Stocks and Precious Metals Charts - Risk Off - Gold Breaks Out to the Upside from the Wedge

"The received wisdom is mistaken on how recessions are made. They are not simply caused by shocks.  They are caused by a window of vulnerability in the economic cycle where the cyclical drivers of the economy have weakened to the point where it’s susceptible to a negative shock.  Within that window of vulnerability, virtually any reasonable shock becomes a recessionary shock. That’s how you get a recession."

Lakshman Achuthan, Economic Cycle Research Institute

In a similar manner one also gets a stock market crash.  Or the collapse of a long running gold pool.  What he calls a negative shock I call a 'trigger event.'

The more vulnerable and unstable a market structure may become, the less of a trigger event is required to initiate a sharp shift in valuations.

Today was definitely a 'risk off' day in the US markets.

Gold broke out and up out of the descending wedge, and with a relatively large about of energy.

As you know I had expected this to happen, but not until after the Non-Farm Payrolls report.

In contrast to May, June is an 'active' month for the gold trade, and there has been a remarkable withdrawal of gold marked as available for delivery at the NY Comex recently.

There are rumors that a bank was caught short with its pants down in gold, and it is now buying its way out, as sufficient bullion is not available in sufficient quantity, so that money must be thrown at the problem. Whoever they are, they must not be a member of the bullion bank club.

Well, in any event, it is difficult to contain a commodity market when it has been coiling with so much energy.   And so much of it has been flowing to the Asian markets, not to return at anything near to these prices.

Silver followed gold up towards its fifteen handle, settling just below that.

This breakout may not be a clear runner, but may have to back and fill a bit. Let's watch its progress, and see if the big cup and handle bottom can be activated.

Stocks slumped, and badly at times during the day, led by big cap tech.

The Trump administration is leaning on Silicon Valley. There is no love lost between Trump and the tech giants, and this makes for strange bedfellows with the progressive Democrats who also consider the antitrust aspects of companies like Facebook, Google, and Apple et al.

Let's see how the rest of this week goes. The stock decline was 'orderly' and there was a bit of a cynical bounce into the close.

Yet is this is truly a risk awareness situation, one wonders if it can be stabilized and pushed to the upside for long.

Or if the quote at the top of this posting described it, stocks will remain vulnerable, and it will take only some trigger event, some tweet, to set them rolling downhill again.

Have a pleasant evening.

Financial Crisis III: Stores of Precious Metals in Trusts and Funds - Junk Bond and Credit Market Concerns

Here is the state of the gold and silver holdings in trusts and funds.

In other matters, there were two articles about risks in the credit markets that caught my eye this weekend.

These *could be* stories spread by market operators who are hoping for turmoil in the junk bond markets.

Or on the other hand this could be signs of something which some have feared would be approaching, as we seem to keep repeating the behaviours that prompted the last two financial crises this century.

The truth is hard to discern these days— it has few friends, and even fewer willing to stand for it.

Nevertheless, I thought it would be appropriate to bring them to your attention, for what it is worth.

Greenwich Time, A New Credit Bubble Gets Ready to Burst, May 31, 2019

The Street, U.S. Officials Meet in Secret Over Junk-Loan Frenzy as Recession Alarms Flash, June 1, 2019

Stocks and Precious Metals Charts - And It Is - Non-Farm Payrolls Next Week

"Shanghai Gold will change the current gold market with its 'consumed in the East but priced in the West' arrangement.  When China has the right to speak in the international gold market, the true price of gold will be revealed."

Xu Luode, Chairman, Shanghai Gold Exchange, 15 May 2014


“Imaginary evil is romantic and varied; real evil is gloomy, monotonous, barren, boring. Imaginary good is boring; real good is always new, marvelous, intoxicating. Everything beautiful has a mark of eternity.”

Simone Weil


"Nature is never spent;
There lives the dearest freshness deep down things;
And though the last lights off the black West went
Oh, morning, at the brown brink eastward, springs —
Because the Holy Ghost over the bent
World broods with warm breast and with ah! bright wings."

Gerard Manley Hopkins, God's Grandeur

Stocks dropped significantly after Trump initiated a 'shock tariff' on all Mexican goods effective June 10.

The Dollar declined.

Gold rallied significantly in a flight to safety. Silver tagged along, weighed down a bit by its industrial component.

On the chart gold has broken up and out from a large descending triangle.  Let's see if it can stick this breakout and expand it through the Non-Farm Payrolls report next week.

If so, this may activate the much larger cup and handle pattern that has been lingering on the chart for some time.

The US Treasury yield curve is now more inverted than at any time since 2007 and the inception of the last financial crisis.

Treasuries are apparently pricing in two rate cuts for this year.

At the same time junk bonds are signficantly diverged from this outlook on risk.

Something is going to break, and badly.

There will be a Non-Farm Payrolls report next Friday.

There is an economy of the lord of this world, that rewards the attentions of its adherents, temporarily if not fleetingly.   And there is the economy of God, that embraces all of us in the next, forever.

For some, that the economy of this passing world deems foolish, it is simply a matter of investment assumptions and horizons.   Their hearts are invested in what is to come— and what will endure.

Need little, want less, and love more. For those who abide in love abide in God, and God in them.

Have a pleasant weekend.

Markets Roiled As Trump Imposes 'Shock Tariff' of 5% Up To 25% On All Mexican Goods Over Immigration

Via tweet Trump tanked the markets by imposing a 'shock tariff' on all Mexico goods of 5%, increasing to 25% until Mexico does something to halt illegal immigration from their country.

Someone is taking the imperial presidency out for a test drive.

The China Manufacturing PMI came out tonight with a miss of estimates at 49.4.

The Treasury yield curve is doing some interesting things tonight.  

The world wonders where such shock tariffs as an instrument of US policy objectives as determined by the Imperial President may be imposed next.

Germany better start working on a cure for male pattern baldness.

Bloomberg
Trump to Impose Tariff as High as 25% on Mexico Over Immigration
By John Harney and Peggy Collins
May 30, 2019

President Donald Trump said that he would impose a 5% tariff on Mexican goods until that country stops immigrants from entering the U.S. illegally.

The tariff would take effect on June 10, “until such time as illegal migrants coming through Mexico, and into our country, STOP,” Trump said in a Twitter post on Thursday night.

He warned that the levy “would gradually increase until the illegal immigration problem is remedied at which time the tariff will be removed.” The tariffs could rise as high as 25% on Oct. 1, Trump said in a statement released by the White House.

“Mexico must step up and help solve this problem,” Trump said in the statement...

Read the entire story here.