The Road Forks

November 3, 2020

Few if any among us who have lived to maturity did not at some time have to make a choice that affected our lives by sending us down a path much different from the one implied by the other choice. Hopefully, by far the majority among us, can look back on the time when we had to choose, knowing that the right choice was made. Some who had not done so, could have been lucky enough to realise the mistake early while there was time to change their futures for the better. The same applies to countries; they too make choices that influence their future development and their dispositions for better or for worse. The US is currently facing such a choice.

While the theme for this week is obvious, it has to be noted that on Friday COVID had a new record new US infections, breaking above 100 000 for the first time and increasing a new record set earlier the week..

The global trend has barely leveled off before increasing again, while the US daily infection rate declined again after a second and higher peak to ramp even higher into record territory. The latest wave is not limited to the US, but several European countries are also setting new high levels of infection with France going back into a state of lockdown.

A key factor in this resurgence of the virus, I think, is the early infectious state of virus victims before they begin to show symptoms as a warning that they have to take precautions. This and increasing complacency among people coupled to the widespread restrictions and other precautions enable the virus to spread widely. A possibility of mutations in the virus has also been mentioned by some experts. It seems as if COVID-10 will be with us into 2021.

Last week I mentioned that Americans have to make a choice. For a very long time, the choice for president used to be between representatives of two parties that did not differ much in terms of changes to the ruling policies. Change happened, in fits and starts as elections came and went, but these tended to be evolutionary; in step with changing global and national circumstances. The 2016 election, however, was, I believe, a watershed election. Ample evidence abounds that since the late 1980s there has been a subversive movement by a clique of powerful people, from across party lines, to execute a ‘New World Order’ coup on the US.

One could speculate about what could motivate such a project that many Americans would regard as treacherous, or consider it the pinnacle of conspiracy theories! By the late 1980s the US was King of the World. Reagan’s poker bluf with Star Wars was breaking up the USSR as an immediate opponent. But China, at that time of no international consequence, was a sleeping giant. Nixon was the first US president to visit China, but GHW Bush was widely considered as “China’s friend”.

I speculate that he must have seen signs that made him realise China was probably going to dominate the future. He must have known how China mustered its people to achieve superhuman efforts with few resources repel the then modern Japanese military might and prevent them from overtaking the whole country. Mao Zedong ruined China by exterminating threats from the intelligentsia and other subversives and effectively stranded the country in the age of subsistence farming. Then came Deng Xiaoping, a new visionary, who during his reign ensured that China would be settled on the path to becoming the great industrial miracle of the 21st century.

Hypothetically, can it be that the concept of the US as a leading light – the leading light? – in a global consortium of countries appears attractive to the conspirators compared to a world in which competition and confrontation between countries remains the old normal? Discarding the freedom and individual initiative that made America great?

Attractive as that my sound, it is certain to attract the loyalty of influential people inside and outside government. If a coup were to be planned, two major efforts would be to have near complete control of the media and to have as many key people in positions of power and influence within key government departments – which would include the FBI, CIA, DoJ, DHS and the courts as could be managed. The third key element to control early on during such a planned takeover of the US would be education – it becomes the duty of schools and colleges/universities to prepare/influence/indoctrinate the younger generations with liberal and progressive ideas and a blinkered world vision for the role they have to play as the shock troops of the revolution.

Is this possible and feasible? In principle it must be possible, because so many of the logical steps for such a coup to be successful appear to have been in place for perhaps decades. The question to ask is whether this is being planned as long term strategy or is it only the result of changing times and fashions and the global liberal trend that had originally set in not long after WWII. There is no clear answer, but the reaction to Trump winning the 2016 election – both from within the executive departments supposed to be loyal to him, all the media and elsewhere on a broad front, including in his own party, makes it not an easy question to answer.

We know where Trump stands; he is for America. Biden is a bit of a dark horse in this race as he has not stated in eloquent clear terms where he stands. However, as a disciple of Obama – who had followed such a strange and convoluted road to the White House – his real motives might not stand the light of day. Could he perhaps be only a figurehead who will be a temporary front for the real powers that be?

Wall Street was supported to almost the day of the election to give credence to the Trump claim that he has rebuilt the US economy. But COVID has not been kind to him and the new third wave is a late blow. Can Biden succeed at the polling booth despite the tatters in which the Democratic party finds itself? Will the result trigger a witch hunt given evidence of possible widespread voter fraud – in the form of the “harvesting” of uncompleted postal votes from the elderly and other people who do not intend to vote and who knows what else? Irrespective of who is doing this on behalf of which party?

While living far outside the US, I know that what choice is being made in the US this week is of great importance to me as well. The result of the election might set the US on a path that almost certainly will result in a political dispensation much like that in China: tight central control of many aspects of life including the absence of free speech, but with the successful Chinese industrial model to ensure a highly productive and disciplined low cost labour force. A system where personal freedom is not considered an essential quality, while democracy and exercising the will of the people are not wanted; these too often result in dissension and a torn society.

S&P500 monthly average. Last = 3425 (Oct 2020)

The chart of the S&P500 monthly average above, updated for October, shows an analysis that anticipated that Wall Street has reached a long term top. There have been similar recent tops that suggested a major trend reversal, but circumstances during much of 2019 and all of 2020 so far explain why previous apparent all time highs were only temporary. Seeing that these circumstances are due to change this week, perhaps this will be the all time high on the monthly chart for some time.

The past few days saw signs of liquidation of futures positions in gold and silver on Comex. Yet the evidence does not favour the longs running for cover. CoT suggests it is more a case of hedge funds reducing both long and short positions, perhaps in order to be better positioned whichever the next trend in the metal prices will be.

We also hear that central banks have ended their decade long buying campaign for gold and have started to sell. It does not take a genius to know where there is now great demand in large quantities for the metal. It would not surprise if the central banks, given their long standing complaint that gold does not offer a return, might welcome an offer to buy at a price that contains a nice premium over spot.

Euro–Dollar

Euro–dollar, last = $1.1647 (www.investing.com)

Initially, the trend reversal at line R ($1.1867) after the break higher above line Z ($1.1788) looked as if there would be a goodbye kiss on linne Z before the bull trend resumed. Then the unexpected happened and the dollar rallied to above 94 on the dollar index. The euro plummeted last week, breaking clear below line Z to look for support at line E ($1.1664).

Has the strong dollar policy returned or is it merely a reflex action given all other market instabilities – a flight to what has been a stable US performer against all foreign currencies since early 2015 against for a long time. On the other hand, it could also be a reaction to the bad news about the European experience with COVID, where infections are also spiking.

DJIA Daily close

DJIA, last = 26501.60 (money.cnn.com)

Last week saw Wall Street wilt a little under sustained selling pressure – was it due to profit taking or to send a message to the polls? Whichever, the monthly chart of the S&P500 earlier shows that there is a good chance that the longer term top is in place. joining the daily Chart of the Nasdaq shown recently. Time will tell, but the week ahead is bound to affect Wall Street perhaps more than investors might like.

Gold London PM fix – Dollars

Gold had to endure a third wave of its own as another bout of suppression took the price well below the $1900 floor, where it was still struggling on Friday. This move lower is probably not directly associated with the election, but influenced by the fact that the longs are so stubbornly holding onto their positions. As mentioned, the last CoT report showed hedge funds closing both long and short positions, which do not help the major shorts to reduce their exposure. It might be some time before the metals can resume their bull trends.

Gold price – London PM fix, last = $1881.85 (www.kitco.com)

Euro–gold PM fix

Euro gold price – PM fix in Euro, last = €1611.24 (www.kitco.com)

Assisted by the euro sell-of last week, the euro price of gold managed to hold in its bull channel KL €1.1601), if barely. Technically that implies that if the bull channel continues to hold, this could be achieved by either a gold rally off the current low prices or it could happen should the euro collapse further against the dollar. What will happen this week should provide some clue to the how gold and the euro are to proceed from here on.

Silver Daily London Fix

Silver daily London fix, last = $23.625 (www.kitco.com)

Silver has broken lower from its bull channel KL ($24.33) after failing with two attempts to break above resistance at line D ($24.98). It closed the week still on a sideways trend below $24 and will have to perform much better soon in order to live up to the expectations for silver as expressed by most commentators. A firs sign that something could be developing, would be a break above steep resistance at line G ($24.87)

U.S. 10–year Treasury Note

The break higher at line Q (0.785%) the failed to hold the next break above line E (0.8015%). The reversal lower however rebounded off line Z – a goodbye kiss? – to end the week a little higher above line E.

Is this move in the yield of the 10-year Treasury note a sign that the prospect of a negative yield is no longer on the table? Despite speculation to that effect, it never really looked to be a possibility. Perhaps a rising trend is to be in place for now.

U.S. 10–year Treasury note, last = 0.874% (www.investing.com )

West Texas Intermediate crude. Daily close

WTI crude – Daily close, last = $35.79 (www.investing.com )

A week ago, the comment was that the price of crude had still showed no direction. Then last week the price dropped below the support of both lines C ($38.72) and G ($8.45) to give a bearish signal. This is still early days and the breaks lower have to be confirmed by the price continuing lower.

The weaker price for crude is likely to be tied to the new third wave of infections that, if the trend continues, could wreak havoc with all attempts to resurrect the economy. 

*********

The California Gold Rush began on January 24, 1848 when gold was found by James W. Marshall at Sutter's Mill in Coloma.

Gold Eagle twitter                Like Gold Eagle on Facebook