I find it fascinating that with metal prices in a slow decline, the silver ETF inflows each day continue to set all-time highs. Current holdings in silver ETFs have reached 664 million ounces. By contrast, the Gold ETFs of late have been experiencing outflows caused by comments from various Fed presidents. Some continue to insist that they need to raise rates at the September meeting.
All the Fed members have to do is open the window and look across the pond to Germany and they will see that the yield on the 2-year bund today is yielding negative .67 percent and their 5-year bund is yielding .50 percent. Bund prices and yields move in the opposite directions and a negative yield implies that investors are paying the German government for the privilege of holding their cash. (If you are thinking that the word “bund” is a typo, bund is the German word for a bond issued by Germany’s Federal Government, equivalent to our U.S. Treasury bond. I just wanted to clarify that.)
We all know that the data does not support a rate hike and all their individual comments only cause unnecessary volatility in prices. If we look today at The CME FED FUND Watch tool, we see that the chances of a rate hike in September are at 15 percent, November is at 23 percent and December at 53 percent.
Most Wall Street insiders believe in December the street will force the Fed hands by pressuring them to put up or shut up on raising rates .25 basis points. I’m sure each of the “hawks” on the committee pray every evening before they go to bed that the data improves and takes the pressure off before they need to decide in December.
At the CME Gold dinner and the IPMI dinner in New York this week, all the chatter between attendees was about the lack of transparency from the Fed. Unfortunately, Fed comments are the ONLY thing that has any influence on the price of gold.
Have a wonderful Friday.
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