History As She Is Wrote – AGAIN

The Constitution of the United States is an awesome document that has stood the test of time, despite having been amended a number of times to allow for changing circumstances, much of these related to individual rights and privacy. Some of the amendments clear up ambiguities in the original text and others bring clarity with respect to state rights. The US Constitution is perceived as sacrosanct and the final constant in matters legal. Yet there are at least two instances when actions were taken contrary to its edicts. The first time has had bad consequences for the US; the second, I believe, will be a disaster if its consequences will not be corrected in time.

The COVID pandemic continues throughout the world and the US. The recent variant that is said to be both more infectious and virulent is also spreading. At the same time, deaths in reaction to the vaccines are mounting – not to extreme numbers, but sufficiently high and widely reported so that people will hesitate before making the choice of living with the risk of contracting the virus or taking the vaccine. The target of 67% inoculations that is expected to confer herd immunity seems a long way off. That is, if the vaccines do protect against all new variants of the virus.

2021 will be an interesting year in more than one context!

Throughout the 1800s there were a number of occasions when the banking system experienced upheavals of some kind, with attempts to establish a ‘superbank’ of some kind or another as one of the reasons for dispute. This intention finally came to a with the secretive establishment of the “Federal Reserve System” – a political euphemism for a privately owned central bank – promulgated by Congress in 1913.

Beliefs on whether the Fed, as it is widely known, is good or bad for the economic health of the US and its people divide interested parties into polarised factions. By all accounts John F Kennedy was opposed to the issuing of US currency by the Fed, against the dictates of the Constitution, which reserve this right for Congress. It is also well known that president Trump has the dissolution of the Fed on his agenda.

The original mandate of the Fed was, “It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system”, often stated as including sustaining the value of the dollar. The success of the Fed in this respect is measured by the purchasing power of the dollar today by comparison with 1913. What had cost about $1 in 1913 today costs more than $26 – which implies the dollar is today worth about 3.9% of its 1913 value.

In terms of a stable currency, the Fed has been an abject failure, both before and after the dollar was taken off the gold standard in 1971, and the effect on the well-being of Americans, mostly the middle class, has been severe. The latest event of blatant disregard for the Constitution, if allowed to run the current course, will be even worse on the majority of Americans. This refers to the deviation from the voting procedures as stipulated in the Constitution and in State legislation which enabled widely reported yet otherwise ineffectual instances of voter fraud.

In this as yet still uncertain time, it is too pre-emptive to anticipate what could happen in the US under a new extreme left government. However, reading about calls to censor social media of all “right wing fascist” content, previously known as traditional conservative views, and that Trump supporters should be stripped of diplomas and degrees by the colleges that issued these and the promised demise of the NRA and open borders and so on, make it clear that the new US will bear very little resemblance to the one of the first 200 years of its existence.

In fact, it then seems set to resemble the China of the last 80 years much more than the “. . . land of the free and home of the brave” that applied until a quite recent shift to restrict free speech and extreme intolerance of true diversity, which stand to become the general rule and not merely a prerogative claimed by the left.

Last week saw a renewed attack on the gold and silver prices. 2021 started off well, as often happened in the past. But then the attacks came again, which were more intense than usual. The obvious explanation, as mentioned last week, is that the steep rally in the crypto currencies caused a real panic among the members of the Cabal. The late rallies during the trading day that were quite common in the past, now have become a flat line, like that of a patient who has expired, until trading begins in Asia again.

Typically, the first move in Asian trading is down, followed at the usual regular intervals by further intense attacks during the day. The obvious desire of the Cabal to reduce their short positions before the near inevitable happens to the precious metal prices, has achieved some success, but the process, as it happens, is more like death by a thousand cuts – relatively small successes soon followed by a brief recovery when buyers try to gain the upper hand.

The probability of a steep decline in the COMEX OI of gold and silver under current political and economic conditions, locally and globally, appears to be rather low. This does not mean that the attacks will cease; only that their effect will fall short of expectations and a time will come when the attacks become counter-productive. Buyers will begin to ambush the sellers in ever larger numbers when demand for a safe haven other than the crypto currencies turns to the precious metals.

The rising trend in the yield on the 10-year Treasury and price of crude oil is still in place, but marked time last week. Should these continue, as expected, the warning calls for coming inflation will proliferate – also if the promises of large amounts of helicopter money for COVID relief come true.

Euro–Dollar

The recent euro rally ran out of steam at line P and the top of channel KL. The euro correction accelerated to seek support at line Q, still well within channel KL, at least for the time being. Students of Elliott waves will view the current correction as the larger B wave after having completed the normal 5-wave rally.

In that case, it can be expected that bull channel JKL will not hold. Until that were to happen, it is assumed that the bull market is still intact and the dollar will end its new rally to resume the bear trend that has been in place since the high above 103 that was set in March 2020, as the COVID scare took off.

Euro–dollar, last = $1.2078 (www.investing.com)

DJIA Daily close

Last week, the DJIA settled in a narrow band below the recent high at 31 098. The week ended on Friday with a loss of 177 points, on higher than average volume – which implies that the selling was met with substantial buying to hold the market up. If sellers had dominated with little buying, the trading volume would have been much lower. This also explains the recovery after the early loss of near 400 points.

This DJIA closed lower on 4 days last week, with Friday’s decline almost double the loss on Monday. Should Wall Street turn bearish, much of the profits made there could find their way to the crypto currencies.

DJIA, last = 30814.26 (money.cnn.com)

Gold London PM fix – Dollars

Gold price – London PM fix, last = $1839.00 (www.kitco.com)

The price of gold has just started to recover to break above the key resistance at the top of the broad channel XYZ when the attack last week sent it below line Z to also break marginally below the steep support along line G. The London PM fix has to recover back above $1870 to make it back above line G again; the alternative is a sideways trend to test support at the bottom of channel JKL in due course.

While the crypto currencies have drifted mostly sideways after their recent steep rally, there is still much attention on their stellar performance and this will not sit well with the large shorts in the PM market. The attack last week has spooked the buyers and the gold OI dropped almost 4000 contracts on Friday, but at about 546 thousand the level is still very high.

Euro–gold PM fix

Euro gold price – PM fix in Euro. Last = €1519.93(www.kitco.com)

The euro price of gold is still hanging near the bottom of megaphone JL and barely holding in channel KL. A definite break below the channel will be bearish for the near to medium term – unless the break is only a brief and limited spike lower.

Silver Daily London Fix

The silver chart bears a close resemblance to that of gold. The spike lower late last week also penetrated below the steep support line G to end close to good support at line B. There is technical hope for recovery as long as support at line B and within bull channel KL holds.

Silver daily London fix, last = $25.245 (www.kitco.com)

U.S. 10–year Treasury Note

U.S. 10–year Treasury note, last = 1.087% (www.investing.com )

Last week there was little change in the yield on the US 10-year Treasury. The yield is still holding barely onto the break above channel RQ – perhaps a reaction to be more stable now that the dollar index has settled above 90 again?

West Texas Intermediate crude. Daily close

WTI crude – Daily close, last = $52.36 (www.investing.com )

The new rally in price of crude hesitated and held briefly at the resistance at line Y before breaking higher and then also broke into channel CB. While break higher and channel KL hold, the way is clear to reach line P near $60 in due course. Much of the behaviour of the oil price will depend on how badly the raging COVID will affect normal US business operations in weeks to come.

© 2021 daan joubert 

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