Wednesday, September 18, 2019

Gold Speculators Refuse To Give Up; Another Drop Likely

by John Rubino, Dollar Collapse:

Normally winter is a good time for gold, with men buying their significant others jewelry for Christmas and lots of New Years Day marriage proposals. Here’s an overview of the dynamic from Adam Hamilton of Zeal Intelligence:

Seasonality is the tendency for prices to exhibit recurring patterns at certain times during the calendar year. While seasonality doesn’t drive price action, it quantifies annually-repeating behavior driven by sentiment, technicals, and fundamentals. We humans are creatures of habit and herd, which naturally colors our trading decisions. The calendar year’s passage affects the timing and intensity of buying and selling.

Gold stocks exhibit strong seasonality because their price action mirrors that of their dominant primary driver, gold. Gold’s seasonality generally isn’t driven by supply fluctuations like grown commodities experience, as its mined supply remains fairly steady all year long. Instead gold’s major seasonality is demand-driven, with global investment demand varying dramatically depending on the time within the calendar year.

This gold seasonality is fueled by well-known income-cycle and cultural drivers of outsized gold demand from around the world. And the biggest seasonal surge of all is just now getting underway heading into winter. As the Indian-wedding-season gold-jewelry buying that drives this metal’s big autumn rally winds down, the Western holiday season is ramping up. The holiday spirit puts everyone in the mood to spend money.

Men splurge on vast amounts of gold jewelry for Christmas gifts for their wives, girlfriends, daughters, and mothers. The holidays are also a big engagement season, with Christmas Eve and New Year’s Eve being two of the biggest proposal nights of the year. Between a quarter to a third of the entire annual sales of jewelry stores come in November and December! And jewelry historically dominates overall gold demand.

According to the World Gold Council, between 2010 to 2016 jewelry accounted for 49{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, 44{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, 45{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, 60{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, 58{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, 57{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, and 47{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of total annual global gold demand. That averages out to just over half, which is much larger than investment demand. During those same past 7 years, that ran 39{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, 37{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, 34{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, 18{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, 20{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, 22{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, and 36{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} for a 29{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} average. Jewelry demand remains the single-largest global gold demand category.

That frenzied Western jewelry buying heading into winter shifts to pure investment demand after year-end. That’s when Western investors figure out how much surplus income they earned during the prior year after bonuses and taxes. Some of this is plowed into gold in January, driving it higher. Finally the big winter gold rally climaxes in late February on major Chinese New Year gold buying flaring up in Asia.

So during its bull-market years, gold has always tended to enjoy major winter rallies driven by these sequential episodes of outsized demand. Naturally the gold stocks follow gold higher, amplifying its gains due to their great profits leverage to the gold price. Today gold stocks are once again now heading into their strongest seasonal rally of the year driven by this robust winter gold demand. That’s super-bullish!

Since it’s gold’s own demand-driven seasonality that fuels the gold stocks’ seasonality, that’s logically the best place to start to understand what’s likely coming. Price action is very different between bull and bear years, and gold is absolutely in a young bull market. After being crushed to a 6.1-year secular low in mid-December 2015 on the Fed’s first rate hike of this cycle, gold powered 29.9{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} higher over the next 6.7 months.

This is pleasant reading for anyone long gold or gold mining shares. But the futures markets continue to tell a different and less encouraging story. See Strange Things Happening In The Paper Gold Market, which noted that last month speculators were overly long and were as a result losing their shirts in the ongoing price correction — but were for some reason refusing to throw in the towel. The conclusion was that they’d need more convincing via another big price decline.

Read More @ DollarCollapse:

LME gold and silver Reference Prices: Will anyone notice?

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by Ronan Manly, BullionStar:

On 29 August, the London Metal Exchange (LME) began publication of a set of daily reference prices for gold and silver. These reference prices aim to capture and reflect paper gold and silver market prices as at 10:30 am, 12:00 midday, and 3:00 pm London time.

Anyone familiar with the former London gold and silver fix auctions, or the successor LBMA Gold Price and LBMA Silver Price auctions, will know that the LBMA gold auction is conducted twice daily at 10:30 am and 3.00 pm London time, while the silver auction is held once daily at midday. These auctions are also for unallocated book entry gold and silver (paper gold and silver) in the London market. ICE Benchmark Administration (IBA) is the auction administrator for both of these LBMA auctions.

Peak Liquidity

As these new reference prices published by the London Metal Exchange are timed to report ‘market’ prices for gold and silver at exactly the same times as the LBMA Gold and LBMA Silver auctions, they add an element of future competition between the LME and ICE in the benchmark price provision business. However, the LME’s prices for both gold and silverare calculated at each of the 3 times of the ICE / LBMA auctions, i.e. at 10:30am (LBMA morning gold auction), 12:00 (LBMA silver auction) and 3:00pm (LBMA afternoon gold auction), periods which the LME describes as having ‘peak liquidity’.

In July 2017, the LME launched a suite of gold and silver futures contracts (LME Gold and LME Silver) for the London market, 2 of which are Spot daily contracts in gold and silver, respectively. Under the hood, these new gold and silver daily reference prices published by the LME are just volume weighted average prices (VWAP) of these LME Gold and LME Silver spot contracts calculated over a 2 minute window at the relevant times each day (i.e. 10:30 am, midday, and 3:00 pm) based on trades on  the LMEselect trading platform. These contracts also represent claims on unallocated book entry paper gold and silver in the London market.

Therefore, the LME reference prices are not based on any auction trades, and merely use prices ‘discovered’ (generated) on the LME’s own trading platform at the time of the LBMA / ICE auctions. Given that these new LME reference prices only began to be published on 29 August, there are only about 50 daily data points so far for each of gold and silver. All prices since 29 August can be seen on the LME website for gold and silver.

Different But Similar

But are these LME prices the same as those generated by the ICE / LBMA daily auctions? No, they are not the same, but they are similar. The reason both sets of prices are not the same is that they are derived differently. The LBMA price resulting from an auction is the price derived in the final round of an auction when the imbalance between the auction’s buy and sell volumes is in tolerance (less than 10,000 ounces). The LME reference prices are average prices calculated (and volume weighted) using trades executed on the LME’s trading platform over a 2 minute interval from the start of an auction until 2 minutes after the start of an auction.

The LBMA auction prices and the LME reference prices are similar in that they are both based on market activity over similar time periods within the wholesale gold and silver markets, and in practice (or at least in theory), arbitrage trading should act to keep prices in the OTC market, and in the LBMA auctions, and in COMEX precious metals futures trading, and in LME gold and silver futures trading in line with each other.

Like their predecessors the London Gold fix and London Silver fix, the LBMA Gold Price and LBMA Silver Price are used every day to value everything from ISDA contracts to  gold-backed ETFs, and the daily auction prices are also referenced widely in the global precious metals industry to execute trades involving miners, refineries, bullion banks, central banks, jewellers and coin shops. In short, these LBMA gold and silver reference prices are the dominant incumbent reference prices, and they also qualify as Regulated Benchmarks regulated by the UK Financial Conduct Authority. But will anyone end up using these new LME precious metals reference prices? Possibly, but it could it a while.

In 2018, the LME intends to offer trading based on its new gold and reference price reference levels. According to a Reuters article from 10 October:

“As of mid-2018 participants will be able to trade at those prices, Chamberlain [LME CEO] said, with technology being developed to match buy and sell orders for execution at the settlement price.

‘Benchmarks take a long time to evolve,’ he said. ‘What we can do is put in place the infrastructure, show that we have day after day of robust prices, but ultimately it is for end-users to decide what they want to use.’”

Being able to trade at the LME reference prices will add more relevance to the published numbers and could add legitimacy in terms of market data and financial media interest.

Conclusion

Right now the LME gold and silver reference prices are published daily and are “available for market participants to use free of charge.” But real world usage in the sense of being used to value precious metals funds, contracts or transactions looks to be a case of “down the road” rather than today.

Read More @ BullionStar.com

Moscow Calls for New Financial System That Bypasses US Dollar

by Louis Heyward, Russia Insider:

“The world should not be dominated by one currency. It is necessary to build a new system of international financial relations”

Moscow and Beijing are leading the charge against US dollar dominance, so naturally Russian Prime Minister Dmitry Medvedev saw his recent visit to China as an opportunity to remind Washington that the petrodollar’s days are numbered:

Transcript:

The world should not be dominated by one currency. It is necessary to build a new system of international financial relations

Dmitry Medvedev stated in Beijing.

Anchor:

Today he held talks with the Chinese President, the head of the Chinese government, and the head of the Parliament. Anastasia Sakhovskaya is reporting.

Corespondent:

Chinese operators and photographers are almost knocking each other down. They always pay special attention to Russian visits to China, but today it’s just extraordinary. This is the first direct high-level contact after the congress of the Communist Party, which confirmed the policy of rapprochement with Russia.

The world needs financial balance. Countries shouldn’t be held hostage by one economy. The development of the ruble and the yuan will contribute to the balance. Russia and China want to introduce settlements in national currencies. We are developing our payment system on the basis of the Mir card.

At the moment, we are discussing the ways the Mir card will be connected to Chinese payment systems. Oil, coal, gas, the Yamal LNG project, deliveries along the eastern route of the “Power of Siberia” pipeline in 2 years, and the western route is being negotiated. Peaceful nuclear cooperation, an agreement was signed with Roscosmos up to 2022.

But there’s another growth point, the Far East which is so close to China.

Li Keqiang, Chinese Premier:

“We are going to increase Chinese investments in the Far East. We are ready to import more energy-related products.”

Corespondent:

An investment package worth $15 billion has already been agreed upon, while a separate fund can be created to finance innovative projects.

Alexander Tkachev, Russian Minister of Agriculture:

“We’re actively advancing livestock farming, including beef and poultry, rabbit, and other types of meat. So, we have no intention to stop.”

Corespondent:

It’s for their contribution to the development of trade, Dmitry Medvedev awarded the Order of Friendship to Vice Premier Wang Yang and his two colleagues. Today the year of media exchange closed, information ties strengthen as well. In the evening, the Russian delegation was received by Xi Jinping. Dmitry Medvedev personally conveyed to the Chinese leader Vladimir Putin’s congratulations on the adoption of strategic decisions for the country at the Communist Party congress.

Read More @ Russia-Insider.com

Hong Kong expands cross-border gold market with China, with 900 kilos of gold traded in Shenzhen

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by Enoch Yiu, South China Morning Post:

The second cross-border gold market between Hong Kong and China kicked off with US$36.88 million worth of the precious metal traded in Shenzhen.

Nine hundred kilogrammes of gold, worth 244.44 million yuan (US$36.88 million) changed hands on Friday evening, kicking off Hong Kong’s second cross-border market with mainland China under the so-called Gold Connect programme.

The first trades under the Hong Kong-Shenzhen Gold Connect were made after a ceremony hosted by Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor and Haywood Cheung Tak-hay, president of the Chinese Gold & Silver Exchange Society.

Under the scheme, mainland Chinese investors can authorise any of the 70 Hong Kong dealers located at the Qianhai special economic zone in Shenzhen to buy and sell gold bullions, and settle the transactions in cash or by physical delivery. The bullions are designated as one-kilogramme gold bars.

The Gold Connect is the city’s second such trading scheme after a link-up between Hong Kong and the Shanghai market in 2015. The new link with Shenzhen has 70 Hong Kong participating dealers, more than double the 30 who signed for the Shanghai-Hong Kong Gold Connect.

“The new Gold Connect, which starts tonight, as well as the gold vault in Qianhai, will help gold traders save time and money settling gold trades,” Chief Executive Lam said. “This will benefit both Hong Kong and mainland gold traders and investors.”

Lam added the new scheme would create closer ties between Hong Kong and Qianhai and credited the local gold bourse’s efforts to tie up with gold exchanges in Dubai, Singapore and Myanmar.

The proposed gold vault will commence operation in April, and be able to store 1,500 tonnes of gold, allowing mainlanders who trade the metal in Hong Kong via Qianhai, and gain physical delivery.

“The new connect will boost the internationalisation of the yuan. The Shanghai Connect has already benefited international investors to trade gold in the mainland,” said Cheung of the dealers’ guild. “The new Shenzhen leg will make it easier for 2,000 jewellery makers to trade gold in Hong Kong.”

Read More @ SCMP.com

29,450 Gold Contracts Dumped In 9 Minutes To Smash The Gold Price

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from SilverDoctors:

Cue the (delayed) smashing of gold & silver coming off of a horrible BLS Jobs Report (wages miss big and nearly a million drop out of the labor force)…

Well, so much for some Friday optimism.

$3,754,875,000 worth of paper gold was just sold between 10:37 a.m. EST and 10:45 a.m. EST.

The smash was steep:

Gold & silver are now poised for a weekly loss:

We’ll see, but for now, disgusting.

Though an awesome opportunity for a flash sale on some precious metal.

Stack accordingly…

Read More @ SilverDoctors.com

A2A with Dave Kranzler of Investment Research Dynamics

by Turd Ferguson, TF Metals:

Our pal, DenverDave, stopped by today for a full hour of analysis and commentary. You should be sure to listen.

As always, this was a fun discussion with Dave and the hour flew by quickly. Among the topics covered:

  • the ponzi scheme financials of TSLA and AMZN
  • the eventual likelihood of a yuan-denominated crude oil contract
  • Dave’s opinion of Novo Resources and the speculative boom in Australia
  • finding relative value in the mining sector
  • his outlook for price given the current CoT structure of both Comex metals
  • and a whole bunch of stuff in between

Click HERE to listen

Read More @ TFMetals.com

Analyzing the Mainstream Analysts: Are SLV Holdings Really Plummeting?

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by Jeff Clark, GoldSilver:

It was a headline designed for shock value. The title screamed, Investors Dumping SLV at Fastest Pace in 6 Years!

The headline came from Bloomberg, the epitome of “mainstream” news in my opinion. The article reported that investors were “dumping” holdings in SLV, the largest silver exchange-traded fund. They claimed the silver market had been “hit by a gale force, spurring an exit from ETFs backed by the metal.”

As you might guess, we do a lot of reading around here. And this was the first I’d heard of a “mass exodus” from SLV. Did I somehow miss this development?

It’s important, because if holdings in SLV were really cratering, it might be a sign that the market—or at least these types of investors—had changed their mind about silver. You might know that holdings in silver-backed ETFs have been stubbornly high for years, refusing to bow to any price pressures. During the crash of 2008, for example, holdings rose sharply in spite of the price falling off a cliff. Same thing happened in 2013 when the price cratered… holdings never really declined all that much, in spite of GLD shares dropping hard.

Given that, you might understand why I perked up upon seeing their chart.

Looks ominous. I needed to check it out…

Fun with Facts

The above chart is correct. There have been outflows from SLV.

But the message the journalists portray is incorrect. We went directly to the SLV site and created a chart of the fund’s holdings. I expected to see a big drop over the past few months. Instead I saw this.

Read More @ GoldSilver.com

POOR JOBS REPORT BUT THAT DID NOT MATTER AS THE CROOKS RAIDED GOLD AND SILVER

by Harvey Organ, Harvey Organ Blog:

COMEX SILVER OI CONTINUES TO RISE WITH ITS LATEST READING OVER 206,000 CONTRACTS/AFTER THE USA FINISHED OFF ISIS IN IRAQ THEY LAUNCHED AN INITIAL ATTACK AT ISIS POSITIONS IN SOMALIA/VENEZUELA ANNOUNCES THEY WILL DEFAULT/DONNA BRAZILLE: THE DNC RIGGED THE NOMINATION ELECTION/OBAMA LIED IN THAT URANIUM IN THAT URANIUM 1 DEAL DID EXPORT THE METAL OUT OF THE USA

GOLD: $1268.90  DOWN $8.65

Silver: $16.85 down 27  cents

Closing access prices:

Gold $1270.00

silver: $16.86

SHANGHAI GOLD FIX:  FIRST FIX  10 15 PM EST  (2:15 SHANGHAI LOCAL TIME)

SECOND FIX:  2:15 AM EST  (6:15 SHANGHAI LOCAL TIME)

SHANGHAI FIRST GOLD FIX: $1300.00 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  $1280.05

PREMIUM FIRST FIX:  $19.90(premiums getting larger)

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SECOND SHANGHAI GOLD FIX: $1292.04

NY GOLD PRICE AT THE EXACT SAME TIME: $1277.00

Premium of Shanghai 2nd fix/NY:$15.04 PREMIUMS GETTING LARGER)

CHINA REJECTS NEW YORK PRICING OF GOLD!!!!  

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LONDON FIRST GOLD FIX:  5:30 am est  $1275.30

NY PRICING AT THE EXACT SAME TIME: $1275.25

LONDON SECOND GOLD FIX  10 AM: $1267.20

NY PRICING AT THE EXACT SAME TIME. 1277.20 ??

For comex gold:

NOVEMBER/

NOTICES FILINGS TODAY FOR OCT CONTRACT MONTH: 63 NOTICE(S) FOR  6300  OZ.

TOTAL NOTICES SO FAR: 829  FOR 82900 OZ  (2.578TONNES)

For silver:

NOVEMBER

 

 18 NOTICE(S) FILED TODAY FOR

 

90,000  OZ/

Total number of notices filed so far this month: 846 for 4,230,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Bitcoin:  $7399 bid /$7424 offer up $392.00  (MORNING)

BITCOIN CLOSING;$7284 BID:7304. OFFER  UP $276.00

end

Let us have a look at the data for today

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In silver, the total open interest SURPRISINGLY  ROSE BY A GOOD SIZED 2165 contracts from 203 ,903 UP TO 206,068 DESPITE  YESTERDAY’S  TRADING IN WHICH SILVER FELL BY  6 CENTS.  THE CROOKS ARE STILL HAVING AN AWFUL TIME TRYING TO COVER THEIR MASSIVE SILVER SHORTS SO THEY TRY TO CONTINUE WITH THEIR TORMENT LIKE THE RAID TODAY. NEWBIE SPEC LONGS ENTERED THE ARENA TO WHICH THE CROOKS SUPPLIED THE NECESSARY SHORT PAPER

RESULT: A GOOD SIZED RISE IN OI COMEX  DESPITE THE  6 CENT PRICE LOSS.  OUR BANKERS COULD NOT COVER ANY OF THEIR HUGE SHORTFALL. THEY NEEDED TO SUPPLY THE NECESSARY SHORT PAPER AS NEWBIE LONGS ENTERED THE ARENA. THE HUGE OI GAIN IN SILVER NO DOUBT NECESSITATED THE CROOKS TO RAID TODAY.  THEY GENERALLY RAID ON FRIDAY’S DUE TO THE FACT THAT THE PHYSICAL MARKETS ARE ALREADY CLOSED.

 In ounces, the OI is still represented by just OVER 1 BILLION oz i.e.  1.030 BILLION TO BE EXACT or 147{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT OCT MONTH/ THEY FILED: 18 NOTICE(S) FOR 90,000  OZ OF SILVER

In gold, the open interest  ROSE BY A TINY 2340 CONTRACTS WITH THE TINY SIZED RISE IN PRICE OF GOLD ($1.55) .  The new OI for the gold complex rests at 533,471. NEWBIE LONGS ENTERED THE ARENA TO WHICH THE BANKERS WERE EVER SO WILLING TO SUPPLY.

NO EFP’S WERE ISSUED FOR THE NOVEMBER CONTRACT MONTH.

Result: A SMALL SIZED  INCREASE IN OI WITH THE RISE IN PRICE IN GOLD ($1.55). WE HAVE NO BANK SHORT COVERING HOWEVER WE DID HAVE A SMALL AMOUNT OF NEWBIE LONGS ENTERING THE ARENA TO WHICH OUR BANKERS WERE WILLING TO SUPPLY.

we had: 63 notice(s) filed upon for 6300  oz of gold.

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With respect to our two criminal funds, the GLD and the SLV:

GLD:

No change in gold inventory at the GLD/

Inventory rests tonight: 846.04 tonnes.

SLV

TODAY WE HAD NO CHANGE IN SILVER INVENTORY AT THE SLV

INVENTORY RESTS AT 319.018 MILLION OZ

 

end

.

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver ROSE  BY A CONSIDERABLE 2340 contracts from 203,903  UP TO 206,068 (AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) DESPITE THE FALL IN SILVER PRICE (FALL OF 6 CENTS).   OUR BANKERS WERE AGAIN UNSUCCESSFUL IN THEIR ATTEMPT TO COVER ANY OF THEIR SILVER SHORTS. NEWBIE LONGS IN SILVER ENTERED THE ARENA TO WHICH THE BANKERS WERE OBLIGED TO SUPPLY THE NECESSARY SHORT PAPER

RESULT:  A GOOD SIZED INCREASE IN SILVER OI AT THE COMEX DESPITE THE 6 CENT FALL IN PRICE  (WITH RESPECT TO YESTERDAY’S TRADING). OUR BANKER FRIENDS WERE UNSUCCESSFUL IN THEIR ATTEMPT TO COVER ANY OF OUR SILVER SHORTS . .NO EFP’S WERE ISSUED FOR THE UPCOMING NOVEMBER CONTRACT.  HOWEVER THE BANKERS DID SUPPLY NEWBIE LONGS AS THE BANKERS CONTINUED TO GO NET SHORT AS THEY FELT THEY HAD TO OBLIGE SUPPLYING THE PAPER. NO WONDER THE RAID TODAY AS THE OI IN SILVER WAS GETTING TOO FROTHY FOR OUR CROOKS.

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late THURSDAY night/FRIDAY morning: Shanghai closed DOWN 11.56 points or .34{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} /Hang Sang CLOSED UP 84.97 pts or 0.30{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} / The Nikkei closed HOLIDAY/Australia’s all ordinaires CLOSED UP 0.49{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}/Chinese yuan (ONSHORE) closed DOWN  at 6.6275/Oil UP to 54.71 dollars per barrel for WTI and 60.97 for Brent. Stocks in Europe OPENED MIXED TILTING TO RED  .  ONSHORE YUAN CLOSED DOWN AGAINST THE DOLLAR AT 6.6275. OFFSHORE YUAN CLOSED STRONGER TO THE ONSHORE YUAN AT 6.6239  //ONSHORE YUAN  WEAKER AGAINST THE DOLLAR/OFF SHORE WEAKER TO THE DOLLAR/. THE DOLLAR (INDEX) IS STRONGER AGAINST ALL MAJOR CURRENCIES. CHINA IS NOT VERY HAPPY TODAY.

Read More @ HarveyOrganBlog.com

ONLY CONTRARIANS WILL SURVIVE

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by Egon von Greyerz, Gold Switzerland:

We are currently standing before one of the most unique and frightening periods in history. Never have there been so many extremes in so many different areas. In the last 100 years everything seems to have developed so much faster, including population, technology, inflation, debt, money printing, budget deficits, stock, bond and property prices, crypto currencies etc.

All of these areas are now in an exponential growth phase. The final stage of exponential growth is explosive and looks like a spike that goes straight up. A spike for a major sample like global population or the Dow never finishes with just a sideways move. Once a spike move has finished, it always results in a spike move down.

It seems that everything in the world is developing much faster today like computers and mobile phones or robots. The world assumes that this exponential growth in so many areas will continue or even accelerate further. But sadly, that is unlikely to be the case.

EXPONENTIAL MOVES ARE TERMINAL

There is a more scientific illustration how these exponential moves occur and also how they end.

Imagine a football stadium which is filled with water. Every minute one drop is added. The number of drops doubles every minute. Thus it goes from 1 to 2, 4, 8 16 etc. So how long would it take to fill the entire stadium? One day, one month or a year? No it would be a lot quicker and only take 50 minutes!That in itself is hard to understand but even more interestingly, how full is the stadium after 45 minutes? Most people would guess 75-90{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. Totally wrong. After 45 minutes the stadium is only 7{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} full! In the final 5 minutes the stadium goes from 7{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} full to 100{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} full.

That is the simple explanation why we are seeing this very fast exponential move in so many areas. It is of course impossible to say exactly when the global stadium or individual stadiums will be filled especially since we don’t know the size of these stadiums. What we do know is that when it is full, the water level will not only stop rising but the stadium will collapse.

We are probably now in the final minute, or probably seconds, of the move since we are in the exponential phase that has lasted around 100 years.

WORLD POPULATION DO DECLINE BY 2-3 BILLION

If we look at a few examples of exponential growth, we can start with world population. For thousands of years global population grew very slowly but finally reached 1 billion in the 1850s. Since then it has gone up over 7x to 7.5 billion. Many “experts” now forecast that we will soon reach 15 or 20 billion.

Yes, global population could grow slightly from here but more likely is that we will see a major reduction in the coming decades. It could even happen a lot faster depending on the type of event that the world is facing. Looking at the size of the exponential move, 6.5 billion people have been added to world population since the mid 1850s. A normal correction to such an exponential growth would be 38{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} to 50{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. This would mean that world population could go down between 2.5 and 3.7 billion to 3.8 to 5 billion people. This clearly sounds horrendous and improbable but looking at the chart, it is likely to happen. It is of course possible that we could see some further growth before global population goes down. But the risk of the downturn starting soon is much greater than a significant further increase.

The triggers for such a major reduction could be manifold like war, epidemic disease, economic collapse leading to poverty and famine or a combination of these events.

For example, around 1340-50 there was the Black Plague that reduced the European population by up to 60{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} and world population by an estimated 30 to 50{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}.

A nuclear war between North Korea and the US would eventually involve China, Russia, Iran, Pakistan, India and many other countries and would be just as devastating, probably leading to world population going down by much more than 60{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}

Likewise, a collapse of the financial system, which is not improbable, would be cataclysmic for the world.

It is absolutely clear that one or several of these events will take place in coming years but when exactly is of course impossible to say.

ETERNAL WEALTH PORTFOLIO

Depending on the magnitude of the problem, including the geographical spread, it is very difficult to prepare for it for normal people. Very few have their private jet and residences in many parts of the world. However, for people who have savings, now is the time to take defensive measures if you haven’t already. I know of very old family wealth who for hundreds of years have kept their wealth in property, art and gold with 1/3 in each. With productive land, this has of course been a superb portfolio and will continue to do very well during the coming downturn. Gold and agricultural land are real wealth preservations assets whilst some art today is a bubble asset and therefore will suffer. But 2/3 of the assets in this family’s portfolio are likely to preform extremely well in coming years.

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