10 June 2016

Gold Daily and Silver Weekly Charts - FOMC Next Week - Policy Error of the First Order - YTD Returns

Both the FOMC and the BoJ will be meeting next week, and the markets will be watching what they say and do with keen interest.

As you may recall, the Bank of Japan is now overtly monetizing the debt of Japan, having bought something like 90 percent of their bonds. What makes it monetization rather than money printing is the fact that the bonds are at least passing through a semblance of a public market on their way from the Treasury to the Central Bank. What makes it monetization is the size of the purchases and the non-market rates paid by the Bank.

In this sense, in addition to the BoJ, the Fed is also monetizing debt, as well as the ECB. They have been emboldened in that so far this has not produced any seriously disruptive consequences, although consequences there most certainly are.

The manner in which this is done and the proceeds distributed in a series of speculative asset bubbles that transfer wealth from the stimulus of aggregate demand to acquisitive rent-seeking makes it a policy error of the first order.

As for the FOMC meeting next week, they are faced with wishing to raise rates, for what I believe are their own policy purposes, in an economy that appears to be slipping into recession. That the Western financial Illuminati may wish to blame Europe and Asia for their economic troubles is another matter.

The US will be reporting much more economic news next week which may provide more clarity on the state of the economy.

Gold is having an unusually large month for delivery action on the Comex. And as for silver, although this is a quiet month, silver bullion continues leaking out of the warehouses. If you take a look at the numbers you can see why some think that JPM has almost cornered the market on free silver bullion at least in the NY markets.

Lets see if gold and silver can break out here. If so, then I think we can provide some reasonable estimates of the upsides.

Have a pleasant weekend.