No, this doesn’t make me particularly happy to report.
But the price of gold today is down into the $1,143 region being down again as the US dollar continues to sneak up on the Euro. Passing parity is a possibility.
In the (excessively mental) World of George (WoG) we can derive an interesting number about gold by taking the current spot price of gold and dividing by the ratio of the Dollars to Euros.
Given around 0.9188 for the ratio and 1,143.70, we arrive at 1,244 ish for gold.
Now let’s do a thought experiment and see where this ratio might push gold if the dollar goes to parity with the Greecerators: Obviously $1,143.70 at parity – or, if the dollar sinks to 0.80 (where it has been in the past) then gold should go up to well north of $1,429.
While you’re building spreadsheets to the moon, you can make other observations as well, notably that the interest rates are not yet jumping.
A check of the 10-year Treasury proxy over here says the interest rate is back down to 2.35% and it has every indication of beginning to fail to break higher. Gold may be suggesting deflation to come…higher bond prices, and all that.
No, we’re not selling our “lone gold coin” (or the silver one, either) since we knew they wouldn’t be going much of anywhere until the Second Depression really hits in 2017-2018, or so and government has to slam the printing press. Then they may soar, but there are now sure bets around, anymore. Everything is arb’ed and hedged. Honest prices are only in fairytales.
But for now, the opposite dynamic is in effect.
The Fed has shut down the printing press (if you look at their H.6 money stocks report) and Janet Yellen is telling congress to keep the hell out of the Fed’s accounting books looking for “transparency.”
What seems to be going on behind the scene is that the Fed wants rates to go up. Not too far – that would blow up the National Debt.
By killing the money printing festival, there will be less cheap money around and the bankster class will start to charge more and that will give the Fed the space it needs to raise.
But whether this dynamic will occur fast enough to keep the dollar from becoming worth more than the Euro, or whether it will happen before gold touches $1,000 is quite the sporting bet.
At any rate, we expect the dip in gold to continue while new equilibrium levels are reached. And like the First Lady of Dough herself said:
‘ A decision by the Committee to raise its target range for the federal funds rate will signal how much progress the economy has made in healing from the trauma of the financial crisis.
That said, the importance of the initial step to raise the federal funds rate target should not be overemphasized. What matters for financial conditions and the broader economy is the entire expected path of interest rates, not any particular move, including the initial increase, in the federal funds rate. Indeed, the stance of monetary policy will likely remain highly accommodative for quite some time after the first increase in the federal funds rate in order to support continued progress toward our objectives of maximum employment and 2 percent inflation.
In the projections prepared for our June meeting, most FOMC participants anticipated that economic conditions would evolve over time in a way that will warrant gradual increases in the federal funds rate as the headwinds that still restrain real activity continue to diminish and inflation rises. Of course, if the expansion proves to be more vigorous than currently anticipated and inflation moves higher than expected, then the appropriate path would likely follow a higher and steeper trajectory; conversely, if conditions were to prove weaker, then the appropriate trajectory would be lower and less steep than currently projected. As always, we will regularly reassess what level of the federal funds rate is consistent with achieving and maintaining the Committee’s dual mandate. “
We continue to look for the Fed to raise this fall, despite the short-term drop in gold prices.
A check of the SPDR GLD reveals how close to the 52 week low we are and once (or if) broken, we have concerns based on Elliott wave theory that the next level down to another support zone might be Robin Landry’s $800 (and lower) range.
We shall wait to see how things evolve, and yes, maybe there will be a buying window in here, since if there is one more major wave up to come prior to collapse – it should be two years of a screaming rally into 2017 –2018.
Still, gold has somewhat regularly lost $20-$40 bucks at month-end deliver windows, and if we back out that kind of drop from this morning’s levels, we see how the gold bulls will have a hard sell, at least through the end of the month.
Especially if Europe keeps making dumb-ass moves such as installing puppet governments in Greece. Eventually, someone besides us will notice that a major world house of cards is on fire. Sort of like the slow burn that has been going on in Chinese markets, as well.
I could tell you I’m excited to see Bitcoin poking above $284 this morning, but I’m still not comfortable with US electric grid exposure or the risks of EMP/.
Gold doesn’t need those things to be a storehouse of value. But the old trading slogan is also true: You can eat gold. And even constantly depreciating paper money still has some residual value for wiping.
Short term, gold needs to rally like hell: the get over the end of month beat-down range, to keep valuation relative to Bitcoins, and to remain with the interest rates, until they drop to 2%, or so.
A rally here is an interesting little wager. One Ures truly will avoid due to risk.
Wait and Greek
The main party in the Netherlands is reserving judgment on the Greece deal with the EU.
Part of the reason is the prime minister of the Netherlands made an election promise not to send money to Greece.
Another part may be cultural memory. Where was tulip mania centered?
The European Central Banksters left rates unchanged today. How about upsetting one apple cart at a time?
Russian MH-17 Whiners
The US off the record points out that the BUK surface to air missile came up from a village under separatist control.
And since Amazon wasn’t selling BUK missiles when I checked this morning,
(Amazon’s lead BUK listing was for 2x36g ZAM BUK Zambuk Ointment Balm Herbal Insect Itch Bites Pain Relief Massage for $7 bucks spelled the other way. Might works on bites, but useless for bringing down airliners.)
Japan Gets Militant
No doubt with some US backing, trying to contain Chinese oil developments in the South China Sea… but a bill to allow Japan to take security actions externally – for the first time since WW II is worth noting.
Moore’s Law Is Failing
A company that brought us the future is now moving it back a bit.
Check the poll data over here. Aw, gee, gosh…
No more Clintons, no more Bushes, thank you.
If you want Aristocracies, try Europe.