And there goes Gold....

Gold

UPDATE: 6:22 AMET.

US Gold Buying Front-runs Asian Gold Buying- SorenK.

Update Continues Here: CHINESE RETAIL DRIVING GOLD/SILVER MKTS- 6:22 AM ET

Gold Trading $1375
Yuan drops to lowest levels in years
UST hit new highs
Stocks in turmoil
Silver Shines

UPDATE 9:34 PM ET

Gold $1371 up 12.50- 9:35 ET
10yr UST hit record low 1.35%
20yr JGB yields ZERO%- Record low
Yuan/ USD fix 6.685 vs 6.659

Gold Stands Tall

The last 2 hours of US trading have seen Gold ramp up from near its lows to its highs. Our first inclination was to blame Hillary. GOLD RALLIES as HILLARY SKATES. You know one of those;"We have no idea why Gold rallied so we'll just use that AS link to imply but not state the 2 are related." But we were forced ot look at the DX and to our shock we saw the DX selling off some but not as spectacularly as Gold was rising. Do we use the "AS" link or not? Can we say both?- Soren K.

Gold Rallies AS Hillary gets a slap on the wrist? (Chart Pops)

Hillary Factor

The DX has weakened since the FBI Conference set the table for Hillary's coronation. But it is still up on the day. So how much of this is the USA becoming a banana republic and how much is something else? In the chart above we label it Asian demand related. So for us, the answer is a combination of things. But to be fair, the entire world doesnt buy Gold because they have lost faith in the US Government in the last 5 minutes. That will take a long time.

Not Really Her Fault

More on the FBI In vestigation here

Asian Demand

We think that as Asia, and China in particular are the main reason. China is well on its way to listing commodities in its own currency and facilitating trading via vaults, sales forces and ease of access. The Shanghai exchange trades more Silver than the Comex. Its physical Silver in storage rivals that of JPM

Chart Courtesy of Bullion Vault

Asia is becoming a key player in the Bullion markets, like it or not. And that means we will see volumes start to rise during those hours. The first obvious tell should have been the spike in rebar, iron, and even grains that took place during their trading hours last month. Much of those gains have since been given back. We are tempted to say that this is because of the demand of the newly minted Chinese middle class being less price sensitive. That may be true. But there is also a difference between industrial commodities and precious metals that should be factored in.

Gold and Silver Liquidity

Precious metals have more 24 hour liquidity than obscure (but huge) commodities like iron rebar. When was the last time your broker called you bullish on rebar? We feel the Chinese, like any good businessmen, began their entry into commodities in areas where they had natural industrial demand and where there was little exchange volume. This way they could grab market share with less contest.- remember the honda CVCC?

For precious metals, broader global liquidity makes a big difference. And because of that difference, we feel you will see more and more origin demand in Asian hours and selling in USA hours. Thecurrent driver is the Chinese not so stealthy Yuan devaluation post Brexit. This is driving investors to get out of their currency before it devalues more. So while pullbacks are inevitable, we fell that today's runup had more to do with scared shorts covering before Asian hours than with Hilllary likely skating.

Yuan vs the Dollar

Chart Courtesy of Kitco

Brexit is Just Starting

As alluded to above, Brexit has forcedthe PBOC to accelerate its Yuan devaluation. So thisis all because of Brexit really. Even Hillary's looming acquittal. UK leaves AS Hillary is innocent? Seriously, Europe is tied up in knots with its Brexit problem. If the UK leaves, the Pound will weaken quickly. If it stays, the Pound must weaken slowly to converge with the EU as the next step will be total absorption into the EURO. This leaves us with every major currency in the world racing to the bottom except the USD. But the USA also wishes to export its deflation. So expect another round of QE soon, after the Brits get their house in order. All these factors are bullish for Gold and Silver. The "tell" is in China. The start was in England. the end will be in the USA.

Brexit as driver of Gold story here:

Good Luck. I'll be out tomorrow for real this time. Be careful.

- Soren K.

Sorenk@marketslant.com