October, 2017 - Week 5 Edition

Will the “Lucky $1,300” Gold Barrier Be Broken After Halloween?

Gold recovered well on Friday after falling below $1,264 on the opening.  The main reason for the drop was a series of positive economic reports on Wednesday and Thursday and then strong earnings reports by the leading tech stocks after hours on Thursday, driving the tech-heavy NASDAQ index up 100 points (+1.5%) on Friday’s opening.  Gold has been in a narrow trading range of $1,265 to $1,285 in the last two weeks of October, but there are some dramatic changes coming soon, which may lift gold above $1,300.

There’s a lot of drama brewing in the major central banks of the world.  First of all, the Bank of Japan meets on Halloween Day (Tuesday), then Federal Reserve meets on both Halloween and All Saint’s Day (Wednesday), then the Bank of England on Thursday, November 2. Also, President Trump is likely to appoint a new Federal Reserve Chairman who will keep pumping liquidity into the economy at any sign of a slowdown.  This is a political move, which helps Presidents get re-elected and helps to sway the mid-term elections – if the economy can keep humming through the mid-term elections in November of 2018.

Britain has been having serious problems exiting from the European Union – 16 months after the Brexit vote in late June 2016.  Europe has also been struggling to fight deflation by “quantitative easing” (more money printing) and Japan has been promoting “QE on steroids.”  Only the U.S. is beginning to tighten money supply a bit by letting some bonds expire without repurchasing them. This has strengthened the dollar over the last six weeks.  The euro has dropped from over $1.20 in early September to $1.16 now.

The “Halloween theme” is also reflected in the dangerous spike in technology stocks lately, reminiscent of the years 2000-02, when NASDAQ collapsed from over 5,000 to under 1,200. Today, these tech stock leaders have some very Halloween-oriented acronyms.  In the U.S., the runaway leaders are called the “FANG” stocks: Facebook, Amazon, Netflix and Google.  In China, the “BAT” stocks (Baudu, Alibaba and Tencent) are soaring.  In a normal stock market, a typical “price/earnings ratio” runs from about 10 to 20, but Baidu trades for 44 times earnings. Alibaba trades at 59 times earnings and Tencent is at 53, so they are breathing rarified air.  But in America, Amazon trades at 280 times earnings, Netflix at 242x! Any correction in global markets could pop that bubble and send investors back into gold as a safe haven.

Gold-Giving Indian Weddings Now More Affordable

India’s peak wedding season starts right now.  It runs from late October to early December each year, a time filled with “auspicious” days and months.  Going into wedding season, gold prices have become more affordable in India, dropping to 30,275 rupees per 10 grams (about one-third of a Troy ounce) for .999 gold (or 30,125 rupees for 0.995 purity).  Although the Indian government has been trying to tax and regulate the jewelry industry, Indian demand will always spring up from the people, who have a saying “No gold, no wedding.” Even the poorest families can come up with a small golden gift at weddings.

Slower demand in India in 2015 and 2016 is one reason why gold bottomed out near $1,050 in late 2015, but the gold price is still up 20% since then, due to broad-based demand in several gold-friendly markets. India’s annual demand rate is back above 1,000 metric tons per year. Gold demand in India jumped 37% in the second quarter, and in September, gold imports rose 31% from a year ago, perhaps in preparation for the wedding season and the festive season, which peaks in October.  The Indian government is also offering a new type of gold, Sovereign Gold Bonds (SGBs), which helps them control the gold market. SGBs are not based on jewelry, coins or bars, but are a “digital” form of gold, like ETFs in the West.  If you hold these bonds eight years, there is no capital gains tax when you sell them. They also offer interest rates of 2.5% paid twice a year, so we’ll see if Indian customers will trust in paper gold over real gold.

Kennedy Assassination File Release a “Non-Event” … So Far

As promised, thousands of new documents were released last week (October 26) from the classified files concerning the investigation into the tragic assassination of John F. Kennedy nearly 54 years ago.  The Central Intelligence Agency (CIA), however, has decreed that many other files must remain classified.

The major revelations of this new batch of documents are not very “major” at all, but they fill in some blanks on Lee Harvey Oswald’s trip to Mexico in September of 1963, as well as a death threat to Lee Harvey Oswald called in on November 23, the day after the assassination and the day before Oswald was slain by Jack Ruby.  The caller purported to represent a “Kill Oswald” committee, but the emotions of that weekend had many people wanting to punish the man who killed our beloved President.

This year also marks the centennial of the birth of President John F. Kennedy in 1917.  There was a surge in demand for Kennedy Half Dollars around the date of his birth (last May 29), and there will likely be another surge in demand as researchers pore through these new files before the anniversary of the fateful date, three weeks from now.

On October 31, 1864 the U. S. Congress Admitted Nevada as the 36^th State

Anxious to have support of the Republican-dominated Nevada Territory for President Abraham Lincoln’s reelection, the U. S. Congress quickly admitted Nevada as the 36^th state in the Union on October 31, 1864.

The 1859 find of the large silver deposits at Virginia City had made the area one of the most important and rich in the West.  The inexpert miners who began to develop the placer gold deposits at Virginia City had complained about the blue-gray gunk that repeatedly clogged up their gold sluices.  After a while some of the more experienced miners realized that the gunk the gold miners had been disposing of was actually quality silver ore, and soon after, they found the huge underground silver deposit called the Comstock Lode.  This discovery played an important role in the establishment of the Carson City Mint.

The new state of Nevada did indeed provide strong support for Lincoln.

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