Shhh, Gold is Back Above $1,250

And now… today’s Pfennig for your thoughts…

Good day, and a Tom terrific Tuesday to you!

Front and center this morning, the price of oil has bumped higher again overnight and now trades with a $40 handle. The petrol currencies from: Russia, Norway, Brazil, Canada, Mexico and even the U.K. are getting bought like funnel cakes at a State Fair this morning, and the dollar, for the most part is on the run. The euro has climbed above 1.14, but it all has to do with dollar weakness, as I explained yesterday that the euro was waiting for the next leg down in the dollar, and we’re seeing it this morning.

All indications to me are that the dollar’s 5-year strong trend, is ending. Not without a fight, but that’s how these things usually end, with the strong asset, fighting to remain relevant, and having good days sprinkled in that become fewer and further in when they appear, until, Puff the Magic Dragon ceases to roar. Of course equities are moving higher too, and that sends chills up my spine, but I’m reminded that a star burns the brightest right before it burns out.

Well, Japanese yen, being Japanese yen, one has to figure that the Japanese officials, PM Abe (and his Abenomics) and Bank of Japan (BOJ) Gov. Kuroda (Abe’s henchman for implementing policy), have to be tossing and turning, they’re tossing and turning all night! In fact, yen is a bit weaker this morning, because of some war of words by Finance Minister Aso.

When PM Abe first announced his three arrows later to be called “Abenomics”, one of the things he mentioned was that “the currency would weaken”.  When asked about that, he made it clear that the he wanted to see yen lose 1/3 of its value to bring inflation into the Japanese economy. Well, let’s see, the three arrows were first introduced in 2012. My has time flown by, eh?  And to think that by now, Japanese yen would probably be nearing 200. Instead, yen has been in rally mode.

What’s a Central Banker to do? Well, there are those among us who have thought that the BOJ would be intervening soon to get the markets to back off their pushing the currency envelope with yen so far. But I read the other day that PM Abe, isn’t so keen on intervention. Let’s listen in to PM Abe talk about this.

When asked about the recent strength in the yen and weakness in the Chinese renminbi and instability in other currencies, PM Abe had this to say:

Countries should avoid competitively devaluing their currencies. Whatever the circumstances, we must definitely avoid competitive devaluation, and I think we should refrain from arbitrary intervention in currency Markets.

So – what’s it gonna be Abe? You promised us four years ago that yen would weaken and stay weak, and now you’re saying that Japan shouldn’t competitively devalue or intervene to get yen weak.

The traders are going to test the BOJ’s mettle. Will the BOJ stand up to the Traders? Oh, you’ve got me tossing and turning, tossing and turning all night!

And I’ll follow all that narrative up with a quick note from the great analyst and writer, Grant Williams, who responded to this statement from an analyst commenting on what the BOJ must do. “For any BOJ action to have market traction beyond a short-term response, they need to beat the markets to a pulp and make it concede.”

And Grant replied. “When will these fools learn? You can’t beat markets to a pulp and make them concede, but that won’t stop them trying.” Great response Grant, and my sentiments exactly, as I’ve always said, the markets have much deeper pockets than any Central Bank.

The dollars of Australia (A$) and New Zealand/kiwi, are really heating up this morning, with the price of oil higher, the Chinese in favor of appreciating the renminbi, and equities showing signs of a strong open in the U.S. the “risk” sentiment is back! And don’t look now but the price of gold finally climbed back over $1,250, quietly I might add.

A nice gain yesterday took gold to $1,258, but the shiny metal is struggling to get back on the rally tracks this morning. I get worried about a gold rally when I see it stall out, even if it is ever-so-briefly, for these “stalls” give the price manipulators the cover of darkness to pull their shenanigans.

In Brazil yesterday, the vote in congress was to impeach president Dilma Rousseff. This process now goes to the lower house, where Rousseff’s critics aren’t as strong in numbers, so there’s still a chance she might survive the impeachment process. It’s a slight chance, but a chance that she’s happy to take! The real has really gotten caught up in this political process, and now it has the price of oil in its corner too. Seems like a trap to me.

The Fed will meet this month on April 27th. Hey! That day will get here before you know it! I don’t believe the Fed will hike rates that day, and that was my position, before Fed Chair, Janet Yellen was summoned to the White House for a meeting with the President.

WOW! When was the last time that has happened? Well, I guess it all depends if you consider the lunches that Bush used to have with Big Al Greenspan as the same thing as being summoned to the White House. I don’t, so that means that the last time this has happened was in 1951, when President Harry Truman summoned the entire FOMC board to the White House. So that’s more years than I’ve been alive, and I’ve seen fire and I’ve seen rain, I’ve sunny days that never end, and so on. So, it’s been a long time, and inquiring minds would have loved to be a fly on the White House wall during that meeting. Let’s do some role playing and have some fun with this.

President of the U.S. (POTUS) “Welcome Janet, don’t mind Joe Biden, he always hugs our guests. I’m going to play Richard Nixon today, and you’re going to play Arthur Burns (Fed Chairman when Nixon was President), I assume you are OK with that? Good.. .let’s get started.  In 1971 Nixon sent Burns a note telling him that he needed to loosen up the money supply and cut rates ahead of the election. do you see where I’m going with this?

Janet Yellen aka Arthur Burns. “You hit me where that hurts, Mr. Nixon! I am a lifelong Democrat, but I can’t look as though I’m political, and for me to cave in like Burns did in 1972, I doubt I will have much credibility as the markets will see right through that, you have put me in a tenuous position, Mr. President.”

Ok, enough of that, I could play that game all day long, even in my sleep that I hope to be in right after I send this out the door today!   But, that’s the $64 question isn’t it? Will Yellen cave in to the President like Burns did in 1972?   Did I mention that she’s a lifelong Democrat? Oh, I did, sorry to repeat myself like that.

I got a chuckle from this opening in Bill Bonner’s Daily Diary yesterday. “”What if you were appointed to head the Fed? In your first week on the job, what would you do?”

The question was not exactly serious. Neither was the answer.

“We’d call in sick.”

The U.S. Data Cupboard isn’t empty today, but it’s certainly not chock-full-o-data that moves markets either! Import Prices, and the Monthly Budget Statement are on tap for today. Keep an eye on that Monthly Budget Statement, as it could really take a leap wider today.  Tomorrow, finally I might add, we’ll see something that makes the A-Team of data reports! March Retail Sales will print, and as I told you last week, the BHI (Butler Household Index) indicates this to be a disappointing print again this morning, not negative like in February, but barely with its head above water.

So, make certain you come back tomorrow for a preview and Thursday for a recap of the data.

Before we head to the Big Finish, I’m going to climb back on my soap box, (I can see the reviewers shivering right now, HA!). Well, I highlighted the Panama Papers story last week, and then even told you about how the Iceland President resigned because of what was revealed. He didn’t do anything illegal, but he also didn’t report his wealth.

Now, the more I read about these “papers” the more I think to myself, that this could all be something that was worth it, IF the whistleblower that released the documents to a German newspaper, hadn’t released them to an institution in the West. 

In other words, I think there’s far too much in those 11 million plus papers, but it won’t get revealed because it would expose institutions and high ranking people in the West, including the U.S. Notice how, so far, they’ve picked on Iceland and some other small countries? I don’t know this for a fact, it’s just my opinion, of which it could be wrong, but things are just lining up this way with every Panama Papers report I read.

I took this from Ed Steer’s letter this morning. It’s a snippet of a video that I can’t deal with, so I’ll just give you the text of what I wanted to highlight anyway. Remember Keith Neumeyer? He’s the CEO of a silver mining company that was very outspoken last year regarding price manipulation of silver. So, let’s see what he has to say now about silver:

Keith Neumeyer, the outspoken CEO of First Majestic Silver and Chairman of First Mining Finance helps us dissect the current state of the global silver market. Keith notes that the current silver to gold ratio of 80 to 1 is absolutely unsustainable in a world where physical silver is being mined globally at a rate of 10 ounces of silver for every ONE ounce of gold that’s mined..

‘How can you possibly trade at 80 to 1 and be mining at 10 to 1? That relationship cannot last,’ Neumeyer says. ‘I think we’ll see triple digit silver for sure over the next couple of years.’

Chuck again. Well, yesterday, I received my statement of metals holdings at one of the locations I hold them, and all I have to say is I sure hope Keith Neumeyer will be proven to be correct! That’s a Big Old 10-4, good buddy!

That’s it for today. And with that thought, I send you on your way to having a Tom terrific Tuesday, and remind you to be good to yourself!


Chuck Butler
for The Daily Pfennig

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