’s exactly what took place last night. The renminbi appreciated by a larger than usual amount.

You know for every letter out there that talks about bad stuff for this, that and the other thing, there are letters that write about sunshine and lollipops, balloons and seashells. So, always be careful making decisions based on one or the other. Make sure you look at things from both sides, so that your decision is fair and balanced.  I have no idea why I went down this road, I just looked up and saw that I ended up here! UGH!

OK! Well, did you hear that Donald Trump took payment for office space he owns in gold?  Now, I would like to think that there was a fundamental reason for doing this, but you have to remember that he is a candidate for President, and could be using this to point out how badly things are, that he has to accept gold instead of dollars.

He did say, “The dollar is going down, and it’s not a pretty picture”.  I’m pretty darn sure that this was an “opportunity” for his candidacy, but he did accept gold instead of dollars, and that’s pretty interesting to me!

Speaking of gold… the shiny metal is down a bit to flat today. It’s been a whirlwind week for gold, and I would have to think that taking a breather would be normal at this point.

I received an email from our metals guru, Tim Smith, yesterday. Tim was letting everyone in World Markets know that he’s finding that silver is still scarce, with most products not shipping until 12/1.  With this kind of scarcity, the premiums for silver continue to bounce around (read: go higher!). We used to change our premiums in the system every now and then. But here lately, we’re having to change them more often. To me this is a sign of high demand for physical silver.  Tim assures me that he can get the silver coins and bars (including limited amounts of silver Eagles), so that’s good!

But how many of you recall me telling you late last year, that there would be a silver supply problem this year? I don’t make this stuff up folks. It’s all there in writing! It just made abundant sense to me, given the orders for Solar Panels in 2015, and the physical demand from investors. And now, look what’s happening. But yet, the price of silver, albeit a bit stronger after the last week but, is still trading with a governor. Doesn’t make sense to me. And I would like a refund for my economics classes in college, for they taught me that supply and demand brought us to price discovery.

The U.S. Data Cupboard only had the August Consumer Credit (read debt) data yesterday, and for those of you keeping score at home, The August number was $16.018 billion, down from the July total of $18.944 billion.  Today’s Data Cupboard has the aforementioned FOMC Meeting Minutes, and the usual tub thumpin’ Thursday fare of Weekly Initial Jobless Claims.

The FOMC Minutes won’t print until this afternoon, so we get to see all kinds of gyrations on thoughts that have no basis, moving the currencies and metals.

Before I head to the Big Finish today I wanted to mention that I heard from a little birdie that there’s a symposium on savings going on, and guess who’s going to give the welcome address for this symposium? Fed Member, and President of the St. Louis Fed, James Bullard.

Now, I have no real interest in attending this symposium, except to hear what someone who has been a Fed member for years now,  and the Fed is responsible for ZIRP, (zero interest rate policy) and causing “savers” much suffering, what he has to say.  Of course it will all be everyone else’s fault that savers have suffered and it will be him riding in on a white steed, to tell everyone that their suffering is over, and that interest rates will rise very soon. All Hail James Bullard, I hear the crowd chanting.  Savers will be saved!

Did you hear all the hub-bub about the German Central Bank, the Bundesbank or BUBA as I used to call them, publishing a gold bar list of the gold bars held in Frankfurt, London, Paris and New York? According to gold researcher, extraordinaire, Koos Jansen:

The list contains the bar numbers, melt or inventory numbers, the gross and fine weight as well as the fineness of the gold. German official gold reserves account for 3,384 tonnes and is the second largest after the US.

Now remember a couple of years ago, when the BUBA requested a repatriation of their gold held in New York? They reasoned that the arrangement that kept it there was old and no longer necessary, given that they held their gold in the U.S. to keep it from the Nazi’s.

And remember what the U.S. told Germany when they requested their gold?  That the U.S. would be happy to return it in seven years.  That’s right! Seven years!  Then the U.S. did send back to Germany a small amount of gold last year, and Germany said they no longer wanted all of their gold back.

So, I have to wonder just why, now after saying they no longer wanted their gold back, did they come out with this list of gold bars?  Makes you wonder too, eh? Well, I think there will be a new request coming from Germany soon.

Getting back to Koos Jansen:

Although the German bar list is anything but complete (it misses the refiner brands, refinery bar number and year of manufacturing) it seems the Germans are increasing the pressure on the FRBNY by releasing the list of bars they have stored at the four locations (Frankfurt, Paris, London, New York). Leaving the FRBNY no other option than returning the exact bars that belong to Germany.

Chuck again. Hmmm… I can see, given all the leasing of gold by the bullion banks, that the Bundesbank lists a gold bar with serial number…  And then someone in China sees the list and says, “Hey! I own serial number….. ”   Now you see why the list didn’t contain everything about the gold bars. But. when it comes time for Germany to request their gold again, the U.S. will have no other choice but to deliver the gold bars listed. Uh-Oh!

That’s it for today. I hope you have a tub thumpin’ Thursday!

Regards,

Chuck Butler
for The Daily Reckoning

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