The Dollar becomes non-gratis with central banks

Good Day... And a Tom Terrific Tuesday to you! Well, they had a sweep in their hands, and then lost it... My beloved Cardinals won the first game VS the Reds but lost the nightcap, after blowing a 3-run lead... UGH! I caught up on my lost sleep from Sunday night yesterday.... And now I have two more days until I go and make up my infusion day... Yes, there won't be a Pfennig on Thursday 8/20... Santana greets me this morning with his song: She's Not There (a remake of a song but he does it best!)

Well, the follow through on the selling of the dollar didn't last too long, as the dollar did gain a bit yesterday after spending the morning below 1,200 in the BBDXY. It finished the day at 1,200 on the mark.... Still down for the day, but not as bad as it was earlier.... The currency traders don't want to go too fast with their selling of the dollar because when the PPT steps in and stops the slide of the dollar, they will get their beatings.

The price of Gold saw buyers early and often yesterday, and so it gained $40 to close at $4,417... And Silver followed Gold down the path the buyers laid and gained $1.73 to close at $65.90.... I want to mention something here and that is during the last mega rally for Gold/Silver, good friend Aaron said to me, "you know Silver has outperformed, on a percentage basis, Gold 7 of the last 10 years" I then looked it up and he was bang on! And so, I've kept that in the back of my mind all these years.

The price of Oil bumped higher yesterday and ended the day trading with an $84 handle... And the 10-year remained at 4.71% yield yesterday.

In the overnight markets last night.... The recovery of the dollar continued as the BBDXY picked up one index point overnight... This would be the time to pick up some currencies and metals in my humble opinion, and I have something for you later in the letter that will illustrate this opinion greatly! 

The SPTs are back at Gold/Silver again... And this time they are taking Copper with them... Gold is off this morning $24 and Silver is off 72-cents to start the day... I warned you, right, that the SPTs were still around and that they were just waiting to pounce.

Gold/Silver's recover will be checkered with days like today, but that just gives procrastinating investors a buying opportunity... 

The price of Oil remained trading with an $84 handle overnight, and the 10-year Treasury saw some additional selling overnight and it starts today with a 4.74% yield.

You know the 10-year Treasury is important to everyone even if you don't own a bond... The 10-year is used in pricing mortgage rates, and lots of other things that you use or deal with daily... and last week's auction of the 10-year wasn't what you would call a walk in the park... Buyers were less than usual and the ones there demanded that the bond be issued with a higher yield.... The 30-year treasury bond saw the same kind of demands and had to raise its yield to the highest its been since 1971.

1971, man I was still in H.S. And playing football.... Things seemed to be normal then for me, for little did I know that bond yields were as high as they were and back then they were on their way down from double-digit yields... Nowadays they are going the opposite way, and they are going up in yield.

Circling back to rising yields... this means the interest we pay to the holder of the bond is going higher on new issued bonds... But guess who holds all those low yielding bonds from before bonds began to lose ground? Well, my guess would be the banks, and the casino banks that are buyers of last resort at auctions.... So, let's just say that banks own a ton of low yielding bonds.... well, that's not a problem as long as they don't need to sell them... Ask SVB (Silicon Valley Bank) . Who's to say that tons of smaller banks (not the Casino Banks) have the word get out that they have tons of unrealized losses on their books.

That could cause a run on deposits from depositors that fear the unrealized losses, and that would cause the bank to have to sell the bonds at a loss... then unrealized losses become realized losses... And that my friend is Damocles Sword that hangs over banks.... Oh, and the size of their unrealized losses in total is $325.1 Billion, and that was at the latest calc of the number, it's probably larger now.... 

Ok, I'm going to stop there, because this scares the bejeebers out of me while I write about it.... But if you want to know more click on this link and the guy will explain it all to you.

The currencies, as a whole, dropped back to reload yesterday... In the morning they were ready to take off higher VS the dollar, but then the selling of the dollar abated, and so did the currencies' rally....

Gold continues to get bought by the global Central Banks... This from Yahoo Finance: "a separate 2026 World Gold Council survey (2). It found 74% of respondents expect the dollar's share of global reserves to fall over the next five years, while 89% expect global central bank gold holdings to rise over the next year. A record 45% also expect to increase their own gold holdings.

The Official Monetary and Financial Institutions Forum (OMFIF) says it's the first time its survey has found more central banks planning to reduce their dollar exposure over the next decade than increase it."

Chuck Again... this was the first time that the Central Banks said that they would reduce dollar holdings instead of gathering them.... I find that to be a bad omen for the dollar... Don't you?

If you answered yes, then where's your diversification? If you've been a procrastinator and not diversified as of yet, no worries, there's still time, and no time is better than today.... Central Banks are going to reduce their dollar holdings, Gold has become more held by Central Banks than dollars, and Chuck says that the dollar in trouble... Couldn't be a better time to diversify.... 

OK, you don't need to be harped at by me this early in the morning, do you? 

The U.S. Data Cupboard today has the July prints of Industrial Production and Capacity Utilization.... The both were meh in June, and I don't see what would make them more than meh in July, but I guess we'll see, eh?

To recap... The dollar recovered a bit yesterday and overnight, so no follow through on the selling from Friday... The SPTs are at Gold/Silver again today and you can't say that Chuck didn't warn you that Gold/Silver's recovery will be checkered.... And China's economy is slowing, what does that mean for the U.S.?  

Here's your snippet: ": Between the Vietnam War and LBJ’s Great Society programs, the national debt was mounting quickly. Foreign governments — especially France — were losing confidence in the U.S. dollar. Under the terms of the 1944 Bretton Woods agreement, those governments were exercising their right to trade in dollars for gold.

Uncle Sam’s gold stash was dwindling quickly, so Nixon decided to “close the gold window.”

“Nixon said the suspension of convertibility was ‘temporary,’” recalls our macro maven Jim Rickards with some lesser-known history.

“I spoke with two of the officials present at Camp David with Nixon the weekend of the announcement, Paul Volcker and Kenneth Dam. They both confirmed to me that the suspension was meant to be temporary.

“The plan was to have a new Bretton Woods-style conference, devalue the dollar against gold (and against other currencies such as the yen, the Deutsche mark and French francs) and then return to the gold standard at the new valuations.

“The first part happened — there was an international financial conference in Washington, D.C., in December 1971 — but the rest did not. While the world was waiting for the conference, countries moved to floating exchange rates without reference to gold."

Chuck Again... Thanks David, this was a good reminder of the dastardly thing that Nixon did to our country's finances... he turned a creditor nation into a debtor nation in 15 minutes on TV.

Market Prices 8/18/2026: American Style: A$ .7106, kiwi .5879, C$ .7206, euro 1.1574, sterling 1.3522, Swiss $1.2310, European Style: rand 16.2232, krone 9.4222, SEK 9.5308, forint 314.74, zloty 3.7332, koruna 20.8866, RUB 84.99, yen 159.72, sing 1.2781, HKD 7.8434, INR 95.67, China 6.7433, peso 17.01, BRL 5.2014, BBDXY 1,201, Dollar Index 99.66, Oil $84.92, 10-year 4.74%, Silver $65.18, Platinum $1,755.00, Palladium $1,344.00, Copper $6.65, and Gold... $4,393.

That's it for today... my son, Alex gave me a CD by Duane Betts, the son of the great Dickey Betts, for Father's Day... I finally got around to listening to it last night... It's got a country sound to it... When I first was given the CD, my wife said she had never heard of the singer and guitar player to which I didn't see the CD plainly and a saw the D. Betts, and I said, it's Dickey Betts of the Allman Brothers... And then I looked at it better and said, "On no, I'm wrong about that it's his son!" The Atlanta Rhythm Section takes us to the finish line today with their song: Imaginary Lover... I hope you have a Tom Terrific Tuesday today and Please Be Good To Yourself!