Author: Gold Macro Page 1 of 18

Policy Malarkey

The “inflation standoff” continues. 

On one side, .gov, Central Banks and Central Bank cheerleaders, aka mainstream Financial media, selling, “if it’s happening it won’t be for long”! On the other side, consumers all over the world wondering how high, and for how long prices will continue rising. 

As a consequence, a little over a week ago, markets had a couple of down bad days after The US Federal Reserve changed its language from “not even thinking about thinking about thinking about tapering or raising rates” to “thinking about thinking about raising rates” IN 2023!!

The (stock) market reaction to the threat of one less thinking about thinking of raising rates due to inflationary pressures was so bad that all hands were called to deck.

So, last week, we had the A-Team, The Plunge Protection Team and 16 Team Fed speakers from all walks of life, walk up and down the Freeway of “everything is actually fine, nothing to see here”.

What is most alarming about the US Biden administration calling in all of its most senior economic “advisors” at the same time the Fed rolls out all available mouthpieces is that this utter panic was caused by only two down days for stocks.  Is the ‘bubble” so long in the tooth that two down days (modestly down) is considered a pop?

By the end of last week (see timeline below), the week ending the 25th of June, markets were back at ease, there will be no change to emergency stimulus and 0 rate hikes, for the foreseeable future! In the chart below, the green is equities, the flat line is Gold! 

Success looks like this:

Source: Zerohedge

To further the theme of Central Bank policy reach, it’s nothing for the Bank of Japan to step up the bid for equity ETF’s. The fact that they stepped up to halt the slide two days before the US Fed intervention is a sure tell we’ll be looking for again. For now, we should be relieved that the BOJ purchase of ETF equities to “save” the market was only the first since April.

Regular readers of these pages need no reminder that the Central Banks, in our opinion, will do nothing about inflation because they can do nothing. 

The events of the last 2 weeks have proven this. Now might be a good time to go back and reassess the sizing of one’s inflationary positioning in asset portfolios.

One might also want to re assess one’s “ESG blowback” portfolio, if you have one. Talk about two birds with one stone for Energy investors right now!!

But hey, this could all be transitionary, right? As far as oil is concerned OPEC could open the spigots wider, a deal could be done with Iran, don’t get too excited.

For the rest of this note, time to enjoy some pictures. We’ve said enough of this malarkey. 

One more thing though, news out of China that they may be tapping into their enormous stockpiles of key commodities amidst price concerns may turn out to be the only transitionary aspect of this inflation bout.

Global markets are now in a position where the only thing that will alter the direction to inflation/stagflation will be the actual bursting of this bubble, the one thing we know Central Banks are hell bent on preventing.

Nothing like a safety net to draw in a bit of retail margin debt near a “peak”.

Couple of gems below from Jesse Felder.

We can only hope.

What bubble?

Anyway, let’s hope there is no bubble pop, and life just sustainably ticks on??

Speaking of “sustainability”, how does this look for a “budget” position?

The explanation of this chart below can be a little complex but it could be telling Central Banks, we’ve got enough money!! #Chockabloc!!

This one we included this as we just liked it.

Didn’t really like this next one but it does tell a story or two.

And this:

Yes, we know we’ve severely neglected Precious Metals in this note, more to come.

Peace. 

BUY IT NOW

For Australian investors, the month of May is “budget” month and, again, Australia’s “conservative” administration, delivered enough debt and deficit to keep even the most hardened lefty blushing. 

It’s a real sign of the times, get on board with debt spending or get left behind other “respected” central bank supported administrations around the globe.

The effects are starting to pop up everywhere. 

Like we’ve warned many times on this website, populations may wake too late to potential consequences of these policies. 

Some laws of economic nature still apply and inflation has been constantly stated as a preferred consequence by global central banks. Other choices are politically unpalatable. The problem is, Central Banks, and their fellow believers, still believe they can reign inflation in once it gets going.

Even more unrealistic, even humorous, is main stream financial media and central bank whisperers attempts to label the rising costs of everything as……., wait for it, …….. “transitionary”, or temporary. 

It’s our view that nothing could be further from the truth.

Central Banks will do nothing to combat inflation because they can do nothing.

From time to time you may hear some noise about winding back spending and stimulus, tapering bond purchases or even rate rises.

Not going to happen. Too much debt for rates to rise, too much ESG/climate change policy to implement, too much infrastructure spending to politic. Then add in the risk of bubble pricking! They aren’t going to risk it.

As you can see in the charts below from the United Nations Food and Agriculture Organisation, food price index increased for an 11thconsecutive month in April, hitting levels not seen in recent times, with sugar prices leading the main index.

It’s not just commodity related inputs, cars, housing and soon to be labour in Australia, the US itself is already on its it way to a double digit inflation print this year, even after they’ve taken all the inputs out that make the number bigger, just check out http://www.shadowstats.com if you’re interested in the make-up.

Anyway, this below, is Temporary?

Transitionary

Not temporary!

Temporary?

The aforementioned commitment of global central banks to multiyear infrastructure spending and stimulus almost guarantees a continuation of the above commodity price performance of the last few months. Fortunately, we are sure followers of these pages are well set to benefit from this commodity cycle.

More copper might be better, if you can find it. As usual, this presents an incredible back drop for precious metals and particularly that other super conductor of energy, Silver!

In spite of the obvious inflationary pressures, precious metals have, so far, failed to launch until this month.

This chart above is very bullish, especially from a technical perspective. A double bottom followed by a multiple moving average take out.

We think one should thank the main stream media for keeping many investors thinking that this whole inflationary thing will be temporary and easily bought into line by central bank rate rises! (A negative for Gold)!! 

It’s not, and investors still have time to get set. Especially, profitable gold producers look incredibly cheap.

As we’ve often stated in the past, precious metals are not the only way to protect ones purchasing power but have proved pretty reliable over a few millennia.

In the energy sector, funding for any fossil fuel project, new and existing, has virtually dried up in the new woke world. A world where the difference between metallurgical coal and coking coal is irrelevant!! 

It’s only a matter of time before markets wake to the reality that wind and solar aren’t going to cut it, for the time being, and the world just needs energy, for everything!!!

Check out this for a set of Alligator Jaws, just waiting to close?

And within the alligator jaws of energy there is Uranium! 

One of the greatest potential supply demand mismatches of the last decade! Potentially.

Finally, when a consumer “buy all the things now before prices rise” mentality kicks in you’ll know that this inflationary bout is more than a supply chain glitch. 

Peace!

Inflation, just Biden its time?

Here we are, Post Easter 2021, and still, not once have global financial markets been allowed to properly “clear” since the beginning of the 2007 GFC.

It’s just one bail out after another, every year, or in the case of recent months, weekly.

Last week’s largest Hedge Fund blow up since LTCM in 1998 barely sent a ripple through financial markets.

We’re guessing you might not know who Archegos was? It WAS an unhinged, Prime Broker funded, Over the Counter (OTC) derivative laden hedge fund investment gambling house. 

And then, “poof”, it’s gone! The last players at the table torched another 10-20BILLION!

But hey, plenty more where that came from so why wouldn’t Financial markets just shrug at this? 

In the US, only weeks after the US Biden administration put in place its latest $2Trillion “package”, the next $2trillion is already on deck, with promises of many more to come.

Right now, the US Fed alone injects 120BILLION per month in financial “stability stimulus”. 

It’s not just the US, everyone is “in” on this money creation malarkey, check the Europeans in the chart below.

So, if everyone is in on it, and all currencies start to debase at an even faster pace (known as inflation), investors would be wise to reassess ways and means of preparing for potential knock on effects or “systemic wobbles”!

In past millennia one way to store value was investing in precious metals.

However, these days, precious metals are as under owned at any time in (just about) recorded history, RELATIVE TO investable financial assets.

This is why this post Easter 2021 note is all about gold.

The other reason, as you will see below, is normally we have to wait until the mid-year for the guys n gals at Incrementum to bring us the always incredible “In Gold We Trust” report but for some reason they’ve pre released some of their hard work!! Thanks.

We’re not sure whether our commentary to the charts below will be helpful but the pictures are great, enjoy.

This chart below is almost out of date, given the rate of TRILLION creations in recent weeks.

Grease the wheels with some money printing! 

 Who gives a sh!t about Silver anyway?

Miners looking good…………

Gold ETF’s have claims to real paper…….

Many financial market participants will never realise the meaning, or reasons, for their being so much derivative leverage in Precious Metals than “other” commodities as laid out in the chart below.

Some Know!

Peace!

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