The US Dollar is still interesting and attractive to investors, despite the statistical fluctuations.

The US labor market statistics in September was surprising, but not as impressive as it might have been.

Improvements in the Unemployment Rate and the Average Hourly Earnings will allow the US Federal Reserve to tighten its monetary policy.

The first October week was quite effective for the American Dollar. The main currency pair updated the low at 1.1668 it reached on August 17th and then was corrected bit, but made perfectly clear that there might be more declines. If there is a reason, the “bears” will come quickly.

The US labor market statistics in September is astonishing. The numbers were expected to be quite high, but the market was really surprised by the readings it saw. The Unemployment Rate was 4.2% in September after being 4.4% the month before. This is the lowest value of the indicator since 2001, over 16 years. It’s highly unlikely to be a mistake: the Participation Rate increased up to 63.1% against 62.9% in August. It appears that the labor market is really feeling good.

Another positive thing is the growth of the Average Hourly Earnings. In September, it expanded by 0.5% m/m after adding 0.2% m/m in the previous month and against the expected reading of 0.3% m/m. On YoY, the indicator increased by 2.9%. That’s a very good result.

However, this is where good news ended. The Non-Farm Payrolls decreased by 33K, although it was expected to expand by 82K after adding 169K the month before. The report says that the decline in some industries likely reflected the impact of hurricanes Irma and Harvey, which made the country nervous last month. But if one takes a closer look at the NFP numbers published in July and August, one can see that the indicator was revised downwardly twice. If one adds the September reading to this period of time, the overall picture won’t be very promising. Still, the fact that the US labor market is usually pretty stable makes all above-mentioned numbers look not so horrible. It means that the September decline will be eliminated in October or November, unless there are some serious stresses of course.

The Unemployment Rate and the Average Hourly Earnings data shows that the inflation in the USA is rising. This, in its turn, supports the Federal Reserve in its intentions to tighten the monetary policy. After they published the September reports on the employment, expectations relating to the key rate increase in December 2017 increased up to almost 80%, according to the CME futures. This was the reason why the USD rose.

 Click Image For Full Size

The best way to see investors’ attitude to the USD is the EUR/USD pair behavior. Let’s take a look at the H4 chart, which shows the downtrend. The key element of the current movement is the price’s consolidating around the support level, and one of the most possible scenarios implies that it may return to the upside border of the descending channel. One of the targets close to the resistance level is the retracement of 61.8% at 1.1875. If this scenario continues, we can expect the price to rebound from the upside border and resume falling to reach 1.16. also, we shouldn’t exclude a possibility that the instrument may break the current resistance level and start forming a new rising impulse. The main short-term target of this impulse will be the local high at 1.2092.

Author: Dmitriy Gurkovskiy, Senior Analyst at RoboForex

Attention!

Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Bitcoin was spoken about at the Sohn Investment Conference. On CNBC we read:

Dan Morehead, chairman of digital currency exchange Bitstamp, said bitcoin and other digital currencies will likely become assets serious investors will want in their portfolios.

“Bitcoin’s essentially going to revolutionize currency, or money,” Morehead said on Wednesday at the Sohn Investment Conference in San Francisco, which was attended by portfolio managers and asset allocators.

“If it does work, the upside is so high, it’s a rational, expected thing to have in your portfolio,” he said.

First of all, Morehead is obviously interested in the success of Bitcoin as he heads up a digital currency exchange. So, you have to take his assertions with a pinch of salt. Having said that, there are parts of this assessment we agree with. The most important one might be that “serious investors” will indeed want to hold Bitcoin. Actually, they might want to hold Bitcoin already. While it might not be public knowledge, it might be the case that as much as 5% of hedge fund managers have small stakes in Bitcoin. At the same time, only 0.5% of hedge funds would actually hold the currency. This might be indicative of the interest of “smart money” in Bitcoin. Hedge funds might be very interested in including Bitcoin in their portfolio but they either don’t have the technical means to do so or are wary of unclear legal status of the currency. If you recall what happened with gold after the first large gold ETF was set up in 2004, this might be the kind of thing to expect from Bitcoin. So, if we do see a Bitcoin ETF, we might see a lot more buying fueled by people who currently want to hold Bitcoin but cannot.

For now, let’s focus on the charts

Bitcoin after Rebound

On BitStamp, we saw a period of depreciation. This came on the heels of a rebound. Recall our recent comments:

There is no change in that Bitcoin has stayed above the 38.2% retracement in a visible way. The outlook is now more bullish than before, at least for the short term, as the currency has held up above the support. The one change that we saw was the move above the 23.6% retracement which is a bullish indication. Based on the current price, we wouldn’t rule out a move to the recent all-time high, or even slightly above it.

The depreciation we have seen has brought Bitcoin back to the 23.6% retracement and even slightly below it. The tiny breakdown is not verified and we wouldn’t draw serious conclusions from this fact but rather wait for a confirmation. Right now, it seems that the situation is slightly less bullish than it was a couple of days ago but the environment hasn’t changed enough to consider speculative positions.

On the long-term Bitfinex chart, we see the tiny pullback from the recent move up. In our previous alert, we wrote:

The more significant move above the 38.2% retracement is not yet visible from the long-term perspective. Also, most of the action to the upside has transpired today (this is written after 12:00p.m. ET). Currently, the situation seems slightly more bullish than was the case previously since the currency is above the 38.2% level, above the recent downtrend and also the currency hasn’t broken down below this level convincingly for some time now. So, we might be seeing more strength in the market. The problem with that is that the volume is clearly low in relative terms and not much action to the downside could result in the conclusions being reversed. (…)

As noted earlier, the move to the upside extended and we not only saw the move above the 38.2% retracement but also above the 23.6% retracement. At the moment, we might see a move back to the all-time high as the move below several retracements has been invalidated. If this is in fact the case, $5,000 might be the level defining whether we see yet another extension or a reversal.

1. Bitcoin is below the 23.6% retracement but this doesn’t necessarily have very strong implications for the next couple of days. Right now, our take is that Bitcoin might be in for further appreciation since the currency has managed to stay above several support levels for some time now. At the same time, any move forward might be limited by the recent all-time high. At the moment, it seems that Bitcoin is showing strength, but this conclusion might be reversed relatively quickly.

2. If you have enjoyed the above analysis and would like to receive free follow-ups, we encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up now.

Regards,

Mike McAra

Bitcoin Trading Strategist

Sunshine Profits: Gold & Silver, Forex, Bitcoin, Crude Oil & Stocks

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Mike McAra and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mike McAra and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. McAra is not a Registered Securities Advisor. By reading Mike McAra’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Mike McAra, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Black Swan Currency Currents

Quotable 

“Be ready to change your strategy with the environment. (The environment, not your strategy, is the data).” 
__Mark Weinstein

Commentary & Analysis

Many precious metals investors are starting to question whether gold and silver are still the best store of wealth in the future.  The reason Alternative Media community is starting to have doubts about their gold and silver investments is due to the rapidly rising value of the cryptocurrency market.  Also, a number of precious metals analysts have jumped ship and are now only supporting the cryptocurrencies as the next best thing since sliced bread.

While some precious metals analysts now believe that Bitcoin and cryptocurrencies are the better assets to own in the future rather than gold and silver, I do not belong to that group or mindset.  I differ from these analysts based upon my energy analysis.  Unfortunately, these analysts that promote cryptocurrencies as the “New” digital assets of the future, are ignorant about the Falling EROI – Energy Returned On Investment, or are clueless to the dire energy predicament the world is facing.

I’ve received many emails from followers who wanted to know my opinion on the matter of “Precious Metals vs. Cryptos.”  So, I thought it would be a good idea to discuss the fundamental reason why I believe the precious metals are still the KEY ASSETS to own in the future.

GOLD vs. BITCOIN:  Price & Monetary Traits

While the gold price has increased significantly since 2000, Bitcoin’s price has gone up exponential in a short period.  The amount of gold that can be now purchased with one Bitcoin has increased dramatically from less than a half ounce at the beginning of 2017, to 3.4 oz currently:

(chart courtesy of xe.com)

Normally, exponential price rises do not last.  However, Bitcoin might be the one asset that is an exception to the rule….. FOR A WHILE.  Many cryptocurrency analysts are forecasting a $10,000+ price by early 2018.  I have no idea if Bitcoin will reach $10,000 next year, but I am more concerned about what happens in the next 5-1o years.  Even though the Bitcoin price might shoot higher, it could also correct much lower and trade flat for several years as it did after its spike in 2013.

Now, how does gold, fiat currency, and Bitcoin compare as “traits of money.?”  I came across this table in an article, but could not find the source to give credit.  However, I find this chart on the monetary traits of gold, fiat currency and Bitcoin interesting.  The individual who put this chart together is showing that Bitcoin has the larger number of “High” ratings compared to gold and fiat currency:

On the other hand, gold, the king monetary metal, suffers the lowest overall score in the group.  The reason gold has a lower rating that fiat currency or Bitcoin is due to advanced technology.  It’s much easier to buy groceries with $20 Federal Reserve Notes than using gold or silver coins.  Furthermore, the supply of Bitcoin is more scarce than either gold or fiat currency (especially fiat currency as it has been printed into oblivion).

While the table shows fiat currency and Bitcoin enjoy higher traits of money than gold, some factors in the graph above are misrepresented.  Let me explain.  First, the table shows that Bitcoin is highly durable.  This is true only if the electric grid and internet remain in a highly functional state.  Just look what happened to Puerto Rico after Hurricane Maria hit the island.  An astonishing 95% of the island is still without power…. and it will take months to restore power to the island.  How does Bitcoin or electronic money function in Puerto Rico today?

Even though Cash is king in Puerto Rico today, what would have happened if the U.S. Dollar went into hyperinflation at the very same time that Puerto Rico lost its power?  Instead of using cash, people would be bartering and using gold and silver for trade.

Second, the “predictable supply” category gives Bitcoin a “high” ranking while gold receives a “moderate” rating.  Bitcoin can only accomplish a predictable supply if the electric grid, internet, and energy supply continue to provide the power for bitcoin mining and transactions.  For Bitcoin to continue mining and providing transactions in the future, the world needs a cheap and growing energy supply.  Unfortunately, a cheap and increasing power supply is not in the cards.

I will be writing more articles-updates on why the U.S. and Global energy industries are in serious trouble.  However, I have written plenty of articles already that you can check out below:

Click Here: THE GREAT U.S. ENERGY DEBT WALL: It’s Going To Get Very Ugly….

Click Here: WARNING: The Global Oil & Gas Industry Is Cannibalizing Itself To Stay Alive

Click Here: THE BLOODBATH CONTINUES IN THE U.S. MAJOR OIL INDUSTRY

These are just a few of my energy articles that provide facts and data that something is SERIOUSLY WRONG in the U.S. and Global Oil Industry.  The situation will only get worse going forward.  Thus, advanced technology will come under a great deal of stress as energy production starts to decline.  The problem with the money traits shown in the gold-fiat-bitcoin table above is that the ratings are based upon a highly advanced technical system that is assumed will continue for the next 2-3 decades.  I disagree.

Gold and silver have been stores of “Economic Energy” (coin termed by Mike Maloney) for thousands of years.  They will continue to provide this function even as energy production and advanced technology suffer in the future.

Gold Still The Key “Safe-Haven” Asset To Own

While Bitcoin and the cryptocurrency market cap has increased over the past year, it is still 20 times less than total global gold investment:

Currently, the total value of all gold investment is $2.9 trillion versus $143 billion for the crypto market and $47 billion for silver.  Thus, the value of all gold investment is 20 times higher than the cryptocurrency market and 61 times greater than the entire global silver investment.

Yes, it’s true that the cryptocurrency market may still experience a huge increase in its total market cap to $1 trillion or more.  However, the crypto market cap could also suffer a massive collapse in value, especially as the world’s energy situation disintegrates.

We must remember, physical gold and silver will still provide a store of “economic energy” in a post-industrialized world, as it has for thousands of years.  Again, I will discuss this in more detail in future articles.

Lastly, the U.S. Stock Market continues to increase even as a barrage of negative news hits the press.  James Kunstler wrote about his in his article, Kunstler: “Nothing Can Faze This Mad Bull, Apparently…”:

Nothing can faze this mad bull, apparently. Except maybe the $90 trillion combined derivatives books of CitiBank, JP Morgan, and Goldman Sachs, who have gone back whole hog into manufacturing the same kind of hallucinatory collateralized debt obligations (giant sacks of non-performing loans) that gave Wall Street a heart attack in the fall of 2008.

Europe’s quaint doings must seem dull compared to the suicidal potlatch of life in the USA, but, believe me, it’s a big deal when the Spanish authorities start cracking the heads of Catalonian grandmothers for nothing more than casting a ballot.

Evidence of the Mad Bull Market is shown in the following chart:

The Dow Jones Index continues to move higher, disregarding any bad news in the press.  After the horrific mass shooting in Las Vegas, the Dow Jones added another 130 points on Monday.  Today, it is up another 76 points to a record 22,633.

As we can see in the chart above, the normal correction phase takes place about every seven years.  If a healthy correction took place, the Dow Jones would be at least 10,000 points less than what is its today.  However, if the Dow Jones Index suffered just a 20% correction, it would gut the U.S. Retirement Market and Pension system.  If the U.S. Pension System isn’t in enough trouble already, a 20% decline in the Dow Jones Index would most certainly push it over the edge.

The Dow Jones Index and other assorted Ponzi stock markets will likely continue higher as that is the only way they can go.  Unfortunately, stock market valuations are now reaching insane levels as Americans suffer from increased BRAIN DAMAGE or over-prescribed FRONTAL LOBOTOMIES.

https://srsroccoreport.com

Cryptocurrencies are being billed as a new and improved form of money that has been offered to us courtesy of technological evolution. There is a big problem with this conclusion. That is, digital money is not money at all. And proving this truth serves to underscore why gold has been utilized as the best form of money for thousands of years.

In the 2013 film titled “Her,” lonely Theodore, played by Joaquin Phoenix, falls in love with Samantha, an operating system. Despite Samantha’s lack of physical presence, the two have a somewhat normal relationship that includes vacations, socializing with friends, fights and even jealousy. But just as the audience starts buying into this unconventional pairing the plug is pulled on Samantha, and she disappears into a cyberspace vortex; leaving poor and lonely Theodore heartbroken.

And, at the dawn of the twenty-first century, this is where we are as a society.  In a place where the digital and real world collide. Social Media has supplanted socializing, texts have replaced phone calls, and artificial intelligence may soon outstrip actual intelligence: robots may soon rule the world! 

In this fast-changing environment, it’s easy to believe that cyber currencies should inevitably replace fiat money; and even that “barbarous relic” gold. After all, the motivation to find as many escapes from debt-based central bank confetti is indeed alluring.

And herein lies the attraction of cryptocurrencies such as Bitcoin – it uses the revolutionary blockchain technology that is managed by the free market, not by government. It is decentralized, anonymous, and has been hugely profitable. In fact, this year we have seen digital currency prices go higher not by percentages but by multiples. This has caused Bitcoin to achieve the “most crowded trade” status, measured by sentiment in the monthly global Bank of America Merrill Lynch Fund Managers survey; as its price has surged by 330 percent this year alone.

But, JPMorgan’s CEO Jamie Dimon isn’t beguiled. He believes the online currency is just as fleeting as the Theodore’s Samantha and will soon leave investors equally as heartbroken. He contends that bitcoin “is a fraud.” “It’s just not a real thing, and eventually it will be closed.”  But it’s not just Jamie Dimon, who has a vested interest in protecting the banking system and the fiat currency that inhabits it, that is questioning Cryptos. Founder of the world’s largest hedge fund Ray Dalio believes Bitcoin is a bubble. Dalio contends that unlike gold, “it’s not an effective store-hold of wealth.”

And Oaktree Capital Management’s Howard Marx agrees stating “…they are not real – nobody has been able to make sense to me of these currencies.”  Marx explains that one of the biggest pitfalls of bitcoin and its fellow cryptos is they are mostly used to buy other “imaginary” money or used it to invest in companies that create other new currencies.

And now some government regulators appear to agree with these sentiments, making the speculation of Bitcoin’s demise closer to reality.

In fact, the Chinese government has just become the first to put the kibosh on crypto’s – and this should sound warning bells to all those enamored with cyber “money.”   On September 4th, China’s central bank banned Initial Coin Offerings (ICOs) maintaining it was an illegal public finance mechanism.  ICOs are a hybrid between an initial public offering, crowd-funding and venture capital that permits start-ups to raise funds using virtual money. Regulating what a crypto-currency could be used for was the first crack in the armor for Bitcoin in China.

China has long been a repository for bitcoin, which came in the aftermath of the 2008 financial crisis as an alternative to fiat currencies. Much of the world’s bitcoin is mined in China. And, according to the WSJ, more than 80% of global bitcoin activity took place in yuan at the start of this year.

But recently, China’s central bank has devised new rules to end commercial trading in virtual currencies under the guise of trying to reign in the chaotic marketplace. And this is sure to offer a template for other nations’ regulators.

Beijing’s clampdown on bitcoin is part of a larger effort to root out risks to the country’s financial system. This is prompting virtual-currency activity in China to move off exchanges, where individuals can trade with each other privately. However, it’s difficult to imagine that when relegated to the shadows these virtual currencies will enjoy the same popularity.

Indeed, this is where cryptocurrencies fail the definition of real money: They are not at all rare or indestructible. Once a government decides to shut down cryptocurrency exchanges, the liquidity evaporates rather quickly. And once Bitcoin transactions become illicit, what retailer would risk fines or imprisonment just to transact in digital money? Since an online retailer needs to use a public application to accept cryptocurrencies, then it cannot simultaneously be kept secret from the prying eyes of government—unless you believe retails will move en masse to the dark web. This is different than gold, which can be exchanged for goods and services furtively offline—making it much more difficult for a government to trace and regulate. Cryptocurrencies are decentralized in nature but do rely on a functioning internet to consummate a transaction. Be it an act of nature or war. However the grid goes down, so goes your Bitcoin.

More importantly, new digital currencies are being created by the day. In fact, there are nearly one thousand already floating around. What is the true value of something that can be created by virtual fiat and in innumerable quantities? It takes about $1,300 worth of physical and human capital to pull an ounce of gold from the ground. While it may take a lot of time and energy to mine for new bitcoins, it takes next to nothing to create a totally new cryptocurrency.

Many analysts have attributed the sharp rise in bitcoin over the last year to Chinese investors, who began buying it up in lieu of the yuan amid worries that the Chinese currency would weaken and to escape capital controls. Since the government’s recent clampdown, the country’s share in Bitcoin has dropped dramatically along with its price (over 20% in the past month). The bottom line is that the central planners in China aren’t going to let a bunch bits and bytes supplant their command and control of the economy.

But the fact is that all competing currencies, including cryptos and precious metals, are adversaries of governments whose monopoly on money is the only saving grace for their complete incompetence. This ineptness is going to force them to clamp down on virtual currencies to protect their foothold in the money creating business.

Therefore, sooner or later, all governments may join with China–sending shock waves through the growing market for virtual currencies.  And while virtual currencies will still be able to be exchanged in the “back alleys” of the digital world, their liquidity and utility will be trending towards its intrinsic value, which is virtually nothing.

Cryptocurrencies are an ephemeral fad that is in a huge bubble. Gold is money, and there is no need to invent a new and improved version of it. There is, however, a need for gold (real money) to be made into a more efficient currency. And there are already companies that fulfill that role by using a gold-backed private blockchain. Therefore, the perfect form of money, thanks to technology, has now become the perfect currency as well. So, unless you need a mechanism to conduct illicit transactions, there really isn’t any role for Bitcoins to fulfill. Gold is money; a newer and improved version does not exist.

“Money is gold, and nothing else.” -J.P. Morgan

By Michael Pento