Faber News Flow

Governments around the world have recently been on a "gold-buying spree."  These countries have a tactful reason for doing so, and this reason is directly tied to the anticipation of the inevitable end of US hegemony. Central banks are  among  the largest purchasers of gold.  So far in 2019, they have  bought  145.5 tons of gold, which is more, in a quarter of a year, than central banks have purchased in the preceding six years.  To put it bluntly, this figure represents a 68 percent increase from the year before. Last year, central banks increased their reserves by 651.5 tonnes compared to 375 tonnes in 2017. Reportedly, this is the largest net purchase of gold since 1967. Most interesting, however, is the class of countries that we find are turning to hoarding more and more gold, many of which are deemed to be adversaries of Washington. As always, Russia is the largest buyer of gold.  In 2018, Russia's Central Bank purchased 274.3 tons of gold. It also dumped 84 percent...

http://www.businessinsider.com/china-rare-earth-list-of-us-products-could-affected-2019-5 Fabrizio

The current boom is heavily built on credit.  This is because in today's fiat money regime central banks, in close cooperation with commercial banks, increase the quantity of money by extending loans – loans that are not backed by 'real savings'. The artificial increase in the supply of credit pushes market interest rates downwards – that is, below the levels that would prevail had there been no artificial increase in bank credit supply. As a result, savings decline, consumption increases and, investment takes off, and a "boom" gets going.  However, such a boom can only last so long.  Its continuation rests on more and more credit being fed into the system, provided at ever lower interest rates. The last ten years provide a good illustration: The Fed's lowering of interest rates and monetary expansion in the financial and economic crisis 2008/2009 has helped the banking industry to get back to its business of churning out more and more credit (see chart a). As...

Gold put in a strong performance with the St. Louis Fed president presenting a case for cutting rates. St. Louis Fed president James Bullard helped light a fire under gold today,  Yapping About Too Little Inflation and the Need for Rate Cuts . Technically speaking, the $1350 to $1370 area has been one tough nut for gold to crack. On a weekly chart, gold has failed in this area five or six times, depending on how one counts. Gold a Hedge, But Against What? Some view gold as an inflation hedge. It isn't. Gold is a hedge against the notion that the Fed has things under control. Gold fell from $850 an ounce in 1980 to $262 an ounce in in 1999 with inflation every step of the way. People believed Greenspan, the great "maestro" had everything under control. It was an illusion. Faith in central banks is about to be tested again.

US stocks futures spiked just before 8 am Eastern Time on Tuesday after the Chinese Ministry Commerce struck an unexpectedly conciliatory tone, saying it believed trade differences should be "resolved through dialogue." CHINA HOPES U.S. TO STOP WRONG DOINGS,MEET CHINA HALFWAY:MOFCOM CHINA COMMERCE MINISTRY SAYS THE DIFFERENCES AND FRICTIONS BETWEEN CHINA AND THE U.S. SHOULD BE RESOLVED THROUGH DIALOGUE AND NEGOTIATIONS This was a marked departure from rhetoric bashing Secretary of State Mike Pompeo and a travel advisory warning about the risks of traveling in the US. Nasdaq futures shot higher, setting the stage for an even more robust recovery after the index tumbled into correction territory on Monday. To be sure, Washington and Beijing have tried this approach before (remember the 'trade truce' that now seems like a distant memory?). The approach worked until a deal was reportedly imminent, at which point Beijing reneged on all of its agreements.

US equity futures and Treasury yields are trading higher this morning following yesterday's tech wreck and bond buyathon but  relative strength signals are flashing warning signs  that the risk of reversion looms large... Treasury yields are 'most oversold' (bonds most overbought) in 21 years... And stocks are most oversold since the December lows... We also note that bond vol is exploding higher as equity vol remains calm (and FX vol is dead)... We suspect the real canary in the coalmine for a bounce will be HY credit which has been the high-beta horror of this latest collapse... And has the 'correction' run its course as liquidity is re-injected to save the world? So which is it?  Beware the bounce or buy the dip?

U.S.-China Trade War: Who Is Winning? U.S.-China monthly trade deficit in goods The Shrinking Trade Deficit This round U.S. 01 China 00 For Trump there's only one metric that shows whether the U.S. is winning or losing the economic scrum with China: the bilateral trade balance. The number still shows he's behind by a large margin, but the trade deficit with China has indeed narrowed in recent months. While economists debate who deserves credit for the recent shifts and whether trade balances are a useful metric at all, the U.S. gap with China was the narrowest in three years in March. Score one for the U...