Gold GOLD PRO WEEKLY, December 25 - 29, 2023

Sive Morten

Special Consultant to the FPA
Messages
18,644
Fundamentals

The news stream this week becomes narrower. Closer to the end of the year, markets become quiet and no important statistics usually released. So, today we prepare a kind of "special" report that let us to explain why gold market should get inspiring future ahead. You will see that all ongoing events, political, economical become a parts of this major process. It is really big stakes on the table - either the US and allies will keep control over the world or its hegemony will be destroyed and they will become just one among the many others. With so poor situation in economy the US will meet cruel deep crisis that could change the structure of the state. But they are not alone who vitally depends on results. For China this is also the question of survival. Not because they will disappear but because they will appear under the US authority if they will loose. When events of such scale stand in the world, you can't stay without gold as it becomes the only reliable wealth preserver. It is a time when investors very soon start asking return of the investments, rather than return on the investments...

Market overview

Gold prices gained on Thursday as the dollar retreated after U.S. economic data fueled expectations the Federal Reserve would cut interest rates in March next year. Data showed U.S. gross domestic product increased at a 4.9% annualized rate last quarter, revised down from the previously reported 5.2% pace, while weekly jobless claims increased slightly. The market expects an 83% chance of a Fed rate cut by March, compared with 79% before the data, according to the CME FedWatch tool.

"GDP data came in a bit soft and gold charged up. Market is craving the burgeoning Fed pivot," said Tai Wong, a New York-based independent metals trader.

The Fed's dovish stance has caused markets to price in several rate cuts in 2024. However, some Fed officials have spoken out against imminent rate cuts. The U.S. dollar fell 0.5% and 10-year Treasury yields hovered near a five-month low.

"Gold will continue to maintain price levels above $2,000 and these expectations we have of lowering inflationary pressures will continue to foster the sideways to higher movement in gold," said David Meger, director of metals trading at High Ridge Futures.
BofA expects rising palladium surpluses under its base case next year, with a possibility of prices falling to a low of $500 per ounce if there are no supply cuts.

"The fundamental backdrop is stronger for platinum and it should continue to outperform palladium going forward," BofA said in a research note dated Wednesday.

October was the second-largest month for sales of US stocks to foreign investors, official institutions are getting rid of Treasuries, and gold reserves are growing. ️For the second month in a row, total net inflows of foreign long-term portfolio investment into the United States were tiny (just $3.3 billion). ️However, the reporting month is not entirely indicative now, since sales reigned in the markets in October, and then a rally began.

1703407975362.png


Situation with global trade is deteriorating. Baltic dry index jumped for 3% this week, global supply pressure is growing either. FedEx shares plunge 9% after report
In general, problems with logistics companies are a bad signal for the economy. Transportation is a key indicator of economic health. The Dow theory was even built on this.

We expect earnings to continue to be under pressure for the remainder of [fiscal] 2024 due to unstable macroeconomic conditions, which is negatively impacting customer demand for our services across our transportation businesses ,” FedEx said in a statement.

The US strategy aimed at de-industrializing Europe has begun to bear fruit: investments in the construction of factories in the US have risen sharply. Bloomberg calls this a “construction boom.” However, adjusted for accumulated inflation (29.5% since 2015), the figures do not look so impressive: the volume of investment is approximately consistent with the previous peaks of 2015-2016.

And the growth of investment in factories is not confirmed by statistics on the growth of industrial production. Despite all the numerous advantages of the United States (lower taxes, ultra-cheap energy, incentives for relocations, the largest sales market), industrial production in the United States has been stagnating since April 2022.
1703408241131.png


The main problem of the US is the shortage of qualified personnel (they are extraordinarily expensive here compared to China, Mexico or even European countries) and demotivation for unskilled labor - huge unemployment benefits are corrupting.

China is draining treasuries, that's a fact. Already almost $125 billion in the 12 months from September 2022:
1703408501312.png


By the way, this is not the first call from the ex-adviser of the PBoC the famous economist Yu Yongding, to get rid of American debt. Let's add a little context and quotes - Yunding spoke at an international forum in the Chinese city of Sanya:

  • China should undertake an orderly reduction of its US treasury holdings and maintain trade balance with the rest of the world.”
  • “The West has blocked the Russian central bank’s access to its foreign exchange reserves, and such moves undermine confidence in the United States.”
  • “The attractiveness of American debt for other countries is also decreasing, given the weaponization of the dollar by Washington.”
  • "The downgrade of US credit ratings in recent months has also highlighted the risks of worsening countries' debt problems."
  • “America's debt levels may continue to rise relative to the size of the US economy. They have accumulated $18 trillion in foreign debt, equivalent to about 70% of their GDP. This figure could rise to 100%.
And this is not about debt/GDP ratio of course, as China itself has even greater debt level that the US. All these comments are mostly political ones. Since China began to speak out loud about the problem (albeit by an ex-adviser of the PBoC), it means that they have already sold everything they could, or at least are very close to it.
Actually, the recent information warm-up on the part of the EU about the confiscation of Russian assets speaks of the same thing. We are on the verge of an active phase of capital market decoupling. Everything that is "bad" will be blocked.

Western countries, including the United States, are exploring the possibility of justifying the seizure of Russian Central Bank assets frozen in the financial system and using them to finance Kiev . However, legal experts warn that this would be a sharp departure from usual practice, fraught with legal and economic risks . In addition, this issue causes a lot of controversy among allies.

1703408893381.png


️The G7 countries, the EU and Australia froze about 260 billion euros of assets of the Central Bank of the Russian Federation in 2022. Most of these assets - about 210 billion euros - are held in the EU, including cash and government bonds denominated in euros, dollars and other currencies. By comparison, the United States has frozen only a small portion of Russian state assets: about $5 billion euros. Once again EU will take the major part of this political risk.

It means they have given up on the global financial system. Once we confiscate assets, we are starting an irreversible process of disengagement and there will soon be no large Asian capital on Western markets. Second is, Germany and Russia are exchanging assets. On a surface it looks like mutual expropriation of frozen assets, but we suggest that this is agreed procedure. Its just simpler to do by mutual seizing now.

The German Prosecutor General’s Office wants to seize part of Russian assets worth more than €720 million and replenish the state budget with them. As reported by Der Spiegel, a corresponding request has been submitted to the court in Frankfurt am Main. Meantime Russia considers to hold OMV and Wintershall assets.

Next big news, as we think is Russia statement on ignoring of credit ratings by Rating Agencies, IMF and World Bank in decision making on loan providing to other States. It might become turning point and other countries could follow including China that for a long time already dissatisfied with dirt deeds from so-called "international and independent" rating agencies. This is big political move, because now Russia and other countries could finance different projects in Africa (and other poor countries) with acceptable loan rates ignoring external basic rules of capital value that make such investments just impossible.

Finally as an interludes to next section, we see that operation "Evergreen 2" is just started. We need to enter a new inflationary circle; it’s time to bring cargo transportation out of its blissful state. But by the way, this hits Eurasia more than America. The Chinese comrades may well respond by causing a sudden accident in the Panama Canal, although there was news that it had already become shallow due to natural reasons.

The transit of ships through the Suez Canal has been mostly stopped. Until November 2023, about 12% of all global cargo traffic passed through the Suez Canal. However, since the beginning of the Gaza war, ships in the Red Sea have come under fire from the Yemeni Houthis, who support Hamas. Since October 2023, 15 ships have already been attacked.

The largest shipping and oil and gas companies, including Moller-Maersk, BP, etc., began to redirect their ships around the Cape of Good Hope. This increases delivery times by 10-14 days. Container shipping companies, which have so far suspended transit through the region, account for 95% of all shipping capacity through the Suez Canal, according to Clarkson Research Services Ltd., a unit of the world's largest ship broker.

There is currently only one container ship in the Red Sea, 67 container ships have headed around the Cape of Good Hope and another 75 are delayed and awaiting instructions on how to proceed, said Ryan Petersen, founder of logistics company Flexport. The EU does not yet know what to do with the Yemeni Houthis and attacks on ships in the Red Sea.

The main thing is not yet clear the volume of economic losses caused by the re-orientation of ship routes from a short route through the Suez Canal and the Red Sea to a longer route around the Cape of Good Hope. But now already there is another problem appears - bad preparation of other African ports for so wide fleet transition and servicing.

The background of all this stuff is worrying as media starts preparation of public opinion for possible campaign against Iran. All these events is another sign of coming global fragmentation. All the events taking place in the world's oceans, when the Houthis fired at some ships in the Red Sea and the straits, and the Iranians, as they say, fired at others in the Indian Ocean, give rise to thoughts about insuring maritime transport.

Strange as it may seem to some, the dominance of naval forces or, let’s say, the projection of power in the world’s oceans is closely related to such insurance. It is not at all a coincidence that since the end of the 19th century, while the British fleet was the strongest, it was the British who ruled the world shipping insurance. In essence, buying insurance meant buying protection from the British from the unfriendly actions of various fleets and criminal gangs. It’s trivial because only the most dumb person wanted to upset gentlemen by causing them losses due to the need for insurance payments.

The current global system is an updated and reborn old one, with a new master in the area/maritime hegemon and a new financial infrastructure on the foundation of the old one. With new mechanisms such as reinsurance, but old pirate-bandit concepts. And the fact that the Houthis and Iranians can afford to sink whatever they want, and the Somali pirates have woken up and do not scare of the American fleet any more, which plies there in large numbers nearby, but no one touches Russian tankers, means that the most the basic risks of physical security of transportation are being realized and, accordingly, the fragmentation of the world based on the fundamentals is proceeding by leaps and bounds.

Do you want to swim in the Red Sea? Buy insurance from the Russians, they will come to an agreement with the Houthis, give them a share and everything will be ok. This is usually called risk reinsurance. If you want to sail a container ship off the coast of Iran, Iran has excellent insurance friends from friendly countries.

The same Iranians can, you see, they can also detain a ship with a fast-moving cargo under the pretext that they are transporting some prohibited substances, and in the meantime the cargo will have time to deteriorate until it becomes clear that they are not there. If only we had insured ourselves with whoever we needed, we wouldn’t have any problems.

Russia already did it in its own "pocket" Seas - national reinsurance company, providing guarantees of the safe navigation in the Black and Azov Seas. This is such fragmentation. As we've said yesterday, the heaviest negative burden will be for EU. They have blasted North Streams, now they totally depends on LNG delivery and other consumer goods from China. All this stuff should become more expensive...
1703410962942.png

The US desire to take control of the Bab-El-Mandeb Strait is understandable. Even a temporary shutdown, and even under a plausible pretext: let’s restore order in commercial shipping, threatens serious problems for the economies of China, Europe, India and especially Russia. Trade and economic ties are too closely intertwined. The Rotterdam-Singapore trade route through the Cape of Good Hope is 40% longer than through Suez. This is a commensurate increase in costs for insurance, transportation financing, and freight.
If the closure of Bab El Mandeb becomes systematic, this will require a noticeable increase in the world fleet of all types of vessels (tankers, gas carriers, bulk carriers, container ships) currently operating on the Europe-Asia route.

However, troubles here have been a long time coming. The leaders of China, Iran, India and Russia understood that sooner or later, through the efforts of the White House, the straits would be blocked. Hence China’s gigantic investments in the land corridor - the Belt and Road, the Indo-Iranian North-South project, and the Russian Northern Sea Route. Logistics was heavily tied to the narrow corridor. As for the US, it is also the question of prestige to resolve this problem and confirm that the US still a Master of Seas and control the situation of global cargo shipping.

LONG READ EXPLAINS EVERYTHING

Every self-confident "analyst", discussing the "global strategy of the Anglo-Saxons 'neo-colonization policy", begins with a description of their power on sea transport corridors; their US 6th fleet in the Mediterranean to control the flow of oil and liquefied gas; their oil companies controlling oil — " the blood of the world's industrial potential". Immediately they will name familiar words and combinations of letters-Exxon Mobil; Shell; TotalEnergies; BP ; Chevron Corporation, then the names of Rockefeller, Rothschild, Morgan will be mentioned.… Then they'll start talking about their power and who rules the world. And why they got mad at Russia, China, Xi and Putin... — well, let's figure it out.

To begin with, the vast majority of people - about 98% - see the world as they were allowed to see it; as it was painted for them. People live by myths, especially in politics: Anglo-Saxons still believe that Churchill was one of the greatest rulers of Great Britain, although he was particularly the person who really handed over the "great lady of the seas" to the Americans. It was after his actions and purposeful decisions that the UK rolled and still rolls into the society of ordinary regional powers with hordes of migrants and a bunch of frightened indigenous citizens.

But let's return to the oil magnates and their influence "on world politics, on the direction of the development of human civilization."

Everyone thinks that oil is almost the main source of wealth and earnings, let's count other people's money. In mid-November 2023, the World Energy Agency reported that it was producing 102 million barrels per day. Accordingly, we multiply by 365 days — this will be 37 billion barrels per year. What is the average annual price per barrel? Take, for example, $ 70-it doesn't matter if it's Brent or Urals. It turns out about 2.6 trillion dollars (the American estimate is 2.9 trillion). This is huge money, colossal-for and for the sake of such money, nations and states are destroyed, they shake test tubes with white powder at the UN, they fight in Syria and hold Middle Eastern monarchies by the throat. For the right to dispose of such revenues, the USSR was destroyed.

And if you compare it?! Are there any markets that are comparable in terms of the amount of live money available there? There are: the pharmaceutical market ($1.45 trillion) and the Cargo Shipping Market (last year its volume was $ 2.35 trillion).

In 6 years, by 2030, this market (freight transportation) will grow to 4 trillion dollars
— at least. The oil and gas market will not grow like this, and with the growing wealth of citizens in China, India, Russia, Southeast Asia and Africa, the growth of revenues in the freight transport market will accelerate even more.

Also, the profitability of transportation is much higher than the profitability of oil production, because costs, especially overhead costs, are about a third lower.

You see, dear reader, tens of millions of Chinese cars, hundreds of millions of tons of their electronics, billions of tons of Russian wheat, ore, metals, gas and oil, hundreds of millions of tons of Turkish jeans and leather, billions of tons of their tomatoes, etc., etc. need to be delivered to about 3 billion people in Africa, Europe, Russia, China, India, and Southeast Asia. We don't even think about the 300 million inhabitants of the United States...

And what do such names as Gianluigi Aponte, Rodolphe Saade, and Vincent Bollore say to the general public today? Nothing at all. And such abbreviations as MSC, SCAC, CMA-CGM? Yes, also nothing. And why should those who hold in their teeth a share of the trillion-dollar pie of container transportation shine?

Yes, dear reader, we have revealed to you the names of some transport companies and the names of their owners — they manage trillions of freight traffic turnover. Their cargo transportation is insured, as a rule, by insurance financial monsters from the UK-the Anglo-Saxons, sea transportation is their fiefdom.

95% of the transportation is carried out by these firms by sea — they have seized everything: containers and barrels, container ships and tankers, ports and service points, educational institutions and tens of millions of personnel. And banks, exchanges - are monsters. This is the world empire that the "Mistress of the Seas — England" has grown up. This is the Anglo-Saxon empire, which tenaciously holds the whole world, and nothing could be done without it permission.

Russia and China took a swing at this particular monster-at transport flows, at the entire transport business in principle: they have decided to oppose the Anglo — Saxon maritime transport infrastructure with their own-land. They have decided to destroy the main business of the Anglo-Saxons, to take away their main financial income. Well, after the paper dollar-everything is already clear with it.

The world's most violent interests have collided, and these interests are shared by trillions of vehicles. And this is not a battle of ordinary bulldogs under the carpet — it is a battle between "sea kraken" and "land bears and dragons".

Everyone has heard about the Chinese initiative "One Belt, One Road", about the Russian" Northern Sea Route "and the transport corridor" North-South", about BAM. For the "sea Kraken", these plans are like a knife near the throat, because the revenue of many container sea carriers is hundreds of billions of dollars a year, and together-trillions! For them, the loss of cargo transportation is death, because the Anglo-Saxons simply have nothing else to earn.

Continued below...
 
Some specifics

The length of the railway line from St. Petersburg (and Helsinki) to Vladivostok is about 10 thousand kilometers. The estimated time of container transportation on this way is 12 days. If the cargo is sent by sea for the same distance, it will take from 30 to 40 days. And the international transport corridor St. Petersburg — Mumbai (India) will transfer goods in 17 days, but if you take them by sea — this is a minimum of 45 days!

In this corridor, a small piece of railway communication between Russia and Iran remained unfinished — now the Iranian section of 165 kilometers from Astara (this is the border of Azerbaijan with Iran near the Caspian Sea) to Rasht is being completed at an accelerated pace. Now, please note: Azerbaijan has already lent half a billion dollars to Iran, and Russia has allocated one and a half billion dollars for this project, for the completion of this section of the railway. In other words, the container will be able to reach the Strait of Hormuz from the Russian city of Derbent in two to three days. Overland — via Azerbaijan and Iran.

And now the most ambitious project is a railway connection from the Chinese port of Lianyungan to the Turkish port of Istanbul. Cargo delivery-from 20 to 23 days, sea alternative-from 40 to 60 days.

Dear reader, do not be lazy, look at the diagram, especially the yellow and brown lines, think and compare — and you will see how financial power is being killed, how the very meaning of the existence of the "Great Anglo-Saxon Empire"is being undermined:
1703417997785.png


But this is not all: we remember how often the leaders of the Middle Eastern monarchies and Vladimir Putin visit each other, how Xi Jinping reconciled the Saudis with Iran-we remember, right?

Russia and China have agreed on everything with Iran, the House of Saud, and the Emirates: they are going to build a railway and automobile route from Iran through the Strait of Hormuz (54 kilometers) to Oman, from there we will stretch the road to Yemen, and then through the Bab-el-Mandeb Strait (26 kilometers) to Djibouti and all of Africa, its entire future market.

The Anglo-Saxons can control the sea with all their aircraft carriers, but on land there will be their own transport infrastructure-shorter, cheaper and faster. If anyone thinks that such construction projects are unrealistic, then they are deeply mistaken — the depth of the Strait of Hormuz is 229 meters, Bab-El-Mandeb is only 180 meters. The Chinese are already building bridges on supports 400-500 meters high. The Chinese have already built the 165-kilometer-long Danyang-Kunshan Viaduct, which is currently the longest bridge in the world. Yes, and Russia, having built the Crimean Bridge, also gained a fair amount of experience.

But there is also the Northern Sea Route: today, on December 19, Russian Foreign Ministry Ambassador-at-Large Nikolai Korchunov said that the Northern Sea Route can provide navigation to those operators who want to rebuild the route due to attacks by Yemeni Houthi rebels in the Red Sea. The announcement comes as global companies are announcing one after another the suspension of traffic across the Red Sea amid Houthi threats to attack any Israeli-linked ships.

Sea transportation is becoming unsafe, and Anglo-Saxons have begun to have problems…

The plans of Russia and China go much deeper than the construction of communication routes for the banal transportation of goods: "One Belt, One Road" is the creation of a new "Silk Road Economic Space", these are transport corridors from China to Europe through Russia, this is the construction of a high-speed Moscow-Almaty-Beijing highway with passenger trains running at speeds up to 400 km. kilometers per hour, this is the construction of railways from China through Central Asia to the Persian Gulf and the Indian Ocean. New huge cities will be created in the distance of transport arteries — this will give an impetus to new technologies and create countless millions of new jobs, tens of millions of people will come, free from the "****-democratic, liberal and other LGBT " * ideas that are forced to adopt by the US.

This is not a fantasy: Russia and China, with their support group-Azerbaijan, Turkey, Iran, the Central Asian republics, and virtually the entire Middle East-have integrated their plans into the long-term decisions of their governments and budget decisions for many years to come, and the process is already underway, it is visible, it is provoking anger and unprecedented opposition from the Anglo-Saxons. The Anglo-Saxons are angry, because they already see how the Russians and Chinese are withdrawing endless ribbons of rubles and yuan from the endless cargo flows in the form of customs duties, transport tariffs, insurance payments, etc., etc. And every ruble or yuan withdrawn is a dollar or pound taken away from the Anglo — Saxons.

If we look at the events in the world from this angle - "the battle of sea kraken with a land bear and dragon" - a lot of things become completely understandable, understandable and logical: the war in Ukraine is an attempt to cut off the land routes of oil and gas delivery from Russia, to force Russia to transport its resources by tankers and gas carriers - yes, to the same India for example. And from India-on tankers and gas carriers, again, by sea - you can take it to any country in the world, the Anglo-Saxons do not mind. Therefore, transportation from Novorossiysk is not blocked - just by sea, they are also carried by ships, and their insurers insure them. And Nord Streams was blown up for the same purpose-to force Russia to supply its gas to Europe in liquefied form: by sea, on gas carriers. And with Transcaucasia, everything immediately becomes clear: tension there is needed just like the Houthis in the Red Sea — to cross the entire Transcaucasia, Iran-Turkey-Azerbaijan-Russia-Armenia-and make it impossible for them to work together to create a single common transport corridor.

Well, one more touch: before the start of the SMO (Special Military Operation in Ukraine), Biden invited Vladimir Putin to a meeting in Geneva, where the headquarters of the world's largest maritime transport company, Mediterranean Shipping Company (MSC), is located. Here Biden announced the beginning of the Great Transport War.

Why so many countries find Russia-China initiative attractive? Because all delivery revenues (including insurance, banking services etc.) will be distributed proportionally between all members, depending of goods turnover, way distance etc. All members get huge investments in domestic transport infrastructure, financial sector etc.

And now, when we're looking at Middle East conflict - it serves the same purposes. Also recall Afghanistan - it was vital to control it where the US has failed. Because Afghanistan is a key and lock to whole Middle Asia. It has the only acceptable path in mountains suitable for big transportation flows that links rest of Asia with Russia and Europe. Yes, there are a lot of secondary events and targets around major one. But, this looks clearly shows that in nearest time gold market can't relax and hardly geopolitical situation will become quiet. We're entering in a period of confrontation of high intensity.

The US and China confrontation is not about Taiwan per se. This is of dominance role in S. Asia - the largest "free" market. If China will be defeated there "the Belt and the Road" project will loose its attractiveness. Despite that everything looks like just local conflicts - Russia-Ukraine, China - Taiwan, Armenia - Azerbaijan, Israel - Palestine etc., etc. In fact this is one big conflict between two largest powers in the world that is just in the beginning and will escalate further...

So, gold should keep it attractiveness in a long term run. We hope that many things have become more clear to you know.

Technicals
Monthly

On long term chart trend remains bullish, despite that the first attempt to break the top has failed, market doesn't show any despear. Now price is consolidating around the top and YPR1. The fact that gold doesn't drop too deep out of the top is a good sign for the bulls. For now we do not have any new clues from monthly chart. Thus, the High Wave pattern that gold is forming probably could be treated as bullish. In general it is logic price action before long holidays and end of financial year.

Monthly overbought stands around 2180-2200, so it is likely top level for January performance. Speaking about longer term perspective, the reverse H&S pattern on top has 2270$ destination point.

gold_m_25_12_23.png


Weekly

Here trend also stands bullish, while weekly overbought around 2125$ area. Hardly we get any breakouts on next week, more probable that price will stay inside the range of High Wave pattern. Next direction depends on the breakout of its range, as usual. Right now we could make some suggestions only.

Since just COP target has been touched, and pullback to K-support area already is done, current upward action could become the starting point of upward continuation, but there are some lack of details to conclude it definitely. Theoretical chances on downside AB-CD here still exist. And many things depend now on market response on daily/intraday resistance areas:

gold_w_25_12_23.png


Daily

Here we have the 1st test of market bullish ambitions - 2078-2080$ major 5/8 resistance area, let's see what will happen around it. Upward breakout will be valuable challenge in favor of further upside action:
gold_d_25_12_23.png


Intraday

We try to use some intraday patterns to identify major direction. So, our last week setup is done well - gold has hit 1.618 butterfly target... but the 4H picture is not about the butterfly. It is about reverse H&S, which has OP around 2090$. So, the 1st moment that we have to watch here is gold action to OP.

If it will not be started at all and price starts dropping - this will be bearish sign in favor of downside AB-CD on weekly chart. Other words speaking, normal bullish market should keep moving with this H&S to OP and next to XOP. If it doesn't happen, then something is wrong with bullish scenario:
gold_4h_25_12_23.png


Second is the butterfly itself. It is nothing wrong with the pullback that we see. But, if market is bullish, the pullback should be minimal, preferably to 3/8. Market should respect butterfly and response, but not break down 2030$ K-area.

gold_1h_25_12_23.png


Just following to these two patterns we should get either confirmation of bullish sentiment or get caution that something is wrong. So, these levels are also to consider for possible position taking...
 
Last edited:
Fundamentals

The news stream this week becomes narrower. Closer to the end of the year, markets become quiet and no important statistics usually released. So, today we prepare a kind of "special" report that let us to explain why gold market should get inspiring future ahead. You will see that all ongoing events, political, economical become a parts of this major process. It is really big stakes on the table - either the US and allies will keep control over the world or its hegemony will be destroyed and they will become just one among the many others. With so poor situation in economy the US will meet cruel deep crisis that could change the structure of the state. But they are not alone who vitally depends on results. For China this is also the question of survival. Not because they will disappear but because they will appear under the US authority if they will loose. When events of such scale stand in the world, you can't stay without gold as it becomes the only reliable wealth preserver. It is a time when investors very soon start asking return of the investments, rather than return on the investments...

Market overview

Gold prices gained on Thursday as the dollar retreated after U.S. economic data fueled expectations the Federal Reserve would cut interest rates in March next year. Data showed U.S. gross domestic product increased at a 4.9% annualized rate last quarter, revised down from the previously reported 5.2% pace, while weekly jobless claims increased slightly. The market expects an 83% chance of a Fed rate cut by March, compared with 79% before the data, according to the CME FedWatch tool.



The Fed's dovish stance has caused markets to price in several rate cuts in 2024. However, some Fed officials have spoken out against imminent rate cuts. The U.S. dollar fell 0.5% and 10-year Treasury yields hovered near a five-month low.


BofA expects rising palladium surpluses under its base case next year, with a possibility of prices falling to a low of $500 per ounce if there are no supply cuts.



October was the second-largest month for sales of US stocks to foreign investors, official institutions are getting rid of Treasuries, and gold reserves are growing. ️For the second month in a row, total net inflows of foreign long-term portfolio investment into the United States were tiny (just $3.3 billion). ️However, the reporting month is not entirely indicative now, since sales reigned in the markets in October, and then a rally began.

View attachment 88935

Situation with global trade is deteriorating. Baltic dry index jumped for 3% this week, global supply pressure is growing either. FedEx shares plunge 9% after report
In general, problems with logistics companies are a bad signal for the economy. Transportation is a key indicator of economic health. The Dow theory was even built on this.



The US strategy aimed at de-industrializing Europe has begun to bear fruit: investments in the construction of factories in the US have risen sharply. Bloomberg calls this a “construction boom.” However, adjusted for accumulated inflation (29.5% since 2015), the figures do not look so impressive: the volume of investment is approximately consistent with the previous peaks of 2015-2016.

And the growth of investment in factories is not confirmed by statistics on the growth of industrial production. Despite all the numerous advantages of the United States (lower taxes, ultra-cheap energy, incentives for relocations, the largest sales market), industrial production in the United States has been stagnating since April 2022.
View attachment 88936

The main problem of the US is the shortage of qualified personnel (they are extraordinarily expensive here compared to China, Mexico or even European countries) and demotivation for unskilled labor - huge unemployment benefits are corrupting.

China is draining treasuries, that's a fact. Already almost $125 billion in the 12 months from September 2022:
View attachment 88937

By the way, this is not the first call from the ex-adviser of the PBoC the famous economist Yu Yongding, to get rid of American debt. Let's add a little context and quotes - Yunding spoke at an international forum in the Chinese city of Sanya:

  • China should undertake an orderly reduction of its US treasury holdings and maintain trade balance with the rest of the world.”
  • “The West has blocked the Russian central bank’s access to its foreign exchange reserves, and such moves undermine confidence in the United States.”
  • “The attractiveness of American debt for other countries is also decreasing, given the weaponization of the dollar by Washington.”
  • "The downgrade of US credit ratings in recent months has also highlighted the risks of worsening countries' debt problems."
  • “America's debt levels may continue to rise relative to the size of the US economy. They have accumulated $18 trillion in foreign debt, equivalent to about 70% of their GDP. This figure could rise to 100%.
And this is not about debt/GDP ratio of course, as China itself has even greater debt level that the US. All these comments are mostly political ones. Since China began to speak out loud about the problem (albeit by an ex-adviser of the PBoC), it means that they have already sold everything they could, or at least are very close to it.
Actually, the recent information warm-up on the part of the EU about the confiscation of Russian assets speaks of the same thing. We are on the verge of an active phase of capital market decoupling. Everything that is "bad" will be blocked.

Western countries, including the United States, are exploring the possibility of justifying the seizure of Russian Central Bank assets frozen in the financial system and using them to finance Kiev . However, legal experts warn that this would be a sharp departure from usual practice, fraught with legal and economic risks . In addition, this issue causes a lot of controversy among allies.

View attachment 88938

️The G7 countries, the EU and Australia froze about 260 billion euros of assets of the Central Bank of the Russian Federation in 2022. Most of these assets - about 210 billion euros - are held in the EU, including cash and government bonds denominated in euros, dollars and other currencies. By comparison, the United States has frozen only a small portion of Russian state assets: about $5 billion euros. Once again EU will take the major part of this political risk.

It means they have given up on the global financial system. Once we confiscate assets, we are starting an irreversible process of disengagement and there will soon be no large Asian capital on Western markets. Second is, Germany and Russia are exchanging assets. On a surface it looks like mutual expropriation of frozen assets, but we suggest that this is agreed procedure. Its just simpler to do by mutual seizing now.

The German Prosecutor General’s Office wants to seize part of Russian assets worth more than €720 million and replenish the state budget with them. As reported by Der Spiegel, a corresponding request has been submitted to the court in Frankfurt am Main. Meantime Russia considers to hold OMV and Wintershall assets.

Next big news, as we think is Russia statement on ignoring of credit ratings by Rating Agencies, IMF and World Bank in decision making on loan providing to other States. It might become turning point and other countries could follow including China that for a long time already dissatisfied with dirt deeds from so-called "international and independent" rating agencies. This is big political move, because now Russia and other countries could finance different projects in Africa (and other poor countries) with acceptable loan rates ignoring external basic rules of capital value that make such investments just impossible.

Finally as an interludes to next section, we see that operation "Evergreen 2" is just started. We need to enter a new inflationary circle; it’s time to bring cargo transportation out of its blissful state. But by the way, this hits Eurasia more than America. The Chinese comrades may well respond by causing a sudden accident in the Panama Canal, although there was news that it had already become shallow due to natural reasons.

The transit of ships through the Suez Canal has been mostly stopped. Until November 2023, about 12% of all global cargo traffic passed through the Suez Canal. However, since the beginning of the Gaza war, ships in the Red Sea have come under fire from the Yemeni Houthis, who support Hamas. Since October 2023, 15 ships have already been attacked.

The largest shipping and oil and gas companies, including Moller-Maersk, BP, etc., began to redirect their ships around the Cape of Good Hope. This increases delivery times by 10-14 days. Container shipping companies, which have so far suspended transit through the region, account for 95% of all shipping capacity through the Suez Canal, according to Clarkson Research Services Ltd., a unit of the world's largest ship broker.

There is currently only one container ship in the Red Sea, 67 container ships have headed around the Cape of Good Hope and another 75 are delayed and awaiting instructions on how to proceed, said Ryan Petersen, founder of logistics company Flexport. The EU does not yet know what to do with the Yemeni Houthis and attacks on ships in the Red Sea.

The main thing is not yet clear the volume of economic losses caused by the re-orientation of ship routes from a short route through the Suez Canal and the Red Sea to a longer route around the Cape of Good Hope. But now already there is another problem appears - bad preparation of other African ports for so wide fleet transition and servicing.

The background of all this stuff is worrying as media starts preparation of public opinion for possible campaign against Iran. All these events is another sign of coming global fragmentation. All the events taking place in the world's oceans, when the Houthis fired at some ships in the Red Sea and the straits, and the Iranians, as they say, fired at others in the Indian Ocean, give rise to thoughts about insuring maritime transport.

Strange as it may seem to some, the dominance of naval forces or, let’s say, the projection of power in the world’s oceans is closely related to such insurance. It is not at all a coincidence that since the end of the 19th century, while the British fleet was the strongest, it was the British who ruled the world shipping insurance. In essence, buying insurance meant buying protection from the British from the unfriendly actions of various fleets and criminal gangs. It’s trivial because only the most dumb person wanted to upset gentlemen by causing them losses due to the need for insurance payments.

The current global system is an updated and reborn old one, with a new master in the area/maritime hegemon and a new financial infrastructure on the foundation of the old one. With new mechanisms such as reinsurance, but old pirate-bandit concepts. And the fact that the Houthis and Iranians can afford to sink whatever they want, and the Somali pirates have woken up and do not scare of the American fleet any more, which plies there in large numbers nearby, but no one touches Russian tankers, means that the most the basic risks of physical security of transportation are being realized and, accordingly, the fragmentation of the world based on the fundamentals is proceeding by leaps and bounds.

Do you want to swim in the Red Sea? Buy insurance from the Russians, they will come to an agreement with the Houthis, give them a share and everything will be ok. This is usually called risk reinsurance. If you want to sail a container ship off the coast of Iran, Iran has excellent insurance friends from friendly countries.

The same Iranians can, you see, they can also detain a ship with a fast-moving cargo under the pretext that they are transporting some prohibited substances, and in the meantime the cargo will have time to deteriorate until it becomes clear that they are not there. If only we had insured ourselves with whoever we needed, we wouldn’t have any problems.

Russia already did it in its own "pocket" Seas - national reinsurance company, providing guarantees of the safe navigation in the Black and Azov Seas. This is such fragmentation. As we've said yesterday, the heaviest negative burden will be for EU. They have blasted North Streams, now they totally depends on LNG delivery and other consumer goods from China. All this stuff should become more expensive...
View attachment 88940
The US desire to take control of the Bab-El-Mandeb Strait is understandable. Even a temporary shutdown, and even under a plausible pretext: let’s restore order in commercial shipping, threatens serious problems for the economies of China, Europe, India and especially Russia. Trade and economic ties are too closely intertwined. The Rotterdam-Singapore trade route through the Cape of Good Hope is 40% longer than through Suez. This is a commensurate increase in costs for insurance, transportation financing, and freight.
If the closure of Bab El Mandeb becomes systematic, this will require a noticeable increase in the world fleet of all types of vessels (tankers, gas carriers, bulk carriers, container ships) currently operating on the Europe-Asia route.

However, troubles here have been a long time coming. The leaders of China, Iran, India and Russia understood that sooner or later, through the efforts of the White House, the straits would be blocked. Hence China’s gigantic investments in the land corridor - the Belt and Road, the Indo-Iranian North-South project, and the Russian Northern Sea Route. Logistics was heavily tied to the narrow corridor. As for the US, it is also the question of prestige to resolve this problem and confirm that the US still a Master of Seas and control the situation of global cargo shipping.

LONG READ EXPLAINS EVERYTHING

Every self-confident "analyst", discussing the "global strategy of the Anglo-Saxons 'neo-colonization policy", begins with a description of their power on sea transport corridors; their US 6th fleet in the Mediterranean to control the flow of oil and liquefied gas; their oil companies controlling oil — " the blood of the world's industrial potential". Immediately they will name familiar words and combinations of letters-Exxon Mobil; Shell; TotalEnergies; BP ; Chevron Corporation, then the names of Rockefeller, Rothschild, Morgan will be mentioned.… Then they'll start talking about their power and who rules the world. And why they got mad at Russia, China, Xi and Putin... — well, let's figure it out.

To begin with, the vast majority of people - about 98% - see the world as they were allowed to see it; as it was painted for them. People live by myths, especially in politics: Anglo-Saxons still believe that Churchill was one of the greatest rulers of Great Britain, although he was particularly the person who really handed over the "great lady of the seas" to the Americans. It was after his actions and purposeful decisions that the UK rolled and still rolls into the society of ordinary regional powers with hordes of migrants and a bunch of frightened indigenous citizens.

But let's return to the oil magnates and their influence "on world politics, on the direction of the development of human civilization."

Everyone thinks that oil is almost the main source of wealth and earnings, let's count other people's money. In mid-November 2023, the World Energy Agency reported that it was producing 102 million barrels per day. Accordingly, we multiply by 365 days — this will be 37 billion barrels per year. What is the average annual price per barrel? Take, for example, $ 70-it doesn't matter if it's Brent or Urals. It turns out about 2.6 trillion dollars (the American estimate is 2.9 trillion). This is huge money, colossal-for and for the sake of such money, nations and states are destroyed, they shake test tubes with white powder at the UN, they fight in Syria and hold Middle Eastern monarchies by the throat. For the right to dispose of such revenues, the USSR was destroyed.

And if you compare it?! Are there any markets that are comparable in terms of the amount of live money available there? There are: the pharmaceutical market ($1.45 trillion) and the Cargo Shipping Market (last year its volume was $ 2.35 trillion).

In 6 years, by 2030, this market (freight transportation) will grow to 4 trillion dollars
— at least. The oil and gas market will not grow like this, and with the growing wealth of citizens in China, India, Russia, Southeast Asia and Africa, the growth of revenues in the freight transport market will accelerate even more.

Also, the profitability of transportation is much higher than the profitability of oil production, because costs, especially overhead costs, are about a third lower.

You see, dear reader, tens of millions of Chinese cars, hundreds of millions of tons of their electronics, billions of tons of Russian wheat, ore, metals, gas and oil, hundreds of millions of tons of Turkish jeans and leather, billions of tons of their tomatoes, etc., etc. need to be delivered to about 3 billion people in Africa, Europe, Russia, China, India, and Southeast Asia. We don't even think about the 300 million inhabitants of the United States...

And what do such names as Gianluigi Aponte, Rodolphe Saade, and Vincent Bollore say to the general public today? Nothing at all. And such abbreviations as MSC, SCAC, CMA-CGM? Yes, also nothing. And why should those who hold in their teeth a share of the trillion-dollar pie of container transportation shine?

Yes, dear reader, we have revealed to you the names of some transport companies and the names of their owners — they manage trillions of freight traffic turnover. Their cargo transportation is insured, as a rule, by insurance financial monsters from the UK-the Anglo-Saxons, sea transportation is their fiefdom.

95% of the transportation is carried out by these firms by sea — they have seized everything: containers and barrels, container ships and tankers, ports and service points, educational institutions and tens of millions of personnel. And banks, exchanges - are monsters. This is the world empire that the "Mistress of the Seas — England" has grown up. This is the Anglo-Saxon empire, which tenaciously holds the whole world, and nothing could be done without it permission.

Russia and China took a swing at this particular monster-at transport flows, at the entire transport business in principle: they have decided to oppose the Anglo — Saxon maritime transport infrastructure with their own-land. They have decided to destroy the main business of the Anglo-Saxons, to take away their main financial income. Well, after the paper dollar-everything is already clear with it.

The world's most violent interests have collided, and these interests are shared by trillions of vehicles. And this is not a battle of ordinary bulldogs under the carpet — it is a battle between "sea kraken" and "land bears and dragons".

Everyone has heard about the Chinese initiative "One Belt, One Road", about the Russian" Northern Sea Route "and the transport corridor" North-South", about BAM. For the "sea Kraken", these plans are like a knife near the throat, because the revenue of many container sea carriers is hundreds of billions of dollars a year, and together-trillions! For them, the loss of cargo transportation is death, because the Anglo-Saxons simply have nothing else to earn.

Continued below...
Master Sive, WHAT a piece of work !!!!! CONGRATS
 
Greetings everybody,

So, Gold has opened up and we do not need any adjustments to our trading plan. That's why let's take a look at JPY instead. Yen is very politicized now and highly sensitive to BoJ decisions. Besides, Japan has very specific bond market. It would be enough to say that more than 50% of all debt stands on the BOJ balance.

Currently the common opinion that BoJ should step out from its dovish policy, because population looses their savings with high speed. Technical picture in general corresponds to this view. Take a look first at 6 month chart - very long-term picture. JPY has completed big OP of H&S pattern:
1703587176415.png


So, we could suggest the retracement at least. Second scenario that seems possible here is larger H&S with the right arm around 90 area. But this seems possible only in two ways. First is, if the US will feel really bad, or yes, if Japan start raising rates... Which we do not know. That's why, for now let's just suggest the pullback.

On monthly chart we see price action that is very typical for DRPO pattern - capitulation of the bulls. Market was not able to break the OP top. Those who bought on 3/8 retracement now are trapped in wrong direction. Once JPY will start breaking major support areas - stops will be triggered and downside acceleration could follow. In fact, we could get Double Top here.. and yes divergence is already in place as well, trend has turned bearish.
jpy_m_26_12_23.png


The same story on weekly chart. Here market was not able even to complete OP, turned down. But for now price stands at oversold, so this is not best point for taking new long-term bearish position here:
jpy_w_26_12_23.png


On daily chart this is also K-support area:
jpy_d_26_12_23.png


Depending on what you would like to do here - you could watch for different scenarios. The most simple one is for bears - just wait the upside reaction on weekly oversold and daily K-area. Market still has solid upside momentum that is not faded yet. Once bounce will happen, it might be much better chance to enter.

If you trade on daily chart and want to buy - you have to wait for clear bullish pattern that we do not have yet. So, it makes sense to wait a bit and see.. We do not exclude that it might be downside butterfly on 4H chart.

Maybe right wing will start forming somewhere around as JPY stands at Agreement support on 1H chart:
jpy_1h_26_12_23.png
 
Greetings everybody,

So, let's go back to Gold market... Meantime it holds bullish context well. Although we've worried about downside drop on weekend, Gold has shown just minimum 3/8 retracement, which is very good for bullish context.

Now price is moving to major daily resistance of 2078$, and this should be great test of bullish context. Yes, by fundamental reasons, it seems that gold should break and pass it, but, the one thing is to suggest and quite another one to see.
gold_d_27_12_23.png


On 4H chart the pullback after butterfly target was just to neckline, which is very good for perspectives of H&S pattern. OP target stands around 2090$

gold_4h_27_12_23.png


But, since we have daily 2078$, I would consider minor butterfly on 1H chart precisely with targets around 2080$ area. Which is also the upper border of the channel. Then - to watch on reaction to make a decision, is it safe to go long or not.

gold_1h_27_12_23.png
 
Greetings everybody,

So, Gold accurately has done upside setup, that we've discussed yesterday - 2078-2082 target area is completed. Now the most interesting stuff begins. Our task is to get early recognition of direction - either we get downside AB-CD or market will keep going higher, breaking this area:
gold_d_28_12_23.png


And 4H chart seems major one for this task. Gold is moving with upside H&S pattern. OP @2082 mostly is done and market starts natural pullback. CD leg looks much slower than AB, which is not vital but still, stands in favor of possible deep downside action.

Absolute vital point is the "C" lows of course, around 2015... But, we also have to control 2045-2060 area. Because to proceed to XOP, market has to keep H&S intact. And this is possible only if price remains above neckline. As some compromise, we could accept minor dive below it to 2045 K-support, but not deeper.
gold_4h_28_12_23.png


So, that's the answer. If Gold will be able to stay above these levels, it keeps bullish context intact. Downside drop below 2045 and especially below "C" point suggests drop under 1975 and makes possible downside AB-CD on daily chart...
 
Greetings everybody,

So, picture is very similar to EUR. Downside retracement is started and now we need to see what will happen around two support areas - 2060 and 2045. Now we have bearish flag on 4H chart, meaning that at least 2060 level should be reached...

gold_4h_29_12_23.png


On 1H chart we also have an AB-CD targets now. OP agrees with the 1st one - 2060, while XOP with the 2nd one around 2045-2050$.
gold_1h_29_12_23.png


That's all about technical side. Next few questions you have to decide isolately. First is - whether you want to wait upside reversal before position taking or not. If not - we suggest to use scale-in entry, taking position in parts on both levels. Second - would you like to take position at all now to keep it through long holidays...
 
Back
Top