Commodity Trade Mantra

Who Says You Can’t Pay Your Debts with Gold?

Who Says You Can't Pay Your Debts with Gold?

Who Says You Can’t Pay Your Debts with Gold?

This will be short-n-sweet today, I promise you that! The dollar is mixed again today, with some currencies like the Russian ruble, and Mexican peso really pushing the currency appreciation envelope this morning. The Aussie dollar (A$) is down, but the New Zealand dollar/kiwi is up, so you can see it’s one of those days, where the sentiment toward each respective currency is here and there, everywhere! The Chinese renminbi finished out the week on a down note, and was weaker for the week. That’s funny “weaker for the week”…

The price of oil is up to nearly $34 this morning at $33.74. I received an email from a dear reader yesterday letting me know that I had missed an opportunity badly, to talk about the rise in the Canadian dollar/loonie. I told him that I had seen it, but had just talked about the rise in the loonie last week, and didn’t want to sound like a broken record. So, in an effort to not sound like a broken record, the loonie is trading over 73-cents, and has really made a statement about the price of oil, I think.

See if this registers on your “that makes sense” meter… the loonie has rallied on the thought that the “lows” have been put in for oil, because there are no other reasons for the loonie to rally… New PM Trudeau is making all kinds of noise about deficit spending his way to the moon, and interest rates are near zero.

The price of gold is flat this morning to down a buck or two, after another day where gold was higher in price (to $1,244) and then saw some major selling in the afternoon that brought it down to $1,232, which is where it ended the day, up $4 on the day. Moving in $3 and $4 strides each day, might make those that don’t want to see gold soar, happy, but it really drives me to yell at the walls, which I can’t really do here, unless I want to wake up the entire condo! On a happy note, gold is up 16.44% so far this year.

In the days 2002 through 2011, and taking out 2008, for we all know the hell the markets went through in 2008, the trading in gold was simple – buy in January, for it would be the lowest price of the year… Could we be going back to that? I can tell you that it sure would make me a happy camper!

Speaking of gold… Well, who says you can’t use gold to pay your debts? Venezuela just did it! In a story on CNN yesterday, a report from the Swiss Federal Customs Administration, reflected that $1.3 billion worth of gold bars were received. This was believed to be payment on two big bond payments due this month, totaling $2.3 billion, beginning this Friday with $1.5 billion payment due to bondholders.

With a loss of revenue from the drop in the price of oil, Venezuela is probably going to have to default on future bond payments, with the next wave of them due this fall. I wonder how the anti-gold crowd will spin this story that gold was used as a payment on debt?

The G20 meeting began overnight in Shanghai, and the Bank of England (BOE) Gov. Mark Carney was one of the first speakers. I was attempting to read what he had said, and found myself mocking his words, taunting him, and making fun of what he had to say. It was pretty hilarious if you had been here. Anyway, Carney warned the attendees that countries should not “export their problems through currency depreciation, there is no free lunch”. He went on to say stuff like, “it’s a myth that Central Banks have run out of ammunition” and that “G-20 members need to urgently coordinate supply side initiatives as they are falling short on previous pledges.”

He did say something though that I sort-of agreed with; “The global economy risks becoming trapped in a low growth, low inflation, low interest rate equilibrium”… Hey, Mark! You think? Really? They run the risks? Aren’t we already there? We’ve got more than just a couple of countries on the list of those having negative rates, and I don’t see, or hear any G20 countries talking about hiking rates, do you, Mark? I’m going to stop here, my mind is telling me to say things I’ll regret later.

The U.S. Data Cupboard yesterday finally had some good news for the U.S. economy, as orders for Durable Goods x-transportation, which can really make this data wacky at times, was up 1.8% in January, vs. the -4.8% negative print in December… and the CAPEX Goods Orders were down -0.4%, after you take out transportation (those airplane orders can really make things look downright silly at times with this data, so I feel compelled to take them out).

The U.S. Data Cupboard gets unloaded today with a laundry list of data prints, most “not worthy”, but still a ton of prints… Like a revision to fourth QTR GDP (like we really care about this data now!), fourth QTR Personal Consumption will also print, along with Personal Income and Spending, and the PCE data for January… Remember, the Fed prefers the PCE data to the stupid CPI… And that’s not all! The U. of Michigan Sentiment for Feb will print too before we turn out the lights the party’s over in the Data Cupboard today…

There was something else that printed yesterday that the folks over at thought to be quite important, and felt like the markets were missing “it”. The Kansas City Manufacturing Index, for the region printed at negative -12 this month, following a negative -9 print in January… so, pay attention here…

You can find this on and I thank Ed Steer for highlighting it this morning otherwise I would have missed it too! But here’s the skinny on this data…

The Kansas City Fed Composite Index has not been positive for 13 months and February’s below expectations print of -12 is the worst since April 2009.

The Fed unleashed QE3 the last time KC Fed dipped… and this time is dramatically worse, as both MoM and YoY, every single component of the KC Fed survey is down, and down hard with employment-related indicators collapsing.

Business is off at levels not seen since the recession of the early 1980’s.

We are starting off to a very slow year. Shipments are down 22% compared to last year. Margins are decreasing. We don’t know how our competitors keep lowering prices, as this is not good for the long haul.

Chuck again… WOW! And we’re not supposed to be worrying about the train leaving for Recessionville? Tell, me again, tell me true, why is that?

Alrighty then, time to get off this bus today, and send you on your way to a fantastico Friday. I won’t make there today, but go ahead and have fun without me! HA!



Courtesy: Chuck Butler

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