The largest month-over-month net seller of US Treasuries was Great Britain at an astounding change of 12 billion dollars.
That move was consistent with the Bank of England’s diligence in raising interest rates to preserve the comparative worth and stability of the British Pound.
Monty Guild’s assessment of the Great British Pound has been confirmed. With one major player deciding to protect itself, others will certainly follow. This revelation does not augur well for the USD and it helps frame the important and irrefutable value of gold.
The statistics also disclose massive Japanese buying to stem the market from demanding a rise of the YEN/USD and YEN/EUR. Even with this input, the Treasury is short 3 billion dollars month-over-month plus amounts auctioned in September.
Since the auctions in September are entirely missing, where have 30 to 50 billion in treasuries notes and bills been placed? Perhaps domestic institutional banks and the Federal Reserve have been facilitating the purchase of debt which has no place to go! It’s also highly possible that mutual fund manager have placed clients’ money into bonds which will erode in value the second interest rates start to rise.
The logical conclusion supports a rise in interest rates to attract foreign holders of Treasuries. And when this happens, the US stock market and outstanding inventory of bonds will plummet. The USD will adjust downward as US assets become less attractive because they’ve been leveraged and mired in debt to the limit which seems to have happened.
Comments from Jim Sinclair:
The most amazing number here is the amount of US Treasuries that Japan has purchased in the context of where the Yen is trading today. It reflects the immense nature of the pressures that are being placed on the various currencies in this scenario of a lower dollar.
This type of pressure is so great as to sink the Exchange Stabilization Fund (ESF) activities. Will the ESF now be able to hold up the stock market, control the currency market, fiddle with gold, and hold the CRB from making new highs? No, it hasn’t the chance of a snowball in hell!
The dyke is simply leaking too much and the capital of the ESF is limited below the level of that required to jiggle every market on earth at the same time.
The other important message in these figures is the “follow the leader syndrome” that always exists among central banks. These figures will be viewed historically as the nail in the coffin of the US dollar. The dollar is heading much lower now and we are seeing the beginning of the end of the “Dollar reserve Standard.”
Another observation I have is that the shortfall in these numbers may well indicate that the auctions were not as successful as advertised and the Fed and some of its friends had to eat billions worth of the auctioned bonds. That would be a blockbuster if true.
Some gold experts will say that gold is now destined for $400 plus. I disagree - gold is now heading for $500.
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