Although stocks bounced back on “Turnaround Tuesday” on the belief that contagion has been contained following the rout that wiped out $3.6 trillion from equity markets following Great Britain’s referendum last Thursday to “Brexit” the European Union… we disagree. It’s bigger than Brexit…
Despite many of the world’s largest hedge funds betting billions on a “Remain” victory and British bookies putting the chances of “Leave” at barely 10 percent, in my June 15 KWN interview I said, “Should the ‘Leave’ vote win, we forecast the US dollar and gold prices will spike while equity markets, particularly those currently under downward pressure, will sink deeply lower.”
Since then, gold hit two-year highs, the British pound fell to 31-year lows and currencies around the world hit new lows against the US dollar – or tested old ones – as investors sought safe-haven assets such as the dollar and Japanese yen.
Central Bank Trap:
With the dollar rising as currencies across the globe decline, the US Federal Reserve, which had signaled four interest-rate hikes for 2016 following its 25 basis-point hike in December, the first in nearly 10 years… is now caught in an interest-rate trap.
As repeatedly noted in our Trends Journal, Trend Alerts, Trends Monthly and Trends in the News broadcasts, the higher US interest rates rise and the stronger the dollar grows, the greater the pressure on emerging markets to service the trillions in dollar-based debt they acquired when the Fed flooded the world with cheap, zero-interest-rate dollars following the Panic of ’08 to help stimulate the global economy.
Therefore, as emerging-market currencies continue to tumble as the US dollar continues to rise, the more expensive it is for those domestic markets to service and pay back the debt.
With employment numbers weakening, GDP tepid, manufacturing slumping, durable-goods orders falling and productivity growth declining… several days before the Brexit vote, Fed Chair Janet Yellen, in defense of not raising interest rates, declared, “Recent economic indicators have been mixed, suggesting that our cautious approach to adjusting monetary policy remains appropriate.”
Following her speech, the odds on The Street were 50/50 for a rate increase in 2016. Following the Brexit vote, the odds fell below 10 percent for a US rate hike. And with vows, such as International Monetary Fund Managing Director Christine Lagarde’s “to supply liquidity to the banking system and curtail excess financial volatility,” we forecast the global trend for more quantitative easing and negative/zero/ultra-low interest rates to persist.
The criticism in the “investor” world has long been that gold yields no interest. However, as interest rates around the world keep trending lower and holding cash yields nothing, in a climate of ongoing market volatility, for many, holding gold is considered the ultimate safe-haven commodity. Thus, we maintain our forecast that when gold rises and stabilizes above $1,400 per ounce, it will spike toward $2,000 per ounce.
GOLD CARTEL IN DEEP, DEEP TROUBLE!
Before I get to today’s highly provocative topic – so much so, many of you are likely “fast forwarding” to it – I’d like to address several equally important issues. Starting with a polite criticism of an economist I deeply respect; who, incredibly, doesn’t believe BrExit is a material issue.
Frankly, I’m flabbergasted how such a thought could be considered, much less believed, given its powerful political, economic, social – and above all, monetary – ramifications. To start, how can anyone ignore the fact that global currency markets were crashing before BrExit – with the average currency at, near, or in many cases well below previous all-time lows. And conversely, gold prices, on average, were at, near, or in many cases well above previous all-time highs. Again, before BrExit. Or that the global economy activity was at its weakest level of our lifetimes – and debt, its highest level ever – before BrExit.
All of those horrific trends were accelerated last Thursday; and watching the chaos of yesterday’s European Parliamentary meeting, it couldn’t be more obvious that the already dead-in-the-water European economy is about to go into an indefinite “deer in headlights” halt, kind of like the U.S. economy after 9/11.
Then there’s the terrifying political possibilities – starting with the break-up of at least the Eurozone; and likely, the ill-conceived, ill-begotten, fiat-cancer-plagued Euro currency itself. I mean, what part of the explosion of “leave” referendum demands from France; to Italy; the Netherlands; Finland, and others can anyone miss? Or the “anti-austerity” -read: pro-default – Podemos’ election success in Spain two days later? Or the prospect of a massive Greek default as soon as July – as even if Greece’s government has the will to accept a new “bailout,” there may not even be a functional “Troika” to administer it. Or the explosive anti-establishment sentiment that rapidly engulfed the globe post-BrExit; and likely, put the ultimate wild-card, Donald Trump, in position to claim the U.S. presidency? And above all, the cataclysmic ramifications of crashing currency markets; which even Mario Draghi warned of yesterday, in uttering the following prophetic words – describing not only what he, but all Central bankers are about to commence.
“(I’m concerned that) reactions of countries trying to correct with what they view as wrong exchange rates could start competitive devaluations, and may increase risk premiums and turbulence.”
And NEVER forget that when financial markets materially decline, draconian government responses get bandied about – and followed up upon, if said declines are not arrested. Such as, in late 2008, the Congressional debates about confiscating IRAs. Or heck, this February’s trial balloons regarding a “cashless society.” Which, if it were to occur, would very likely coincide with negative interest rates. To that end, on queue, Larry Summers – who “suggested” the $100 bill should be eliminated back in February – was prognosticating gloom and doom yesterday morning on CNBC. And I assure you, “where there’s smoke, there’s fire.” As in, we’re going to see a lot more of his ilk in the coming months, if markets are not “saved.” Which frankly, I don’t see in the cards – particularly when I see a day like yesterday, when despite blatant PPT and Cartel efforts, bank stocks and Treasury yields still ended the day lower.
Bond yields are lower still this morning – whilst not only has gold recouped most of its Cartel-orchestrated losses as I write at 8:30 AM EST, but silver has surged above the Cartel’s long-standing “line in the sand” at $18/oz, to $18.30/oz as I write. This, with COMEX “Commercial” shorts at an all-time high as of last Tuesday; as in, we’re likely to learn in this Friday’s COT report, that said “Commercials” went A LOT more short capping prices amidst, and in the aftermath of, BrExit. To the point that, it’s becoming crystal clear to the world’s “big money” that not only does the COMEX Emperor have no clothes, but none are available – no matter how intent they are to beg, borrow, and steal them.
Which brings me to today’s main point; which is, that the convictions I had in June 20th’s “finally, the long-awaited ‘Commercial Signal Failure’ is nigh” – penned before BrExit – have since been multiplied a thousandfold; particularly following last Friday’s COT data – which, as noted above, will likely become dramatically more PM bullish in this Friday’s report, a mere two days from now.
To that end, I can’t help but consider incredulously the “analysis” of yet another Precious Metal expert I respect greatly; who first, told readers last week to be leery of the build-up of “Commercial” shorts, just before prices surged post BrExit. Next, he warned of a “deflationary” plunge in gold just just before it exploded to multi-year highs, whilst all other markets declined. And last but not least, he warned that silver’s more modest post-BrExit rise had not “validated” gold’s bigger surge – just before this morning’s dramatic silver increase.
I know, I’m digressing. However, as was the case with the aforementioned economist, neither are seeing the forest through the trees; particularly, as neither is focusing on – nor have they ever – on the most important variable in the Precious Markets, for at least the 15 years I have been watching them. Which is, the Cartel – i.e, U.S.-government-led – suppression of prices that is quite visibly reaching its practical limits. Which, when it is inevitably – and perhaps, imminently – broken, will unleash a tsunami of deadly monetary forces unlike anything the world has ever seen. And I do mean the world, as never before in history have all currencies been backed by nothing.
Frankly, the Cartel’s final “death throes” couldn’t be more pathetic. Such as, for instance, the laughable “margin increase” the COMEX instituted Monday night on gold trading; trying to regain past manipulative glories, but instead, falling flat on their faces as 36 hours later, gold prices are unchanged, and silver much higher. Or the U.S. Mint reporting that June silver eagle sales are well below all other months this year – when in fact, dealers like Miles Franklin are busier than at any time all year.
Yes, I know “they” have found ways to escape their destiny time and again over the years. Thus, inertia tells us to be wary; and in many cases, to continue paying attention to clueless “technicians” that prognosticate negativity and peddle fear, to the point that they often prevent you from protecting yourself from what we all know is coming. That said, I can count on two hands the amount of people on the planet that have studied gold and silver manipulation as much as myself. And from that analysis, spanning every trading day of the past 14+ years, everything I have come to know tells me the most sinister Precious Metal suppression scheme in history is on its very, very last legs.
To that end, I encourage you to “spread the word” – globally – that “the gold cartel is in deep, deep trouble.” Present the evidence I have presented you, and make sure everyone in the financial world is aware. Together, we are legion. And together, we can help push the Cartel over the edge. I firmly believe this, with all of my heart!
P.S. As I edit, Germany just “blew up” Italy’s insane “bank bailout” proposal, causing bank stocks throughout Europe to plunge anew. This is EXACTLY what my article yesterday was about, titled “BrExit, the ultimate money printing scapegoat, is already being capitalized on!”
Author : Andrew Hoffman
Published: June 29th, 2016
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