Gold’s Post-Fed Letdown

  • Dammit, Janet: Fed sends gold on a wild ride
  • Another “monster bear raid” — Rickards says it can’t go on forever
  • 20 years of evidence that Apple is about to resume its rally today
  • So much for the second-quarter manufacturing recovery
  • Sudden progress on the Texas Bullion Depository
  • More reasons good help is hard to find

Say this much: Someone made a lot of money yesterday off the price action in this chart…


As we mentioned yesterday, the gold price jumped the moment some disappointing economic numbers came out. Retail sales fell out of bed, which bodes ill for second-quarter GDP. And inflation, from the Federal Reserve’s standpoint, is moving in the wrong direction.

The thinking was that even though the Fed was set to raise interest rates later in the day, the stars were aligning in such a way that in time the Fed would be forced to move in a direction of “looser” monetary policy — which would weaken the dollar and strengthen gold.

But if Fed chair Janet Yellen is concerned about a falling inflation rate, she didn’t let on during her quarterly press conference.

Inflation as measured by the consumer price index (yeah, we know it’s bogus — just play along with us here) has decelerated from a 2.8% annual clip last February to 1.9% in May.

Yellen doesn’t want to hear about it: “The recent lower reading on inflation,” she said, has “been driven significantly by what appear to be one-off reductions in certain categories of prices such as wireless telephone services and prescription drugs.”

Yes! It’s a cellphone price war that’s dragging down the inflation rate! Don’t you dare suggest that businesses are reluctant to invest and consumers are reluctant to spend!

Yellen’s decidedly hawkish tone coincided with that big drop in the gold price yesterday afternoon. It’s not getting any better today; at last check the bid has slumped to $1,253.

That big drop was reminiscent of another big drop a week ago today, coinciding with former FBI chief James Comey’s testimony to Congress. “Some mystery seller or sellers dumped the notional equivalent of $4 billion in gold futures,” says Jim Rickards of that day.

“Four billion dollars is the equivalent of about 90 tonnes of gold. Just to put that in perspective, total annual output of all the gold mines in the world is about 3,100 tonnes per year. So 90 tonnes represents about 3% of global annual production. That’s a lot of gold to sell with one phone call.”

Of course it’s not gold that gets traded when gold makes these sudden down moves. It’s only paper.

“Do you know what would happen if you had to deliver 90 tonnes of gold on short notice to cover a physical sale?” Jim goes on. “You couldn’t do it. There’s no way you could source that much gold on short notice, or even within months.”

It’s an old story by now. “That these monster bear raids,” Jim goes on, “are a kind of market manipulation that flies in the face of fundamental physical supply and demand. In the short run, it’s not hard to trash the price of gold by ‘painting the tape’ on the Comex.

“Whether the selling comes from China (trying to keep the price down while they secretly accumulate), a hedge fund (it’s just good, clean fun to them) or Western central banks operating through undisclosed agents at the Bank for International Settlements in Basel, Switzerland, doesn’t really matter.

“What matters is that all manipulations fail in the end,” says Jim.

“The infamous gold corner led by Jay Gould and Jim Fisk in 1869 failed. The London Gold Pool of the late 1960s failed. The U.S. and IMF gold dumping secretly approved by Henry Kissinger in the late 1970s failed. Orchestrated gold dumping by the U.K., Switzerland, France, Italy and Germany in the 1990s and early 2000s under the Central Bank Agreement on Gold, also known as the ‘Washington Agreement on Gold’ (the name gives it away), failed. Net sales by central banks stopped cold in 2010.

“Every historical attempt to suppress the price of gold has failed. In the end, the price of gold goes higher because the value of paper money goes down.”

This round of efforts will fail too. And in the meantime, gold still has that “constructive” chart pattern of higher highs and higher lows going back the last six months. Gold isn’t in trouble, even short term, unless it sinks to $1,218… and it’s still $35 above that level.

[Ed. note: We had a strong response to Jim’s live online briefing last night — about a market anomaly soon to hit junior gold stocks. And we’re talking only days.

Some of these companies are likely to get slammed… but others will be propelled to all-new heights. If you want to learn more about this gold anomaly and how to position yourself ahead of impact… here’s a chance to watch a replay of the webinar.

It will stay online through noon tomorrow. After that, it will be out of date, so it pays to watch now.

To the stock market — where tech shares are dragging down the major U.S. indexes.

The “Big 5” companies that have come to dominate the S&P 500 have resumed their sluggishness that started last Friday. As we write this morning, Microsoft is down more than 1%. Apple is down more than 1.5%. Facebook is down nearly 2%. Alphabet (Google) and Amazon are down more than 2%. With that, the S&P 500 is down about two-thirds of a percent.

No, there’s no major news driving the action. As noted here on Monday, the tech sector was due to take a rest.

That said, the weakness in Apple of late might be a temporary thing. Certainly that’s the takeaway from AAPL’s “Kinetic Composite” chart.

As we explained yesterday, the Kinetic Composite is our Jonas Elmerraji’s proprietary indicator that averages 20 years of performance to indicate the ideal time of year to buy and sell. It can be applied to an index like the S&P 500… or it can be applied to an individual stock.

Based on AAPL’s price action from 1997–2016, the first “Kinetic Window” of the year starts on Jan. 27… and ends on May 27. That’s what’s shaded in green on this chart. The blue line, meanwhile, is AAPL’s share price during 2017.


Wild, huh?

As it happens, AAPL has two Kinetic Windows during the year. And the next one opens… today. It will run for nearly six months. Over the last 20 years, this 175-day window has generated average returns of 35.5% in AAPL.


As we said yesterday, using Kinetic Windows can generate major outperformance. Over the last 20 years, AAPL has generated an average annual return of 24.6% excluding dividends, according to Bloomberg data.

But by holding AAPL only during its Kinetic Windows, that turns into a 51.7% annual return.

Think about that: Just by staying out of AAPL during the white spaces on that chart — about 75 days of the year — you can double the performance of merely buying and holding.

We’re days away from taking the wraps off this new strategy. Stay tuned for updates…

The day’s economic numbers once again show a yawning gap between “soft data” and “hard data.”

“Soft data” are what come from surveys. To wit, this morning’s Empire State Manufacturing Survey for June, which rings in at a silly-good 19.8 — up from a minus 1.0 reading in May.

“Hard data” are real numbers of goods produced and sold. To wit, this morning’s industrial production figure for May — which was ruler-flat, confounding expectations for a 0.2% increase. The manufacturing component of this number tumbled 0.4%. It turns out the strong reading the previous month was a one-shot deal.

From our lips to Texans’ ears? Two days after we noted progress on the Texas Bullion Depository was moving at a snail’s pace, the pace is suddenly accelerating.

Indeed, Texans might be able to stash their gold and other precious metals at the depository as early as next January, based on an announcement yesterday.

The state comptroller has chosen Lone Star Tangible Assets as the contractor to operate the depository. Based in Austin, the company will use existing vault space to accommodate depository customers sometime next year. And it will build an all-new vault in the Austin area specifically for the depository; it could be ready by the end of 2018.

But customers won’t have to schlep to Austin. “We envision a network of licensed and insured depository agents to help Texans sign up for our services,” says state comptroller Glenn Hegar.

Ironically, though, the original reason for building the depository appears to no longer be operative. The whole idea, back when it was first mooted in 2011, was to house the massive gold stash owned by the endowment for the University of Texas and Texas A&M.

But it appears that bullion will stay at HSBC in New York; endowment managers say the Texas depository would have to be a member of the Comex trading platform. At this time, the depository has no plans to join the Comex. Hmmm…

“I thought you might want some feedback from someone actually trying to run a business,” writes a reader on the subject of small business having trouble finding qualified help. “After all, opinions are a thousand Zimbabwe dollars a dozen.

“Running a construction business in Southern California, I can tell you it has been a real challenge finding people who actually want to work. We are happy to train new people, but they have to actually be willing to do work for their money, so we test for that first. Usually, we go through three or four new people before finding someone. We don’t actually fire them, you understand. They just sort of wander away when they realize a construction site isn’t a video game.

“About the end of last year it became really hard to find anyone at all to even try out, as the building boom (especially in remodeling) was in full swing. That is still the case here, by the way. And here is where it gets interesting. In desperation, we tried going broad on Craigslist, and this is where the real problems that businesses have come into sharper focus for me.

“We used to keep the outreach for new personnel fairly narrow – particularly, by getting referrals from current employees. That wasn’t working, and so we went nuclear and I immediately got introduced to the hiring laws of the great state of Kalifornia. The most unqualified people imaginable started — and continued — calling.

“The main impression I got was that if I pursued any, I would have to be extremely careful about anyone I might accidentally overlook and decide not to hire because I didn’t really think that person was capable of pushing a wheelbarrow around all day. Several seemed to belong to special groups who appeared to me to be crouching in waiting with bared fangs for an unsuspecting employer who might have deep pockets and a loose understanding of discrimination laws.

“It was a lengthy travel to gain even a minimal working knowledge of the rope snares and spiked pits enshrined into the local tribal law. We are still undermanned and have turned away numerous potential clients but there is no way I want to walk through enough coals to solve that problem.

“I am certain that these types of official barriers are the real reason for any current underachievement in the real business world.”

“I operated small businesses for 30 years, from 1962–1992,” writes another reader.

“In the early years I enjoyed hiring kids just out of school and training them to be of value to the business, but in the latter years the politicians kept raising the minimum wage to the point that I could no longer afford to do that, so I had to resort to hiring older people who at least knew some of the basics of life.”

The 5: Sheesh, and that was a quarter-century ago.

Another factor now is surely the health insurance Catch-22. You attract more qualified candidates if you offer health coverage… but will they produce enough revenue to justify the ever-rising cost of that coverage?

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. During his live webinar last night, Jim Rickards shared the following chart…


That’s right. Since the Federal Reserve began a new rate-raising cycle in December 2015, gold has made a big move up every time the Fed has jacked up the fed funds rate. Those are the red lines on that chart.

Assuming this time is no different, gold will soon be on its way to $1,350 — nearly a $100 move. The $22 drop in the last 24 hours will be only a memory.

Meanwhile, far bigger moves are coming to a select class of junior gold stocks — a looming market anomaly Jim has been watching for weeks. It was the main topic of his webinar. If you want to watch a replay, here’s where you can do so.

But please note the time-sensitive nature of this information. It will be out of date as early as noon tomorrow. This is the last time we’ll be telling you about it. Watch now while the information is still fresh and there’s time to act.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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