Precious metals investors are really miffed after seeing gold and silver smacked down two days in a row and right after a slew of central banks, including the FED, BoC, BoE and ECB all raised their key lending rates by 25 to 50 basis points. Seeing gold and silver pushed down yesterday didn't surprise me much. Weird things always happen with spot prices when these bankers mess around with rates.
It happened again this morning, especially with poor silver being pushed down another 80 cents or so, but what gives? On Wednesday after the FED announced another 25 basis point hike, silver initially rose a dollar overnight into Thursday morning to $24.50. Then, the news came through that the Bank of England and European Central bank both hiked by 50 basis points. What followed was a precipitous drop of one dollar. This morning (Friday) it happened again with an even sharper fall to $22.69 and will likely trigger many conversations online over the weekend as to what happened.
I went on a search to find any possible causes to why precious metals tumbled so hard over the last two days. On January 31, just one day before the FED hike announcement, the USD Index dropped to 101.173, a low not seen since about May 30th of last year. Since the announcement, the dollar rose to 102.484, where it sits at time of writing. That's a jump of 1.311 on the index and is quite significant. Usually, the dollar and gold act inversely so this likely adding to downward pressure on gold and silver.
Another reason may be employment data just released by the BLS (Bureau of Labor and Statistics) this morning. An article appeared on Zero Hedge this morning titled, 'January Payrolls Explode To 517K, 8-Sigma Beat To Expectations, Unemployment Rate Tumbles To Record Low'. Don't you believe it! Even their own article mocks the BLS BS!
If you do a lot of reading, then you'll already know about the mass layoffs occurring across the board. You'll already know about declining home sales and massive credit card debt, not to mention the ever increasing interest rate burden on those debts and rising car repos. Yet, somehow, the BLS wants you to believe there's record low unemployment in the U.S.A.
Just another 3 letter agency that's lost all credibility. Nevertheless, this data has pushed the dollar up, thereby weakening spot precious metals prices. Another article on Zero Hedge suggests this is actually a 'disaster for the soft landing narrative' and has sent rate hike expectations soaring. I have stated in previous articles that the real inflation rate is closer to 14% to 16% and to tame inflation, interest rates must go higher than the inflation rate, known as the 'terminal rate'.
Central banks aren't anywhere near the terminal rate. It's clear to me they are playing a game of cat and mouse, stating they may pause on hiking rates. I think the opposite is true and to expect more rate hikes this year. We're into the 'Big Ugly' and it should be obvious we're headed for recession or worse yet, a possible depression.
But the BLS wants you to believe 'everything is awesome'. Sorry but this isn't LEGO world. This is real life. Don't tell anyone the U.S. debt to GDP ratio has surpassed 120% or that the debt ceiling has been reached or that more than half the budget is going to the Pentagon alone. Those things don't matter. Beating the Russians is the only thing that matters. Otherwise, everything is awwwwwwesome!
Fortunately, crypto gold, known as Bitcoin, is on fire and presently sits at $23,520. I'm really glad I bought $92 CDN worth of Bitcoin last week, my very first purchase. On January 3, Bitcoin sat at $16,670 and since then has seen an increase of close to $7,000. Now, that's impressive yet, Charlie Munger, one of the greediest bastards on the planet, thinks America should follow Communist China's lead in banning Bitcoin.
By the way, the Chinese people are more savvy than people think and continue to be number two in the world as far as Bitcoin mining goes. Looks like the Chinese people prefer decentralization too, unlike Charlie Munger who thinks it's more like gambling but casinos and lotteries are ok though, in which there are far more losers than winners.
Another possible reason gold and silver coming down is that oil, particularly WTI crude also came down to $76.96 at time of writing. In 2010 / 2011 when oil spiked to $145 per barrel, gold skyrocketed to almost $2,000 an ounce. Last spring when gasoline prices spiked, we saw gold breach the $2,000 mark. Since then, oil prices have come down and so has gold so there is a positive correlation between gold and oil. If oil rises, expect gold to rise as well.
OilPrice.com reports this morning that oil prices are under pressure despite a looming fuel embargo on Russian imports set to take effect on February 5, this Sunday. This should make oil prices go higher in coming days and weeks. Enjoy the little break at the pumps this weekend because it may not last, unfortunately.
So then, while interest rates should have propelled precious metals higher, bogus data from the BLS, the higher dollar and lower oil prices have conspired to do the opposite. As a result, I expect a rebound next week in gold and silver, as if nothing happened this week.
If you know of any other info that might add to this article, please let me know in the comments section below. I always love to hear from my fellow PublishOx'ers. Before I sign off, here the gold chart showing the dramatic fall over the last 2 days... Almost $100 drop... CRAZY! Buy the dip! Buy the dip!
Peace & Love to Everyone.
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