- The Squeeze is On! Gold & Silver spike through $1300 & $20- is the next major bull move underway?
- Will the end of the Silver Fix kill the gold fix as well? Alasdair explains why THE FIX IS DEAD!!
- We discuss physical demand in US & Europe, & Alasdair breaks down how 3/4 of all above ground gold is now in Asia!
- Bloomberg admits paper derivatives in silver is a $5 trillion annual market, with gold an $18 trillion annual market- 20 x as much paper silver as gold capping prices?
- With gold & silver bursting out of consolidation patterns this week (& silver breaking out of a 3+ year downtrend) Alasdair informs SD readers that once an uptrend is established (perhaps within a matter of a few weeks): “The prices of gold and silver are going to run very, very quickly“, and that “If we look back on 2014 and saw that was the year gold & silver broke into new high ground, it wouldn’t surprise me-I’m not predicting it, but I would not be terribly surprised because the underlying dynamics are there!“
The SD Weekly Metals & Markets with Guest Host Alasdair Macleod is below:
As we entered June, most precious metals market observers were downright despondent. Calls for silver and gold to crash through $18 and $1200 respectively were common. But as I noted on our May 30th Metals & Markets show, it was highly probable we had hit bottom that week, and my thesis for a very strong summer remained in place. I called the turn to the day.
Now, we must be leery of next week. Just as excitement is ramping up, I think we’ll see a brief pull-back. It will be minor, with Tuesday’s London trading session and the Tuesday morning COMEX open representing the highest probability window for the bulk of the short-term consolidation and cartel amplification thereof. Mining shares cooled off this Friday and even though precious metals turned in a respectable after-hours session, the burst of short covering and organic buying seen earlier in the week leveled off. History shows the cartel conducts its “managed retreat” capping once momentum appears to have reached a short-term peak.
Overall, precious metals remain in strong rally mode, with a particularly explosive set-up for silver given an untenable short position. We have to get through silver options expiration next week. But once options expiration passes, the odds are high for gold and silver prices to once again burst higher – with silver leading the way. By the end of July, I believe silver will have in the very least tested $25/ounce.
Summary of big picture trends
Before my head swells too much, it’s an appropriate time to point out a forecast I got dead wrong. Generally speaking, my forecasting track record stands up well against anyone. But last fall I expected the Chinese government to start to let the yuan rise, and for banking regulators to encourage lending by relaxing reserve requirements. Instead, we saw China’s shadow banking system come under great scrutiny as insolvent trust products threatened a deflationary domino crash. China bailed-out a handful of insolvent trusts, stemming the risk of an immediate crash. But confidence was deeply shaken, and speculators betting on a stronger yuan were spanked.
It was clear China was going to bailout broken trusts. Similarly, any dislocation within China’s shadow banking system created by excessive hypothecation and rehypothecation of base metals warehouse receipts will also be papered over. Even though fear of a crisis growing out of the latter continues to make headlines, the currency market is hinting that’s no longer a pressing concern. The dollar/yuan currency cross seems to be reflecting a shift towards rising confidence and the perceived grip Chinese authorities have over the nation’s credit bubble.
No one has yet to connect these trends — these dots. This shift in the dollar/yuan cross should also be viewed in the context of a return to the global inflation trade. Bond yields hit bottom just before we entered June. Crude oil is breaking to the upside and even government reported inflation stats for “core” inflation (stripping “volatile” food and energy) is percolating higher.
The threat of a deflationary crash has been the primary potential fundamental force some market participants have been able to honestly reference when making a bearish case for precious metals. Dear reader, market expectations for the deflation crash scenario in China and beyond is fading at the margin, and this is going to contribute to higher precious metals prices through the so-called summer doldrums period dead ahead. This year, there will be no summer doldrums in precious metals.
Dollar reserve status an ongoing story
This week, China’s Prime Minister Li Keqiang paid a visit to the U.K. with a fistfull of business contracts and finalized plans to launch direct trade between the yuan and the British pound on China’s Foreign Exchange Trade System (CFETS). This follows other recent news including Gazprom Neft CEO Alexander Dyukov’s statement earlier this month: “We have agreed with our buyers on possible conversion of (our) contracts into euro. Almost all, to say precisely, 95%, of purchasers confirmed that they were prepared to shift to settlements in euro.”
It’s clear the mainstream media will continue to downplay the risk of further erosion of the dollar’s reserve status — until the story can’t be ignored. Per usual, it’s wise to think beyond the mainstream. The dollar’s reserve status is under assault, and the pace of salvos against “King Dollar” is escalating.
Since I referenced the dollar/yuan cross, it’s worth mentioning that the Russian rubble is catching a bid too. Check out this interesting chart:
Obviously, a big part of the bounce back from the March Ukraine crisis lows comes on the back of perception that Ukraine crisis escalation risk has diminished. But here’s an important question to ponder: just how much of this modest rubble bounce reflects the prospects for a stronger Russian economy on the international stage as energy trading in the rubble is set to increase? I believe the degree to which traders are pricing in this shift is modest — for now. But we’re looking at a trend shift all the same.
Iraq and the ISIS: WTF is going on?
I hate to say it, but it looks like the US is once again arming terrorists to facilitate objectives that serve only the interests of an oligarchy addicted to the time tested Anglo-American “divide and conquer” formula. For example, we are told that an ISIS force of roughly 1,000 fighters overtook Mosul, Iraq, with minimal resistance. Mosul was guarded by over 30,000 extremely well armed Iraqi forces backed by US financial and military support (including tanks, attack helicopters and F-16s!). How improbable is that? It turns out the leader of the local Iraqi military just so happened to skip town before the assault. Abdication of Iraqi command and control played a major role in the cake-walk attack on Mosul. Why?
Professor Michel Chossudovsky makes the case the fall of Mosul was a staged event. He maintains that the US is backing both ISIS and the Iraqi government (well documented) in order to foment chaos and ultimately, the division of Iraq into three separate nation states. I don’t agree with everything Professor Chossudovsky theorizes — particularly his traditional leftist world view of our global economic system’s failings and, in turn, his leftist-informed set of remedies. But he’s putting together pieces of this ISIS puzzle rather well and his political analysis is pretty much spot-on. For this week’s recommended podcast, check out his interview with the “Guns & Butter” radio show. Click here. Most certainly, you’ll never hear analysis like this in the mainstream media. Professor Chossudovsky delivers much food for thought.
Have a great weekend — Eric Dubin
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