➡ This week’s report from The Endgame Investor focuses on gold, not silver. The Federal Reserve has reduced its balance sheet by $123 billion over the past six weeks, a faster rate than expected. Gold prices are rising due to a mini squeeze, with short positions closing at a loss. Meanwhile, Bitcoin has reached its all-time high in gold terms, and Japanese yields are set to break a 25-year high.

Well, hello there, my friends. Raf here from The Endgame Investor with this week’s Silver Report, but it’s not really a Silver Report because I’m going to be talking mostly about gold because that’s where the action is. So should I rebrand this the gold report? Probably not. We’ll just call it what it isn’t, the Silver Report. And if you haven’t noticed, I got a new shirt, which is very important because it means I’m a new man. It demonstrates my monochromatic personality. So what are we going to talk about this week? Well, QT, quantitative tightening has accelerated for the sixth week straight with the biggest chunk taken out of the balance sheet since whatever the month is that I’ll show you on the chart that I’m going to show you in a few minutes.

The Fed has erased $123 billion from its balance sheet over the last six weeks, which is a pace of $92.3 billion per month over the last two months, which is a lot higher than the rate they say they would do per month since June. Gold is in a mini squeeze. How do we know this? Because open interest has fallen by about 43,000 contracts since the price low of $25.44 on November 5th, was it? November something-eth. And we’ve had a $134 rise since then. So contracts are closing, price is rising, which means that shorts are closing at a loss.

This isn’t a major gold squeeze, but it is a squeeze, which suggests to me that the bottom for now is in an intermediate bottom in gold and it will keep going higher. Reverse repos stubbornly persist at below $200 billion throughout November. So far, we’re at $188 billion. It looks like it’s going to take another month for these stupid things to drain. And when that happens, things are going to get really interesting very quickly, in my little opinion. Gold has sliced back above the 50 day moving average without even a shred of resistance at that line.

We’re back near $2,700. That’s another piece of evidence that the bottom is in. But yes, the big news this week is Bitcoin, which has tagged its all time high in gold terms at 37.2 ounces just below its all time high. I think about 37.4, but we’re just about there, which means if this high is not broken through, we have a potential triple top in Bitcoin. Has Bitcoin surprised me to the upside? Of course it has. What I’ve held onto it as I owned Bitcoin from 2012, 2015, rather than buy a car with my tripling of earnings from Bitcoin in those years, I probably would have, I have about right now $100 million station wagon.

So that’s comforting. Everybody can relax. I found the car. Need some suspension work and shocks and brakes, brake pads, lining, steering box, transmission, rear end, maybe new rings, also mufflers, a little wiring. Do I let it get to me? I don’t know, maybe. Japanese yields are about to break through a 25 year high. I’ll show you the stair step on Japanese bonds and Japanese bonds move together with Japanese yen. They don’t move inversely as in other currencies. The higher Japanese yields go, the lower the currency goes. And guess who the number one seller of bonds, of treasury bonds is? These days.

That’s right. It’s Japan. And before we get started with the slides, check out the end game investor on substack to get my monetary philosophy musings. When people ask me what I do, that’s what I say. I’m a monetary philosopher. It sounds really weird, but does anybody else say that? No, which means every time somebody asks me what I do, people think I’m nuts, which, you know, that’s par for the course. They think I’m nuts no matter what I say. So it doesn’t matter. Like parents shouldn’t lock their kids in a room for two weeks, or maybe not trying to trigger a world war three is a good idea.

Totally nuts. Anyway, let’s get on with the slides in our first chart this week. I’m going to show you this chart and interactive in a second so you can get a better idea of what I’m talking about here. The black line is where we are in QT weekly, right? You see here is the latest latest reading. I think it’s $43 billion down on the balance sheet. What is notable about this, first of all, is that we are at a rate here that we haven’t seen since before they started slowing down QT in June.

The Fed slowed down its pace of QT in June, but we’re beyond that now. We’re at $43 billion this week, and it really hasn’t been higher than $43 billion in any consistent way since QT started way back in 2021. This starts from the regional bailout, this chart here. We’re going to go to an interactive chart right now, and I’ll show you why I think this is pretty notable. You may recognize this chart from the one you just saw. What I’m pointing out here is that QT, every time it’s below zero, we have the balance sheet shrinking.

Very rare circumstances. It’s above zero for some accounting reasons or whatever, but generally QT has continued since the regional bank bailout in March 2023 pretty consistently. We have here, this is the key. On October 9, 2024, the balance sheet shrunk by $85 billion and the next week by $7.556 billion, and then $9.876 billion, then $16 billion, then $19 billion, then $27 billion, and now this week, $43 billion. This is the first, second, third, fourth, fifth, sixth week of QT acceleration. Now, it’s not just the bank term funding program that is causing this.

The bank term funding program is being liquidated because rates are being cut and the rate of the bank term funding program, which is the regional bank bailout program, those rates are steady. As rates get cut, the rates of holding those loans to maturity become more expensive than refinancing those loans at lower interest rates, which the Fed is offering now because they’ve cut interest rates. That is being liquidated. That’s not the only thing going on here. There’s a whole bunch of other accounting things going on at the Fed’s balance sheet that even I don’t understand, but what is happening here is that the quantitative tightening program is accelerating for six straight weeks, and the faster we go down, the faster the reverse repos will eventually fall to zero, and the faster we will get to the final banking crisis, which is still just around the corner.

It’s a very long and annoying corner, but it’s still there. Anyway, we’re going to continue with the slides here. The next one shows you the monthly rate of QT, how fast indeed we have accelerated. The black line is the rate, the monthly rate of QT that we’re at now. Everything above that rate is slower than the rate right now, and everything below it is faster. So we’re about the average of the monthly QT rate that we’ve been in since the regional bank ballot over here. That’s where I started the chart, has re-accelerated to the average level that it’s been at since the regional bank bailout took place.

There’s a little gold squeeze going on, a mini gold squeeze. How do we know this? Well, if you look at the open interest chart here, you will see that the green lines on the bottom have descended to, right now it’s 498,000. This is one day delayed, so it’s 501 here. We’re at 498,000, so we broke 500,000, and during that time, as this has been descending, it descended from about 545,000 to now 498,000, something like that, but I calculated it. It’s 43,000 contracts, and in that time, the gold price has risen by $134, which means that short positions, the ones who hold the gold short positions on the futures markets, are closing their positions, and because of that, the price is rising.

So these bullion banks are closing their positions into a rising price, which means they are losing money on them. Not that much money. They’re not in desperate dire straits or anything, but this is very indicative of a firm intermediate bottom here in gold. I don’t think we’re going to go much below that, barring the next financial crisis, which might very temporarily, ephemerally bring us below this, and that will be our final opportunity to get some real money before we have a hyperinflationary explosion. So even a mini short squeeze is encouraging in the gold price, and it looks like we’re headed higher and back higher from here, and very soon we’ll be back to old highs and past them.

Reverse repos, despite all this encouraging talk, have stubbornly persisted at just below $200 billion for this whole month. We’re at $188 billion. We’ve got to issue more treasury bills to get these back down to zero. Hopefully that will happen before the end of the year, and then we can get into the final banking crisis, hopefully before Trump takes office, maybe a little bit after. It’s not going to be that far into his term if it happens after he’s inaugurated. Don’t worry, these things are pretty frustrating right now because they’re just flirting with zero, and they will get there.

We just all have to be a little bit more patient. Gold slices back above the 50-day moving average. This chart is a little bit out of date. It’s one day delayed. We’re at $26.90, maybe $2700 right now. Depending on when you’re watching this, I think we’re going to break $2700 pretty fast. The blue line, the 50-day moving average, is at $26.75. If we break through that and we hold there, that would mean that the 50-day moving average did not serve as any kind of resistance, which means another sign that we’ve hit a firm bottom at about $2540-something or wherever it was down here, and we’re not going to look back.

But yes, the big news this week has been Bitcoin. We’re nearing $100,000 on Bitcoin, and in terms of its real price, in terms of ounces of gold, we’re at 37.2, I believe, and the high in October 2021, I think it was 37.3-something, so we’re very close. We can count it as a tag of that top in Bitcoin. Did I think we’re going to get here? No, I didn’t. And so if we hold this triple top here, you can count one tag over here in April 2021, another tag over here in October 2021, and finally, the third tag over here.

If there is a triple top, triple tops are vicious, bearish patterns. I don’t know if this one’s going to hold. We’ll see. But if Bitcoin is going to break through, it’s got to break through quickly, or there will be a triple top, and watch out for that, because I don’t think Bitcoin is going to deal with the next financial crisis very well. I think it’s going to deal with it worse than it dealt in 2022, and it’s going to hurt a lot of people, and it’s not going to be pretty, I’m afraid.

Japanese yields are about to break through a 25-year resistance at 1.08. Go to a 25-year chart, and you’ll see that this level has held for the last 25 years. We have not gone above it, so we can see here the ceilings that the Bank of Japan makes for the Japanese 10-year yields. You can see the ceiling that it held throughout most of the year of 2022 and then broke in 2023. Another ceiling over here at about 0.5. This is the yield curve control of the Bank of Japan, obviously, so there’s another piece of yield curve control over here at about 1.08.

It’s going to break through, and once it does, the yen is going to fall. Why does the yen fall with yields rising, which is the opposite of most currencies, because the yen is backed by almost all Japanese government bonds. I can show you here. The red line is the Japanese yen-to-dollar ratio. The higher the red line, the weaker the yen is, and you can see the higher the blue line, the weaker the Japanese bonds are, because the higher the yield is. So the blue line and the red line goes together, which means the higher Japanese bond yields are, the weaker bonds are, the weaker the currency is, because the yen is the Japanese bond market.

It’s the other side of it. Ironically, the Bank of Japan has to keep interest rates low in order to keep its currency competitive with the dollar, but that’s not going to last much longer. Why not? Because check out this article from Bloomberg. Two of America’s biggest debt holders are dumping treasuries. Investors from Japan offloaded record amount of U.S. debt in quarter number three. Both nations may continue to sell debt at global markets. Two of the world’s biggest foreign holders of treasuries ditched a pile of U.S. debt in the last quarter just before the U.S.

election. Bloomberg are going to try to blame this on Trump, as all left-wing media tends to do. Even left-wing financial media and all financial media, except maybe Mises.org, is left-wing financial Keynesian media. So you can see the chart in Japan. They’ve sold a record amount of U.S. treasuries, about $60 billion, going back to 2000. It has never been this bad in terms of sales of U.S. debt. Why is this happening? It says here, Japan’s selling may have been in part amplified by the nation’s intervention in the foreign exchange market on July 11th and 12th, when the Ministry of Finance sold dollars to buy the yen for a total of 5.53 trillion yen, or $35.9 billion.

So basically Japan has to sell dollars to buy yen in order to sell dollars. They have to sell treasuries. And when they sell treasuries, the yield on U.S. treasuries goes higher, and they have to hike as a result of that. They’re Japanese government bonds to keep them in tandem with U.S. treasury rates and not keep them too out of whack, which disturbs trade relationships. And if they hike their own rates, they weaken their own currency, which is the opposite of what they’re trying to do when they sell treasuries. So they’re really in a bind.

There’s nothing they can do. They can only do very short-term moves when the market reacts for only a few weeks or a few months, which is what we’re seeing now. And the yen weakening back to its all-time low of around 160. It will get there pretty soon. And since Japan is a fulcrum of the international financial swamp that we’ve built up in the world since 1971, when the yen falls, the endgame does happen. I don’t know where in the domino stack the yen is, but it’s somewhere in there. And when the end falls, that’s going to be it.

And with it, I think Bitcoin and all the other speculative vehicles on the dollar falling will fall with it, except for gold and silver and real assets that people need to survive. And why do you need gold and silver to survive? Because you need money, you need a liquid commodity to maintain a division of labor so that we don’t all have to make the stuff that we need to survive, which would mean that about 99% of humanity in the world would die of starvation, which isn’t really something that any of us are looking forward to, except maybe the World Economic Forum.

But anyway, this is Rafi and Game Investor with this week’s Silver Report. And I’ll see you on the Endgame Investor. Sign up there, subscribe, and check out my Patreon at patreon.com slash endgameinvestor. The last thing we covered is environmental movements that don’t really care about individual human life. This is not the first time we’ve had to deal with things like the World Economic Forum sanctimoniously lecturing us about sustainability. I’ll see you guys next week. [tr:trw].

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