Dow Up 5%+: Covid-19 Cure or Biden? Gold Tanks

Pfizer announced this AM that the Covid-19 vaccine being developed by Pfizer Inc. and BioNTech SE prevented more than 90% of infections in a study of tens of thousands of volunteers, the most encouraging scientific advance so far in the battle against the coronavirus.

Eight months into the worst pandemic in a century, the preliminary results pave the way for the companies to seek an emergency-use authorization from regulators if further research shows the shot is also safe.

US Treasuries? The 10-year Treasury Note rose 10.8 basis points.

Gold?

For commodities, gold is down 4.52% while silver is down 6.46%.

A possible cure to the infection caused by Covid or a career bureaucrat that has been in DC for 47 years with little to show for it? I’ll go for the Covid cure!

Week Wrap-up! Bitcoin Soars Above 15,500 As Investors Seek Protection From Eroding US Dollar (Ethereum Up 6.90%, Silver Up 1.95%)

Bitcoin, the popular Cryptocurrency, soared to about 15,500 as investors fear an eroding US Dollar.

In percentage terms, Ethereum is up 6.90% today.

The US Dollar seems to be spiraling down from a cycle high.

But silver is up 1.95% while gold is only up 0.23%. Hi-yo Silver!

Iron ore is up 3.87%, but my neighbors would be rather angry if I had 5 tons of iron ore dumped on my driveway.

Speaking of Bitcoin,

Thousands of bitcoins — worth $1 billion — were seized by law enforcement this week in what the Justice Department said was the largest seizure of cryptocurrency in the history of agency. The cryptocurrency is linked to sales of illicit drugs and goods on Silk Road, a dark web marketplace that shut down in 2013.

Revival! Gold Is Rallying In Part To Never-ending Fed Stimulus (Rate Increases On Hold Until After 2023)

Gold’s rally is showing signs of a revival.

The spot metal has posted two straight weekly gains, and at least one technical signal is pointing to further increases. Bullion’s moving average convergence-divergence indicator, a gauge of price momentum, crossed above the so-called signal line last week for the first time since early August in a bullish sign for traders who follow price patterns.

Of course, never ending juice from The Federal Reserve is helping.

And the juice isn’t going away until after 2023 (according to the Fed Dots plot).

Its a shame for the people of Venezuela that they can’t pump gold instead of oil given that their 9.25% sovereign bond has fallen from over $100 in 2013 to $9.28 today.

Where Will Mortgage Rates Be In Three Years? Hint: Right Where They Are Now Because The Fed Isn’t Going Anywhere Until 2023

One question that is often asked if “Where Will Mortgage Rates Be In Three Years?”

Take a look at Freddie Mac’s 30Y mortgage survey rate (white line) and M2 Money Velocity (green line). And then overlay The Federal Reserve Balance Sheet, pushing down the benchmark 10Y Treasury Note yield. It is clear that mortgage rates aren’t going up anytime soon.

Look at home price growth and The Fed’s balance sheet. As the Fed began shrinking its balance sheet in 2018 and then the Case-Shiller home price index growth rate started falling … then recovered as The Fed threw more gas on the fire.

Gold? There is also a positive relation to The Fed’s balance sheet.

The Fed isn’t going until at least 2023. So, The Fed is here to stay, distorting markets and prices.

Rock and roll, hoochie koo.

Gold Soars As US Budget Deficit Soars And M2 Velocity Crashes

Oddly, there is an election in less than a month and no one is talking about the crashing US budget deficit (where government spending is greater than government receipts [taxes].

The US Federal Budget consists mostly of “mandatory” expenditures (Social Security, Medicare, Medicaid, etc.). Discretionary spending is a much smaller amount.

Which budget it is growing the fastest? Medicare and Medicaid. Defense is a small fraction of healthcare spending.

Covid helped to drive the US budget deficit to -15.009 while M2 Money Velocity has collapsed to 1.0970 indicating that printing money to stimulate economic growth isn’t working. At the same time that Washington DC has lost its will to control their spending, gold prices has soared.

Note that gold prices soar when US budget deficits grow, then recede as budget deficits moderate. But the latest spike in budget deficits has led gold to all-time highs.