Summary
- The Federal Reserve announced a pause in interest rate hikes, impacting various markets.
- The US dollar gained strength against other major currencies following the Fed's announcement.
- Gold initially rose but traded sideways and down throughout the week.
- US 10-year bond yields reached their highest levels since 2007.
- US bonds are on track for losses in 2023, potentially marking three consecutive years of decline.
- The US Treasury plans to implement a yield curve control bond buyback program in 2024.
- Concerns about bank balance sheets and bond buybacks were raised by former central banker Kathleen Tyson.
- The US stock market experienced its worst week of losses since the previous March.
- High levels of stock allocations among US households were noted, despite concerns about market fundamentals.
- A potential shift in favor of silver over Nasdaq stocks was suggested for the coming decade.
This week the fiat Federal Reserve announced they would stand down and pause interest rate rises for now barring incoming future data.
The immediate response to this news was bullish relative fiat US dollars versus other major fiat currency pairs. While the bond market yields spiked higher in a bearish week for US bond holders.
While spot gold rising into the announcement was cut down and traded relatively sideways and down for the remainder of the week.
US 10 yr yields climbed to their highest levels since 2007.
And for the year 2023, US bonds are looking at losses as of now.
If this trend continues it will be the first time that US bonds have experienced losses three years in a row. And this coming off of the worst US bond performance on record achieved last year in 2022.
No fear of US bond bag holders, the US Treasury announced via Bloomberg and Reuters this week that they plan on implementing a likely yield curve control bond buyback program next year in 2024 in order to keep the bond market from freezing up.
Former central banker & markets supervisor Kathleen Tyson responded by tweeting:
Buybacks bail out bank balance sheets. Now that an underwater $1 UST bond sells for 50p, banks will sell back to Treasury at $1 and buy higher yielding bonds that will earn more interest and appreciate as rates go down. Just another banker enrichment scheme to buy votes in an…
— Kathleen Tyson (@Kathleen_Tyson_) September 22, 2023
Turning to the US stock market which suffered its worst week of losses since last March.
While many default rates amongst increasing credit card borrowing Americans are currently hitting record high levels, let us have a look at tell-tale signs of market complacency and underlying concentration in a market with crumbling fundamentals.
At the moment, US households have their highest percentage level of stock allocations amongst their financial asset holdings throughout this full fiat currency era.
Yet not only fundamentally, but also technically on a chart the S&P 500 looks weak with lower high levels rolling over of late.
Meanwhile the clear divergence in falling job openings versus a stock market bubble bear market rally have diverged, for now.
Speaking of unhealthy market concentration, did you know that at the moment nearly 1/4th of the entire S&P 500's market cap or overall worth is tied up amongst 5 tech stocks still?
Apparently the hopium that AI or Artificial Intelligence is going to soon revamp the world remains high.
This is the NASDAQ market index throughout this full fiat currency era.
We are going to look through this data with silver as the valuation metric as we are likely setting up again for a long run in which silver sharply outperforms.
You see, Nasdaq stock darlings Microsoft, Apple, Amazon, and Google Alphabet were all part of the last 2000 stock bubble that took some 15 years to bottom and then eventually return back to the early century's former nominal high.
During a run from the early 2000s to the early 2010s silver bullion buyers and stackers were able to afford 10Xs more Nasdaq. And we can see that by simply dividing silver's spot price by the Nasdaq over the last few decades.
We are again near massive Nasdaq overvaluation levels versus an essential precious metal like silver.
My contention is that over this decade into the next we are going to witness a similar reversal upwards as silver vastly outperforms overvalued Nasdaq stocks for many years to come.
As mentioned prior, the spot gold price ramped into the fiat Federal Reserve's interest rate policy announcement only to be cut down and finish the week flat.
The spot silver price closed well higher though, closing above $23.50 oz bid as gold finished just over $1,925 oz bid.
The spot gold silver ratio as a result of silver strength closing the week tightened back down to 81.
Despite the current market conditions, the fiat US dollar spot gold price has been relatively resilient. This is puzzling to gold bears, who might believe that gold should be getting hammered right now.
Central Banks and investors are increasingly buying gold bullion as a hedge against a potential recession. Investors are buying gold as a protection against long term inflation and fiat currency devaluations coming.
You can see the gold price pulling out of the station to new coming record price high levels in virtually every major currency in the world.
What happens to the fiat US dollar gold price when the tide finally turns out again, when the relatively still strong US dollar and bond yields eventually turn sharply lower?
This week in physical gold market news and data, we saw a resurgence of Indian gold bullion buying while record high price premiums recently paid in China came back to their more normal mean.
India reported importing nearly 100 metric tonnes over 3 million ounces of gold in August 2023.
While Indian silver importation levels remain lack-luster coming off their record silver bullion demand from last year 2022.
The Chinese Shanghai Silver Futures market continues to see massive off-taking of silver bullion seeing over 3.7 million ounces withdrawn this week alone.
Meanwhile on the floundering silver supply side of the market fundamentals equation, the world's largest silver mining nation of Mexico continues reporting large silver production drop off through this year 2023. Note the persistent red bars of underproduction in Mexico throughout this whole year, month after month.
And finally to close this week, the hard US national debt level passed $33 trillion this week. A figure that represents over $1/4 million per household in national debt. Of course none of this takes into account $100 of trillions in off balance sheet unfunded liability expenses like social security, Medicare, and Medicaid increasing coming due this decade into next.
Take a gander at just how much US debt has exploded since the Debt Ceiling agreement.
Oh, and $33.04 trillion was the debt level at the start of this week. By the end of this week, it has already climbed another $96 million to now $33.1 trillion.
And while the following Deep Fake clip parody tries to make light of this starkly worsening situation. History shows the largest release valves for all time debtor empires is ultimately devaluing the currency units for which their all time record debts are issued in.
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That will be all for this week's SD Bullion Market Update.
As always to you out there. Take great care of yourselves and those you love.
