Will The Reports On The Gigantic US Trade Deficit Ever Push The Price of Gold and Silver Higher (in US dollars)?

There were a bunch of financial reports this morning. But the one that caught my attention was the US trade deficit. Essentially, the rest of the world provides the US with stuff and they get US fiat in return. The U.S. trade deficit in goods widened 6.3% to $102.7 billion in July, according to the Commerce Department. IMHO this should have crushed the US dollar and this should have led to the price of gold and silver in US$ going higher. But the other reports were mostly good news, so interest rates went up, pushing the US dollar index (DXY) higher, and a drop in the price of gold and silver futures was what actually occurred.

The US trade deficit reports are seldom market moving news. But for gold and silver investors that are protecting themselves from US dollar debasement it's a data point that seems like it should be meaningful. How much longer will the rest of the world want to hold US dollars and give us stuff in return for fiat as the US debases the dollar via the enormous trade and Treasury deficits?

Size of US Treasury Note Auctions This Week Is Stunning Given April Is Rare Month When Net Revenue Is A Surplus

As I type this, this morning's price of silver is down over a dollar an ounce and gold is down over $64 an ounce. But glancing at the size of the US Treasury Note auctions has me more convinced than ever that an upward trend is the price of gold and silver continues to be inevitable.

The US Treasury is auctioning $173 billion in notes this week. The ongoing debasement of the dollar in order to cover the immense US spending deficit seemingly ensures that the price of gold and silver is headed higher.

Treasury Note Auctions This Week

$69 Billion - 2 Year Notes - 2/23/24

$70 Billion - 5 Year Notes - 2/24/24

$44 Billion - 7 Year Notes - 2/25/24

Total - $173 billion in Note auctions this week

Last year, the US ran a deficit in 10 out of 12 months. April was a rare surpus month ($177 billion) due to the timing of the April 15 tax deadline. But regardless of the fact that the Treasury may be in surplus this month, there is little relief in their need to raise dollars via auctions.

Am I making too big a deal out of one deficit figure? Maybe. The total being raised by the US Treasury this week is lower than most recent weeks. Specifically, Bill sales are lower than most recent weeks ($215 billion this week versus $300 billion or higher weeks not being unusual.) And there are not any bond auctions this week.

Regardless, the growing amount the US Treasury needs to auction off every week to refund the expiring $34 trillion in debt and to cover the deficit is eventually going to crush the US dollar and lead to the price of gold and silver skyrocketing higher

Protect yourself from US dollar debasement. Consider allocating a significant percentage of your investment dollars to precious metals. 

Personally, I am a fan of silver because it offers more leverage than gold. However. this also makes it more risky than gold as the downside moves, as well as the upside moves, are larger than for gold.

If you are interested in direct exposure to the price of silver, take a look at the PSLV etf. It's the silver ETF preferred by many silver bulls. 

My favorite option for buying silver is offered by First Majestic. Their prices are competitive for all buyers, and they offer a $0.50 an ounce discount to stockholders.   

Full disclosure - I'm a First Majestic stockholder (stock symbol - AG). 

2024 Is Likely To Be Another Year With A High Level Of Hurricane Intensity

According to https://tropical.atmos.colostate.edu/Realtime/index.php?arch&loc=northatlantic, the accumulated cyclone energy of North Atlantic cyclones has been above 95 for each of the past 8 years (2016 thru 2023) and above 100 for 7 of the last 8 (2022 was the outlier with 95). Comparing this result to the previous 30 years, 14 out of the previous 30 years had accumulated energy below 95 (47%). I doubt many readers of this blog will be surprised by the fact that years with accumulated cyclone energy of North Atlantic hurricanes with high intensities are becoming more frequent.

I conducted this review because I speculated it highly likely that given the warmer ocean temperatures, that the Carribean Islands, Atlantic and Gulf of Mexco coastal communities are likely to be devastated by the next round of hurricanes following the flip of ENSO to La Nina.

However, when comparing accumulated energy years to El Nino and La Nina years, I found that while there is definitely a correlation, it is not as strong as I had expected to find https://ggweather.com/enso/oni.htm. While El Niño generally tends to suppress Atlantic hurricane activity, and La Niña tends to enhance it, an eyeball review of the results suggests that it does not appear to be highly predictive of whether there will be destructive hurricane activity in 2024. Thus, if there is a flip of the ENSO cycle from El Niño to La Niña, as some forecasters are predicting, it makes a devastating hurricane season more likely but not a certainty.

While coastal communities may not be as vulnerable to hurricanes in 2024 as I had supposed before starting this review, I fear that the warmer ocean temperatures will lead to more devastating Atlantic hurricanes in the not too distant future during both El Niño and La Niña years.

Why Do The Gullible Folks In The Right Wing Echo Chamber Think That A Regional Winter Cold Snap Proves That Global Warming Is A Hoax?

We're in the midst of winter and much of the US is in the middle of a cold snap. Shocking, right? Yet, as typically happens during a regional cold snap the right wing echo chamber is filled with posts claiming that frigid weather during winter and rescheduled NFL games proves global warming to be a hoax. These claims ignore that the portion of the U.S. hit by this cold snap is a fraction of global surface area. Moreover, it is common for localized incursions of Arctic air masses to be compensated for by warmer-than-normal conditions in other areas of the mid-latitudes.Frankly, anyone that is paying attention should realize that weather is so variable that regional US cold temperature records are commonplace even while locations south of the equator are sizzling. For reference, from January 2020 through November 2022, 91% of 245 locations measured had more record heat than record cold. 

Here's a news flash, when the US suffers through what is likely to be the hottest summer in recorded history during 2024 with hot temperature records being set throughout the country, there will almost certainly be cold records set during the winter season south of the equator. However, it seems probable that globally the hot temperature records will be about 3 times as frequent as the cold termperature records.

If along the lines of climate science deniers, I was to cherry pick a variable data set to make an outrageous claim, it would be that sea level rise has gone parabolic. Check out the chart below. The increase in sea level between May 4 and September 29 is a bit frightening. If the 4.7 mm (0.36 inches) increase in sea level rise is extrapolated out to a full year, that's about 0.8 inches of sea level rise per year and over 8 inches per decade. Whoa, sunny day flooding is already becoming a problem. Eight more inches of sea level rise by 2034 would convert sunny day flooding from a major nuisance into a coastal real estate catastrophe. Even if there is another 0.8 inches of sea level rise in 2024, it will be a problem for low lying coastal cities such as Charleston.

However, a close review of the chart indicates that upward spikes occurred in 2011-2012 and 2014-2015 and were both followed by declines in sea level. Thus, reversion to the mean of about 1/8th inch of sea level rise per year seems at least as likely as a continued rise of 0.8 inch a year. 

https://climate.nasa.gov/vital-signs/sea-level/

In conclusion,  the right wing echo chamber is very effective at amplifying climate disinformation. They cherry pick data, utilize obscure data sources, and make a big deal of the wildest faulty predictions made by individual climate researchers which never obtained widescale acceptance. On the other hand, climate science researchers don't need to do any cherry picking as the results of a warming planet are abundant.

Related Posts

Climate Science Deniers Have Uncovered 1,600 Scientists Who Signed A There Is No Climate Emergency Declaration. That is 0.02% of the 8 Million Scientists In The World

Got A Climate Change Denial Opinion Piece For The WSJ? No Need To Worry About Editor Fact Checking - Global Temperature

Large US Treasury Bond Auctions May Be Good Gold and Silver Dip Buying Opportunities

The market is starting to choke on the massive size of US Treasury auctions. Auctions sizes are particularly large currently as Treasury refills its coffer after emptying most of the surplus during the close to the wire negotiations on the US debt limit. We're talking $500-600 billion in debt being auctioned off every week to pay off the expiring bonds that fund the soon to be $34 trillion debt, as well as to cover the monthly deficits. And with the US running $100-200 billion monthly deficits, that's an additional $25 billion or more in debt that needs to be raised every week.

On Wednesday demand for the 20 year bonds being auctioned off was underwhelming. So, interest rates went up, the US dollar index (DXY) responded by going higher, and that led the alogos to sell off gold and silver futures. The Wednesday dip in the price of gold and silver futures was reversed the next day.

In a more rational world, weak bond auctions would be a sign of trouble for the US dollar, and the prescious metal futures would go higher. And eventually, that will be the case. But for now, don't be surprised by dips in the price of gold and silver after weak US bond auctions. 

While there are no long term bond auctions scheduled for the rest of 2023, there will be a heavy schedule next month. But with the enormous funding requirements, Treasury auctions can not be completely shut down for the rest of December. There will be 5 and 7 year note auctions next week (12/27 and 12/28), but these auctions are much less likely to lead to fireworks than long term bond auctions

Climate Science Deniers Have Uncovered 1,600 Scientists Who Signed A There Is No Climate Emergency Declaration. That is 0.02% of the 8 Million Scientists In The World

Most people know someone that is brilliant yet has no common sense. Thus, the fact that climate science deniers are making a big deal about finding 1,600 scientists from random fields that have signed a declaration that "there is no climate emergency" is little more than fodder for their echo chamber. I'm pretty certain with a sufficient effort I could find 1,600 scientists to sign a declaration stating that "God (or the devil) placed dinosuar bones in the ground to test Christians' faith".

To deny that there is a climate emergency, these 1,600 scientists (0.02% of the total) have to overlook the following:

1. Hurricanes and typhoons are growing in intensity at rates never experienced during the satellite era. They are becoming increasingly deadly (the climate science deniers talk about there not being a significant increase in the number of hurricanes, but there has never been a consensus among mainstream climate researchers in regard to frequency, only that intensity would increase).
2. Deadly flooding is becoming increasingly common. A warmer atmosphere holds more moisture—about 7 percent more per 1.8°F (1°C) of warming—and a significant increase in atmospheric moisture is present due to the air holding more moisture as it warms.This added moisture powers heavy rainstorms becoming flooding events.
3. Sea level is rising by 1/8th inch per year globally and by more in many locations. In the past 20 years, the rate of sunny-day flooding has doubled. Compared to 2000, it's increased 400% on the East Coast and 1,100% on the Gulf Coast. As an example, Charleston SC flooded about 1 out of every 5 days in 2019, and the sunny day flooding problem is worsening.
4. Some areas of the Middle East are too hot for human survival without the aid of air conditioning, fans or shade. The limit is somewhere between 104 and 122 degrees Fahrenheit if you're sitting perfectly still, according to a study conducted in the United Kingdom. Other research focuses on wet bulb temperatures.
5. The capability of the oceans to support seafood harvesting is diminishing. 

 A. Coral bleaching is occurring globally  For example, a recent paper shows that around 70% of reefs are now net erosional in the Florida Keys, meaning they are losing more habitat than they build. And the Great Barrier Reef has experienced mass bleaching events in 1998, 2002, 2016, 2017, 2020 and 2022. An estimated 25 percent of all marine life, including over 4,000 species of fish, are dependent on coral reefs at some point in their life cycle. The reefs provides essential food, shelter and the spawning grounds needed for their species’ survival. When their homes disappeared, the fishing industry becomes less productive. 

B. The acidity of the ocean has increased by 26% since the beginning of the industrial era. For oysters, scallops and other shellfish, lower pH means less carbonate, which they rely on to build their essential shells. As acidity increases, shells become thinner, growth slows down and death rates rise.The shellfish industry is experiencing higher mortality rates. Many shellfish farmers have had to add soda ash to their hatcheries to permit the seed clams, oysters and geoduck to thrive. 

Conclusion

The social conservative echo chamber is very effective at amplifying climate disinformation. They cherry pick data, utilize obscure data sources, and make a big deal of the wildest faulty predictions made by individual climate researchers which never obtained widescale acceptance. The amount of coverage of a declaration by 0.02% of scientists from an assortment of fields is a good example of how effective the social conserative echo chamber is at promoting their denial of climate science.

Will Climate Change Suppress The Price of Tech Stocks Due to Crop Failures Keeping Food Costs and Inflation High?

In the financial markets, it seems stunning how nonchalant the vast majority of investors and commentators are to the risks to stocks and bonds from climate impacts. However the world's largest  investor, Norway's sovereign wealth fund, is cutting their tech exposure due to global warning.

For reference, Norway's sovereign wealth fund, the world's largest stock market investor with $1.4 trillion in assets under management,made a stunning profit of $143 billion for the first half of 2023, due to the growth of U.S tech companies (the AI craze).

But they are cutting back on tech exposure. Their CEO stated that global warming is lowering food harvests, and thus increasing food prices. The fund expects it will be difficult to reduce inflation worldwide due to high food prices. And high inflation leads to high interest rates. High interest rates produce a poor risk reward for owners of pricey tech stocks versus earning substantial interest fees from bonds. This makes tech investments signifiantly less attractive and far less likely to increase in price.

While food shortages may be the first climate impact to hit the financial markets, the markets seem oblivious to the multitude of long term impacts that are likely to wreck economies worldwide (along with potentially causing mass starvation and making large swathes of the globe unlivable).