Oct 24.2014: as of 6 pm, there is no change in silver inventory at the SLV. Note the difference between gold and silver.  Gold leaves the vault of GLD as little silver leaves the SLV.  (I guess it means that there is no silver to give to the banker participants)/Inventory:  343.415 million oz

Oct 23.2014: no change in silver inventory at the SLV (as of 6 pm est

Inventory: 343.415 million oz

Oct 22.2014: no change in silver inventory at the SLV ( as of 6 pm est)

Inventory: 343.415

Oct 21.2014; no change in silver inventory at the SLV (as of 6 pm est)

Oct 20.2014: we lost 1.15 million oz of silver inventory at the SLV/inventory 343.415 million oz

Oct 17.2014: no change in silver inventory/344.565 million oz

Oct 16.2014: no change in silver inventory/344.565 million oz

Oct 15.2014 no change in silver inventory/344.565 million oz

Oct 14.2014 today we had a loss of 1.201 million oz/SLV inventory rests at 344.565 million oz

Oct 13.2014: no change in silver inventory so far:

345.766 million oz

end

Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

2. Sprott silver fund (PSLV): Premium to NAV falls to positive 3.75% NAV (Oct 29/2014)  

3. Sprott gold fund (PHYS): premium to NAV  falls to negative -0.65% to NAV(Oct 27/2014)

(courtesy Mark O’Byrne)

Omniscient Federal Reserve Captures The Capital Market, For Now. Gold Beckons.

Published in Market Update  Precious Metals  on 28 October 2014

A cursory glance at the various financial news media this morning shows nothing particularly unusual for these unusual times. The ECB have paraded a list for stress tested banks and the market shrugged. However, there is a disturbing thread running through most of the stories to which we have become immune but which would have been considered highly unusual at almost any time in the twentieth century. And that thread is the influence of the Federal Reserve in practically every key market in the world.

The markets have become increasingly captured by Federal Reserve policy, watching what might be and what might change. “Schrodinger’s Cat” is the name given to the idea that the observer (Federal Reserve) of an experiment can by virtue of their very presence affect the subject (Markets) being observed. The Federal Reserve is far, far from a passive influence within the markets, poised to prop up the market should an unthinkable catastrophe threaten, no, now they are THE market.

They control almost every facet of the market directly or in most cases indirectly. They have almost limitless power to monetise debt and force their will on the market for as long they wish or along as enough people believe in them in the absence of alternative. And therein lies the keys: market confidence and acceptable alternative monetary systems.
Reuters report that, among other factors, last week’s slight weakness in gold was caused by fears that the Fed might signal their intention to raise rates at the conclusion of their two-day meeting tomorrow. This, despite the Fed signalling last week that rates may have to remain at their current rate in light of the situation in Europe. Bloomberg reports that the Fed is expected to keep rates stable. The Wall Street Journal doesn’t offer an opinion on the outcome but regards the issue as one of great importance.

What we find odd is how a central bank, whose function is to act as lender of last resort to banks in times of crisis has expanded its mandate to micromanage the economy itself. During the twentieth century such a scenario could never have occurred in the U.S. and Western Europe. It would have been equated with the Marxism and central planning of the Soviet Union.

Robert Fitzwilson defined capitalism succinctly in his interview with KWN on Sunday: “Capital used to be derived solely from hard work, ingenuity and productivity as a surplus after costs. That surplus capital was utilized for reinvestment by the owner or sent through financial intermediaries such as banks to people in need of capital for productive purposes.” He went on to explain how this principle has been undermined: “That centuries-old system has been virtually made irrelevant by the modern ability of the central banks to create and supply unlimited amounts of what serves in our day as capital, fiat currency.”

Now, this new style of capitalism may be viable – we wouldn’t claim to know – but it depends entirely on the honour and integrity of the people managing the system. Marxism was similarly dependent. And if “by their fruits you shall know them” then it is quite clear that the system is being managed by oligarchs on behalf of their cronies. Noam Chomsky muses over how the cures prescribed by the rich for the poor always fail but still seem to have the unforeseen consequence of making the rich even more wealthy. Over the weekend Hillary Clinton echoed the claim made by president Obama that it was the federal government and not businesses who create employment as reported by Zerohedge. Are we in the midst of the transition from free-market economy to a centrally planned one? Is this the dawn of the U.S.S.A.?

In Europe the situation is no different. The experience of peripheral nations like Ireland and Greece show that the so-called troika have taken upon themselves the job of managing national economies (while reneging on their duties such as acting as a lender of last resort). The ECB removed democratically elected scoundrel Berlusconi from office in Italy only to replace him with a former Goldman Sachs banker.

So what does this mean for owners of gold and those considering acquiring it? We cannot begin to speculate. But we would look at the experience of every other centrally planned economy in history and note that it ended in currency collapse, massive wealth destruction and tears. Our usual prescription still applies. We advise clients to own gold in fully segregated and fully allocated accounts in ultra-secure vaults in the safest jurisdictions in the world.

See Essential Guide to  Storing Gold In Switzerland here

GOLDCORE MARKET UPDATE
Today’s AM fix was USD 1,228.25, EUR 967.58 and GBP 762.23 per ounce.
Yesterday’s AM fix was USD 1,230.50, EUR 970.58 and GBP 764.29 per ounce.
Gold and silver both finished last week down at 0.53% and 0.52%.

Spot gold closed at $1,226.38 yesterday and spot silver closed at $17.11 per ounce. A Bank Holiday was observed in Ireland on Monday.

Investors and traders are focused on the U.S. Federal Open Market Committee (FOMC) regular meeting today and tomorrow. Wednesday afternoon’s policy statement will be very closely scrutinized by the market place. Most believe the Fed will formally end its monthly bond-buying program, called QE(quantitative easing)3.

A delay in any interest rate rise by the U.S. Fed could boost gold, a non-interest-bearing asset.

In London, gold in Swiss storage traded up 0.2% at $1,227.86 an ounce by 1033 GMT, off an early low of $1,222.20 an ounce, its lowest since October 15th. U.S. gold futures for December delivery were down $1.40 an ounce at $1,227.90. In other precious metals, spot platinum was up 0.3% at $1,251.90 an ounce and spot palladium gained 1% to $785.25.

Data reported yesterday showed China’s net gold imports from Hong Kong jumped to a six-month high in September as purchases ramped up ahead of its National Day holiday.

Get Breaking News and Updates on the Gold Market Here 

Futures are largely unchanged ahead of today’s, if not the year’s, key event: the FOMC meeting in which Janet Yellen will announce the end of QE3, and with that the market will finally realize that the training wheels from the past 6 years are off, if only until the next market tantrum, or European/Chinese gray swan, pushes the Fed right back in.

As Deutsche Bank observes, the Fed has been wanting to hike rates on a rolling 6-12 month horizon from each recent meeting but never imminently which always makes the actual decision subject to events some time ahead. They have seen a shock in the last few weeks and a downgrade to global growth prospects so will for now likely err on the side of being more dovish than in the last couple of meetings. They probably won’t want to notably reverse the recent market repricing of the Fed Funds contract for now even if they disagree with it. However any future improvements in the global picture will likely lead them to step-up the rate rising rhetoric again and for us this will again lead to issues for financial markets addicted to liquidity. And so the loop will go on for some time yet and will likely trap the Fed into being more dovish than they would ideally want to be in 2015.

But for now, expect a creeping hawkishness to finally be realized by a broken market that has levitated on nothing but implicit and explicit Fed support for the past 6 years. In the meantime, for those curious how to trade today’s FOMC, DB’s Alan Ruskin notes that over the last two yearsthe S&P 500 has on average been 0.35% down on the day of the statement when there is no press conference. When there is one the index is up 0.87%, perhaps reflecting the dovish nature of Bernanke and Yellen relative to the committee.There is also more volatility across different asset classes on press conference days. Alan speculates that this is perhaps due to the market’s interpretation of the dots that appear at press conference meetings.

So will yesterday’s epic short squeeze be undone? Tune in in just over 7 hours to find out.

In the meantime, despite yesterday’s amazing Facebook flameout which rivaled the Antares rocket explosion, in which a conference call announcement about the company’s rapidly slowing growth and soaring expenses sent the company, held by nearly 130 hedge funds, plunging by over 10%, yet another rollercoaster night of Yen-carry levitation has assured that all initial losses in the Emini are made up futures are flat to start the day.

Once again, price action for European equities has centred around the slew of large cap companies reporting throughout the session, with European indices trading in the green with the exception of the IBEX and FTSE MIB. More specifically, Spanish heavyweight BBVA (-1.9%) is leading the Spanish banking sector lower, with Saipem and STMicroelectronics placing further weight on peripheral stocks following their respective earnings reports. In terms of other notable stocks news Sanofi (-4.0%) have announced they have ousted their CEO, while Total (+1.3%) have provided the CAC with some reprieve after their positive pre-market update. Despite the modest upside for stocks, fixed income markets trade in a relatively unchanged with today’s covered Bund auction failing to provide the German benchmark with any sustained price action.

Turning to Asia markets are generally stronger across the board following the positive lead from the US. Bourses in Japan, Hong Kong, China and Korea +1.6%, 1.4%, +1.2% and +1.7% respectively as we type. Focusing on Japan, the September industrial production print surprised to the upside (2.7% mom v 2.2% exp) but all eyes will be on the conclusion of the Bank of Japan policy meeting on Friday for whether a refresh of policy is attempted or hinted at. Asian credit markets are also on a firmer footing overnight with IG spreads around 1-2bp tighter across benchmark names while new issues are also being well absorbed.

JGBs trade marginally lower by 2 ticks, although lead futures touched a record high despite strength in Japanese stocks, supported by the BoJ who offered to buy JPY 1.05trl of debt. The Nikkei 225 (+1.5%) broke back above its 100 DMA at 15440.81 and 50% fib-level of the Sep-Oct sell-off, further buoyed by Japanese IP which printed an 8-month high (2.7% vs. Exp. 2.2%, Prev. -1.8%). Shanghai Comp (+0.2%) and Hang Seng (+0.9%) also traded higher, with the latter erasing its post Hong-Kong protests led losses.

Looking at the rest of the day ahead, we’ve got a fairly quiet calendar in the US with just the mortgage application print to look forward to. in Europe the notable readings include the September retail sales for Spain and consumer confidence in France. All eyes will be on the FOMC statement today though.

Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities trade mostly in the green with the exception of Spain and Italy as large cap earnings dictate the state of play amid a lack of notable macro Eurozone commentary.
• Both fixed income and FX markets remain tentative as participants begin to position ahead of today’s eagerly anticipated FOMC meeting.
• Looking ahead, attention will turn towards the upcoming DoE release, 2yr FRN and 5yr note auction and a stream of large cap US earnings, although the main focus for the session will likely be placed on the FOMC meeting.
• Treasuries gain as market awaits FOMC policy statement at 2pm in Washington DC; Fed expected to keep “considerable time” language, end QE.
• Fed won’t provide new economic projections, Yellen not scheduled for post-meeting presser; click here for Decision Day Guide
• The end the Fed’s third round of bond purchases is proving to be a non-event for MBS, partly because even though the central bank won’t be adding more of the bonds to its balance sheet, it will still be buying enough to prevent holdings from shrinking
• Bank of England Deputy Governor Jon Cunliffe said slowing inflation and a bleaker outlook for the economy justify keeping emergency stimulus for longer
• EU said no nation has broken budget rules by a big enough margin to warrant immediate action, a move that gives France and Italy more time to win approval for their draft spending plans
• Pimco, seeking to stem redemptions after its co-founder Bill Gross left unexpectedly, was dropped as manager of a $6.16b strategy offered by a unit of Prudential Financial Inc
• Iraqi Kurdish fighters armed with mortars and Katyusha rocket launchers arrived in Turkey today on their way to the Syrian town of Kobani, where they’ll join the fight against Islamic State, according to live footage on NTV television
• The U.S. vowed to continue its commercial space launch program just hours after a rocket carrying supplies to the International Space Station exploded over a Virginia launch pad
• North Korean leader Kim Jong Un is seeking to erase the remaining influence of his dead uncle, executing about 10 senior Workers’ Party officials on charges from graft to watching South Korean soap operas, according to an aide to a South Korean lawmaker
• Sovereign yields mostly lower. Asian and European stocks gain; U.S. equity-index futures mixed. Brent crude and copper gain, gold little changed

US Event Calendar

• 7:00am: MBA Mortgage Applications, Oct. 24 (prior 11.6%) Central Banks
• 2:00pm: Fed seen maintaining overnight bank lending rate of 0%-0.25%
• Fed seen ending QE program
• 11:30am: U.S. to sell $15b 2Y FRN
• 1:00pm: U.S. to sell $35b 5Y notes

ASIA

JGBs trade marginally lower by 2 ticks, although lead futures touched a record high despite strength in Japanese stocks, supported by the BoJ who offered to buy JPY 1.05trl of debt. The Nikkei 225 (+1.5%) broke back above its 100 DMA at 15440.81 and 50% fib-level of the Sep-Oct sell-off, further buoyed by Japanese IP which printed an 8-month high (2.7% vs. Exp. 2.2%, Prev. -1.8%). Shanghai Comp (+0.2%) and Hang Seng (+0.9%) also traded higher, with the latter erasing its post Hong-Kong protests led losses.

The World Bank said China has buffers to prevent disorderly debt unwind and sees China GDP growth slowing to 7.1% in 2016. Elsewhere, Deutsche lowered China’s GDP growth forecast by 0.5pp to 7.3% for 2014 and by 1pp to 7.0% for 2015. (RTRS)

FIXED INCOME & EQUITIES

Once again, price action for European equities has centred around the slew of large cap companies reporting throughout the session, with European indices trading in the green with the exception of the IBEX and FTSE MIB. More specifically, Spanish heavyweight BBVA (-1.9%) is leading the Spanish banking sector lower, with Saipem and STMicroelectronics placing further weight on peripheral stocks following their respective earnings reports. In terms of other notable stocks news Sanofi (-4.0%) have announced they have ousted their CEO, while Total (+1.3%) have provided the CAC with some reprieve after their positive pre-market update. Despite the modest upside for stocks, fixed income markets trade in a relatively unchanged with today’s covered Bund auction failing to provide the German benchmark with any sustained price action.

FX

FX markets remain relatively tentative ahead of the FOMC, with the modest upside for AUD seen overnight being sustained throughout European trade following a flurry of bids in AUD/JPY. Elsewhere, GBP was unreactive to the UK Mortgage approvals data (61.3K vs. Exp. 62.0K) which came in at its lowest level since July 2013 as the release painted a relatively similar picture to recent mortgage-related data points. Furthermore, comments from BoE’s Cunliffe who said the BoE can keep stimulus longer than previously thought, citing softening in UK pay and inflation data also failed to weigh on the UK currency. However, in recent trade EUR/GBP has just broken above 0.7900, with the move said to be spurred by the usual month-end buying from a large European central bank.

COMMODITIES

WTI and Brent crude futures trade in the green after API Crude Oil Inventories (+3200k vs. Prev. +1200k) showed a lower than expected build in today’s DOE crude report (Exp. +3650k, Prev. +7111k). However, prices remained unscathed to comments from OPEC’s Sec Gen who said that if oil prices stay at USD 85/bbl, a lot of oil will go out of the market, adding that OPEC does not have a price target and they ‘just leave it to the market’. Elsewhere, precious metals markets remain relatively steady ahead of the FOMC release.

* * *

DB’s Jim Reid Conludes the Overnight Recap

Two weeks ago today’s FOMC conclusion was looking set to be a pretty exciting event. However the fact that the S&P 500 has rallied 9.03% off the intra-day lows that week to now only be around 1.3% off the all time highs probably means it will be a much more predictable affair. However it’s likely that recent events will have had an impact in our opinion.

Our take is that the Fed has been wanting to hike rates on a rolling 6-12 month horizon from each recent meeting but never imminently which always makes the actual decision subject to events some time ahead. They have seen a shock in the last few weeks and a downgrade to global growth prospects so will for now likely err on the side of being more dovish than in the last couple of meetings. They probably won’t want to notably reverse the recent market repricing of the Fed Funds contract for now even if they disagree with it. However any future improvements in the global picture will likely lead them to step-up the rate rising rhetoric again and for us this will again lead to issues for financial markets addicted to liquidity. And so the loop will go on for some time yet and will likely trap the Fed into being more dovish than they would ideally want to be in 2015.

On the specifics for today, DB’s Peter Hooper expects the Committee to maintain a modestly dovish stance with relatively few changes other than those necessitated by the ending of QE. A big question mark will be as to whether they explicitly mention the recent volatility or tighter financial conditions similar to what they did in September last year. Peter doesn’t think so as back then Treasury yields had climbed over 100bps and the labor market had showed signs of slowing which hasn’t happened this time round. Peter thinks they are concerned about there being an ‘investor put’ if they make too much of the volatility of two weeks ago. For us though its easy for them to act like this now that markets have recovered but it might be a little circular. The rebound started with Bullard’s about turn suggesting that QE might be extended and also as markets started to price out 2015’s interest rate rises. The rally soon got extra legs when speculation arose that the ECB might be considering buying corporate bonds. So if the Fed use this rebound to be too hawkish then it may backfire so we’d expect some compromise probably in the form of keeping considerable time in and emphasising the global risks to growth and inflation.

DB’s Alan Ruskin makes some interesting observations about the FOMC. Firstly he says that over the last two years the S&P 500 has on average been 0.35% down on the day of the statement when there is no press conference. When there is one the index is up 0.87%, perhaps reflecting the dovish nature of Bernanke and Yellen relative to the committee. There is also more volatility across different asset classes on press conference days. Alan speculates that this is perhaps due to the market’s interpretation of the dots that appear at press conference meetings.

Ahead of all this markets shrugged off some mixed data in the US yesterday to rally strongly. The good news came from the Conference Board Consumer Confidence report that topped estimates (94.5 v 87.0) to print at a seven year high. The Richmond Fed manufacturing survey also came in stronger than expected (20 v 11). The bad news though came from September’s durable goods data. The volatile headline series fell unexpectedly (-1.3% mom v +0.5% mom expected) and the core capex reading (ex. aircraft and defense) also weaker. A weak core capex adds downside risk to the Q3 GDP numbers as our US colleagues pointed out earlier this week. The other notable data release in the US yesterday was the S&P/Case Shiller house price index which came in slightly below expectations (+5.57% yoy v +5.70% expected).

With the S&P 500 (+1.19%) and the Russell (+2.86%) rallying, US Treasuries were unsurprisingly weaker. 10yr yields closed +3bp to 2.29%. Commodities were also stronger with WTI, Brent, and Copper up +0.5%, +0.2% and +0.8% on the day.

Turning to Asia markets are generally stronger across the board following the positive lead from the US. Bourses in Japan, Hong Kong, China and Korea +1.6%, 1.4%, +1.2% and +1.7% respectively as we type. Focusing on Japan, the September industrial production print surprised to the upside (2.7% mom v 2.2% exp) but all eyes will be on the conclusion of the Bank of Japan policy meeting on Friday for whether a refresh of policy is attempted or hinted at. Asian credit markets are also on a firmer footing overnight with IG spreads around 1-2bp tighter across benchmark names while new issues are also being well absorbed.

Looking at the rest of the day ahead, we’ve got a fairly quiet calendar in the US with just the mortgage application print to look forward to. Over on this side of the Atlantic, the notable readings include the September retail sales for Spain and consumer confidence in France. All eyes will be on the FOMC statement today though.

The euro fell quite a bit in value during this afternoon’s  session, and it was down  by closing time , closing well below the 1.27 level to 1.2646.  The yen was well down during the afternoon session,and it lost 70 basis points on the day closing well above the 108 cross at 108.82.   The British pound lost huge ground  during the afternoon session and  it was down for the day as it closed at 1.6018

Italian FTSE-MIB down 319.82    or 1.64%

Nasdaq; up 78.36   or 1.75%

OIL:  WTI 82.15

Brent: 87.17

end

The big news:  talks renew after Russia cuts off gas through the Ukraine:

(courtesy Reuters) and special thanks to Robert H for sending this to us