Change

The past almost 3 weeks prove the point made here last week: the US of today is far removed from what it used to be during the years before and for a few decades after WWII. The physical and emotional violence of the past four years, culminating in as yet unproved accusations of voter fraud on a large scale, is well beyond the scale and stresses of the either the Walks for Freedom or the time of Vietnam. The US have changed in ways that are not healthy, including the newly raging COVID pandemic. It will require a most special Leader to meld Americans into one people again, as they last were in the first decades after WWI.

COVID is rampant! On Friday, 201 083 new infections were recorded. Early during the local pandemic, the number of daily deaths spiked above 2500, but the rate soon declined to below 1000 per day. For some time, it looked as if the war against the virus was being won. More recently, new infections increased steeply, with the implication that daily deaths would also increase. Now the daily deaths are ready to break above 2000. Other countries are also experiencing steep increases in the number of fresh infections – and soon deaths as well – and they are reacting to this by re-introducing restrictive measures to combat the spread of the virus.

This despite widespread civil unrest to protest COVID regulations that have been kept in place. Now with new restrictions to be introduced again, more unrest can be expected in other countries and, should the US follow foreign examples, soon here as well. In the US the rate of the increase in new infections is getting steeper. Since there is a 2-3 week lag between an increase in infections and a similar effect on the number of deaths, it can be predicted that the shock of the rising death rate will be felt midway through December.

It is suspected that the 1918 Spanish flu that lasted for two years became more virulent later because of a mutation of the virus. It is to be hoped that evolution – the subject here last week in another context – will not play the same card again. There are more than enough other troubles that require urgent attention not to be handicapped be a situation that have people protesting about what apparently is essential to curb the spread of the virus.

Given that the accusations of voter fraud on a large scale have not yet been tested in court, if that is to follow in all earnest, the difference in attendance of the Trump rallies and those of Biden did not prepare on for such a close election. Neither did the many polls, which reflected a completely different outcome from that predicted by popular attendance at Trump’s rallies.

It will be premature to discuss either and Biden administration ion place for the next 4 years or to consider what Trump could accomplish if he were to have 8 years in the White House. From what is known from Biden’s statements and the Democratic platform, the next four tears with Biden in the White House will be very different from the course Trump has defined for the US during the past four years. I believe that should Biden retain his victory in the election, as seems likely, the US will be steered down a path that has in principle been selected during the past sic presidential administrations.

Reviewing those aspects can wait until there is certainty as to whom will occupy the White House come 2021.

On the matter of possible voter fraud, admittedly there seem to be strange events and circumstances associated with the voting. The use of voting machines that are said to have a mind of their own to missing large batches of votes that turn up later after the counting was through to be over have to be cleared up and solidly proven – not only to clear up any potential problems with this election, but to ensure that future elections are conducted without similar problems. Strange volume spikes in the submission of batches of voting data during times of low voting activity could be no more than aberrations in the processing of votes, but that is not certain. It will be better not to have anything that could raise suspicions happen during an event of such great importance for the future of the country.

Without waiting for the final outcome of the election, it is safe to say that there is a major fork in the road with a choice on which one to take now in the making, as I discussed in a recent US Markets report.

Something that is near certain is that during the next four years China generally will be recognized as the largest economy in the world, replacing the US at the top of the list. It is also near certain that with Biden’s leadership relations with China and the rest of the world will be markedly different from what happened during the past four years. If Trump should return to the White House for four more years, will he continue as before or adjust to the reality that China is to be the number one global economy given what is the potential for a post COVID recovery in the two countries as things stand at the moment.

How relations develop between the US and China – with Russia in the wings – is of course of cardinal importance for the rest of the world. A world that is facing many problems of great significance for the next few decades at least during which we have to come to grips with climate change that could be either global warming as has been warned for some time, or a chilly world as the sun goes to sleep for quite a long time, of which the duration is not yet certain. Add in the growing disparity between the rich and the poor, both within and between countries and the kind of problems that can arise from such a wide difference in the distribution of wealth at a time when the global population is growing steeply; but also with different rates for the poor and the wealthy - citizens and countries both.

The list of problems can be added to, such as pollution of land, air and sea and the availability of sufficient food and clean water for the anticipated global population of 2040. Which model of government will be in general use at that time? Will it then still be the democracy as we know it, or is the Chinese central government with very tight control over the population, including a less tightly controlled free market system, going to be preferred? I guess that what happens next with this election is to have a significant influence on such matters.

As written here before, America is in a process of evolving into something that is quite different from what it had been for a long time, but so, too, is the world as a whole. We know within ourselves that the world of our children and grand children is going to be much different from the world in which we grew up. But we must also remind ourselves that this process of change has been going since our ancestors lived in caves. The only change since then as has been said many times before, is the pace of change is ratcheting up steeply as technology in all its forms changes the world we live in. And changes us too.

Euro–Dollar

Euro–dollar, last = $1.1853 (www.investing.com)

The euro rally following the recent bear spike down to line E ($1.1683) once more reached to line R ($1.1870) as it has done time and again. And then again failed to break higher. The recent reversal lower off line R found support at line Z ($1.1748), the top of broad bear channel WXYZ, rebounded higher again – a possible goodbye kiss on line Z – to again hold at line R.

Given the congestion below line R and the multiple tops along that resistance, the greater becomes the possibility that a break higher will be explosive.

DJIA Daily close

DJIA, last = 29263.48 (money.cnn.com)

So we have a new all time high for the DJIA on Monday, which did not extend, but pulled back to end the week close to line M. The rally into the new high, with some weakness towards the end of the week, is an indication that investors already have accepted the verdict of the election and find it good for business. Perhaps the late weakness last week warns that the recent revelations about voter fraud has sown some seeds of doubt about the outcome of the election.

There is still some time for the Trump lawyers to produce sufficient hard evidence of their suspicions to make a case in court. There will probably be more fresh news about their progress and investors may have to take this into regard when they get to ponder on the future of Wall Street. The developments with COVID adds to the mix of major factors that increase uncertainty about the economy.

Gold London PM fix – Dollars

Three and a half months, or a little longer perhaps. That is how long the price of gold has spent under the control of the highly concerned owners of short positions in the futures and options markets. Reports from various sources talk about a large increase in demand for precious metals, which implies that as time passes it would become even more difficult to close short positions without having to join the rush of speculators when longs eventually are happy to take profit at higher prices.

Prices were hit hard again last week and – as been happening since the end of July – there initially is selling from near term traders with tight stop loss levels, but then the long term bulls add to their portfolios at the new low prices. Both the gold and silver OI added more than 4000 contracts on Friday according to the preliminary report from COMEX.

Also, the longer the suppression lasts, the greater the risk that investors will renew attempts to get the courts to intervene on their behalf with a claim for damages. It could be that such litigation will be more successful in a climate where some of the big banks have paid large amounts to settle DoJ cases of fraudulent trading.

Gold price – London PM fix, last = $1875.70 (www.kitco.com)

Euro–gold PM fix

The euro gold price failed to recover from the marginal break below bull channel of two weeks ago. A brief attempt to do so lost steam when the euro last week again rallied against the dollar. The new weakness held just above line G (€1556) and is holding short of the support at line Y (€1566).

Given that a break by the euro above the solid resistance on the euro-dollar chart could happen at any time, it is important for the euro price of gold that the dollar price has to shake off the cap that is now in place at $1900 and break loose to get going with the longer term bull market.

Euro gold price – PM fix in Euro. Last = €1580.46 (www.kitco.com)

Silver Daily London Fix

Silver daily London fix, last = $24.245 (www.kitco.com)

The silver briefly broke higher above the steeply descending resistance of line G ($25.25), but then immediately retreated to below the line. Doing so also had the price breaking below bull channel JKL ($25.50) for a second time.

It was reported that a large number of December silver options are in the money at and above $25, but that there are many still in the money above $24 to represent large losses for the sellers of the options. It therefore looks as if the price of silver will be kept below that level until the end of this week. Perhaps once the December futures have become the active month – for silver and gold – there is no longer as much need to keep the prices as low as they have been during the past two weeks. Which might mean that Decembers will again be a good month for the precious metals.

U.S. 10–year Treasury Note

U.S. 10–year Treasury note, last = 0.824% (www.investing.com )

Political tit for tat that is going on apparently has repercussions for the Treasury market. The matter of financial assistance to suffering households and smaller businesses is trapped in the political arena with no party willing to let the other grab the headlines by finalising the payment of the financial assistance.

The break above line Y (0.917%), perhaps in response to a new and large issue of 10-year notes failed to hold when it became evident that such a step might not be imminent. On the other hand, it does not look as if negative rates – as is becoming prevalent in Europe – will arrive in the US.

West Texas Intermediate crude. Daily close

WTI crude – Daily close, last = $42.44 (www.investing.com )

The price of crude has finally, after a number of attempts, broken well above the resistance at line Q ($40.79). It is also holding clear of support of line G ($39.46). The reason for the increase could be the energy market is either expecting supply to decline or demand to improve. Speculation points us to the first of these.

A possible reason for the higher price is that areas such as North Dakota, mostly rural. should have a lower incidence of COVID. On the contrary, though, N Dakota is suffering from a large number of cases relative to the population of the state If this worsens further – and it may already have affected production – then supply could be reduced even more than it may already have been.

The economy is not positioned to absorb the effects of higher priced energy with ease and with winter settling in higher energy is expected. If prices continue to climb after the break above resistance, the production of oil can perhaps become another aspect of the disagreement over what measures to use to reduce COVID infections.

Inflation? The recent weakness in the price of crude was last week considered a result of the increasing number of COVID infections – which should still have had a similar effect this past week. Now the bounce in the price could be due to the resolution of who will be the new president – which implies that the rally could extend or reverse as suddenly as it had started depending on how the election is proceeding.

©2020 daan joubert 

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