Posted on 08/15/2025 3:21:23 PM PDT by delta7
Expectations for Trump’s meeting with Putin in Alaska have been downplayed but diverted attention from a stalling US and global economy.
Any independent observer will note that the outlook for the dollar is deteriorating, credit risk rising, and a debt trap is being sprung on the US Treasury. Tonight’s Alaska circus is a diversion from this reality.
Gold and silver continued to consolidate earlier gains this week, but the market underneath continues to tighten. In European morning trade today gold was $3340, down $60 from last Friday’s close, and silver was $37.90, down 40 cents. Comex volumes in both contracts declined over the week, in silver’s case from the noticeably high levels seen the previous week.
Market makers face a flight out of paper into gold
A stand-out feature was the scale of stand-for-deliveries in the Comex gold contract, at 90.6 tonnes from 31 July so far, reflecting the expiry of the August contract. 267.5 tonnes of silver were also stood for delivery. To put these numbers in context, 861 tonnes of gold have been stood for delivery since 1 January. Comex gold warehouse stocks total 1,201.3 tonnes and have begun to rise again. How much of this is gold yet to be delivered but in Comex warehouses is not known. This chart is from MacroMicro:
Of course, Comex is only part of the overall picture. And with respect to futures, the Shanghai futures exchange is opening direct access to non-Chinese entities which will take trading liquidity away from Comex. This move is consistent with the internationalisation of China’s capital markets, centred on gold and silver trading in yuan.
That is for the future. Meanwhile, Comex gold futures still remain relatively oversold with low participation. This is next:
At 450,000 contracts, open interest is close to oversold territory, yet the swaps taking the short side are close to record short in value terms:
This chart will update tonight to reflect last Tuesday’s position. But with open interest on 5 August at 449,647 contracts and a gold price $40 above today’s gross shorts were $92.3 billion held between 27 traders, and the net position was $80bn. It amounts to a serious squeeze on the market-making establishment, faced with converting paper into physical gold.
The only escape for the swaps is a reversal of the gold price’s drivers. But that is unlikely, with credit risk in the fiat dollar increasing. If anything, currency and financial markets face increasing instability. The next chart updates the dollar’s TWI:
Not only is the dollar’s TWI heading lower technically, but Trump’s avowed policy is for a lower dollar and lower interest rates. The pressure on the Fed to reduce its funds rate have mounted to the extent that a 0.25% cut in September is a done deal, despite reservations about the course of inflation. Adding to the political interference is Trump’s appointment to the Fed of Stephen Miren, subject to Senate confirmation. As an inflation dove, presumably he will be in a position to be nominated as Chairman by Trump when Jay Powel’s term ends next year.
In contrast to political pressures for lower interest rates and a lower dollar, these same policies will drive longer maturity bond yields higher. And when the long bond yield breaks the 5% barrier, a consolidation will be completed projecting yields to 9% or more (move in from 2020 equals move out above 5%):
This would be devastating for the dollar and the entire fiat currency system.
Driving it will be an emerging debt trap, rapidly increasing the ratio of government debt to GDP. Outstanding debt is already rising at an increased pace, and the private sector, ex-budget deficit is contracting. Furthermore, the dollar is over owned by foreigners facing losses on dollars and underlying financial assets as the overall position unfolds.
Gold is the principal escape from this emerging catastrophe for the dollar. Other currency alternatives are simply unattractive. The next chart from Thorsten Polleit shows the catastrophe that is Germany, at the core of the Eurozone:
The euro is the largest component of the dollar’s TWI by far at over 50%.
When we emerge from our summer lethargy, markets will see something which macroeconomic textbooks say should not happen. Bond yields will be rising, and the gold price will rise as well. Where the textbooks are wrong is to ignore the risks arising from a dollar collapse; risks which the Fed under a new dovish chair will refuse to face, triggering massive flows out of the fiat dollar benefiting gold, which is real money and everyone’s final settlement.
Every article I’ve read lately has China buying mass quantities of the stuff.
The USA is in better shape than other countries. All because of President Trump repairing America after idiot Biden created massive debt. Is a storm coning? Sure, but not as bad as some say.
ping
“stalling US and global economy.”
Am I on the same planet? Stock market, employment, new factories, optimistic investments in the future, many indicators are at an all time high.
I personally am stalling. But the US is leaving me behind.
I hope you’re right. High finance ain’t my thing.
Just take care not to be heavy in debt. That means not relying on credit card debt for getting by. Don’t invest all your eggs in one basket. We have no debts, have cash and metals, home paid off, and our adult kids are doing well with their families so we don’t have to worry about bailing them out. We are heavily invested in stocks, but it won’t kill us to lose it - all currently healthy. I feel bad for relatives who made bad decisions and didn’t prepare for old age (mostly democrats). We started poor but lived within our means.
China yes, and India as well. And especially when prices go below moving averages.
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