What’s behind the gold’s rise?
There’s a new crisis afoot and gold is at its centre, confirmed by rising bond yields, and the end of hopes that interest rates will fall.
MACLEODFINANCE
Today, in a note to subscribers Ross Norman of Metals Daily admitted that:
“The rally in the gold price has left me non-plussed ... who is behind it and why?
Rather like an Agatha Christie murder-mystery novel, with evidence thin, the culprit or cause may be deduced by excluding what it is not ... and what remains, is.
Spoiler alert ... I am really not sure of the answer but follow me ... it's fun anyway.”
Ross has probably been the most frequent winner of the LBMA’s annual price forecasting competition.
He has an uncanny knack of reading gold and silver markets, based on his in-depth knowledge of what the bullion banks are doing, the channels and methods which central banks use to accumulate bullion, etc.
He’s the ultimate insider.
If Ross is non-plussed, it is significant.
He once told me that he had never considered economic theory in the context of gold markets, so perhaps that’s a clue.
Like almost everyone else in the London bullion market, I don’t think he majors in geopolitics either.
In fact, if you do know your money and credit and geopolitics, until the ordure actually hits the fan, knowledge of this sort would almost certainly hamper your forecasting record.
Perhaps this is the moment the brown stuff is becoming airborne.
It’s my belief that it’s not central bank buying, though I wouldn’t rule it out entirely.
Instead, I strongly suspect from his pronouncements in the past that Putin knows that the dollar is in trouble, because of the consequences of the Fed raising interest rates over the last two years on the massive mountain of US Treasury debt.
And I know (and this is public knowledge) that he has encouraged all who would listen to him to get rid of dollars and euros.
He has conditioned foreign movers and shakers to do just that.
In the Middle East, they will almost certainly be sold for gold, bought in Dubai and other Asian sources, which is why the source of this demand is not evident in London.
Meanwhile, non-aligned nations are watching the American train wreck.
It will be dawning on them that there is no way US interest rates should fall, because of the debt position.
Foreign demand is the marginal pricing mechanism, and China is not playing.
Japan is busy selling dollars to support the yen.
US credibility, which is the only support the dollar possesses is ebbing away.
Oil prices are rising, a sure sign that the dollar is falling, and China is stockpiling Dr Copper.
10-year US Treasury yields are rising bullishly as the chart below shows:
It is a classic technical bull market, with the yield now above its moving averages in bullish sequence.
Kiss goodbye to falling bond yields, urgently needed to rescue equities, property values, the US Government, zombie businesses, the banks — in fact, the whole shebang.
And look at the long-term 10-year UST chart:
The days of interest rate suppression and yield curve control are over.
Paper speculators might think that rising bond yields are bad for the gold price, but they miss the point.
Foreigners just want out of dollar credit, and Putin has done a good job of telling them why.
The next problem will be in bullion banks on the short side in the paper markets and through unallocated gold accounts.
That could be why silver has suddenly taken off today, rising over 4%.
Every which-way, this is developing into a crisis with gold at its heart.
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