My website is now ready but we still have to add a little stuff to it. You can find my site at the following url:
harveyorganblog.com or harveyorgan.wordpress.com
I will continue to send the comex data down to my good friends at the Doctorsilvers website on a continual basis.
They provide the comex data. I also provide other pertinent data that may interest you. So if you wish you can view that part on my website.
I would like to thank you for your patience and I would like to thank my son, Stephen for his invaluable assistance in setting my website up. We are confident that it will not be shut down.
Gold: $1183.50 down $2.00
Silver: $16.05 down 26 cents
In the access market 5:15 pm
Gold and silver did not have a great day price wise.
I reminded everyone on Friday that:
“The bankers will regroup and will try and forcefully send gold and silver back down on Monday. Of course the problem that the bankers have is this:
every time they orchestrate a huge raid, some strong entities (a sovereign??) are in there gobbling up much of the naked offering of our bankers. The bankers risk that many of the longs purchased will end up on the delivery table.”
And sure enough, the bankers started their raids once the comex session got under way. Gold and silver were doing just fine in the Asian/European time zone with gold reaching its zenith at $1194.00 at 4 am est and silver lagging behind, hitting its zenith at $16.39 at around 2 am est. Silver started to swoon at that point which is a sure sign that an attack was imminent. Gold hit its nadir at $1182.50 around noon time, and finished as indicated above.
However in the access market, gold and silver rose to that indicated above.
The gold comex today had a humongous delivery day, registering 462 notices served for 46,200 oz. Somebody was in great need of gold in a hurry. This may portend a huge number of gold ounces that will stand in December.
Silver comex registered 1 notices for 5,000 oz.
A few months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 255.02 tonnes for a loss of 48 tonnes over that period. .
In silver, the open interest rose considerably despite Friday’s gain in price ( 70 cents). It looks like we have a few nervous shorts in silver racing against the clock to cover some of their shortfall!! The total silver OI remains extremely high with today’s reading at 172,725 contracts. The big December silver OI contract marginally lowered to 79,997 contracts.
In gold we had a huge gain in OI with Friday’s rise in price of gold to the tune of $24.10 . The total comex gold OI rests tonight quite elevated at 453,974 for a gain of a 3,611 contracts. The December gold OI rests tonight at 213,140 contracts which had a smallish contraction of 5,863 contracts. We lost some of the paper longs into February .
Today, we had a huge addition of 2.39 tonnes in gold Inventory at the GLD / inventory rests tonight at 723.02 tonnes.
In silver, the SLV inventory remained constant tonight
SLV’s inventory rests tonight at 346.900 million oz.
We have a few important stories to bring to your attention today…
Let’s head immediately to see the major data points for today.
First: GOFO rates: move again deeper in backwardation!!
All months basically moved deeper into backwardation
Now, the first 4 months of GOFO rates( one, two, three and six month GOFO) moved deeply into the negative with the 6th month GOFO now negative again and in backwardation. On the 22nd of September the LBMA stated that they will not publish GOFO rates. However today we still received today’s GOFO rates.
It looks to me like these rates even though negative are still fully manipulated.
London good delivery bars are still quite scarce.
The backwardation in gold is incompatible with the raid on gold . It does not make any economic sense.
Nov 17 2014
1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate
-.22% -0.16% -0.1075% – .0075% + .1150%
Nov 13 .2014:
1 Month Rate 2 Month Rate 3 Month Rate 6 month Rate 1 yr rate
–.2175% + -.1575% -.097500% -.0075 % + .1150%
Let us now head over to the comex and assess trading over there today,
Here are today’s comex results:
The total gold comex open interest rose by a wide margin of 3611 contracts from 450,363 up to 453,974 with gold up $24.10 on Friday. The front delivery month is November and here the OI fell by 466 contracts. We had 920 delivery notices filed on Friday so we gained 454 contracts or a whopping 45,400 additional gold ounces will stand for the November contact delivery month. The big December contract month saw it’s Oi fall by a smallish 5,863 contracts down to 213.140. Most of the selling December longs rolled into February. The estimated volume today was fair at 164,588. The confirmed volume on Friday was very good at 332,271. (with mucho help from our HFT traders.) Strangely on this 13th day of notices, we had another monster notice of 462 notices filed for 46,200 oz. We had only 22 notices outstanding Friday night, so again somebody was in urgent need of gold.
And now for the silver comex results. The total OI fell slightly by 2,538 contracts from 175,263 down to 172,725 as silver was up 70 cents on Friday. It seems that judging from silver’s OI, our banker friends are still very nervous as they try to cover their massive shortfall in silver. In ounces, this represents a total of 863 million oz or 123.3% of annual global supply. We are now in the non active silver contract month of November and here the OI remained constant at 89. We had 0 notices filed on Friday so we neither gained nor lost any silver contracts oz that will stand for the November contract month. The big December active contract month saw it’s OI fall by only 4085 contracts down to 79,997. A normal contraction is around 5,000 contracts per day on a roll. The December contract month remains highly elevated for this time in the delivery cycle. In ounces the December contract is represented by 400 million oz or 57.1% of annual global production (production = 700 million oz – China). The estimated volume today was good at 39,154. The confirmed volume on Friday was huge at 94,313. We also had 1 notices filed today for 5,000 oz.
If I am reading the comex first day notice properly, first day notice is Nov 26.2014 the day before Thanksgiving. We thus have 7 more comex sessions.
Data for the November delivery month.
November initial standings
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz||nil|
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz||9,645.000 oz (300 Kilobars???)|
|No of oz served (contracts) today||462 contracts(46,200 oz)|
|No of oz to be served (notices)||14 contracts (1400 oz)|
|Total monthly oz gold served (contracts) so far this month||1392 contracts (139,200 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month||80,623.1 oz|
Total accumulative withdrawal of gold from the Customer inventory this month
Today, we had 0 dealer transactions
total dealer withdrawal: nil oz
total dealer deposit: nil oz
we had 0 customer withdrawals:
total customer withdrawals : nil oz
we had 1 customer deposits:
Into Scotia: 9,450.000 oz or another of our famous 300 kilobars.
total customer deposits : 9450.000 oz
We had 0 adjustments:
Total Dealer inventory: 868,910.561 oz or 27.02 tonnes
Total gold inventory (dealer and customer) = 8.205 million oz. (255.22) tonnes)
Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 48 tonnes have been net transferred out. We will be watching this closely!
Today, 0 notices was issued from JPMorgan dealer account and 385 notices were issued from their client or customer account. The total of all issuance by all participants equates to 462 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.
The stopper again today was Scotia with 456 contracts stopped out of the 462. On Friday, Scotia stopped 833 of the 920 issued. JPMorgan customer account on Friday was the issuer of all 920 contracts.
To calculate the total number of gold ounces standing for the November contract month, we take the total number of notices filed for the month (1392) x 100 oz to which we add the difference between the OI for the front month of November (476) – the number of gold notices filed today (462) x 100 oz = the amount of gold oz standing for the November contract month.
Thus the initial standings:
139,200 (notices filed today x 100 oz + ( 476) OI for November – 462 (no of notices filed today) 140,600 oz or 4.373 tonnes.
We gained 45,400 oz of gold standing for the November contract month.
November silver: initial standings
|Withdrawals from Dealers Inventory||251,546.400 oz|
|Withdrawals from Customer Inventory||658,189.790 oz
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||536,933.670 oz (Delaware)|
|No of oz served (contracts)||1 contracts (5,000 oz)|
|No of oz to be served (notices)||88 contracts (440,000 oz)|
|Total monthly oz silver served (contracts)||156 contracts 780,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month||781,023.9 oz|
|Total accumulative withdrawal of silver from the Customer inventory this month||5,196,526.6 oz|
Today, we had 0 deposits into the dealer account:
total dealer deposit: nil oz
we had 1 dealer withdrawal:
i) out of Delaware: 251,546.400 oz
total dealer withdrawal: 251,546.400 oz
We had 4 customer withdrawals:
i) Out of CNT: 27,355.600 oz
ii) Out of Delaware: 4,444.800 oz
iii) Out of Scotia: 600,316.120 oz
iv) Out of Brinks; 19,073.27 oz
total customer withdrawal 658,189.79 oz
We had 1 customer deposits:
total customer deposits: 536,933.67 oz
we had 1 adjustment
i Addition of 127.768 oz into Delaware (adding error)
Total dealer inventory: 65.350 million oz
Total of all silver inventory (dealer and customer) 177.715 million oz.
The total number of notices filed today is represented by 1 contract or 5,000 oz. To calculate the number of silver ounces that will stand for delivery in November, we take the total number of notices filed for the month (156 ) x 5,000 oz to which we add the difference between the total OI for the front month of November(89) minus (the number of notices filed today (1) x 5,000 oz = the total number of silver oz standing so far in November.
Thus: 156 contracts x 5000 oz + (89) OI for the November contract month – 1 (the number of notices filed today) = amount standing or 1,220,000 oz of silver standing.
we neither gained nor lost any silver ounces standing today.
It looks like China is still in a holding pattern ready to pounce when needed.
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:
i) demand from paper gold shareholders
ii) demand from the bankers who then redeem for gold to send this gold onto China
vs no sellers of GLD paper.
And now the Gold inventory at the GLD:
Nov 17.2014; we had a huge addition of 2.39 tonnes of gold added to the GLF inventory/inventory rests tonight at 723.01 tonnes. They may be running out of metal to give China!!!
Nov 14. we had no change in gold inventory at the GLD/inventory 720.62 tonnes
nov 13. we lost another 2.05 tonnes of gold at the GLD/Inventory at 720.62 tonnes
Nov 12.2014; we lost another 1.79 tonnes of gold at the GLD/Inventory at 722.67 tonnes
This gold left the shores of England and landed in Shanghai.
Nov 11.2014: we lost another 0.900 tonnes of gold at the GLD/Inventory 724.46 tonnes
Nov 10. we lost another 1.79 tonnes of gold at the GLD/Inventory 725.36 tonnes
Nov 7 wow!! we lost another huge 5.68 tonnes of gold at the GLD/inventory 727.15 tonnes
Nov 6.2014: we had another huge withdrawal of 2.99 tonnes of gold. Inventory 732.83 tonnes
This gold is also heading to Shanghai. If I was a shareholder of GLD I would be quite concerned as there will be no real gold inventory left per outstanding shares.
Nov 5 we had another huge withdrawal of 3.000 tonnes of gold. This gold will be heading to Shanghai/GLD inventory 735.82 tonnes
Nov 4.2014: a huge withdrawal of 2.39 tonnes of gold/GLD inventory/738.82 tonnes
Nov 3.2014: no change in gold inventory at the GLD/741.21 tonnes
Oct 31.2014: no change in gold inventory at the GLD despite the raid/inventory at 741.21 tonnes
October 30.2014: we had another 1.2 tonnes of gold leave the GLD and heading to Shanghai/Inventory 741.21 tonnes
October 29.2014: we had another .99 tonnes of gold removed from the GLD/inventory 742.40 tonnes
Today, Nov 17. a huge addition of 2.89 tonnes of gold inventory.
inventory: 723.01 tonnes.
The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks).
GLD : 723.01 tonnes.
And now for silver:
Nov 17.2014 .SLV inventories remain constant tonight at 346.90 million oz
Nov 14.2014; wow!! we had an addition of 2.012 million oz into the SLV/inventory at 346.900 million oz
Nov 13. no change in silver inventory at the SLV/344.888 million oz.
Nov 12.2014: no change in silver inventory at the SLV/inventory rests tonight at 344.888 million oz. And please note that gold leaves GLD/silver does not. Why? there is no physical silver at the SLV..just paper obligations.
Nov 11.2014: no change in silver inventory at the SLV/inventory rests tonight at 344.888 million oz.
Nov 10/ we had an addition of 1.438 million oz of silver into inventory at the SLV/Inventory 344.888 million oz (again note the difference between gold and silver)
Nov 7/ 2014/no change in silver inventory/inventory rests at 343.45 million oz. (please note the difference between silver (SLV) and gold (GLD)
Nov 6.2014: no change in silver inventory/(as of 6 pm est) inventory rests at 343.45 million oz.
Nov 5 today, the total silver inventory drops of 2.074 million oz/SLV inventory: 343.45 million oz
Nov 4.2014: wow!! we had another addition of 1.151 million oz of silver inventory/SLV inventory rises to 345.524
Please note the difference between GLD and SLV. The GLD has physical gold to send on its way to Shanghai/SLV has no silver to offer to the participants to give to various players..
Nov 3.2014: this is good news: the “actual silver inventory” rose by 958,000 oz to 344.373 oz
(I guess there is no physical silver to raid from the SLV vaults:)
October 31.2014: despite the huge raids yesterday and today: no change in silver inventory at the SLV/inventory at 343.415 million oz
Nov 17.2014 no change in silver inventory at the SLV
And now for our premiums to NAV for the funds I follow:
Note: Sprott silver fund now deeply into the positive to NAV
Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at Negative 9.6% percent to NAV in usa funds and Negative 9.7% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.3%
Percentage of fund in silver:38.10%
( Nov 17/2014)
2. Sprott silver fund (PSLV): Premium to NAV rises to positive 4.10% NAV (Nov 17/2014)
3. Sprott gold fund (PHYS): premium to NAV falls to negative -0.37% to NAV(Nov 17/2014)
Note: Sprott silver trust back hugely into positive territory at 4.10%.
Sprott physical gold trust is back in negative territory at -0.37%
Central fund of Canada’s is still in jail.
And now for your most important physical stories on gold and silver today:
Early gold trading form Europe early Monday morning:
(courtesy Goldcore/Mark O’Byrne)
Cameron Says Second Global Crash Looming – Russian Relations Worsen at G20, Japan in Recession
David Cameron warned last night that the global economy risked another crash and said in an article that ‘red warning lights’ were ‘flashing on the dashboard of the global economy’ and the eurozone was ‘teetering on the brink’ of another recession.
The warning came at the same time that the world’s largest economy, Japan, fell into another recession. Japan shrank by an annualised 1.6% in the third quarter. This followed a huge 7.3% contraction in the previous quarter caused by a rise in the national sales tax and ran counter to economists forecasts for a 2.1 percent rebound.
Mr Cameron’s warning follows a claim by Bank of England governor Mark Carney that a ‘spectre’ of economic stagnation was haunting Europe. Christine Lagarde, managing director of the International Monetary Fund, has also expressed fears that a diet of high debt, low growth and unemployment may yet become ‘the new normal in Europe’.
Writing in the Guardian at the close of the G20 summit in Brisbane, Cameron says there is now “a dangerous backdrop of instability and uncertainty” that presents a real risk to the UK recovery, adding that the eurozone slowdown is already having an impact on British exports and manufacturing.
Mr Cameron said global instability such as the continued eurozone crisis and the ebola outbreak threatened the UK’s recovery.
The G20 summit in Brisbane seems to have been a highly entertaining affair. Albeit for all the wrong reasons.
The 20 richest countries in the world pledged to magic up 2.1% of economic growth over the next five years. How this is suddenly possible after six years of failure is unclear but it makes for good PR. Climate change was also high on the agenda.
But it was the brow-beating of Vladimir Putin by the leaders of the increasingly repressive free world that got most of the media attention. Canada’s Harper reluctantly shook Putin’s hand while demanding Russia pull out of Ukraine or face the might of Canada.
Australia’s assistant secretary of defense was sent to greet him. Merkel said the EU is considering further sanctions even as protests by farmers across Europe are erupting due to the loss of the Russian export market.
Obama assured the G20 that the US, who have waged a series of bloody and costly wars since 2002 would lead the charge against Russia’s aggression against Ukraine, “which is a threat to the world, as we saw with the appalling shoot-down of MH17” – the Malaysian Airlines flight which was shot down over Ukraine in July.
Australia’s Abbott had threatened to “shirt front” – that is to physically confront – Putin over the atrocity which claimed 28 Australian lives.
Perhaps he was restrained from doing so due to the lack of evidence of Russian involvement in the attack on the plane which had been diverted from it’s regular flight path and directed over rebel held territory by Ukrainian air traffic control.
While the Western media try to present Vladimir Putin as being a pariah in the “global community,” it is important to remember that Putin was treated as the guest of honour at the APEC conference in Beijing. The official photograph of that event made it clear that the US are now regarded as less important in the conduct of East-Asian affairs.
This week it was Putin’s turn to be humiliated as the official photo placed him out at the very edge of the picture. No such disrespect was shown to China’s Xi Jinping who appeared in the centre, indicating Australia’s reliance on China. The close relations between Russia and China indicate that Putin is not as isolated as the media would make it seem.
Tensions between Russia and the West are escalating. The West are threatening even more sanctions unless Russia stop aiding pro-Russian rebels in Ukraine. Putin insists that Russia is not involved in Ukraine and so there is no resolution in sight.
The damage being inflicted on Russia’s economy by sanctions have caused Russian figures to openly discuss dethroning the petrodollar. Sergey Glasyev, economic advisor to Putin, recently said that while “all freely convertible currencies are today under American control,” the dishonest monetary policies of the US is leading towards the “end of the American financial empire.”
“It will give us a chance to be among the first to suggest a new configuration for the world financial system in which the role of national currencies would be significantly higher,” he said.
When that time comes what Russia will propose will almost certainly involve gold-backed currencies. In Q3 Russia bought more gold than the combined buying of all other central banks. Russia imported 55 tonnes of gold in that period.
Russia have increased their gold stocks three-fold since 2004. This is happening against a backdrop of central banks being net buyers since 2009.
Currency wars look set to rapidly escalate as Russia look to dethrone the dollar in response to onerous sanctions being placed on it by the west. Russia’s official gold holdings have surpassed those of China with a dramatic upsurge in imports since sanctions began.
It is certain that currencies will come under increasing pressure over the next few months. The countries who have consistently improved their standards of living over the past two decades are also the countries who are consistently accumulating gold. The countries who have seen a steady decline over the same period appear to have little or no gold reserves.
It would be wise to act as ones own central bank and add some gold to one’s portfolio.
Get Breaking News and Updates on the Gold Market Here
Today’s AM fix was USD 1,187.00, EUR 950.36 and GBP 759.49 per ounce.
Friday’s AM fix was USD 1,154.00, EUR 926.31 and GBP 736.20 per ounce.
Gold climbed $28.90 or 2.49% to $1,190.70/oz Friday. Silver surged $0.69 or 4.42% to $16.30/oz.
Gold in U.S. Dollars – 5 Days (Thomson Reuters)
Gold hovered at two week highs on Monday, after a short covering rally and gold buying Friday.
Spot gold was at $1,187.20 an ounce by 0724 GMT, after earlier rising to a two-week high of $1,193.95. Friday’s jump over 2% allowed the metal to break out of a key technical level of $1,180.
Bearish bets on gold futures and options by hedge funds are near a record, according to CFTC data. Trading today on the Shanghai Gold Exchange’s benchmark bullion spot contract was the highest since April 2013.
Despite hugely negative sentiment towards gold, it is worth bearing in mind that gold is down just 1.3% this year.
Asian demand and particularly Chinese and Indian demand continues to be very robust.
India’s October gold imports surged 280% year on year to $4.18 billion, the trade ministry said today
Ongoing softness in global gold prices is prompting more buying in the United Arab Emirates and in the Middle East. As jewellery buyers and store of wealth gold coin and bar buyers snap up gold in its various forms. There are estimates from the local jewellery trade showing that retail offtake for the full year in the UAE could be up by 15-20% in volume terms (in kilograms) on 2013, according to Gulf News.
and gold did not react to this???
(courtesy zero hedge)
ECB Says May Buy Gold, Stocks Next, Admits “Not Sure If Japan’s QE Has Worked”
While it remains to be seen if a majority of the Swiss population want their central bank to purchase a whopping 1,500 tons of gold in the coming years, perhaps the most notable event for gold overnight (aside from news that while India exports fell 5% in October, gold and silver imports soared by 280% and 136% Y/Y, respectively), came from ECB Executive Board member Yves Mersch who in a speech in Frankfurt said that the ECB balance-sheet expansion is “neither an end in itself nor a fetish.” As quoted by Bloomberg, the ECB member said that “the effect on rates that comes along with it is at best a collateral benefit.”
Nothing new here: we have discussed why unlike Japan and the US, the biggest gating factor for Europe is the presence of freely-available, unencumbered collateral that could, at least in theory, be purchased by the ECB. Which brings us to the Mersch punchline: “Theoretically the ECB could purchase other assets such as gold, shares, ETFs to fulfill its promise of adopting further unconventional measures to counter a longer period of low inflation.”
In other words, for the first time ever, the ECB revealed just what the endgame for the Eurozone would looke like: full-blown monetization of virtually everything that is not nailed down. Including gold.
More from Mersch via Bloomberg: “The ECB should allow current stimulus measures to take effect first, then potential new measures must be analyzed in advance for effectiveness and conformity to ECB mandate.” He concluded by saying that “Monetary-policy easing can bring no positive effect if Europe’s economy isn’t structurally well-positioned” through reforms.
Which is ironic because in the same speech the same Mersch also opened a whole new can of worms when he admitted that he is not sure if the BOJ’s QE has worked.
“I’m not so sure it has worked, considering that this morning we saw that Japan has officially slid into recession again.”
Well, it has if one is long of the Nikkei (in Yen or USD terms). For everyone else, it has been an absolute disaster as we previewed early this summer in Abenomics’ Legacy: Japan’s Greatest “Misery” In 33 Years.
But back to gold. Here is the Telegraph’s take:
Gold, shares, and exchange-traded funds (ETFs) – the European Central Bank (ECB) may turn to buying any or all of these in an attempt to boost inflation in the currency bloc.
Yves Mersch, a member of the ECB’s executive board, said that the purchase of these assets was “theoretically” an option for the central bank, which earlier this year resolved to “take further unconventional measures to counteract a lengthy period of lower inflation”.
His speech, delivered in German, came as official statistics published on Friday showed inflation of just 0.4pc in the year to October.
Very low levels of inflation were characterised by Mr Mersch as “abnormally low”, as price growth remained well below the ECB’s target of close to 2pc.
“Every purchase of a security – or precious metal or foreign currency – naturally increases the credit risk of the buyer”, he added, noting that the ECB may lack a mandate to increase the risk of its balance sheet.
Mr Mersch, a Luxembourgian, is often seen as leaning towards the position of the ECB’s German members – hesitant to pursue monetary stimulus in an attempt to revive the eurozone.
So yes: in “theory” the ECB can buy pretty much anything, up to and including gold. And before all is said and done it most likely will, especially if one looks at today’s GOFO update, where the 6-Month rate remained at a negative -0.0075%, while the 1 Month rate just dropped to a fresh 13 year low, of -0.22%, a fresh low since 2001, suggesting concerns that institutional demand is (and will continue) soaking up all physical for a long, long time. This is how DB carfeully tiptoed around this topic late last week:
It is interesting to note that benchmark gold-dollar swap rates have recently traded negative, meaning investors are paying to borrow gold. This is unusual as gold is traditionally used as a source of collateral for cash financing. While a number of factors may play a role, such as excess dollar liquidity or an increased demand for collateral on the back of the global regulatory developments, it is possible that anticipation of an affirmative vote in the gold referendum has played a role.
In other words, if Switzerland “returns the favor” to the US, whose president recently crushed the legacy banking secrecy prevalent in Switzerland for centuries, and votes to force the purchases of massive amounts of gold in the open, or not so open market, watch as the entire GOFO curve trades negative for the first time ever.
Gerald Celente talks about gold’s importance to Russian in its defense against sanctions and the run on its rouble:
(courtesy Gerald Celente/Kingworldnews/Eric King)
Gold is part of Russia’s defense against U.S., Celente tells KWN
8:37p ET Friday, November 14, 2014
Dear Friend of GATA and Gold:
Russia’s steady acquisition of gold is part of the nation’s defense in the international currency war, where, in the Russian view, “all freely convertible currencies are today under American control.” That’s the outlook of trends forecaster Gerald Celente’s new interview with King World News, posted at the KWN blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
a must view/David Stockman talks about confidence fading across the globe as deflation is rearing its ugly head
(courtesy David Stockman/Kingworldnews)
Confidence in central banks is fading and markets will rediscover gold, Stockman says
10:28p ET Friday, November 14, 2014
Dear Friend of GATA and Gold:
Former U.S. budget director David Stockman tells King World News tonight that central banks are losing the confidence of the markets and eventually the markets will rediscover a currency more reliable than anything printed by central banks — gold. An excerpt from the interview is posted at the KWN blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Iran said to open refinery as ‘resistance,’ doubling annual gold production
From The Associated Press
via ABC News, New York
Saturday, November 15, 2014
Iranian state television is reporting that the country has inaugurated a new gold-processing plant that will double the country’s annual production to 6 tons.
The report says First Vice President Ishaq Jahangiri attended the inauguration Saturday of the plant near Takab in northwestern Iran.
It says the new processing facility, built next to Iran’s Zarshouran gold mine, also will produce an estimated 2.5 tons of silver and 1 ton of mercury a year.
State television says Iran previously produced an estimated 3 tons of gold a year.
This is part of Iran’s “economy of resistance” to counter sanctions imposed over Tehran’s contested nuclear program. The Islamic Republic is currently negotiating a final deal over its atomic program with world powers.
Swiss central bank could nullify gold initiative with overnight gold swaps
12:58p ET Saturday, November 15, 2014
Dear Friend of GATA and Gold:
Zero Hedge reports today that a market analyst for Deutsche Bank has figured out an easy way for the Swiss National Bank to nullify the Swiss Gold Initiative if it is approved at Switzerland’s national referendum on November 30.
The referendum would require the central bank to increase its gold reserves, and the Deutsche Bank analyst, Robin Winkler, writes that rather than purchase more reserves, the bank could just pretend to have them for one day each month, the day of the bank’s monthly report, a bookkeeping pretense accomplished with an overnight gold swap, reversed the following day.
Of course such evasion and deception would be perfectly in the spirit of central banking, though it might tend to remind people that central banking has become worse than the disease it purports to cure.
As was confirmed by the secret March 1999 report of the staff of the International Monetary Fund, gold swaps and loans are primary mechanisms of surreptitious manipulation of markets by central banks:
Zero Hedge’s report is headlined “How Central Banks Use Gold Swaps To ‘Boost’ Their Gold Holdings” and it’s posted here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Turk says mining shares have never been been cheaper, mining executives are clueless
1:45p ET Saturday, November 15, 2014
Dear Friend of GATA and Gold:
In an hour-long interview with the TF Metals Report’s Turd Ferguson, GoldMoney founder and GATA consultant James Turk says, among other things:
— Shares of monetary metals mining companies have never been cheaper.
— Gold backwardation has never been as severe, indicating massive intervention by central banks against gold.
— The World Gold Council and most monetary metals mining companies are not defending gold’s role as money, nor defending the industry itself, as most mining company executives are clueless about the nature of the monetary metals.
— Central banks are destroying the world’s market economies.
— And the Swiss Gold Initiative has a chance.
The interview is an hour long and can be heard at the TF Metals Report here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Low gold prices set off buying surge in UAE
By Manoj Nair
Gulf News, Dubai, United Arab Emirates
Sunday, November 16, 2014
DUBAI, United Arab Emirates — Shoppers of gold and jewellery in the UAE have never been in need of a reason or an excuse to buy. There would always be an occasion coming along to indulge in purchases at various times through an year, and if any incentive was needed it would be provided by the generous seasonal promotions such as daily raffles and 1 kilogram of gold as takeaways.
But the ongoing softness in global gold prices is prompting more shoppers to snap up more of the metal in its various forms. According to estimates from the local jewellery trade, retail offtake for the full year in the UAE could be up by 15-20 percent in volume terms (in kilograms) compared with 2013. If only the second half of the year is taken into account, which was when prices started to show real weakness, volume gains could even be in the 40-percent range. …
… For the remainder of the report:
Another very strong week for Chinese wholesale gold demand, measured by withdrawals from the Shanghai Gold Exchange. In week 45 (November 2 – 7) physical withdrawals from the vaults accounted for 54 tonnes. My basic equation tells me more than 40 tonnes had to be imported to meet this demand. Year to date 1708 tonnes have been withdrawn from the vaults and this number will likely surpass 2,000 tonnes by year end as December and January are seasonally the strongest months.
As we can see in the chart above, the Chinese are quite eager to buy gold on the dips. SGE premiums were again pushed upwards last week by the new lows in the price of gold. The inverse relation is demonstrated in the next chart.
I would like to share a thought: The SGE premium chart illustrates the largest physical gold buyer on the planet has an increasing interest in buying gold, rising premiums, over the interest of the seller when prices decline. What we’re seeing is increasing demand from the largest physical buyer and falling prices concurrently. I wonder if this would be possible without a paper market.
The Shanghai International Gold Exchange
The Volumes on the Shanghai International Gold Exchange (SGEI) are weakening in recent weeks. On November 6 only 2 Kg were traded, the total for the week ended at 801.5 Kg. Low SGEI volumes are improving our estimates of Chinese wholesale gold demand. On October 30, I wrote:
Chinese law dictates all gold bullion imported into the mainland (in general trade) by commercial banks is required to be sold first through the SGE. If gold is imported into the Shanghai FTZ it’s officially not imported into the mainland. The thing I’m not sure about at this stage is, if Chinese banks buy gold on the SGEI, withdrawal this from the vaults in the FTZ and import it into the mainland, is this required to be sold through the SGE again (?). My common sense would say no, but I need to have it confirmed by the SGE.
This week the SGE confirmed to me gold bought by domestic banks on the SGEI and withdrawn from the “International Board” Certified Vault in the Shanghai Free Trade Zone (FTZ) to be imported into the mainland is not required to go through the “Main Board”/SGE (click here for an introduction on the SGE, SGEI, IB, MB, FTZ, etc). Meaning: the volume traded on the SGEI can distort Chinese wholesale gold demand measured by SGE withdrawals numbers. This is because we simply don’t know who the SGEI traders are; domestic banks from the mainland that buy and withdrawal gold to import – in this case withdrawals would count as Chinese demand – or for example buyers from Singapore – in this case withdrawals would be exported to Singapore?
If the SGE and SGEI would separate withdrawal numbers in the future (as I have requested) it would still be a guess how much Chinese wholesale gold demand is measured by SGE withdrawals, as domestic banks can withdrawal from the SGE and SGEI vaults for the domestic gold market. It would be better than the current situation as SGEI withdrawal numbers could be either foreign or domestic demand, making SGE withdrawals the bottom limit representing Chinese wholesale gold demand.
However, SGEI volume is very low at this point, so we can safely measure Chinese gold demand by SGE withdrawals.
The Chinese Silver Market
Silver on the Shanghai Futures Exchange (SHFE) has been trading in backwardation for over two months. Physical silver supply remains tight in my opinion.
SHFE silver inventory has stabilized at 125 tonnes.
SGE silver premiums (discount) bounced up on -8 %.
There was interesting article from Bloomberg last week about China’s ambition to increase it’s solar power supply in local rooftop projects to fight its pollution problem. As you may know solar panel fabrication requires silver. From Bloomberg:
China Hunger for Clean Energy to Leave No Rooftop Behind
China expects to install as much as 8 gigawatts of small solar systems this year, more than 10 times what was built last year.
The push to promote wider use of rooftop solar comes amid growing health concerns tied to smog within its own population and from foreign companies. It also adds to the nation’s push to be a leader within the global climate community.
China’s National Energy Administration introduced policies in September aimed at boosting the use of distributed solar power.
The agency asked local authorities to identify potential sites for rooftop plants and smaller, ground-mounted projects. These would include industrial and commercial companies with large rooftops, and public buildings such as railway stations and airport terminals. China has set a goal of installing 8 gigawatts of small systems this year and 6 gigawatts for larger projects.
SHFE vs COMEX
Silver volume on the SHFE was strong in week 46 (November 10 – 14) at 88,370 tonnes, up 7.9 % from the previous week. The Open Interest (OI) fell 6 % to 6,183 tonnes.
Silver volume on the COMEX was 51,473 tonnes, up 1.4 % from the week before. The OI closed at 27,000 tonnes.
Gold volume on the SHFE was also up in week 46 at 832 tonnes, up 9.2 % from the previous week. The OI marginally increased to 141 tonnes.
Gold volume on the COMEX was 3,909 tonnes, up 14 % from the week before. The OI closed at 1,418 tonnes – which is ten times the gold OI on the SHFE.
As Chinese wholesale gold demand, measured by withdrawals from the Shanghai Gold Exchange, has been strong over the first three quarters of this year we will have a close look in this post at how this demand was supplied. Total Chinese wholesale demand Q1 to Q3 2014 was 1,453 tonnes, down 13 % y/y. In comparison, the World Gold Council (WGC) states Chinese consumer demand in the first three quarters was 638 tonnes, which is not even half of SGE withdrawals – more about this difference in a future post.
Domestic mine supply is a certainty in China, this year 451 tonnes will be mined domestically (37.6 tonnes a month), which leaves import and scrap to fill the gap.
In 2013 most supply of total Chinese wholesale demand was originally sourced form the UK – the London Bullion Market, transferred through Switzerland and Hong Kong, eventually reaching China mainland. The bulk of Chinese import in 2013 came in through Hong Kong.
This year the Chinese have started to import more gold directly into the mainland, circumventing Hong Kong. Unfortunately China itself doesn’t publish gold trade data – as they prefer to keep the world uninformed about their gold hunger not to influence the price. China openly changed import policy in April (from 1:14):
China’s shift in import policy has been made possible as China developed it’s refining capacity significantly in recent years, hence not all gold across the globe that is headed for the Chinese market has to go through Switzerland. Additionally the Shanghai Free Trade Zone will take over Hong Kong’s transit point. The result being, this year it’s harder to track gold import into China as all countries around the world can ship directly to the mainland.
Based on my basic equation for Chinese gold import (Import = SGE withdrawals – scrap – mine) I was able to make an accurate prediction for Chinese gold import for 2013. In March 2014 I said in a interview it was 1,500 tonnes, a few months later the China Gold Association confirmed it was a little over 1,500 tonnes.
17 tonnes of doré was imported from overseas mines in 2013 and 428 tonnes domestically mined, total Chinese mined gold was 445.417 tonnes; Scrap supply was 246.923 tonnes; 1506.5 tonnes of bullion was imported by commercial banks; total Chinese gold supply (and demand) was 2198.840 tonnes.
Although I don’t think I’m able to make such an accurate prediction ever again, my basic equation has proved to be a legitimate tool for estimating gold import. Putting it to use, China should have imported 936 tonnes in the first three quarters of this year.
This would imply SGE withdrawals (1453 tonnes) were supplied by:
- 936 tonnes import
- 179 tonnes scrap
- 338 tonnes mine
To trace the imported 936 tonnes, let’s run through the customs data of the world’s largest trading hubs, countries that additionally have large amounts of gold stocks; Hong Kong, the UK, Switzerland and the US.
Hong Kong net exported 566 tonnes to China year to date, down 34 % y/y.
As SGE withdrawals have shown a rebound since September, Hong Kong net export to China increased concurrently.
In September Hong Kong net exported 69 tonnes to China mainland.
(Looking beyond September SGE withdrawals have increased even more. Seasonally Chinese gold demand is at its peak in December and January.)
China changed it’s import strategy in April, until April most gold destined for the Chinese market – and more – was transferred to Hong Kong to be re-exported to China or stored in transit. In the next chart we can see hundreds of tonnes of gold were not only transferred through Hong Kong since 2013, but also remained in Hong Kong.
Hong Kong remains an important transit point for the coming months, as I wrote in Hong Kong Is The Key In Global Gold Trade, For Now (June 2014). From Koos Jansen:
In 2013, the year Chinese demand for physical gold exploded, Hong Kong gross gold import was 2239 metric tonnes. The bulk of this was exported to China mainland (net 1158 tonnes), but a staggering 597 tonnes was left behind. Hong Kong is inhabited by 7 million people who couldn’t have bought 597 tonnes of gold in one year. According to my analysis most of Hong Kong’s net import is floating supply that was shipped to the East by the bullion banks, pending for a bid in Asia, likely from China.
…It will be interesting when Hong Kong becomes a net exporter.
In June I was speculating there are still hundreds of tonnes of floating supply in Hong Kong available for China to import.When Hong Kong becomes a net exporter we will experience more of the globe’s finite floating supply is being sucked into China’s black hole, not to return in the foreseeable future. This is exactly what is happing at the moment; Hong Kong turned from net importer to net exporter in Q3 2014. The next chart will be crucial in coming months/years.
In August Hong Kong net exported 820 Kg, in September 14.16 tonnes. I expect, based on strong SGE withdrawals in October and November, to see future Hong Kong net export to China to be strong and Hong Kong to continue to be a net exporter.
In 2013 the main source of gold for China was the UK, home of the London Bullion Market. The UK net exported 1424 tonnes in 2013, which took a large bite out of London’s floating supply. How much there is left remains to be seen.
The UK has net exported 64 tonnes to China year to date. We can clearly see the UK started exporting directly to China in April.
The UK has net exported 418 tonnes YTD to Switzerland.
According to Eurostat no other European nation has exported gold directly to China in 2014.
How much Switzerland directly exported to China in 2013 we don’t know, at the time the Swiss only disclosed total gold import and export data (we do know from Hong Kong’s trade data Switzerland net exported 913 tonnes to Hong Kong in 2013, YTD 253 tonnes). Luckily, Switzerland discloses gold trade data country specific since 2014. In the first three quarters of this year Switzerland net exported 110 tonnes of gold to China.
The United States
I checked with multiple sources, but the US officially doesn’t export much gold directly to China, only 3 tonnes YTD.
ROW is short for the Rest Of the World.
Hong Kong, the UK, Switzerland and the US have net exported 743 tonnes in the first three quarters to China. My estimate for Chinese import YTD was 936 tonnes, so were did the other 193 tonnes came from?
From the countries I just reported on I have free access to their gold trade data . For many other countries this service is not free or hard to access through the country’s own customs database. However, by searching the net we can collect more information on how much gold was directly sent to China. For example from Australia.
According to GTIS Australia net exported 173 tonnes of gold in 2013 to China (Bron Suchecki noted The Perth Mint exported 225 tonnes to China in 2013 in this post’s comment section). Clearly Australia is a significant gold exporter to China.
According to COMTRADE Australia net exported 72 tonnes to China from January until May. If we make an estimate how much was exported YTD, this could have been well over 100 tonnes. Let’s be conservative and estimate Australia has exported 110 tonnes in Q1 – Q3 to supply the SGE.
Hong Kong, the UK, Switzerland, the US and Australia net exported (566 + 64 + 110 + 3 + 110) 853 tonnes to China. This leaves a gap of 83 tonnes (936 – 853) of gold China should have imported from the ROW. Could this have been possible? Yes, I think so as there are many counties of which I have no gold trade data (think about Africa, South America and central Asia).
On September 19 The Shanghai Customs District People’s Republic China reported Shanghai imported approximately 380 tonnes ($15.983 billion) of gold in 48 batches from January until August. Of course this gold can be the exact same metal I just reported to have been imported. However, Shanghai is just one port in China. From the SGE:
The SGE currently has a network of 58 Certified Vaults (of which 55 are for gold storage and three are for silver storage) in 36 cities nationwide covering all major gold refinement and consumption regions, providing physical delivery, transfer, logistics, and transport services to enterprises and individuals across the country.
I assume gold can be imported directly to many other regions than Shanghai (Shenzhen, Beijing, etc.)
The 936 tonnes import is an estimate, though, the only way this estimate could have been lower is if scrap supply was higher, which is unlikely as the Chinese are clearly accumulating more gold in an environment of low gold prices, not selling.
One thing is for sure, China has at least imported 900 tonnes in the first three quarters of 2014. If we add 338 mine supply the total is 1,238 tonnes, which is already twice Chinese demand as reported by the World Gold Council. The gold trade numbers disclosed in this post can not be explained as weak Chinese gold demand. I hope this post gives you a clear view of how much Chinese gold demand is in contrast to the reports of the mainstream media.
NEW YORK (Reuters) –
Hedge fund Paulson & Co maintained its stake in the world’s biggest gold-backed exchange-traded fund, SPDR Gold Trust, in the third quarter, bolstering the confidence of bullion investors at a time when an improving U.S. economic outlook pummeled gold prices.
Legendary investor George Soros, however, has sharply cut his stake in Barrick Gold Corp and several gold mining company ETFs after boosting his investments in the metal during the second quarter.
Investors pay close attention to the quarterly filings by Paulson and other notable hedge fund managers because they provide the best insight into whether so-called smart money sentiment has changed toward gold as a hedge against inflation and economic uncertainty.
New York-based Paulson & Co, led by longtime gold bull John Paulson, owned around 10.2 million shares of the ETF worth $1.19 billion on Sept. 30, a filing with the U.S. Securities and Exchange Commission showed on Friday. That represents a loss of around $121 million as the price of gold fell around 9 percent in the third quarter.
“There are lots of factors pushing against gold right now,” said Mihir Dange, a COMEX gold options floor trader. “Anything that boosts the confidence for gold and commodities is a good thing, especially after the Fed ended QE3.”
Worries the Federal Reserve will start raising interest rates soon after it ended the third round of a monthly bond-buying program, also known as quantitative easing (QE3) in October have dented bullion’s appeal as a hedge.
Paulson’s $400 million PFR Gold Fund was up 11 percent year-to-date through the end of September, according to a person familiar with his firm.
In the second quarter of 2013, Paulson slashed its stake by more than half when bullion prices plummeted $225 an ounce over two days in mid April, a record two-session drop for gold.
“Paulson is obviously still holding gold for a good reason and that reason has not changed,” said Axel Merk, president and chief investment officer at Merk Investments in Palo Alto, California, with currency mutual-fund assets worth about $400 million.
Gold remains attractive for institutional investors as long as real interest rates, calculated by deducting inflation rates from nominal interest rates, stay negative, Merk said.
Soros Fund Management sharply cut his stake in Market Vectors Gold Miners ETF to around 1 million shares valued at $22 million at the end of the third quarter, compared with 2.1 million shares worth $54 million in the second quarter.
Soros also switched to 1 million put options in the Gold Miners ETF in the third quarter, in sharp contrast to the 1.3 million call options he held in the second quarter.
In addition to trimming his stake in Toronto-based Barrick, one of the world’s largest gold producers, Soros also cut his stake in Market Vector Junior Gold Miners ETF.
Eric Sprott: Global Gold Demand Is Overwhelming Supply
Submitted by Adam Taggart via Peak Prosperity,
Precious metals have had an especially tough go of it over the past month. Both gold and silver are back in price territory last seen in 2010.
Eric Sprott returns to the program to discuss the facts as we know them in this market, and what’s likely to happen from here. Specifically, he explains the tremendous imbalance currently seen between global supply and demand for precious metals. In his view, prices will have to correct upwards — prodigiously — to bring the two back in alignment:
We see almost 60 tons a week being delivered on the Shanghai Gold Exchange.Well, you start annualizing 60 tons a week you’re talking 3,000 tons a year now. We saw 94 tons of gold go into India in September. We saw the Russian Central Bank buy 37 tons of gold in September. I mean I could come up with numbers that might suggest that we’ve got 400 tons a week of demand. And we only got 230 tons a week of mine supply. And I’ve only gotten to three data points. I haven’t even gone to the rest of the world.
We’ve now created a situation unfortunately in the market where between high frequency trading and algorithms and interference by the planers they can make things happen that looks like everything is OK. And it’s the “OK” part where I think we can really relate to gold not being allowed to go up. Because that’s the canary in the coal mine. If gold was above $2,000 we’d all be wondering: What the hell is going on here? And so they haven’t allowed it to happen.
But by suppressing the price — and one of the great things about a price of $1,100/oz is that you can buy a lot of gold at $1,100 versus $1,900 — you can buy almost 50%-60% more gold than you could three years ago with the same amount of money. And you can buy 3x the silver. With the same amount of money!
So, they’re just making the market so small that sooner or later somebody is going to figure it out. And take it on. It’s just such a small market. Imagine if the whole inventory is only $15 billion. What the hell is $15 billion in this day and age? It’s nothing. And a lot of that inventory is already held by people like us and like-minded people where it’s not coming back on the market. So, I’m kind of very hopeful that things are going to work out for us. I know it’s just been a depressing time, in particularly for people like myself and our customers who are in the mining stocks — the miners have just been eviscerated here. But, by the same token if the market comes back to its sense and gold and silver move up from here, there’s going to be a lot of money made in precious metals equities.
I think a true price recovery has got to come from the physical market first.When the mint says they don’t have any more silver coins, that’s a good sign there’s more demand than supply. Maybe folks start figuring it out then.
To me, the biggest win will be if there is a delivery failure. If somebody says we were promised some gold we didn’t get it. And that could happen — I mean we just can’t have China continue to buy 60 tons a week. That’s impossible.
Click the play button below to listen to Chris’ interview with Eric Sprott (38m:46s):
Swiss National Bank chairman forswears ‘tricks’ to circumvent gold referendum
SNB Head Says No Sovereign Fund for Gold if Referendum Passes
By Katharina Bart
Sunday, November 16, 2014
ZURICH, Switzerland — The chairman of the Swiss central bank ruled out creating a sovereign wealth fund to manage Switzerland’s gold reserves if a referendum on banning the bank from selling them passes, according to a newspaper interview published on Sunday.
The “Save our Swiss gold” proposal, spearheaded by the right-wing Swiss People’s Party (SVP), will be put to a plebiscite on Nov 30. …
Asked whether the SNB could set up a fund to manage its gold, chairman Thomas Jordan said such a move — which some currency dealers have speculated about — was “unthinkable.”
“The SNB cannot simply use some tricks to circumvent the will of the people. I rule that out categorically,” he told weekly paper Sonntagszeitung. …
… For the remainder of the report:
Four key observations from the Deutsche Bank report on the Swiss Gold Initiative
7p ET Sunday, November 16, 2014
Dear Friend of GATA and Gold:
A full copy of last week’s Deutsche Bank report on the Swiss Gold Initiative, provided by GATA consultant R.M., conveys these four major points:
1) Any gold purchases made by the Swiss National Bank pursuant to approval of the initiative in the referendum on November 30 are unlikely to have much impact on the gold market because the purchases would be small and made over time and because they likely would be accomplished outside the gold market and through central banks, which are always trading gold among themselves. (Secretly, of course, to facilitate their market interventions.)
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Fw: The bottom is in!
And now for our more important paper stories
1. Stocks down with major Asian bourses with a slightly higher yen value to 116.24
2 Nikkei down 517 points or 2.96%
3. Europe stocks all down (except Spain) /Euro falls/ USA dollar index up at 87.76.
3b Japan 10 year yield at .49%/Japanese yen vs usa cross now at 116.24
3c Nikkei now below 17,000
3e The USA/Yen rate crosses back over the 116 barrier
3fOil: WTI 74.42 Brent: 78.45 /all eyes are focusing on oil prices. A drop to the mid 60′s would cause major defaults.
3g/ Gold up/yen up; yen well above 116 to the dollar/
3h/ Japan is to buy the equivalent of 108 billion usa dollars worth of bonds per MONTH or $1.3 trillion
Japan’s GDP equals 5 trillion usa/thus bond purchases of 26% of GDP
3i Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt (see Von Greyerz)
3j Chinese shadow banking sector basically shut down as bad loans skyrocket
3k Japanese GDP plummets/sales tax hike will no doubt be delayed
Snap election likely to be called.
3l Putin leaves the G20 summit early as everyone gangs up on him.
3m Gold at $1188.50 dollars/ Silver: $16.16
4. USA 10 yr treasury bond at 2.30% early this morning.
5. Details Ransquawk/Bloomberg/Deutche bank/Jim Reid
(courtesy zero hedge/your early morning trading
from Asia and Europe)
BTFTripleD Algos Engage: Futures Rebound Following Third Japnese Recession
Perhaps the biggest shock following last night’s completely expected and very predictable (previewed here over a month ago) Japanese slide into triple- (actually make thatquadruple) dip recession, is that it took the BTFTripleDip recession algos as long as they did to recover most of the overnight futures losses. Because after surging to 107 on a confused short squeeze kneejerk reaction, the USDJPY subsequently tumbled 150 pips to 115.50 as rationality briefly emerged, and the market wondered for a few brief hours if rewarding the destruction of one’s economy is actually a prudent thing. Then, however, when European traders started walking into work, the now default USDJPY levitation on no volume came right back, and with that the correlation algo buying of E-mini futures, no doubt helped by the Bank of Japan itself taking advantage of the CME’s ES liquidity rebate program. Because without confidence as expressed by the lowest and only common denominator left – global equities – there is nothing else.
Luckily, there was not if nothing on the plate in one after another Japanese press conference overnight, where we heard such brilliant pearls of Keynesian wisdowm as
- AMARI: ABENOMICS HASN’T FAILED
- HAMADA: CURRENT WEAK YEN IS PLUS OVERALL FOR JAPAN ECONOMY but…
- HAMADA: JAPAN IMPORTERS MAY BE SUFFERING FROM WEAK YEN
- SUGA: INVENTORIES, WEATHER, CONSUMER MINDSET CAUSED GDP FALL.
- HONDA SAYS GOVT SHOULD DISCUSS STEPS TO SUPPORT ECONOMY:REUTERS. Uhm, what was govt discussing in past 2 years?
- SUGA:ABE TO DECIDE ON ANY ECONOMIC MEASURES NEEDED AFTER RETURN. Is “quitting” one of them?
- and HAMADA: NO NEED TO WORRY ABOUT FUTURE OF JAPAN FINANCES. True: the outcome is quite clear
In short: Abenomics has failed miserably, and the only question is if there will be a “shocking” defeat of Abe at the coming impromptu elections (which Goldman believes will take place on December 14), as the re-peat PM just can’t wait to get the hell out, especially since he already used the “diarrhea” defense once…
In other news, the other greatly anticipated event overnight, the launch of the Chinese Stock Connect trading with Hong Kong was a dud: as Macquarie said “China Stock Connect trading volume “disappointing”).
Most H.K. stocks in the connect declined, with China investors taking ~17% of the 10.5b yuan daily quota, according to Bloomberg data after the market close. Keep in mind, 80% of brokers in a survey expected Shanghai quota to be filled; 50% expected H.K. quota to be filled. Another result: Shanghai Composite Index -0.2%; HSCEI -1.9%, down most in 2 mos.; HSI -1.2%, down most in 5 weeks. Because nobody buys stocks as good as central banks.
As while most eyes were on the Nikkei during Asian hours, European equities opened firmly in the red in sympathy with the Nikkei 225 (-2.96%) which saw its largest decline since August. Heading into the North American open, European equities remain in the red albeit off their worst levels, with stocks seeing some reprieve after comments from PM Adviser Honda who said that a sales tax hike is out of the question and the Japanese economy may require a JPY 3 trillion stimulus package. Further negative sentiment has also stemmed from the fallout of the G20 summit over the weekend that saw Russian President Putin leave the meeting earlier due to confrontations with other members, although German Chancellor Merkel has said she will continue to engage in negotiations with the Russian leader. Fixed income products have largely tracked the movements seen in equities with Bunds firmly in the green albeit off their best levels amid the mild recovery in equities. More specifically, the short-sterling strip contract is trading higher by around 1-8 ticks following dovish rhetoric from BoE members Carney and Haldane, with tier 1 investment banks continuing to push back their expectations for a rate-hike by the BoE.
Bulletin Headline Summary from RanSquawk and Bloomberg
- European equities feel the squeeze in-line with their Japanese counterparts as Japanese GDP falls well short of expectations.
- EUR/USD faces further downside after ECB’s Mersch said unconventional measures could theoretically include buying state bonds or other assets such as gold, shares or ETFs, while GBP is also seen lower following increasingly dovish rhetoric from BoE members.
- Looking ahead, attention turns towards US empire manufacturing and industrial production figures, as well as any comments from ECB’s Draghi, Coeure and Fed’s Evans.
- Treasuries gain, led by long bonds, as Japan unexpectedly sank into recession, with 3Q GDP shrinking 1.6% vs est. +2.2%.
- Japan Economy Minister Amari says PM Abe likely to make decision tomorrow on snap elections, sales tax delay, also says he sees high chance of economic package being needed
- Abe says he’ll decide on sales tax increase after careful analysis, shouldn’t through away chance to end deflation; PM adviser Hamada says now isn’t best time to raise sales tax
- China’s bad loans jumped by the most since 2005 in 3Q, fueling concern that a cooling economy will be further weakened as banks limit lending to avoid credit risks
- Draghi will succeed in boosting the ECB’s balance sheet back toward EU3t ($3.75t ), though he’ll have to override some policy makers’ qualms on quantitative easing to do so, according to Bloomberg monthly survey
- ECB’s Yves Mersch says ABS purchases to start this week; says balance-sheet expansion no end in itself
- Putin warned he won’t allow rebels in eastern Ukraine to be defeated by government forces as EU ministers met to consider imposing more sanctions on the separatists
- Russia sees no sign of political will in Iran and the U.S. to strike an agreement on the disputed Iranian nuclear program by the Nov. 24 deadline, the top Russian negotiator at the talks said
- German Chancellor Angela Merkel said she has “very good German reasons” for convincing the U.K. to stay in the EU, saying the EU needs Britain’s dynamism and its broad global perspective.
- Bank of England Governor Mark Carney and his chief economist, Andy Haldane, indicated they are focused on downside risks to inflation as the central bank emphasizes the reasons for keeping loose monetary policy
- Sovereign yields mixed. Asian stocks fall, Nikkei -2.96%. European stocks, U.S. equity-index futures higher. Brent crude -1.2% to 78.47, gold and copper gain
In FX markets, EUR/USD has been seen lower throughout the session amid the recovery in the USD, before being placed under further pressure and breaking below 1.2500 following comments from ECB’s Mersch who said unconventional measures could theoretically include buying state bonds or other assets such as gold, shares or ETFs. Elsewhere, GBP continues to get squeezed following further dovish rhetoric over the weekend from BoE’s Carney and Haldane with the latter saying he is watching “like a dove” for signs that expectations of very low inflation in Britain could become entrenched. USD/JPY has naturally been a key focus overnight after initially breaking above 117.00 for the first time since 17th Oct’07, before seeing an aggressive sell-off heading into the European open to break back below 116.00 on profit-taking and safe-haven flows. Thereafter, the pair has recovered off its lows amid continued hopes of further Japanese stimulus.
In the commodity complex, price action has largely been swayed by movements in the USD-index with Brent and WTI crude futures seen lower once again as global growth concerns continue to weigh on prices following the Japanese GDP release. More specifically, oil risk manager Nunan at Mitsubishi said the move to the downside has been exacerbated by yet ‘another bearish factor’. Bearish sentiment has also been enhanced by comments from West’s energy watchdog who said a quick return to high prices is unlikely. For precious metals, following the Japanese GDP release, spot gold managed to see some reprieve with prices supported by the subsequent safe-haven bid, while Iron ore futures saw steady overnight trade on expectations that Chinese steel mills will continue to replenish stockpiles after an output halt earlier this month.
* * *
DB’s Jim Reid Concludes the overnight recap
It is a fairly busy week ahead. We’ll review it in full at the end but perhaps the biggest headlines will come out of Japan where Abe may dissolve the lower house this week ahead of snap elections, with the BoJ also meeting one month on from their surprise and narrow 5-4 decision to increase asset purchases. As DB’s James Malcolm pointed out over the weekend there is some evidence that Abe wasn’t privy to the coordinated BoJ/GPIF action and perhaps wasn’t appreciative of the pressure to go ahead with the sales tax that this move might have subtly encouraged. So will the BoJ be disappointed in the ever increasing likelihood of a delay to the sales tax and snap election? The likelihood of which has surely only been further enhanced this morning following a weak Q3 GDP print pushing Japan into a technical recession, the -0.4% qoq reading well below expectations of +0.5% for the quarter (-1.6% annualized versus +2.2% expected). The problems is that the longer the government leaves it to improve the fiscal situation the longer the BoJ’s asset purchases might have to last and the more it’s possible that the market will think the BoJ actions increasingly amount to monetising the debt. So this week’s decisions by Abe could have big implications further down the road and also shorter-term on the relationship between him and the BoJ.
Taking a quick look at price action in Asia this morning, markets are generally mixed with bourses reacting to the Japan data and the opening day of the Shanghai-Hong Kong Connect. This has generally dominated over headlines out of the G20 over the weekend with news that leaders have agreed to raise global growth by 2% over the next five years. With few details around the story, investors appear to be treating the news with caution although it’ll be interesting to see if we get any clarity around structural reforms associated with the plan. In terms of markets, the Nikkei is currently trading -2.7% whilst the Hang Seng and CSI 300 are -0.7% and +0.3% respectively. The latter boosted by a report in Bloomberg that Shanghai stock purchases through the link have exceeded Hong Kong buying by more than ten times over the first hour. This seems to have largely offset a reported increase in bad loans for China this morning, jumping by the most since 2005 in the third quarter to 776.9bn yuan. The JPY has recovered from the earlier weakness post the GDP print to now trade +0.58% stronger versus the Dollar.
Before we look at the rest of the day and week ahead, markets on Friday finished the week fairly subdued in the US with the S&P 500 virtually unchanged (+0.02%) on the day despite better than expected macro data, whilst 10y Treasuries closed 2bp lower and credit markets ended flat. In terms of data, the -1.3% mom import price index reading came ahead of the -1.5% mom expectations and marked the fourth consecutive monthly decline although this was somewhat influenced by lower oil prices and a rising dollar. Meanwhile the University of Michigan consumer confidence (89.4 vs. 87.5 expected) and business inventories (+0.3% mom vs. +0.2% mom) were other notable beats whilst the Dollar rallied following a strong retail sales print. The headline figure and ex. auto component were both a touch above consensus at +0.3% mom. Our US colleagues noted that the latter component was also revised up +0.2% in the previous month which should have the effect of contributing modestly to Q3 real GDP. The more material reading was the retail control figure which rose +0.5% in October along with a cumulative +0.3% revision in the previous month. This is a key input into GDP and our colleagues note that at the current level, retail control is +2.8% annualized compared to its Q3 average. Given low inflation this is consistent with real consumption growth well above last quarter’s +1.8% annualized reading. As mentioned the dollar rallied post the print, with the DXY index touching its highest level since June 2010 at 88.27, only to then settle lower later in trading closing -0.15% on the day. Away from the data releases we also had the usual Fedspeak, this time from Bullard who reiterated his forecast from his last statement of raising interest rates in the first quarter of next year, supported by rebounding inflation and strong jobs data. His comments a month ago about continuing with asset purchases seems to have been forgotten.
Closer to home, the Stoxx 600 was similarly subdued, closing -0.07% at the end of play. This was despite marginally better than expected GDP data out of the region with the overall Eurozone print +0.16% qoq, a tad above the +0.1% consensus. In terms of regions, Germany (+0.1% qoq) and Italy (-0.1% qoq) were in line with expectations whilst France surprised to the upside (+0.3% qoq vs. +0.2% expected). Our European colleagues noted that the print, similar to October PMI’s suggests that the growth outlook is stabilizing somewhat (albeit at low levels) following downward surprises in recent months. Elsewhere the HICP reading for the eurozone turned out to be fairly non-eventful with both the headline and core in line with consensus at +0.4% yoy and +0.7% yoy respectively.
Wrapping up the market moves on Friday, WTI and Brent pared back some of the losses over the week, climbing +2.17% and +2.48% respectively on the day with sentiment improved after Bloomberg reported that the slump in oil prices will force OPEC to act ahead of its meeting at the end of the month. WTI and Brent are currently trading -0.45% and -0.59% respectively this morning.
Looking at the day ahead, this morning looks like it’ll be fairly quiet with just trade data expected out of the Eurozone. This afternoon however, will likely be highlighted by Draghi’s quarterly testimony to the Committee on Economic and Monetary Affairs. Over in the US, industrial production, capacity utilization and empire manufacturing are the key releases for today.
In terms of the rest of the week ahead, we’ve got a fairly packed calendar in the US highlighted by the FOMC minutes on Wednesday and CPI print on Thursday. In terms of the former DB’s Joe LaVorgna notes that the minutes could potentially be a market-moving event given that the statement from that meeting was much more hawkish than what the market expected, whilst the Fed was also upbeat over comments around the economy and labour market. However we note that there was no mention to a stronger dollar or tightening financial conditions so conceivably these items could be mentioned in the minutes. With regards to the CPI reading, our US colleagues are expecting an energy related -0.1% decline in the headline and a housing related +0.2% increase in the core. Elsewhere tomorrow kicks-off with October property price data out of China – this comes after new home prices fell in all but one city in September so it’ll be interesting to see what the reading shows. We then follow this up with the ZEW survey in Germany and CPI and output prices out of the UK. In the US session we will be keeping an eye on the PPI print which we expect to continue to be depressed by lower energy costs whilst our US colleagues note to keep an eye on the healthcare component of the reading given it’s used to estimate the comparable component of the PCE deflator (the Fed’s preferred measure of inflation).
Later on Tuesday we will also get the homebuilders’ sentiment index out of the US. Away from the highlighted FOMC minutes on Wednesday, we will also get housing starts data of the US. Before all this in Asia we will be keeping an eye on developments out of the Japan, particularly with regards to Prime Minister Abe with the possible dissolving of the lower house potentially coming to fruition ahead of the well-publicised potential snap elections. Of course we will also have the results from the BoJ monetary policy statement. In the UK we will be casting a keen eye over the BoE monetary policy minutes. There’s no shortage of highlights on Thursday and we start the day in Asia with the November HSBC flash manufacturing PMI prints in China as well as machine tool orders out of Japan. We then follow this up with the ever important flash PMI’s out of Europe as well as consumer confidence and UK retail sales. Later in the day and on the other side of the pond, as well as the much anticipated CPI we will also be anticipating the Philadelphia Fed survey print, existing home sales and finally leading economic indicators, so certainly a lot for the market to digest.
Following a busy Thursday, the market will be perhaps be happy to hear that Friday is particularly data-light, with the main highlights being potentially comments out of the ECB’s Draghi and Nouy. We will also be getting our usual dose of Fedspeak with Dudley, Plosser, Williams and Mester due to speak at various points so there will certainly be enough to keep the market busy.
Abenomics Officially Leads Japan Into A Triple-Dip Recession
Submitted by Tyler Durden on 11/16/2014 19:07 -0500
UPDATE: The crazy-talk is out already…
- AMARI: ABENOMICS HASN’T FAILED
- SUGA: INVENTORIES, WEATHER, CONSUMER MINDSET CAUSED GDP FALL
The Nikkei 225 has now dropped 600 points from the post-GDP highs and is back below 17,000
Japanese GDP fell for the 2nd quarter in a row making it official – as we warned a month ago – that Japan has entered a triple-dip recession. Against hope-strewn expectations that the rebound from a sales-tax-driven slump would create a magical 2.2% (annualized) expansion, Japanese GDP slumped 1.6% in Q3 – missing by the most since March 2011. So no tax increase… and thus fiscal responsibility goes out the window. Abe dissolves government and bails on another failure? The initial kneejerk reaction sent USDJPY surging back over 117.00 (and NKY followed but that has quickly reversed and NKY futures are 200 off their highs (and S&P futures are back below Friday’s lows).
Abenomics – FTMFW!!!
Missing by the most in 42 months!!
Which left this reaction…
and S&P futures tumbled
We can’t wait for the spin… buy Japanese satocks because they are in recession which means so much more pent-up demand when Abenomics really works? Oh and by the way… Kuroda just fired his biggest bazooka ever so don’t expect any monetary policy reaction to this.
This is huge: the huge Chinese shadow banking sector grinds to a complete halt.
“One thing is certain: Japan’s paltry, in the grand scheme of things, expansion in its own QE will barely be felt if the record Chinese credit creation dynamo is indeed slamming shut.”
(courtesy zero hedge)
China’s Shadow Banking Grinds To A Halt As Bad Debt Surges Most In A Decade
It is probably not a coincidence that just as we learn that “China’s bad loans jumped by the most since 2005 in the third quarter, fueling concern that a cooling economy will be further weakened as banks limit lending to avoid credit risks” that we also learn that in the month of October, China once again slammed the breaks on credit creation, with total new loans dropping to RMB548 billion from RMB857 BN, below the RMB626 BN expected,the lowest monthly expansion in 2014...
… and with the broader Total Social Financing aggregate also tumbling from RMB1050 billion to RMB663 BN, and well below the RMB888 BN consensus estimate.
As the following chart shows the main reason for China’s relentless slowdown in its growth pace, which only two years ago was expected to rebound back into the double digits soon (at least according to the IMF), is the ongoing contraction in credit formation, which rising at 13.2% for new loans and 15.4% for TSF outstanding, was the lowest credit expansion recorded in China also since 2005.
So what is the main culprit for the contraction in China’s all important credit formation? In two words: shadow banking. As Bank of America summarizes “shadow banking is being tamed” because “the changing structure of TSF suggests that Beijing’s efforts in controlling some types of shadow banking have made some achievements. Two major drivers for the steep decline of TSF from Sept to Oct were the falling of non-discounted bills (down RMB241bn) and falling trust loans (down RMB22bn). By contrast, new corporate bonds were at RMB242bn, a sharp rise from RMB151bn in Sept.”
Breaking this further down:
- New trust loans posted a negative RMB22bn in October compared with a fall of RMB33bn in September. New entrusted loans declined to RMB138bn in October from RMB161bn in September.
- Non-discounted bankers acceptance (BA) decreased by another RMB241bn in Octoberafter decreasing by RMB669bn between July and September. The new deposit deviation ratio regulation has significantly restricted those manipulations via BA issuance, which may boost balance sheet.
In other words, China’s shadow banking not only ground to a halt, it actually continued moving in reverse!
A better explanation comes from JPMorgan:
The monthly Chinese money and credit figures released this week showed continued contraction in the share of shadow bank intermediation in new credit creation. Figure 6 shows that the share of shadow banks, proxied by the ratio of monthly total social financing over monthly new bank loans, has been on a downward trajectory since the end of 2013, experiencing its fourth episode of slowing since 2010. As of October this year, our smoothed trend in the share of shadow bank intermediation (blue line in Figure 6) stood at its lowest level since 2009. The previous episodes of slowing in shadow bank intermediation during the first halves of 2010, 2011 and 2013 did not see such a sustained pace of contraction. This likely reflects the impact of regulatory tightening on shadow banking activity. With the ratio in Figure 6 approaching 1.0, the picture we are getting is of almost all of new credit creation in China being intermediated via traditional rather than shadow banks currently.
In other words, as China finally reveals little by little the true extent of its gargantuan bad debt problem (which is far worse than ever in history, although Beijing is taking its time in making the necessary revelations: and after all Chinese banks are all SOEs – if needed they can all just get a few trillions renminbi in in liquidity injections a lathe “developed west”), it is also slamming the breaks on the shadow banking system that for years what the sector where marginal credit creation, and thus growth as well as bad debt formation, was rampant.
And as Japan showed so clearly just 48 hours after the end of America’s own QE3, reserves, like credit and money, are infinitely fungible in the global interconnected market. And infinitely, no pun intended, in demand, because if one central bank ends the goosing of risky assets, another has to immediately step in its place.
So while it has been widely documented that Japan is doing all in its power to crush the Japanese economy and in the process to send the Nikkei to all time highs, little has been said about a far greater slowdown in domestic (and indirectly global) credit creation using the “China” channel, where shadow banking has just slammed shut.
Finally recall: it was the epic collapse in America’s own shadow banking liabilities in the aftermath of the Fannie and Freddie, and shortly thereafter, Lehman bankruptcy, which wiped out $8 trillion from the US shadow banking peak, that was the main reason for the Fed’s relentless intervention and attempts to reflate systemic funding since then.
If the shadow banking collapse virus has finally jumped to China, there is no saying just how far Chinese GDP can drop if it is now constrained on the top side by surge in bad debt. One thing is certain: Japan’s paltry, in the grand scheme of things, expansion in its own QE will barely be felt if the record Chinese credit creation dynamo is indeed slamming shut.
OH OH!! I thought that things were kind of tame at the G 20 meetings.
I guess I was wrong:
US and China on brink of bitter trade war
Excess supply of steel has forced many of China’s biggest producers to dump excess stock on international markets
The US fired the first shots last week when the Department of Commerce imposed duties on the imports of carbon and alloy steel wire from China Photo: Getty Images
By Andrew Critchlow, Commodities editor4:50PM GMT 16 Nov 2014A flood of Chinese steel being dumped on to international metal markets is threatening to pitch the world’s two largest economies into a bitter all-out trade war.The US fired the first shots last week when the Department of Commerce imposed duties on the imports of carbon and alloy steel wire from China after complaints of dumping made by several North American producers. According to the ruling, some Chinese exporters of steel wire to the US will face anti-dumping duties of as much as 110.25pc.In response to such anti-dumping rulings, China’s ministry of commerce has repeatedly warned the US authorities to resist protectionist policies and abide by their country’s global commitments to maintain free trade. However, as more and more Chinese metal floods on to global markets, the scene is being set for a broader breakdown in trade relations between Washington and Beijing.The trigger for the US Department of Commerce’s action has been a dramatic slowdown in demand for steel in China’s domestic construction industry and overcapacity amongst the country’s mills. Platts’ China Steel Sentiment Index has slumped to its lowest level since it began tracking the market in May 2013, as producers absorb slowing domestic demand and a tougher environment for exports.The index has dropped 12.47 points month-on-month to a reading of 25.61 out of a possible 100 points in November. A figure below 50 points for the index, which surveys up to 75 Chinese steel market participants, shows a contraction in sentiment.Excess supply has forced many of China’s biggest producers to dump excess stock on to the international market, with a potentially devastating effect for US and European mills. China already accounts for about half the world’s exports of steel. However, the US industry has been helped by lower energy costs in Europe, while in the UK producers are being squeezed from both sides.“We are confident that weaker Chinese demand during the winter coupled with overproduction will continue to result in high Chinese steel exports, which is also likely to weigh on European prices,” warns Commerzbank.Despite the slowdown in its domestic market, China is continuing to produce record quantities of steel and this year official figures suggest that output could exceed 80m tonnes. In addition, Chinese producers, which already are among the cheapest in the world due to cheap labour and power, costs are benefiting from a deep slump in the cost of raw materials such as iron and nickel ore.European smelters are already beginning to suffer from a flood of cheap Chinese steel. According to Macquarie, Chinese stainless steel exports to Europe have surged by 115.4pc to 522,000 tonnes in the first three quarters of the year. The broker also notes that China’s share of the market for cold-rolled stainless steel sheet metal, a material used widely in the European car industry, has climbed to 35pc in the past few months, up from just 10pc last year.In the UK, the industry’s decline since it was privatised in the 1980s has been pronounced. Recently, Tata Steel said it had entered into talks with Switzerland’s Klesch to sell part of its British operations, raising concerns over jobs in Scunthorpe and on Teesside. To compete with cheaper Chinese prices, the UK industry has focused more on higher- value steel products in recent years.However, according to Wolfgang Eder, chairman of the World Steel Association, the US is much more aggressive in challenging price-dumping activities than the European Commission.“You have only free trade in Europe,” Mr Eder, who is also the chief executive of the Australian producer Voestalpine, told The Daily Telegraph. “Europe is really the only region that has free trade and this creates several problems for Europe as other regions try to protect their economies from competition from outside,” he said.endAnd now two other stories showing demand for those commodities waning:first oil and second cotton(courtesy UK Telegraph/Crichtlow)OIL:
Oil price slide Iran and Venezuela form alliance to pressure Opec towards $100
Top officials from Iran and Venezuela held high-profile meetings over the weekend that are said to be the first signs of major oil producers plotting to cut production in order to restore oil prices back to a level of $100 (£63.80) per barrel.Iran’s oil minister Bijan Zanganeh and Venezuela’s representative to the Organisation of Petroleum Exporting Countries (Opec) have held meetings in Tehran to discuss a strategy to halt the current slide in prices, which has resulted in Brent crude falling 28pc in value since June.“A return to past oil prices is difficult, but we have to modify the price to a level allowed by new market conditions,” said Mr Zangeneh said following the meeting.Mr Ramirez told the Iranian oil ministry’s state-run news agency, Shana: “We believe that the prices are at a very low level and instability in the market is in no one’s interest. One hundred dollars per barrel is the desirable price for Venezuela.”Both Iran and Venezuela are thought to be hawks within the 12-nation group of Opec producers. However, both countries will have to convince Saudi Arabia – the group’s largest producer – if significant reductions to its 30m barrels per day production limit are to be successful .Opec meets in Vienna on November 27.end
King cotton appears to have lost its crown after the material joined the global commodities rout.Cotton traded in New York closed last week at $58.57 (£37.36) per pound, its lowest level in almost five years and a 6pc decline on the week.Cotton is suffering from the same problem now facing the entire commodities and raw materials supply chain: too much supply coupled with too little demand.The US Department of Agriculture has increased its estimate for global cotton stocks as of the end of the current crop year in 2015 to a record 23.4m tons, largely due to a higher than anticipated picking estimate in North America. Growers expect prices to fall further.
The following will cause a run on Ukrainian banks
(what a farce~~~!!!)
Ukraine Bank Runs Begin As Poroshenko Plans To Sever Socio-Economic Ties With Separatist-Held Regions
In what the pro-Russian separatists call “an act of genocide,” Ukraine’s President Poroshenko signed a decree Friday that will explicitly withdraw state support for the regions within a month. While appearing to implicitly recognize the regions of Donetsk and Luhansk as autonomous, the decree means that the central bank will no longer service bank accounts, prisoners will be transferred (inmates with minor offences will be released), and perhaps most troubling as the cold winter begins, the order covers all public services, including crucial ones, such as schools, hospitals, and emergency services; and local heating and power plants will be subject to new laws that could involve cutting energy supplies altogether to the plants that don’t pay. Luhansk’s leader exclaimed, “the total socio-economic blockade of Donbass is de facto an act on genocide and devastation of our people,” and as the images below show, bank runs have already begun across the region with long lines forming at ATMs.
Ukraine’s president has ordered the withdrawal of all state services, including funding for hospitals and schools, from rebel-held areas.
Petro Poroshenko issued a decree that also asks parliament to revoke a law granting self-rule to the Donetsk and Luhansk regions.
* * *
Kiev has suspended the protection of human rights and ordered the withdrawal of its institutions from areas controlled by local militia in the nation’s east. Rebels have branded the decree, which hits the population on winter’s eve, an ‘act of genocide.’
The move was prepared by the Ukrainian National Security and Defense Council last week and enacted by a presidential decree signed on Friday. It has yet to be ratified by the newly-elected parliament, but the decree explicitly says that this procedure must be expedited – so there is little doubt that the new governing coalition will adopt it next week.
Arguably the most controversial part of the decree is the suspension of the European Convention on Human Rights in rebel-held areas. The convention, which guarantees basic human rights and fundamental freedoms in Europe, has a provision which allows some of its articles to be derogated by a signatory “in time of war or other public emergency threatening the life of the nation.”
Kiev has been insisting that the military campaign it launched against the dissenting provinces is not a war, but an “anti-terrorist operation.” Apparently the operation threatens the life of Ukraine, which will now observe only those provisions of the convention, which cannot be derogated under any circumstances. In particular, they are the right to life, the prohibition of torture and slavery, and the right not to be subjected to unlawful punishment.
In practical terms, the decree orders that many social and economic ties with the self-proclaimed Donetsk and Lugansk People’s Republics be severed. Kiev will withdraw all its officials and evacuate its offices in rebel-held areas. The order covers all public services, including crucial ones, such as schools, hospitals, and emergency services.
Local heating and power plants will be subjected to a “special procedure for accounting supplies of fuel” to ensure that their debt will not grow. This potentially could involve cutting supplies altogether to the plants that don’t pay.
“Poroshenko’s decree on the total socio-economic blockade of Donbass is de facto an act on genocide and devastation of our people,” Igor Plotnitskiy, leader of the Lugansk People’s Republic, said.
* * *
Ukraine’s President Petro Poroshenko has ordered a halt in serving bank accounts of enterprises and residents in southeastern Ukraine within a month, said a decree published on the president’s official website Saturday.
“National bank of Ukraine [shall] adopt measures within one month to stop serving bank accounts, including card accounts, that belong to economic entities… and residents in the territories of anti-terror operation in Donetsk and Luhansk regions,” the decree said.
The Ukrainian central bank has been ordered to stop servicing all banks operating in the rebel-held areas. The accounts of individuals living there and companies located there have been frozen. This will stifle the local economy, as businesses will have to conduct transactions in cash or use a bartering system.
At the same time, the rules of taxation and budget transfers between Kiev and local governments in the Donetsk and Lugansk regions will be altered under the decree.
* * *
As AFP reports, the bank runs have begun…
People line up to withdraw money from the cash machine at a bank in the eastern city of Donetsk.
The Ukrainian president plans to shut state offices and banks in the region.
* * *
What is perhaps even more surprising is that following plans by authorities of self-proclaimed Donetsk People’s Republic plan to open new banks tomorrow to replace the existing branches of one of Ukrainian lenders, Poroshenko has stomped on that idea too..
- Ukraine Denounces as Illegal Plan by Insurgents to Set Up Bank
Almost seems like someone is spoliing for a fight again and is annoyed at the lack of headlines (and cash) his country is getting since the ceasefire began.
European Bond Risk Plunges As Draghi Hints At Sovereign QE (Again)
Seriously!! Draghi utters a few words – all of which we have seen and heard a thousand times before:
- *DRAGHI SAYS ECB WILL DO WHATEVER IT TAKES, WITHIN ITS MANDATE
- *DRAGHI SAYS EXPANDED PURCHASE PROGRAM COULD INCLUDE GOVT BONDS
and EURUSD, European stocks and bonds get uber-excited…
European bond spreads tumbled…
EURUSD sliding back under 1.25
And stocks surged…
* * *
As a reminder, here is what Draghi said about this in his own words…
December 2011 – ECB Press Conference
Question: Why is it so impossible for the ECB to act like
the other central banks, like the Federal Reserve System or the Bank of
England? Why do you not act more directly to help European countries by
buying up the debt on a massive scale?
Draghi: As I said before, we have a Treaty and the Treaty states what our primary mandate is, namely to maintain price stability. Also, the Treaty prohibits monetary financing.
I am old enough to remember that, when this Treaty was written in the
early 1990s, some of the countries around that table were actually doing
what you suggest doing now, namely some of the central banks of these
countries were financing the government expenditure of their governments
through money creation, and the consequences were there for all of us
to see. That is why, in a sense, this Treaty embodies the best tradition of the Deutsche Bundesbank, whereby monetary financing has always been prohibited.
So do not hold your breath!!!
Draghi Replays “Whatever It Takes” As ECB Buys Only EUR3bn In 6th Week Of Bond Purchases
After 6 weeks of the ECB’s (3rd) Covered Bond Purchase Program, the cumulative buys amount to a mere EUR 10.485 billion. It appears they are limited (by collateral availability and market liquidity.. and dealers unwillingness to sell) to around EUR3 billion per week– around the same amount The Fed’s QE3 would suck up in 1-2 days of POMO. At this rate, it’s a long way to go to reach the $1 trillion goal. Is it any wonder that Mario Draghi once again used the ‘w’ word – uttering ECB will do “whatever it takes” (cough within its mandate).
- *DRAGHI SAYS ECB WILL DO WHATEVER IT TAKES, WITHIN ITS MANDATE
So just 6 more years of buying to reach $1 trillion?
It seems Draghi is getting desperate:
- *DRAGHI SAYS EXPANDED PURCHASE PROGRAM COULD INCLUDE GOVT BONDS
USA/JAPAN YEN 116.24 down .030
GBP/USA 1.5643 down .0025
USA/CAN 1.1308 up .0012
This morning in Europe, the euro is down, trading now well above 1.24 level at 1.2495 as Europe reacts to deflation and crumbling bourses. Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31.. The yen reversed like a yoyo last night as the world reacts to its crumbling GDP. It finally settled in Japan up 3 basis points and settling above the 116 barrier to 116.24 yen to the dollar. The pound is well down this morning as it now trades well below the 1.57 level at 1.5643.(very worried about the health of Barclays Bank and the FX/precious metals criminal investigation)
Early Monday morning USA 10 year bond yield: 2.30% !!! down 2 in basis points from Friday night/
The NIKKEI: Monday morning down a whopping 517 points or 2.96%
Trading from Europe and Asia:
1. Europe all in the red (except the mighty Spain)
2/ Asian bourses all in the red except India / Chinese bourses: Hang Sang in the red, Shanghai in the red, Australia in the red: /Nikkei (Japan) red/India’s Sensex in the green/
Gold early morning trading: $1188.50
Your closing Spanish 10 year government bond Monday/ down in basis points in yield from Friday night.
Spanish 10 year bond yield: 2.11% !!!!!!
Your Monday closing Italian 10 year bond yield: 2.35% / down 3 in basis points:
trading 22 basis points higher than Spain:
IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Friday night/USA dollar index/USA 10 yr bond:
Euro/USA: 1.2527 up .0054!!!!!!
USA/Japan: 116.16 up .360
Great Britain/USA: 1.5682 down .0018 (Barclay’s in big trouble)
USA/Canada: 1.1275 down .0106
The euro rose dramatically in value during this afternoon’s session, and it was up by closing time , closing well above the 1.25 level to 1.2527. The yen was up during the afternoon session, but it lost 36 basis points on the day closing well above the 116 cross at 116.16. The British pound gained some ground back during the afternoon session but it was down on the day closing at 1.5682. The Canadian dollar was up dramatically in the afternoon and was up on the day at 1.1275 to the dollar.
Currency wars at their finest today.
Your closing USA dollar index: 87. 92 up 40 cents from Friday.
your 10 year USA bond yield , up 1 in basis points on the day: 2.33%
European and Dow Jones stock index closes:
England FTSE up 17.60 or 0.26%
Paris CAC up 23.64 or 0.56%
German Dax up 53.41 or 0.58%
Spain’s Ibex up 161.00 or 1.59%
Italian FTSE-MIB up 251.33 or 1.33%
Nasdaq; down 17.54 or 0.37%
OIL: WTI 75.40 !!!!!!!
And now for your big USA stories
Today’s NY trading:
Small Caps Slump For 3rd Day – Worst Streak Since “Bullard Lows”
Overnight weakness from Japan (NKY -3%) and USDJPY slowly leaked away as Europe was bid – bouncing higher on Draghi’s SovQE “whatever it takes” comments (and multiple broken markets), but once he stopped speaking stocks faded to the lows of the day at the European Close. Once it was just the American algos playing, the S&P and Dow ripped back to green. However, Small Caps, Nasdaq and Trannies were not playing along, nor was VIX or HY Credit. The USD surged 0.45% (on EUR weakness) which stalled the bounce in commodities. Gold flatlined through the US session (-0.25%) with Silver -1% (bouncing this afternoon). Oil prices slipped 0.5% again (but above Friday’s lows) at $75.50. Treasury yields rose 1-2bps on the day (but 5-6bps off the overnight lows as Europe opened) but flatlined during US session. Most notably, itseems many feel like Carl Icahn that a major correction is coming and hedging via VIX and HY credit was significant.
- CARL ICAHN STILL HEDGING AGAINST STOCK-MARKET DECLINE, BELIEVES THERE WILL BE A ‘MAJOR CORRECTION’
- ICAHN SAYS CORPORATE EARNINGS ARE ‘SUSPECT’: REUTERS
- ICAHN: “YOU HAVE TO BE CONCERNED” ABOUT GLOBAL GROWTH: REUTERS
Last six days S&P close: 2038, 2039, 2038, 2039, 2039, 2041.
Quite a divergence in major stock indices today… with Small Caps slammed at the close
But realistically, the S&P and Dow merely crept back to the futures close from Friday.
This is The Russell 2000’s worst streak since the Bullard lows and the start of the drop last month…
HY credit is not buying this exuberance…
Nor is VIX…
But on the day, Treasury yields surged in the Europe session then flatlined in US session…
FX markets were a one-way-street of USD strength until Draghi stopped speaking
Oil prices were almost not mentioned today – but fell – along with the rest of the commodity complex…
Bonus Chart: While USDJPY levitated back during the US and EU session, Japanese stocks hardly liofted at all…
Two big misses from the USA:
First: Industrial production (and Auto manufacturing)
(courtesy zero hedge)
Industrial Production Drops; Auto Manufacturing Slumps 3rd Month In A Row – Worst Run In 5 Years
Driven by a combination of Mining (-0.9% – biggest drop in a year), Utilities (-0.7% led by a 3.2% plunge in Natural Gas) and most of all motor vehicle manufacturing (-1.2%), US Industrial Production slid 0.1% in October (notably missing expectations of a 0.2% rise). This is the 3rd monthly drop in motor vehicle & parts production – the worst consecutive run since Jan 2009. It seems the government-free-credit inspired subprime auto boom that provided just enough impetus to a fragilee conomy to enable the Fed narrative of “things are better” to play out… has ended… abruptly.
Industrial Production drops, missing notably.
Worst auto production run since Jan 09
Second: the NY manufacturing index falters for the 2nd straight month in a row:
(courtesy zero hedge)
Empire Fed Manufacturing Misses 2nd Month In A Row, Workweek Plunges
Following last month’s collapse, hopes were high for the Keynesian data mean-reversion to bounce Empire Fed Manufacturing data solidly higher… it didn’t. A small bounce to 10.16 (against expectations of 12.2) is the 2nd miss in a row and below January’s mid-polar-cortex levels. Under the covers, it was even uglier as average workweek and prices received plunged to their lowest levels in 2014 (as prices paid only inched lower – sparking fears over margins). The number of employees also fell (despite a rise in new orders?) but the headline print was saved from worse by a surge in ‘hope’ yet again as the business outlook jumped by 6 points to 47.61 – its highest since Jan 2012!!
2nd miss in a row with only a small rebound
Much of the subdata was a disaster, if only for the present:
as Hope trumps reality once again…
From the report:
The prices paid index inched down to 10.6, its lowest level in more than two years, pointing to a fairly slow pace of growth in input prices. The prices received index recorded its lowest reading in a year, falling seven points to zero in a sign that selling prices were flat. The index for number of employees edged down to 8.5, indicating a modest increase in employment levels. At -7.5, the average workweek index reflected a decline in hours worked for a second consecutive month.
But that’s ok, because one can pay their bills with Hopium:
Indexes for the six-month outlook were generally higher this month and conveyed a strong degree of optimism about future business conditions…. Indexes assessing the six-month outlook generally rose this month, and conveyed considerable optimism about future business activity. The index for future general business conditions climbed six points to 47.6, its highest level since January 2012.
Which probably explains why algos promptly filled the 20 pip drop in the USDJPY upon the headline miss. Because there is always hope the central banks will get it right next time.
And remember that California is mega short fresh water:
(courtesy zero hedge)
3 Billion Gallons Of Fracking Wastewater Pumped Into Clean California Aquifiers: “Errors Were Made” State Admits
Dear California readers: if you drank tapwater this morning (or at any point in the past few weeks/months), you may be in luck as you no longer need to buy oil to lubricate your engine: just use your blood, and think of the cost-savings. That’s the good news.
Also, the bad news, because as the California’s Department of Conservation’s Chief Deputy Director, Jason Marshall, told NBC Bay Area, California state officials allowed oil and gas companies to pump up to 3 billion gallons (call it 70 million barrels) of oil fracking-contaminated waste water into formerly clean aquifiers, aquifiers which at least on paper are supposed to be off-limits to that kind of activity, and are protected by the government’s EPA – an agency which, it appears, was richly compensated by the same oil and gas companies to look elsewhere.
And the scariest words of admission one can ever hear from a government apparatchik: “In multiple different places of the permitting process an error could have been made.”
Because nothing short of a full-blown disaster prompts the use of the dreaded passive voice. And what was unsaid is that the “biggest error that was made” is that someone caught California regulators screwing over the taxpayers just so a few oil majors could save their shareholders a few billion dollars in overhead fees.
And now that one government agency has been caught flaunting the rules, the other government agencies, and certainly private citizens and businesses, start screaming: after all some faith in the well-greased, pardon the pun, government apparatus has to remain:
“It’s inexcusable,” said Hollin Kretzmann, at the Center for Biological Diversity in San Francisco. “At (a) time when California is experiencing one of the worst droughts in history, we’re allowing oil companies to contaminate what could otherwise be very useful ground water resources for irrigation and for drinking. It’s possible these aquifers are now contaminated irreparably.”
The process, for those confused, explained by NBC:
In “fracking” or hydraulic fracturing operations, oil and gas companies use massive amounts of water to force the release of underground fossil fuels. The practice produces large amounts of waste water that must then be disposed of.
Marshall said that often times, oil and gas companies simply re-inject that waste water back deep underground where the oil extraction took place. But other times, Marshall said, the waste water is re-injected into aquifers closer to the surface. Those injections are supposed to go into aquifers that the EPA calls “exempt”—in other words, not clean enough for humans to drink or use.
But in the State’s letter to the EPA,officials admit that in at least nine waste water injection wells, the waste water was injected into “non-exempt” or clean aquifers containing high quality water.
For the EPA, “non-exempt” aquifers are underground bodies of water that are “containing high quality water” that can be used by humans to drink, water animals or irrigate crops.
If the waste water re-injection well “went into a non-exempt aquifer. It should not have been permitted,” said Marshall.
Yet it was, to the tune of 3 billion gallons. And nobody said a word about it until someone finally did a little research and found that people, especially those in power, lie.
And lie they did because the severity of the pollution is only now becoming clear:
In its reply letter to the EPA, California’s Water Resources Control Board said its “staff identified 108 water supply wells located within a one-mile radius of seven…injection wells” and that The Central Valley Water Board conducted sampling of “eight water supply wells in the vicinity of some of these… wells.”
“This is something that is going to slowly contaminate everything we know around here,” said fourth- generation Kern County almond grower Tom Frantz, who lives down the road from several of the injection wells in question.
According to state records, as many as 40 water supply wells, including domestic drinking wells, are located within one mile of a single well that’s been injecting into non-exempt aquifers.
That well is located in an area with several homes nearby, right in the middle of a citrus grove southeast of Bakersfield.
Cue the just as angry community organizers:
“That’s a huge concern and communities who rely on water supply wells near these injection wells have a lot of reason to be concerned that they’re finding high levels of arsenic and thallium and other chemicals nearby where these injection wells have been allowed to operate,” said Kretzmann.
“It is a clear worry,” said Juan Flores, a Kern County community organizer for the Center on Race, Poverty and The Environment. “We’re in a drought. The worst drought we’ve seen in decades. Probably the worst in the history of agriculture in California.”
“No one from this community will drink from the water from out of their well,” said Flores. “The people are worried. They’re scared.”
It remains to be seen just whom that other, far more prominent community organizer will blame for this latest environmental debacle. Surely it will somehow be the fault of the Keystone pipeline?
In the meantime, the oil companies are already taking defensive measures, blaming the fiasco on… a “paperwork issue.”
The trade association that represents many of California’s oil and gas companies says the water-injection is a “paperwork issue.” In a statement issued to NBC Bay Area, Western States Petroleum Association spokesman Tupper Hull said “there has never been a bona vide claim or evidence presented that the paperwork confusion resulted in any contamination of drinking supplies near the disputed injection wells.”
Well, actually, there is:
However, state officials tested 8 water supply wells within a one-mile radius of some of those wells.
Four water samples came back with higher than allowable levels of nitrate, arsenic, and thallium.
Those same chemicals are used by the oil and gas industry in the hydraulic fracturing process and can be found in oil recovery waste-water.
And now back to the source of it all: the California Department of Conservation, where we are confident a little further investigative reporting will find millions in kickbacks and corruption, all funded by the oil and gas “lobby.”
When asked how this could happen in the first place, Marshall said that the long history of these wells makes it difficult to know exactly what the thinking was.
“When you’re talking about wells that were permitted in 1985 to 1992, we’ve tried to go back and talk to some of the permitting engineers,” said Marshall. “And it’s unfortunate but in some cases they (the permitting engineers) are deceased.”
Kern County’s Water Board referred the Investigative Unit to the state for comment.
We hope to learn who the state will refer the unit for comment next.
Finally, for those living around the blue dots, avoiding the tapwater for the time being may be a good idea.
As for whether the public’s opinion about fracking is changed as a result of revelations such as this: we reserve judgment until comparative Investigative Units piece uncover how many billion gallons in fracking wastewater was dumped in other states where the shale miracle is (still) alive and well.
That is all for today
I will see you Tuesday night
bye for now