Bitcoin: One Heck of a Wild Ride

Bitcoin over the course of last weekend caught everyone by surprise, firing on all cylinders and quickly rocketing through its key psychological $10,000 USD barrier level.

As market participants woke up on Monday morning, the FOMO (fear of missing out) could be felt in the air, it was everywhere as stories of the last historic bitcoin mania began to be retold and the profits that could of been had if only they had acted sooner.

Forget the fact that there are still people attempting to recover from that very predictable, but none the less devastating crash, this time was going to be different!

Throughout the week, the hype compounded in a stunning way, as the algorithms joined in on the action and propelled bitcoin to above the $13,000 USD mark.

(Chart via CoinDesk)

This was the first time that bitcoin had reached these heights since January 2018, and many market experts simply couldn't explain what was going on? Why was this happening? What had changed?

As many of you know, I am a strong supporter of bitcoin, despite my short term negativity over these recent erratic price movements, as nothing should move this high, this fast, without some strong short term dramatic change that dictates a resetting in price.

Of course, this move higher was soon set to change, as reality came crashing down and as traders began to take out some quick profits, sending the price of bitcoin crashing down below $11,000 USD in just ONE trading session!

(Chart via CoinDesk)

At the time of writing, bitcoin stands at $10,831 USD, which is a 19.22% loss within less than a day. A complete bloodbath and a loss that is going to leave many traders who hopped on the hype wagon deep in the red.

Once again bitcoin and cryptocurrencies in general are reminding everyone just how volatile and unpredictable that they can be and that they should be approached with extreme caution, as they are still a relatively young asset class, unlike gold and silver, which have over 10,000 years of history backing them up as a safe store of value.

Bitcoin does however have strong long term fundamentals as a competing "fiat-lite" currency, which in my opinion makes it vastly superior to the current corrupt dollar based fiat system we find ourselves in at the moment.

These fundamentals are only growing stronger with each passing day, as bitcoin continues its long march across the globe, becoming more and more common place in the world of commerce.

As recently pointed out by Cointelegraph, there are now over 5,000 bitcoin ATM's around the world, in about 90 different countries, with 150 of these being installed in the month of June alone. This equates to 6 new bitcoin ATM's per day.

Bitcoin is also going to have its block mining reward halved once again, in just 11 short months from now in May 2020. This, as it did last time, should ultimately result in bitcoin settling in at a higher price level.

Additionally, the bitcoin network is more secure than it has ever been before, with the total computing power, aka the bitcoin hash rate, hitting a recent all time high of 65,000,000 TH/s.

(Chart via blockchain.com)

Hash rate increases as mining interest in bitcoin increases and makes the overall bitcoin network immensely more secure. At this level, the bitcoin network is essentially impenetrable.

This level of security is one of the many reasons why bitcoin is going to remain the big dog in the cryptocurrency house and make it the first go to choice for those looking to get into the sector.

As you can see, overall, I continue to have faith in bitcoin. I believe that it will continue to play a valuable role in the monetary markets moving forward and in the long term, I believe that the price is going to continue to move steadily higher, despite its many set backs.

However, these recent price actions are not healthy and are detrimental to the overall state of the bitcoin markets.  They are a reminder that absolutely nothing goes straight up forever and that the rules of basic economics still apply.

Bitcoin to the moon? Clearly not today. However, who knows what the future will bring.

- Source, As first seen on the Sprott Money Blog

Peter Schiff: The Dollar Will Fall Through the Floor, Here's Why

Money manager Peter Schiff predicts, “Inflation is going to run out of control. This is why people need to buy gold. Paper currencies are going to lose a tremendous amount of value. 

So, if you want to preserve your purchasing power of your savings, you better be saving real money and not all this funny money the central banks create.

Once the market perceives that there is no light at the end of the tunnel, that we are never going back to normal, that interest rates are going to stay negative in real terms forever, that the Fed has no ability to raise rates, that all the new money that has been created will never be destroyed, that the Fed balance sheet will grow in perpetuity so liquidity will never be removed, then the dollar will fall through the floor. 

Then we are going to get all that inflation.” Schiff is predicting another bull market in gold and silver. Schiff says, “If we are going to have another bull market in gold, which we will and it’s probably already starting, we are going to have a bull market in silver. 

I don’t think we have ever had a gold bull market that didn’t include silver. In every gold bull market, silver has outperformed gold (on a percentage basis). So, there is a lot of upside in silver.

- Source, USA Watchdog

Treasury Market Acts Like Economy is in Death Spiral, But Wait...

In the past, the Treasury market was terribly wrong about this. In these instances, the 10-year yield had no predictive quality. It was just a stupid move that then self-corrected brutally. The last such idiocy happened in 2016. The good folks who made that move are still ruing the day.

- Source, Wolf Street

Bitcoin Explodes 20% Overnight, Rises Just Shy Of $13,000 And Everyone Wants To Know Why

After breaching $10K over the weekend for the first time since March 2018, bitcoin has accelerated its sharp move higher and, trading close to $13,000 on Wednesday, up almost 20% in the past 24 hours. It is now up 240% since the start of the year, and even though it remains below its all-time high of nearly $20,000, at the current pace, it will surpass its all time high in just a few days.

The last time Bitcoin rose above $12,000 was in December 2017, when it continued to rally, on some days moving several thousand dollars inhours, eventually reaching its all time high as $19,511 just before Christmas 2017. That surge, however, was followed by a calamitous drop as retail investors fled, with the crypto dropping below $6,000 by February, and hitting $3000 just months later. All in all, in December 2017 and January 2018, Bitcoin spent about six weeks above $12,000.

What If There Was No Money?

Will this time be different, is the main question asked by traders. And as usual, the second biggest question posed by traders, investors, speculators and plain old haters is what is the reason behind the move.

According to some, Facebook’s announcement this month has revived interest in coins, while investors seeking safety have also pushed up Bitcoin’s price.

“It obviously does appear to be benefiting from some sort of flows that gold is benefiting, too,” CMC Markets chief strategist Michael Hewson said. “You’ve got all this stuff about Libra going on, which is renewing interest in bitcoin. Crypto is back in vogue.”

That part was right; what he said next, however, was not - he added that the investors buying bitcoin were speculative. That is precisely the opposite of what JPM found last weekend when the bank concluded that the current bout of buying is not retail - as was the case for much of 2017 - but institutional.

Meanwhile, as bulls cheer signs that the next bubble in cryptos is well and truly here, sparked by interest in virtual currencies from major companies like Facebook and JPMorgan, skeptics say it’s unclear how those initiatives will ultimately benefit Bitcoin and its peers.

It is also unclear if Facebook's Libra "crypto" experiment has anything to do with the recent move. To be sure, it's not news as it was well known months in advance that Facebook was launching its "crypto" product, which as explained here before, is not even crypto. Instead what appears to be causing the rush into bitcoin, ethereum and other cryptos is global monetary policy (and Chinese capital flight).

Meanwhile, not everyone agrees with JPM that institutions are now long bitcoin: according to the WSJ citing the latest CFTC Commitment of Traders report, hedge funds and other money managers held about 14% more bearish “short” positions in CME bitcoin futures last week than they did bullish “long” positions,

Other large traders were even more bearish. “Other reportables”—a loose category of firms that don’t necessarily manage money for outside investors—held more than three times as many short positions in bitcoin futures as long ones, the CFTC report shows.

The WSJ concludes that it is mostly small, retail investors who are taking the other side of the trade, in clear disagreement with JPM's conclusion. Among traders with fewer than 25 bitcoin contracts, a category that likely captures many individuals placing bets in bitcoin, long wagers outnumbered short bets by 4 to 1.

“Traditional market participants may be more skeptical of [bitcoin] than millennial day traders,” said George Michalopoulos, a portfolio manager with Chicago fund manager Typhon Capital Management LLC, although he stressed that his views were speculative and that it is hard to know what is driving the CFTC’s numbers.

Of course, if the WSJ is right, it would suggest that a big reason for the bitcoin surge higher is an institutional short squeeze as retail investors are once again proven right.

Finally, for an extended attempt to explain the recent surge in bitcoin, here is a tweet storm from CoinShares Chairman Danny Masters who lays out his, in our opinion, far more accurate take of what is behind the latest bubble in bitcoin.

- Source, Zero Hedge

Yield Curve is Inverted for Nearly 25 Years

Using the Fed Funds Rate as the baseline overnight duration, the yield curve is inverted for nearly 25 years.

Yield Curve - Overnight Fed Funds Rate Through 30 Years

Synopsis

• Using the Fed-Funds Rates as the zero-duration starting point, the yield curve is inverted for 99 quarters, nearly 25 years.
• If we use the 3-month T-Bill as the starting point (2.105%), the yield curve is "only" inverted for 58 quarters, 14.5 years.

New Home Sales

On Tuesday, a Census Department housing report showed New Home Sales Plunge 35.9% in the West, 7.8% Overall, Prices Down 8.1%

Powell Bluff

Also on Tuesday, Powell Chastised Trump and Praised Himself in one of the most self-serving Fed speeches in history.

Specifically, in a blast pointed directly at Trump, Powell proclaimed "The Fed is insulated from short-term political pressures—what is often referred to as our 'independence.''"

What a hoot.

Uncle!

The Fed will cry uncle in July.

Expect at least one 25 basis point rate cut.

The market has a 100% chance of at least one cut.

Meanwhile - We Still Have Questions

Dear Jerome Powell, instead of patting yourself on the back and answering fluff prepared questions, how about addressing some real questions?

• Let's discuss the Fed's economic models and their miserable performance.
• Let's discuss bubbles.
• Let's also debate the Fed's inflation expectation theory. I can logically show the theory is nonsense.

Answers Please

Hello Jerome Powell, We Have Questions

Please have a go at it, Mr. Powell.

Mike "Mish" Shedlock

Federal Reserve Cornered, Bullion Prepares

Another strange week in financial markets as hoopla for what the Federal Reserve was going to do with targeted interest rates was once again visited upon us. 

This past Wednesday, June 19th, 2019, the US central bank Federal Reserve and it's Open Market Committee decided to leave interest rates unchanged, yet they also hinted at standing ready to cut interest rates in the months to come to potentially accommodate financial markets as a possible recession draws near. 

Last week our guest David Jensen pointed out that the previous 2 Federal Fund Rate cut cycles were closely intertwined and followed by financial market recessions. So the ongoing meme that somehow if the Fed cuts rates it will be good for financial markets, in the long run, remains dubious based on past cycles. 

What you are looking at right now is a Bloomberg chart tweeted on Wednesday by Real Vision’s Raoul Pal, and it shows the full fiat currency era in terms of Fed Funds Rate cut cycles versus recessionary timeframes. 

The correlation is not perfect, but about 75% of the time the Fed’s cutting of interest rates was closely followed by financial market valuation losses for the mass of US stock shareholders. Turning to the gold and silver markets on the day of this recording 7:45 PM Eastern on Wednesday, June 19th, 2019. 

The silver spot price reacted positively to the news that the Federal Reserve is likely to go full dovish with accommodative policies. We are closing the day with the silver spot price around $15.20 per troy ounce in full fiat US dollars. 

As for the gold price, similar story with a day closing $1,365 per ounce fiat Federal Reserve not price. Remains to be seen if gold can find enough strength to plow through this long-running $1,400 oz resistance level any time soon, or will it merely be a little later for gold to resume its long-awaited upswing in price. 

The gold-silver ratio has fallen below the near 30-year high mark of 90, closing the day’s trading at 89.5 ounces of silver to afford one mere troy ounce of gold. If we do end up seeing Federal Fund Rates cut and the US dollar somehow strengthens into the end of summer, do not be surprised to see this ratio climb a bit higher and possibly threaten the 1930 Great Depression-esque 100 level.

- Source, Silver Doctors

The Wolf Street Report: Stealth Stimulus Has Arrived

The Fed has already accomplished more with its verbiage so far this year than it had in the past when it cut rates multiple times, all the way down to near-zero, and did trillions of dollars of QE. 

And we’re seeing the first results. Where will this all end, how much further can they push this already cobbled together fiat based system?

- Source, Wolf Street

Conflict with Iran Quickly Spiraling Out of Control, Oil & Gold Surge Higher

This is not good news, this is not what you want to see happening, nor what anyone currently needs, especially given the powder keg that is geopolitics in 2019.

Yet, this is the situation that the world now finds itself in and seemingly it appears to be the direction that the "powers to be" are pushing us, setting the stage for rapidly rising gold and oil prices.

Last week, as reported on, we had the unfortunate "Oman tanker" attack, in which Iran was blamed (whether correctly or not is still yet to be seen), for attacking two commercial vessels near the Strait of Hormuz, a crucial transit and shipping route within the Gulf region.

This enraged both the United States, who believe Iran carried out the attack and Iran itself, who claims that this was a "false flag" carried out by U.S. Interests, who wish to see Iran further destabilized and face increased scrutiny.

The fact is, we don't know who is right and who is wrong, but what we do know is the ramifications of these actions.

Hostilities have only continued to escalate since last weeks Oman tanker attack, hitting a boiling point this morning as a U.S. Military drone was shot down by none other than Iran.

They have taken full credit for this action and are not trying to deny it, as they claim the drone was illegally operating within their air space and they had every right to protect their borders and interests.

The United States on the other hand, paints a very different story, stating that the drone was shot down in international airspace as it operated over the Strait of Hormuz, meaning that this was a completely unprovoked attack.

Iran was fast to provide photo evidence, showing the drone plummeting from the sky after it was struck down within their borders. However, these photos were quickly disproved and shown to be old photos from a previous military strike that occurred in 2017.

This news, plus strong signals from the FED indicating a rate cut in the near future, have caused oil to jump by over 5% and gold by 3.38% at the time of writing. Coming along for the ride, silver also surged higher, increasing by 3.57%.

Iran may of accidentally shown the incorrect photos, but at this point that doesn't matter, as the error is rapidly spreading across global media and is being used against them, most notably by the United States who are claiming that this is proof that they are lying about the conflict.

On his twitter, President Trump made the two following ominous tweets;

"Iran made a very big mistake!" and

"If Iran wants to fight, that will be the official end of Iran. Never threaten the United States again!

Make no doubt about it, the Neocons within the United States political establishment are going to be calling for blood and retribution, which in the end, is not going to be good for anyone.

As previously mentioned, 20% of the world's global oil supply flows through the Strait of Hormuz, making it a key strategic location for Iran and one that it could easily disrupt if they so choose to do.

They know this and they are going to use it to their full advantage, however, so too does the United States and their allies, they are going to bring down their full might to ensure that global trade and production continues to churn along, unhindered.

However, this won't be settled overnight and we are going to see both gold and oil continue to surge higher, as uncertainty and fears continue to escalate.

With a rapidly rising oil price, the cost of everything else will follow suit, as it is in one way or another linked to the cost of all other goods, either directly or indirectly such as rising transport costs.

What this means is that inflation is going to rear its ugly head and in a serious way, $100 per barrel oil could easily become a real reality once again in this scenario, which is going to have a massive impact on the supply chain of all products.

Gold, the best hedge against inflation that this world has ever seen is going to come along for the ride, possibly even shattering the $1900 per ounce level once again before moving on to new highs.

Hopefully, sanity will be restored and things can deescalate, but unfortunately, this grows less and less likely with each new threat and each new act of aggression.

Get ready for rising oil prices, get ready for rising gold prices, get ready for increased uncertainty.


- As first seen on the Sprott Money Blog

What Does the Fed's Interest Rate Decision Mean for Gold and Silver?

Join Half Dollar and James Anderson for the best independent post-FOMC coverage around. We're talking - Interest rates, inflation, jobs, the markets, and what it all means for gold & silver.

- Source, Silver Doctors

How to Survive the Coming Chaos with Precious Metals

Legal and financial expert Wayne Jett says, “The key to your financial stability between this side of the chasm and the other side of the chasm is owning metals, owning gold and silver. 

These are most likely the types of things that will hold their real value. Therefore, on the other side of the chaos of this chasm, when you declare the present currency system has ended.

I think the President is trying to make the period of uncertainty as short as possible between the time when the old currency dies and the new currency is in place.” When is this going to happen? 

Is it before or after the 2020 Election? Jett predicts, “I think it is before the 2020 Election. I don’t think we can make it that long, especially with the global cabal trying to start a world war or trying to have a currency failure right now.”

- Source, USA Watchdog

The Gold Standard is Coming Into View, Countries Need to Adapt

The Gold Standard is step by step coming into view. Consider it arriving on a four-legged table, each with strong legs. Given the steadfast vicious defense of the King Dollar and its hegemon court, all transformations and transitions must be gradual, subtle, and deep. During the last two years, the Jackass has regularly made the claim that the Gold Standard would see it initial implementation in the trade payment form. This has turned out to be the case.

GOLD TRADE NOTE – commercial global trade payment

The suspicions are ripe and rabid that China is using the Gold Trade Note (GTNote) in their crude oil purchases. Nothing can be proved, all done surreptitiously with large scale payments made, like with the Saudis and other Gulf oil monarchies such as Qatar and Oman. Significant RMB currency has shown up on the ARAMCO balance sheet in recent months. In fact, the volume exceeds the British Pound and Japanese Yen ledger items together. The RMB item was not present a year ago. It would make sense that China also uses the Gold Trade Note with oil purchases from Iran. These two nations are expanding their barter facilities, like with Import-Export Bank functions, and might underpin a growing volume with the GTNote itself. Their motive would be to advance the Gold Standard, indirectly in the King Dollar’s face. The entire Belt & Road Initiative (aka One Belt One Road) is to conduct trade outside the US Dollar.

BASEL-3 RULE CHANGE – gold as countable asset in ratios

The rule change has opened the gates. The major central banks and the secondary central banks are deploying closely aligned financial firms to go out and buy Gold bullion while selling USTreaurys. This is all being done in secrecy, and kept off the balance sheet. In the meantime, the same dutiful agents of the banker cabal decry, denigrate, and deny the value of gold. They are grand hypocrites. These many central banks are collecting Gold for the big rise in its price, which might tend to save their fat hind parts during the crisis that builds. Their FX paper will be shredded while their newly placed Gold will enjoy a fast rise on the balance sheets. What they say is usually 180 degrees opposite for what they actually do. They want the public to be on the opposite side of their movements always.

PANDA BOND ISSUANCE – gold backed sovereign bonds

A bond priced in Chinese RMB terms defines a Panda Bond. They typically are for sovereign debt issuance, with some high profile corporate bonds at times. This is the newest of the four legs to the Gold Standard implementation. The astute analyst can infer a gold role in these Panda Bonds, which heretofore has not been admitted. This golden leg is analyzed in the June Hat Trick Letter to be posted very soon this month.

REGIONAL GOLD CURRENCY USAGE – decentralization

When Malaysian Prime Minister Mahathir announced the cooperative venture to use a regional gold currency in order to settle bilateral trade obligations a few weeks ago, he put his life at risk. The very same initiative announced by Japan was quickly followed by the Fukushima attack, called an accident in the West, but called an attack all through the East. Expect the entire Pacific Rim to climb aboard the regional gold currency for settlement of trade payments, which has yet to take shape or to be named. The Jackass expects Malaysia to be joined by Indonesia, the Philippines, Singapore, Thailand, even Taiwan, possibly Hong Kong. The key to this regional instrument for trade payment will be the absent participation of China. They might direct the movement from behind the curtain...

- Source, Jim Willie via Goldseek

US Unilateralism Forces World to Seek Aternatives

Helga Schmid, secretary general of the European External Action Service, affirmed EU support for the Iran nuclear deal, including using a new payment system to facilitate non-dollar trade and to circumvent US sanctions, according to Reuters on Monday.

All parties concerned should negotiate and declare a dollar replacement strategy so as to minimize the negative effects brought about by Washington's capricious acts and peacefully resolve the Iran nuclear issue.

The Trump administration's withdrawal from the Iran nuclear deal and other capricious acts have triggered worldwide dissatisfaction and many countries started to consider using new payment systems to circumvent US sanctions. For example, the Instrument In Support of Trade Exchanges, or INSTEX, is a payment channel set up by the UK, France and Germany that allows EU entities to have business exchanges with Iran, bypassing the US sanctions.

Suffering from severe sanctions by Washington, Tehran has been forced to seek alternatives to the US dollar. Iran has reportedly replaced the US dollar with China's yuan for its official currency rate. This is an important counteraction by the oil-rich country to circumvent US sanctions and maintain its national interest.

However, the US dollar is far from being marginalized and is still leading the international monetary system. Washington still has much political and economic influence on the global stage. Since finance is the root of US hegemony, the US is using its monetary power to throw its weight around. Washington issues orders worldwide as if all countries should obey its commands and follow its strategy.

But what about these countries' own interests? Has the US ever considered their welfare? Washington's selfish acts reflect the US global strategy. Using the current US-led global system to realize its goals: America First, launching unilateralism and seeking hegemony. This has sabotaged the international order. It is essential for countries to act together against unilateral US sanctions and long-arm jurisdiction.

Find alternatives: This is what the US has been forcing all countries to do. The capricious US acts oppose other countries' will and the US is ruining the future of dollar itself. Countries are seeking monetary alternatives and this may be the start of them seeking alternatives in other fields in the future as well, including high-tech alternatives. In other words, the US is isolating itself.

The unilateral US sanctions cannot make Iran surrender. The best way is to resolve the crisis peacefully, not to impose threats and sanctions. If these risky moves eventually lead to a war, no country will benefit.

Perhaps it is time for international society to negotiate and think how to deal with US unilateralism and hegemony, and how to make it more reasonable and fairer through reform and adjustment. Thus, the international system can operate normally instead of being kidnapped by the US.

- Source, Global Times

Are You Ready for the Global Financial Reset?

Lynette Zang returns to SGT Report to discuss the reasons she thinks the time for a global economic reset is drawing near.

Are you ready for the global reset that is possibly coming on the horizon? Is anyone, or any country truly prepared?

- Source, SGT Report

Black Gold Moves Higher as Iran Receives Blame for Oman Tanker Attack

The drums of war are once again beating loudly as another country finds itself directly in the cross-hairs of the United States government.

Fingers were pointing all around the room after Thursdays attack on two tankers near the Strait of Hormuz, a key transit and shipping route within the Gulf region.

The first tanker to report problems and send a distress signal was Front Altair, which, according to Bloomberg, was carrying 75,000 tons of naphtha, destined for Japan and departing from Abu Dhabi.

The second was a Japanese owned tanker, the Kokuka Courageous, which departed from Saudi Arabia and was heading to Singapore. Its cargo was methanol.

This of course caused the price of oil to surge higher on Thursday, with both WTI Crude Oil and Brent Crude making significant gains, the former moving higher by 2.41% and the latter by 2.42%.

Reports have been muddy and incredibly unclear to say the least, as we are still very much in the early days of this global incident and an official investigation has yet to begin. 

Even with that said, it is unlikely that we may ever learn what truly transpired, as no one has yet come forth to lay claim to this act of terrorism. Still, this has not stopped some from quickly pointing the finger and attempting to lay blame on others.

Tensions Soar, Fingers Are Pointed, Conspiracy Theories Abound

A U.S. defense official told CBS News on Thursday the following;

"It's highly likely Iran caused these attacks."

Quite a bold statement indeed, given the fact that no evidence has yet been brought forward that would make this claim have any validity, however, this does not mean that this statement is untrue, even if unlikely.

Iran is already under enough pressure from the United States government and its allies, as hostilities continue to escalate and sanctions against them continue to mount, resulting in severe damage to their economy.

In the United States governments own words;

"These are the toughest U.S. sanctions ever imposed on Iran, and will target critical sectors of Iran’s economy, such as the energy, shipping and shipbuilding, and financial sectors. The United States is engaged in a campaign of maximum financial pressure on the Iranian regime and intends to enforce aggressively these sanctions."

Performing such a brazen, foolish attack would only result in further punishment to Iran and would be of no benefit to them, as they are outgunned and outclassed by any metric of conventional warfare, when compared to the U.S. military.

The Express compared the military firepower of both the United States and Iran, which unfortunately for Iran, doesn't look so good;

Aircraft

USA: 13,398
Iran: 509

Ships

USA: 415
Iran: 398

Tanks and Armour

USA: 48,422
Iran: 3,979

Active Personnel

USA: 1,281,900
Iran: 523,000

Most Fearsome Aircraft:

IRAN: ‘Kowsar’ fighter aircraft - home built, based on 50-year-old US F-5 design.
USA: Lockheed Martin F-35 Lightning II - cost and capabilites mind-blowing.

Most Fearsome Tanks:

IRAN: Karrar - Iran claims among best in world, actually based on a 1970s Soviet T-72.
USA: M1A2 SEP - incredible technology and armour one of the most feared main battle tanks.

Most Fearsome Ships:

IRAN: IS Alvand - mid—class frigate with 60s technology.
USA: USS Gerald R. Ford - a floating city armed to the teeth, carrying 75 attack aircraft.

Despite the sabre-rattling from Iranian officials who have been attempting to defend themselves in negotiations with U.S. administration, they know they cannot win an outright war with the United States, they know the odds are not stacked in their favor.

Iran's Greatest Weapon, Location

However, what they do know, is the fact that I pointed out earlier and that is that they are strategically located on the North coast of the Strait of Hormuz, which is only 21 nautical miles (39 km) wide at its narrowest point and of which roughly 20% of the worlds oil supply flows through.

(Image source, Wikipedia)

Oil is often called black gold and for good reason, it is a vital commodity and is critical in keeping our modern day society running smoothly and efficiently. 

As you can see, Iran could cause significant and serious damage to world trade given their key, strategic location in the world and they know this. This IS their bargaining chip and they are going to let the world know it.

Understandably, both gold and silver, which are insurance policies against geopolitical and financial crisis responded accordingly and moved higher throughout the trading day as well, with gold ticking up by 0.71% and silver by 1.23%.

If tensions continue to mount and if Iran continues to be blamed for this act of terrorism, whether true or not, then you can expect commodities to continue their march higher.

How high will be decided by how far the powers to be wish to push this conflict, are they truly ready for the fallout that would come next and the financial uncertainty that would come along with it? 

Unlikely, but only time will tell. Stay tuned.

- As first seen on the Sprott Money Blog

Currency War or Trade War? Two Edged Dilemma for US and China

Does China (Trump) want to fight a trade war or a currency war?

Before addressing the question, let's take a the US quarterly goods trade deficit with China.

Net Goods Trade with China Quarterly

Trade Deficit Timeline

The US trade deficit with China blasted higher starting in 2004.
Despite a 26% appreciation in the yuan (Renminbi) starting 2005, the US trade deficit blast continued.

From 2015 until the second quarter of 2018, the trade deficit with China shrank.

From the moment Trump launched tariffs in July of 2018, the trade deficit shrinkage reversed.

Trade War Timeline

China Briefing has a Trade War Timeline.

It pegs the start as July 6, 2018. That's when Trump first announced tariffs on China...

- Source, Mish Talk, read more here

China Is Buying More and More Gold as the Trade War Drags On

China extended its gold-buying spree, adding to reserves for a sixth straight month, as the protracted trade war with the U.S. hurts growth expectations and boosts demand for a portfolio diversifier.

The People’s Bank of China increased its bullion reserves to 61.61 million ounces in May from 61.10 million a month earlier, according to data released on Monday. In tonnage terms that’s a rise of 15.86 tons, after almost 58 tons of gold were added to the nation’s stockpile in the five months to April.

The rise reflects the government’s “determined diversification” away from dollar assets, Argonaut Securities (Asia) Ltd. analyst Helen Lau said, adding that retail demand has also picked up. At this rate of accumulation, China could buy 150 tons in 2019, according to Lau.

China, the world’s top gold producer and consumer, is facing the prospect of a slowing domestic economy as the Trump administration raised tariffs on Chinese imports and looked to cut off companies such as Huawei Technologies Co. from the U.S. market. The latest PBOC data signal that China has resumed buying at a steady pace after a pause from late 2016 to last December.

“It’s a diversification away from the U.S. dollar, particularly given the trade tensions and the potential technology cold war that’s evolving,” said Bart Melek, global head of commodity strategy at TD Securities. “We have to remember that gold is nobody’s liability.”

Gold’s Rally

Bullion prices have risen for the past three weeks, hitting the highest level since April 2018, as investors seek out havens and traders increase bets that the Federal Reserve will cut interest rates following signs of weakness. Spot gold was at $1,329.60 on Monday, after climbing 1.7% in May.

China has previously gone long periods without revealing increases in gold holdings. When the central bank announced a 57% jump in reserves to 53.3 million ounces in mid-2015, it was the first update in six years.

The PBOC’s move comes as other central banks, especially from emerging markets, increase bullion holdings. First-quarter purchases were the highest in six years, according to the World Gold Council...

- Source, Investing.com

Trump's Trade War & Coming Recession... The Fed Can't Save Us, But Gold Can

While President Trump continues to pile up one bad trade policy after another, Fed Chairman Powell indicated that he's ready to pile on too! More money printing, more debt creation and more QE look to be in America's future. Look out below!

- Source, Ron Paul

Recession Fears Take Hold, FED to Repeatedly Drop Rates?

The Federal Reserve has capitulated time and time again to Wall St, they have proven recently that they are now beholden to them and they will do as they wish, they have tossed away their hawkish ideologies and are ready to go full dove mode.

What the markets want at the moment is rate cuts, and in a significant way. Because of this, I believe we are going to see a series of rate cuts heading into and throughout 2020.

This is the general consensus of economists as well, as many are now forecasting that we will see approximately four rates cuts over the next year and a half, as recession fears take hold and they foresee troubling times ahead.

This comes despite the fact that the Federal Reserve has yet to take an official stance and state that they are indeed going to lower rates over the coming month and heading into 2020.

However, the recent posture and wording from the FED has given the markets the green light, indicating that the punch bowl is going to remain and the low rates party is going to continue on for the foreseeable future.

In fact, CME Group's FedWatch Tool has the odds of a rate cut by end of next month at 79.4%, 95.2% by September 2019 and then a staggering 98.6% by the end of 2019. Talk about confidence that rates are indeed heading lower!

JPMorgan was the first to jump the shark, changing their forecast to two rate cuts by the end of 2019, while Barclays quickly followed suit and upped the ante, changing their forecast to a stunning three rate cuts by the end of 2019.

These forecast revisions are "seemingly" being confirmed by recent figures being released, most notably the latest US Jobs numbers, which just missed the mark in a significant way.

As indicated by the Labor Department, nonfarm payrolls for May increased by just 75,000, rather than the forecasted 180,000 that economists surveyed by the DOW Jones expected.

Even though this is a miss, it is still not horrible news, given the fact that US unemployment is still at an impressive 50 year low of 3.6% and the average hourly earnings were up year over year by 3.1% (a slight miss).

By all accounts, this should not have markets panicking and expecting the FED to plummet interest rates time and time again, over the next year and a half. So what has them truly worried?

The trade wars. Wall St sees a long drawn out battle between not only China, which the United States is embroiled in a full blown trade war, that is threatening to turn into a full blown currency war, but now another combatant has entered into the picture, Mexico.

The US administration has taken a hard stance against Mexico and is making a threat in the hopes of curtailing their illegal immigration problem. Millions are flooding into the United States and President Trump is not happy, therefore he is trying to hit them where it hurts, the pocketbook.

This hard line stance has worked for him numerous times in the past, but for how much longer can this hardball tactic work?

For now, at least in the short term, it appears to be having some effect, as Mexico has been brought to the table and talks are continuing, even while the threat of tariffs continue to dangle over their heads.

As of right now, a 5% import tariff is scheduled to go ahead starting this coming Monday on all imports from Mexico entering into the United States.

Markets hate tariffs, they hate taxes in general and this increase is going to hurt more than just Mexico, but also US consumers and businesses that manufacture their goods across the border, which is mainly due to lower cost and wages.

Perhaps, as I have speculated in the past, this is exactly what the current US administration wants?

Perhaps they want to force many US businesses home, through increased costs abroad, making it more attractive both logistically and financially to bring production back to US soil. 

This is greasy if true, but a real possibility if tariffs continue to increase. Businesses care first and foremost about the bottom line and will move production to wherever is cheapest.

Regardless, the trade wars are here to stay, as President Trump has proven that it is a key tactic for him in negotiating and this has the markets worried. 

Expect lower rates, increased increased turmoil, expect the trade wars to continue on.

- Source, As first seen on the Sprott Money Blog

Catherine Austin Fitts: Inflation is Already Here

Just because trillions of dollars are “missing” and the federal budgets are now “secret” doesn’t mean you cannot see the effects of all the massive amounts of money created. 

It is showing up in the form of inflation, not official inflation calculated by the government, but real inflation for the man on the street. Investment advisor and former Assistant Secretary of Housing Catherine Austin Fitts contends, “The U.S. dollar is getting debased.

Inflation is already here. If you are looking at an area with a 14% increase in the cost of goods year over year and your income isn’t rising, or it’s falling, we are already there. It’s not hyperinflation, but it is very significant inflation. 

If you look at the controls they have put on globally to fight inflation, they are quite significant. The U.S. debt went up 6% last year, and it’s estimated to go up 8% this year. God forbid we try to start any of the wars rattling around the world because the debt will skyrocket. 

We are in a spiral upward on the amount of debt. Next year, the Social Security fund will go negative cash flow. In other words, it’s going to stop being a net buyer of Treasuries and is going to be a net seller of Treasuries, which means if the foreigners are not buying, it’s down to the U.S. pension funds and the Fed.” 

Fitts says “invest in real things” such as gold, silver, and she “loves farmland.”

- Source, USA Watchdog

The Reserve Bank Cuts As Expected!

Debt Is Now The Focus, Trump Accelerates Transition Plan

Trump is in the UK, says Nigel Farage should lead the BREXIT talks. Trump backs no deal BREXIT, EU deal not good. [CB] economy declining quickly, Fed now focuses in on debt, Trump accelerates transition by placing tariffs on India and Australia could be next. Fair trade needs to be established for the transition.

- Source, X22 Report

China's "Trump" Card in the Trade Wars? Rare Earths?

All across the Mainstream Media, you are hearing the alarm bells going off, the U.S.-China trade wars are accelerating yet again and things are about to get even messier than they already have been.

The talk of the week has been the casting aside of pleasantries from the Chinese government, as they attempt to exert themselves and strike back against the US administration, which has been ramping up tariffs against them in an attempt to get China to honor its previous promises, of which, according to the US government, have been broken.

The way in which China plans on doing this, is through their near monopoly on rare-earth elements.

The name itself, Rare-earths, is a slam dunk for the Mainstream Media, as the news cycle thrives on fear-mongering, confusion and the constant beating of the war drum. 

Anxiety abounds over this latest volley in the trade wars and this is working out perfectly for the Chinese government, a move well played indeed, but for how long?

This is what the MSM is ignoring and not telling its viewers. Rare-earths in all reality aren't actually that rare.

The 17 rare-earth elements are as follows;

• cerium (Ce), 
• dysprosium (Dy), 
• erbium (Er), 
• europium (Eu), 
• gadolinium (Gd), 
• holmium (Ho), 
• lanthanum (La), 
• lutetium (Lu), 
• neodymium (Nd), 
• praseodymium (Pr), 
• promethium (Pm), 
• samarium (Sm), 
• scandium (Sc), 
• terbium (Tb), 
• thulium (Tm), 
• ytterbium (Yb)
• yttrium (Y)

With the exception of the radioactive promethium, rare-earths are actually quite plentiful within the earths crust. 

For example, Cerium is the 25th most abundant element at 68 parts per million, making it more abundant than even copper.

The name is incredibly misleading, however, what is rare is the diversity in countries and companies that currently mine and produce rare-earth elements. China has a current stranglehold on this industry.

Up until the 1990's this was not the case, as the majority of rare-earths were mined within the United States at the Mountain Pass Mine in California.

This, however was not meant to last, as China made a strategic and smart long term move around the end of the 1990's by moving into the rare-earths market, buying up strategic mining locations and flooding the market with lower prices, forcing their competitors out of business one after the other.

They were able to offer such lower prices, due to increased environmental and regulatory requirements placed on Western countries, that they themselves simply ignored and did not partake in.

This is a similar story to how so much Western production of goods has moved to China over the last few decades, as companies simply cannot compete with a country that is willing to ignore environmental regulations in pursuit of increased production and lower costs.

This has gotten us to the period of time that we now find ourselves in, in which China accounts for 90% of the rare-earths mined in the world.

These rare-earths are vital in many computer systems and electronic devices.

However, what has the United States currently on edge is the fact that rare-earths are vital to the Department of Defense and are needed in the production of their radar systems, missile guidance systems, aircraft and so much more.

This is the alarm bell that the MSM is currently ringing and good. I for one am glad that they are. However, there is no need to panic, despite what the chicken little's are telling you.

The United States military is the largest in the world, with the most advanced modern technology that money can buy, dwarfing even their closest rivals. They are in absolutely no short term need of immediate production.

Regardless, this move by China ultimately should be a wake up call for the West and fortunately, I believe it will be.

Already we can see the free market springing into action, driving up the price of exploratory mining shares and those few produces that exist outside of China that still remain.

In Canada and Australia, Lynas Corp (ASX: LYC), based in Western Australia rose by 16% on Wednesday, while Avalon Advanced Materials Inc (TSX: AVL), based out of Toronto was up by a whopping 33%!

Geomega Resources Inc (TSX-V: GMA), Ucore Rare Metals Inc (TSX-V: UCU) and Commerce Resources Corp (TSX-V: CCE), all Canadian junior miners, were up significantly as well.

Basically, if you are a rare-earth mining company based outside of China, then things are looking bright at the present moment and likely for the foreseeable future.

Expect serious money to flow into the rare-earth mining sector, as prices increase moving forward and the United States seeks to invest in and revamp old rare-earth mines that were shuttered in the past due to depressed prices.

However, this takes time and will not happen overnight. Mines do not simply spring back into action, which is why in the short term, we can expect prices to continue to trend higher in the rare-earths sector.

Ultimately, this is not the "sky is falling" moment that the MSM is attempting to portray it is. 

The free market will exert itself, the free market will correct this imbalance and the rare-earths industry in the West will be revitalized, a prime example of short term pain, long term gain.

The trade wars continue on.

- As first seen on the Sprott Money Blog