ECB deposits update: No bank run

In case you're wondering whether depositors are fleeing the banks, in particular Deutsche Bank, here is the soothing answer.

Depositors are nowhere near the idea of a bank run.

U.S. Dollar Liquidity Vs. Emerging Markets

When U.S. dollar liquidity goes down, it means that there is a tightening in U.S. dollar funding conditions. This coincides with a negative EUR-USD cross-currency swap basis. 

Dollar borrowing conditions can be improved by implementing quantitative easing (QE). This will depreciate the U.S. dollar. One of the global effects of this is that emerging markets will benefit from this added U.S. dollar liquidity (see chart below).

 

Tightening of liquidity is best seen at the shorter end of the curve. See chart below when Deutsche Bank started to have troubles in September 2016.

As U.S. dollar liquidity tightens in September 2016, I expect that the Federal Reserve will initiate another round of quantitative easing to ward off such U.S. dollar liquidity panic.

Gold Silver update: silver is better than gold

Premiums on gold and silver have been very low, just like months before. So it is not the best time to buy precious metals.

But there is one thing I want to point out.

Silver stocks at the COMEX have been going up (registered silver). This means funds are buying silver now.



Gold stocks at the COMEX on the other hand have topped out (registered gold). This means that funds aren't buying physical gold anymore, for example in the GLD trust.



The idea is that you should buy silver instead of gold at this moment.

The same can be said on the COT report.

Gold shorts are low, so there won't be a short squeeze on gold.



Silver shorts on the other hand have gone slightly up, so there is more chance that silver will go up due to a short squeeze.