disregard the noise

Good morning and welcome to the last “Top Shelf Thursday” of July. Wow this month has flown by! Anytime I think about “time flying,” it reminds me of when my little niece Betsy explained why time is so different for youngsters than adults. She must have been around eight years at that point and she explained so matter-of-factly that when you are eight, a year is a big percentage of your short life, but when you are as old as Uncle Paul, it’s like a single day! So full of smarts and sense. And so true. Wonder what she’d say about precious metals? I’ve got a pretty good idea! So let’s refill our cups and pull up a chair. Steely Dan greets me this morning with their hit, Rikki Don’t Lose That Number.

As I shared on Tuesday, I am really not expecting huge price movements with gold and silver over the next few weeks. Yesterday, gold closed up +$7.30, silver was up +$0.15, platinum saw a +$11.00 increase, and palladium was up +$26.00. These increases seem to be short lived as overnight trading has pushed gold and silver below my reported spot prices from Tuesday morning. So although all of the guru’s and prognosticators out there are reporting great things in store for the metals, I’m taking a wait-and-see attitude. Of course it’s always easier to predict the past! HA!

This morning, as I’m reading my news and updates, and deciding what’s important enough to share, I’ve run across Kevin Muir’s “The Macro Tourist” blog titled “Gold: Come’On – Admit It – You Want To Own It.” In it, Muir explains…

"The gold bears have taken a special glee in this decline as they gloated, “see? gold can’t even go up in the midst of a trade war!” Well, I take the opposite view. Gold didn’t fall amid a trade war, it went down because of the trade war. We all know gold is inversely correlated to the price of the US dollar. Yet this relationship goes through periods where it is more or less correlated.

But what is interesting is gold’s special attraction to the 900 SDR level since the Chinese were admitted into the Special Drawing Right basket in October of 2016. However, I have an even better chart to show you. Here is the price of gold as measured in CNY:

Look closely at the price action of gold measured in CNY. It is becoming less and less volatile… It’s almost as if someone has pegged the price of gold in CNY. Suddenly it becomes a little more clear why gold has been falling even during a “trade-war”.

In response to the Trump tariffs, the Chinese have allowed CNY to fall, and in doing so, the price of gold has been dragged down as well."

Okay, I’m back. Wow! That’s an interesting take on things. I do believe that China now holds gold reserves north of 30,000 tons in contrast to the U.S. which has either sold or leased much of its gold. I further believe that in the next two years, we’ll be seeing the CNY (Chinese Yuan) tied to gold which will further their desire to have the Yuan be an acceptable unit of trade and one for Central Banks to retain in their portfolios.

So what’s all this mean? How will this knowledge, if it’s accurate, help me? If he's right and obviously, if the USD is losing it’s footing to the likes of CNY and even the RUB (Russian Ruble) due to questionable gold holdings, funded and unfunded liabilities, and economic manipulations, the swamp of ours had better drain sooner rather than later. And I’d consider adding a small amount of precious metals to everyone’s portfolio to minimize your exposure to the coming inflation. But that's just me.

Well, I’ll let that be it for today. Go out there and make a difference! See ya later!

*Disclaimer: Precious Metal Musings™ is written for entertainment and news purposes only and should not be used in making purchases and/or sales of precious metals.