With the price of gold on the move, surging above the $1,225 level, here is a great contrarian indicator for gold. Also, a quick look at Saudi Arabia’s US Treasury holdings, plus China, Japan and the ECB.
Saudi Holdings Of US Treasuries
October 15 (King World News) – Here is a portion of what Peter Boockvar wrote today as the world awaits the next round of monetary madness: As if the investing world wasn’t complicated enough to figure out we now have the Saudi Arabia situation. The potential oil impact is one thing, now we have to watch the flow of Saudi Arabian investment…
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Boockvar continues: SoftBank stock fell 7.3% in Japan as not only did Saudi Arabia invest $45b in the first Vision Fund, they committed just last week to invest another $45b in the 2nd Vision Fund. Also, as of July in the last US Treasury International Capital flow data, Saudi Arabia held $167b of US Treasuries. That is their biggest stash yet. What will they do with that if this escalates and we ‘punish’ them?
A Great Contrarian Indicator For Gold
According to the CFTC data on Friday for the week ended last Tuesday, the net speculative short position in gold almost doubled w/o/w to the highest level since April 2001 (typically a great contrarian indicator). With gold up another $12 today, it’s now up $42 since last Tuesday to the highest since late July.
China, Japan & US Treasury
The Shanghai comp after the overnight 1.5% drop is now half the level it was in June 2015 and 58% below its peak in October 2007. With a current valuation (moving target with slowing growth) of 10.5x earnings and 9x 2019 current estimates, it’s one of the cheapest in the world for anyone with a time horizon more than a year or two.
After I highlighted last week the nonsense of calling out China as a currency manipulator, I saw a Reuters story over the weekend that Treasury Secretary Mnuchin “wants to include a provision to deter currency manipulation in future trade deals, including Japan.” We know Japan is the king of currency suppression but the Fed is pretty good at it too. We’ll see this week if the Treasury Department takes the advice of his staff or not in determining whether China is.
ECB Headed For Trouble With Rates Already Negative
Two and a half months before the end of ECB QE to be followed when, and if, the ECB decides to get out of zero interest rate policy, Governing Council member Olli Rehn today said “We see some signs that the Phillips curve is waking from its coma. It’s maybe alive but not kicking very much at the moment.” The ECB might go in to their next downturn, whenever that might be, with rates still negative.
***KWN has now released the powerful audio interview with John Mauldin discussing the gold market, this week’s stock market plunge, how QT will impact major markets, what will trigger the Fed to initiate the next round of QE and much more and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
ALSO JUST RELEASED: Greyerz – This Will Make The World As We Know Unrecognizable CLICK HERE TO READ.
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