Gold Vending Machines

The currencies remained in that range I talked about yesterday, with a slight bias to sell dollars, but not much of one. Crude oil prices moved higher on the day and overnight, which doesn’t play well with a dollar rally, and therefore, has pushed the dollar down a bit… But again, we’re talking minor moves. It’s as if someone (traders) is waiting for something BIG to happen with data, the Fed, or the Treasury, before taking one direction.

Did you hear about the gold vending machine in Germany? I saw this yesterday morning, and thought it to be a hoax… Then someone in the office brought me a print out of a story in the U.K. Telegraph… So maybe it’s not a hoax… Anyway… Here’s the skinny… In Germany, they’ve come up with a vending machine that can update prices of gold every few minutes, and… Dispense 1 gram gold wafers, 10 gram gold bars, or coins… There’s about a 30% increase in the market price! WOW! Imagine that, you need some gold in your pocket just for GP, and you simply walk up to a vending machine and buy some, as simple as getting that Zero bar, or Snickers!

OK… What gives a guy this kind of idea to make a vending machine that disperses gold? It’s all about taking advantage of the times, folks… I may have told you this in the Pfennig before, I don’t recall, but I use it in my presentation for gold… Investment in gold increased 427% last year… To put it into tonnes of gold, retail investment purchases of gold reached approximately 108 tonnes of gold in 2008, up from 36 tonnes in 2007, and 28 tonnes in 2006!

The Big Boss, Frank Trotter, mentioned the other day that he was concerned that gold could be the next bubble… I assured him that I didn’t see it that way, not until my neighbors are asking if they can buy gold at $1,200 oounce! (I tried to get them to buy it at $800 ounce, but to no avail!)

When I was a kid, we used to have these bomb shelters in our schools, and we would practice going into them… It was a different time, the cold war was strong, and the fear was put in all of us toward Russia… I had a teacher, many moons ago, that told the class that it was a good thing that Russia and China didn’t see eye-to-eye… Well… I wonder what he thinks about the news that China and Russia have agreed to use each other’s currencies and eliminate the use of dollars in their trade?

It kind of feels like Russia and China are ganging up on the dollar!

The other “new kid on the block” – Brazil – is joining in with Russia and China… But that news didn’t help the Brazilian real (BRL) yesterday, as it saw one of its worst days in weeks! But that’s the real… I watch it trade some days, and my eyes grow very wide in amazement at the wild swings in this currency. It will move 2-3% in a day – in either direction – in a heartbeat! Which tells you that the “number of players” in real, is smallish when compared to the second most liquid currency in the world… The euro (EUR)! So… If you’re going to own reals, you need to be aware that it has these wild swings!

Speaking of the euro… It’s getting a boost this morning from an improved outlook for risk today, as U.S. stock futures are stronger. The “Big Dog” looks a little tired of chasing the dollar, and then being pulled back on to the porch over and over again, recently… But, as I always tell you, this is all “noise.” Investment portfolio diversification into currencies and precious metals is a long-term relationship… The dollar didn’t lose over 90% of its value overnight! The euro didn’t gain over 50% versus the dollar overnight! These things are long sweeping moves, and you have to drown out the “noise”… Otherwise, you’ll become a currency and metals “trader,” and you’ll be chasing these assets all over the board!

Pound sterling (GBP) is getting hit on the chin this morning, as retail sales fell in May, which was the first drop in three months. Retail sales fell 0.6% in May, and pretty much squashes those so-called “green shoots” that have been talked about for the U.K. economy… I think you can expect to see stuff like this for the next year… Up and down, in and out, green and brown shoots… And… Like I’ve said before, if it’s happening in the U.K. it won’t be long before we experience the same, as the U.K. just seems to be ahead of the U.S., time-wise…

The Swiss franc (CHF) is stronger this morning, as the Swiss National Bank (SNB) met, left rates unchanged, and made a statement that has given a green light to franc traders to buy. The SNB announced that they were not targeting a specific exchange rate for the currency. You may recall that the SNB had previously stated that they were not happy with franc strength, and had intervened on occasion to keep the currency from strengthening. I would be careful here, as this could be a “trap.”  Oh, you don’t think central banks set traps for traders? OK, well, maybe they don’t really set “traps,” but they do send mixed messages that cause losses!

Big Al Greenspan was famous for these “mixed messages” that were called “Greenspeak”… After reading two books on Big Al, I can tell you that I personally think that “Greenspeak” was gobble-de-gook! Confuse everyone so they think you are some sort of messiah! Right, Big Al? When… In reality, he was just “a guy,” who really screwed things up!

Today, we will see the Weekly Initial Jobless Claims, which for me has turned into watching the “continuing claims.” This part of the data tells me if unemployed people are being re-hired… I haven’t seen that happening, as continuing claims have continued to grow larger in numbers… We’ll also see the Philly Fed Index, (manufacturing).

The real meat (where’s the beef?) will come from a testimony before the Senate Banking Committee by U.S. Treasury Secretary Geithner, on the President’s plan to overhaul the U.S. financial regulatory system. I doubt these Senators will understand what Geithner is talking about, and will “rubber stamp” the plan. Which means, folks… That the government gets its foot in the door further.

I know, I know, I get quite a few emails from people that take exception to me getting upset with the government getting more involved in the markets, etc. As they say, “Yeah, Chuck, and you think the ‘markets’ have done a better job?” Well… The markets are the markets, folks… If left alone, they will act as markets should… What? You didn’t like the fact that the Mr. Market, as my friend, Bill Bonner, calls it, turned the whole credit, and deficit spending on its ear? Mr. Market was just trying to correct what was wrong. Getting the government involved is just plain, wrong! One foot in the door… Then next it’s the next thing, and the next, and pretty soon, the government is completely in the door, and hanging out on your couch!

Please… These are just my opinions… If you don’t like them, you have that right! It is still a free country for speech! Just delete it and go on with your life!

In Norway yesterday, the Norwegian Central Bank, The Norges Bank, surprised me and the markets by cutting rates 0.25% or 25 BPS. I did say the other day that the Norges Bank was the only central bank that was meeting this week that had some room to cut rates. The Norges Bank did say in their press conference after the rate announcement that rates were at the “bottom” and that they were looking toward the first quarter 2010 as the timing on the first rate hike!

Well, with traders so forward looking, this was good news for the krone (NOK), as the rate cuts were quickly put in the rear view mirror, and now everyone is looking forward to higher rates!

And under the heading of “dirty float”… The Reserve Bank of Australia (RBA) is reported to have sold the most Aussie dollars in the month of May, since February 2004! Now, go back to May and recall the move in Aussie dollars (AUD)… The currency gained almost 10% in the month. So, the Aussie dollar would have gained even more if the RBA had not sold A$1.4 billion in the month! I personally think the RBA was just trying to smooth out the trading the Aussie dollar, which given this information would have been moving up the charts with a bullet in May!

I don’t think the RBA would get involved if the move was a slow, general appreciation of the currency… So, I don’t look for future intervention to keep the Aussie dollar from gaining the ground I believe it will gain rest of this year, as inflation fears grow stronger and stronger.

The Daily Reckoning