03 September 2015

Gold Daily and Silver Weekly Charts - The Fed's Fugue For Tinhorns - Can Do, Can Do

I got the horse right here
The name is Paul Revere
And here's a guy that says that the weather's clear
Can do, can do, this guy says the horse can do
If he says the horse can do, can do, can do.

I tell you Paul Revere
Now this is no bum steer
It's from a handicapper that's real sincere
Can do, can do, this guy says the horse can do.
If he says the horse can do - can do - can do.
Paul Revere. I got the horse right here.

Can do - can do - this guy says the horse can do
If he says the horse can do - can do, can do.

Guys and Dolls, Fugue for Tinhorns

Gold was hit by selling early in the New York trade and stayed there, while silver, which is now in its active month, showed a little more resilience.

Things were remarkably quiet at The Bucket Shop yesterday.

There was intraday commentary about the steady increase in leverage of physical gold over a greater number of paper claims in New York, and most likely in London.  You may read that here.

I do not look for a proper overt default on the Comex.   I also doubt it will be the initial locus of any dislocation in the gold market.   I would look eastward towards London and the physical markets of Asia for that sort of situation to manifest.    Those who are just looking at the US markets are likely to get hit with a world class blindside if something breaks in the gold pool operation.

Tomorrow is the Non-Farm Payrolls Report.

This report takes on a special significance because the Fed has the itch to raise its benchmark interest rate in its September meeting. They want to get themselves off the zero bound in the worst way because they do not have enough ammunition for the next phase of policy action they will need to take, most likely to correct the asset bubbles that they have created, again, in financial paper.

The commentary on the financial network from the usual suspects was enlightening.

Jeremy Siegel says that the Fed should only look at the unemployment rate tomorrow. It is 5.3% now. The Wombat of Wharton thinks that a drop to 5.2 is good, but a drop to 5.1% would be a clear 'go' signal for the Fed to raise in September, without regard to any other economic data such as number of jobs added, hours worked, Labor Participation, Wages, Demand, etc. Hmm.

The commentary from the institutional carnies like Deutsche Bank's talking head on Bloomberg is that the economic recovery is robust, and he rattled off a long string of reasons why the Fed should raise now because employment and the recovery are so good. Meanwhile Dean Baker sat there listening to this bilious balderdash like someone had just served up some funk beer with refried wiener schnitzel from last week.

The Fed is shooting themselves in the foot if they try to make the case that raising rates is a good idea because the economic recovery is so great that it is time to start worrying about inflation.

No one is going to believe that, except for those whose paychecks depend on their agreement.  And it will be especially hard to maintain that story when the economy craters again, even if they try to blame it all on China, or whatever else is handy.

But they cannot keep delaying it because next year is a Presidential election year and the Fed has a long standing rule to cool it with the monetary policy changes close to key elections, since they are supposed to be 'independent.'

The otherwise widely discredited IMF has served up a 'too soon' caution for the Fed.   It's a no lose derriere covering piece of advice for Madame Lagarde, one of the Valkyries of global wealth destruction.  

Let's see how the Jobs Report comes out. wink wink, nod nod.

I still think that the Fed is going to raise rates before year end, but that they will be doing it between a rock and a hard place, and a race with a devil of their own creation.

Did I mention that we will be seeing another Non-Farm Payrolls report tomorrow morning?

Have a pleasant evening.