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http://www.harveyorganblog.com or www .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.
Gold: $1228.90 down $2.60
Silver: $17.13 up $0.05
In the access market 5:15 pm
The gold comex today had a poor delivery day, registering 1 notice served for 100 oz. Silver comex registered 72 notices for 360,000 oz.
A few months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.83 tonnes for a loss of 57 tonnes over that period.
In silver, the open interest rose by a considerable 1658 contracts with yesterday’s rise in price of $0.86. Looks like some of the shorts are vacating the arena as they are scared at what they are witnessing. For the past year, we have been witnessing massive liquidation of contracts despite the fact that it cost nothing to roll. This makes no sense and it smacks of cash settlements which are totally illegal. Since I have been following comex data, I have never witnessed such a massive liquidation in both gold and silver. The total silver OI still remains relatively high with today’s reading at 148,195 contracts. The big December silver OI contract fell by 12 contracts down to 575 contracts.
In gold we had a fall in OI with the rise in price of gold yesterday to the tune of $36.80. The total comex gold OI rests tonight at 375,323 for a gain of 6693 contracts. The December gold OI rests tonight at 1077 contracts losing 858 contracts.
TRADING OF GOLD AND SILVER TODAY
After the bankers pushed gold down a bit in the very slow Asian time zone, gold picked up steam whereby at midnight, it was trading at $1232.00. By London’s first fix gold had advanced to its zenith at $1238.10 upon which fact the bankers said no more and they pushed gold down and by 6:30 am it reached $1225.85. Not to be undone, our bulls then drove back up to $1234.21 by comex opening and $1232 by London’s second fix.Once London was put to bed it was easy for our bankers to lower the price of gold has the physical time zone was now over. Gold settled at 1228.90 comex close and $1225.50 access market close.
silver behaved much better than gold today. After a fierce run up to over $17.00 yesterday, the bankers in the Asian time zone knocked silver down to $17.00 at midnight. By 3 am (London’s first fix) it jumped to $17.30, it zenith for the day and only 30 cents away from the magical $17.60 breakaway point for silver. The bankers then used excessive force knocking silver all the way back to $16.98 by 9:20 am this morning. Not to be undone, and looking at the bleak financial scene gave incentive to our silver bulls to attack once more and drove silver up to $17.17 by London’s second fix. Silver closed at 1:30 (comex closing time) at $17.13 and in the access market at $17.06
expect fireworks in both metals tomorrow
Today, great news, we gained another 2.99 tonnes of gold Inventory at the GLD / inventory rests tonight at 724.80 tonnes. The tap looks to be a little clogged in its supply of gold to China.
In silver, we had no change in silver inventory
SLV’s inventory rests tonight at 345.223 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:
all rates moved closer to the positive and out of backwardation!!
Now, all the months of GOFO rates( one, two, three six and 12 month GOFO moved positive and moved closer to the positive needle. They must have found a few bars to lease. 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.
Dec 10 2014
1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate
+.1375.% + .142500 -% -+1450 -% +. 160 .% +. 1925%
Dec 9 2014:
+.0975% +.10500% +.1150 % +.1275% +.1825%
Let us now head over to the comex and assess trading over there today,
Here are today’s comex results:
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 today by 6693 contracts from 368,630 all the way up to 375,323 with gold up by $36.70 yesterday (at the comex close). We are now into the big December contract month where the number of OI standing for the gold metal registers 1077 contracts for a loss of 858 contracts. We had 753 delivery notices served yesterday so we lost 105 contracts or 10,500 oz of gold will not stand for the December contract month. The non active January contract month fell by 48 contracts down to 554. The next big delivery month is February and here the OI rose to 237,167 contracts for a gain of 6,245 contracts. The estimated volume today was poor at 88,545. The confirmed volume yesterday was good at 254,950 with the help of high frequency traders. The comex now has no credibility and many investors have vanished from this crooked casino. Today we had 1 notices filed for 100 oz .
December initial standings
|Withdrawals from Dealers Inventory in oz||482.25 oz (Brinks)|
|Withdrawals from Customer Inventory in oz||321.54 oz (Brinks,Manfra)includes 1 kilobar|
|Deposits to the Dealer Inventory in oz||100.0000 oz?????Brinks|
|Deposits to the Customer Inventory, in oz||3215.000 oz (Scotia)100 kilobars|
|No of oz served (contracts) today||1 contracts(100 oz)|
|No of oz to be served (notices)||1182 contracts (118,200 oz)|
|Total monthly oz gold served (contracts) so far this month||2605 contracts(260,500 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month||153,424.154 oz|
Total accumulative withdrawal of gold from the Customer inventory this month
Today, we had 2 dealer transactions
i) Out of Brinks: 482.25 oz
total dealer withdrawal: 482.25 oz
we had 1 dealer deposit:
i) Into Brinks: 100.000 oz????? (can someone explain??)
total dealer deposit: 100.0000 oz
we had 2 customer withdrawals
) Out of Manfra; 32.15 oz (1 kilobar)
ii) Out of Brinks: 289.38 oz
total customer withdrawal: 321.53 oz
we had 1 customer deposits:
i) Into Scotia: 3215.000 oz
We had 1 adjustment and it was a doozy!!
we had an exact removal of 450.000 oz from JPMorgan as an error of some sort.
I would like someone to explain this one!!
Total dealer inventory: 737,166.946 oz or 22.93 tonnes
Total gold inventory (dealer and customer) = 7.905 million oz. (245.87) tonnes)
Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 57 tonnes have been net transferred out. We will be watching this closely!
Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 1 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.
To calculate the total number of gold ounces standing for the December contract month, we take the total number of notices filed for the month (2605) x 100 oz to which we add the difference between the OI for the front month of December (1077) minus the # gold notices filed today (1) x 100 oz = the amount of gold oz standing for the December contract month.
Thus the initial standings:
2605 (notices filed for the month x 100 oz) + (1077) the number of OI notices for the front month of December served upon – 1) notices served today equals 368,100 oz or 11.449 tonnes
we lost 105 contracts or 10,500 oz that will not stand.
This initiates the month of December for gold.
And now for silver
December silver: initial standings
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||1,061,295.47 oz (Delaware,Brinks,Scotia)|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||551,073.56 oz (Scotia)|
|No of oz served (contracts)||72 contracts (360,000 oz)|
|No of oz to be served (notices)||503 contracts (2,515,000 oz)|
|Total monthly oz silver served (contracts)||2563 contracts (12,815,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month||1,163,562.6 oz|
|Total accumulative withdrawal of silver from the Customer inventory this month||5,109,973.9 oz|
Today, we had 0 deposits into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawal:
total dealer withdrawal: nil oz
We had 3 customer withdrawal:
i) Out of Brinks: 999,892.000 oz ??????
ii) Out of Delaware: 992.660 oz
iii) Out of Scotia: 60,410.810 oz
total customer withdrawal 1,061,295.47 oz
We had 1 customer deposits:
i) Into Scotia; 551,073.56 oz
total customer deposits: 551,073.56 oz
we had 0 adjustments
Total dealer inventory: 64.479 million oz
Total of all silver inventory (dealer and customer) 176.204 million oz.
The total number of notices filed today is represented by 72 contracts or 360,000 oz. To calculate the number of silver ounces that will stand for delivery in December, we take the total number of notices filed for the month (2563) x 5,000 oz to which we add the difference between the total OI for the front month of December (575) minus (the number of notices filed today (72) x 5,000 oz = the total number of silver oz standing so far in November.
Thus: 563 contracts x 5000 oz + (575) OI for the November contract month – 72 (the number of notices filed today) =15,330,000 oz of silver that will stand for delivery in December.
we lost 35,000 oz that will not stand for the December silver contract.
for those wishing to see the rest of data today see:
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:
dec 10.2014: we gained another 2.99 tonnes of gold at the GLD. If China cannot get its gold from London, then its only source will be the FRBNY.
Inventory: 724.80 tonnes
Dec 9.2014: we gained 2.69 tonnes of gold/inventory 721.81 tonnes
Dec 8.2014: we lost .900 tonnes of gold/inventory 719.12 tonnes
Dec 5.2014: no change in tonnage/720.02 tonnes
Dec 4 no change in tonnage/720.02 tonnes
Dec 3 no change in tonnage/720.02 tonnes/
December 2/2014; wow!! we had a huge addition of 2.39 tonnes of gold /Inventory 720.02 tonnes
December 1.2014: no change in gold inventory at GLD
Nov 28.2014: a loss in inventory of 1.19 tonnes/tonnage 717.63 tonnes
Nov 26.2014: we lost 2.09 tonnes of gold heading to India and or China/inventory at 718.82 tonnes
Today, December 10 we gained back another 2.99 tonnes of inventory previously lost/ inventory now 724.80
inventory: 724.80 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 : 724.80 tonnes.
And now for silver:
December 10.2014; no change in inventory/345.223 million oz
Dec 9.2014: no change in inventory/345.223 million oz
Dec 8.2014: no change in inventory/345.223 million oz
Dec 5/2014: no change in inventory/345.223 million oz
Dec 4/we lost another 2.204 million oz of silver/inventory 345.223 million oz
dec 3. we lost 2.73 million oz of silver/inventory 347.427 million oz and back where we were on Dec 1.2014.
dec 2 wow@!!@ a huge addition of 2.20 million oz of silver/inventory 350.158 million oz.
December 1: no change in inventory/347.954 million oz
Nov 28.2014: no change in inventory/347.954 million oz
Nov 26.2014; no change in inventory/347.954 million oz
December 10/2014/ we had no change in silver/inventory registers: 345.223 million oz
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 10.9% percent to NAV in usa funds and Negative 10.9% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.0%
Percentage of fund in silver:37.5.%
( December 10/2014)
2. Sprott silver fund (PSLV): Premium to NAV rises to positive 0.84% NAV (Dec 9/2014)
3. Sprott gold fund (PHYS): premium to NAV rises to negative -0.34% to NAV(Dec 9/2014)
Note: Sprott silver trust back hugely into positive territory at 0.84%.
Sprott physical gold trust is back in negative territory at -0.34%
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 from Europe early Wednesday morning:
Gold Surges As Greece Crashes – Eurozone Debt Crisis Part II Cometh
Gold jumped 2.3 percent to a six-week high yesterday as sharp falls on stock markets globally led to renewed demand for gold as a haven.
Monday night and Tuesday saw renewed market turmoil across the world. Leading shares suffered their biggest daily fall since the middle of October, hit by renewed fears about the global economy and uncertainty in Greece following the announcement of snap presidential elections.
The FTSE 100 finished 142.68 points or 2.14% lower at 6529.47 yesterday as a combination of worries unsettled investors. Greece’s stock exchange crashed as the banking sector dragged the rest of the stock market down a staggering 13 percent, it’s most dramatic single-day decline ever. Greece is failing to exit its bailout amid uncertainty over its political future after the election news.
Meanwhile Chinese shares fell sharply in the wake of Monday’s disappointing trade data, showing a drop in imports, and a clampdown on its corporate bond market, while Japan was revealed to be deeper in recession than expected and the Nikkei was down 2.25 percent this morning.
The Shanghai Composite and Abu Dhabi’s ADX saw their sharpest falls since 2009. Wall Street joined in the global declines and stock markets lost $100 billion on Monday.
The already jittery market apparently balked at the shock announcement of Greek Prime Minister, Antonis Samaris, to hold a snap presidential election. If the government candidate loses it would pave the way for a general election in which the socialist Syriza party would be strong contenders.
Syriza say that they will renegotiate with the Troika and increase public spending which may put bondholders at risk. Britain’s Independent quotes Charles Robertson from Renaissance Capital warning that “a possible Syrizas election victory may force the Eurozone to choose between a fiscal union or the first euro exit.”
Greece still has very high unemployment of around 25 percent and GDP has been wallowing since 2009 with a 1 percent rise in the cards for this year off a base that is 30 percent below 2009 levels.
The attention being brought to bear upon Greece highlights once again the hollow nature of the “recovery” in Greece, Europe and the western world. The crisis is far from resolved – merely to use the very true cliche – kicked down the road. Well we appear to be coming towards the end of the road in Greece and this could set the stage for the next stage of the Eurozone debt crisis.
On cue, gold reacted to the global turmoil as it should, rising nearly 3 per cent, over $30 at one stage. Silver made even more impressive gains, rising 5.3 percent.
Despite significant headwinds in 2014, in form of surging oil prices, surging and record high stock markets and the end of the FED’s QE, gold has performed very well this year and looks to be in the process of bottoming.
Gold is 15.5% higher in yen terms, 13.2% higher in euro terms, 7.7% higher in sterling terms and has even made 2% gains in the “strong” dollar this year (see table and chart). This demonstrates once again gold’s benefit as a long term, store of value.
Must Read: 7 Key Gold Must Haves
Today’s AM fix was USD 1,228.25, EUR 991.88 and GBP 783.82 per ounce.
Yesterday’s AM fix was USD 1,206.50, EUR 975.98 and GBP 770.98 per ounce.
Spot gold rose $24.60 or 2.2 percent to $1,229.60 per ounce yesterday and silver surged $0.66 or nearly 5 percent to $17.04 per ounce as renewed risk aversion leads to a flight to quality.
Gold in Singapore inched marginally lower today and that weakness continued in London trading. Gold remains near its seven-week high hit yesterday. A small rebound in equity markets and lower crude prices may have offset the impact of a weaker dollar.
Spot gold was down 0.3% at $1,229.90 an ounce in late trading in London The metal had risen to $1,238.20 yesterday, its highest since October 23.
Since November 7, gold has climbed nearly 10% from a four-year low. Japan’s massive QE experiment, China’s stimulus programme and signs that the ECB will increase money supply are again heightening gold’s appeal as a store of value.
Ultra loose monetary policies are set to continue despite the constant threat that the Fed may increase interest rates. As policy makers try to revive economies, major central banks will together add almost three times more liquidity next year than they did in 2014, according to Credit Suisse Group AG, as reported by Bloomberg.
Holdings of the SPDR Gold Trust, the world’s largest gold ETF, rose 0.37% to 721.81 tonnes on Tuesday.
India, which accounts for about a quarter of global bullion demand, eased import restrictions on gold bullion, Finance Minister Arun Jaitley said today. The nation may change a rule mandating that “star trading houses” export all of their gold imports, Reuters reported today, citing an unnamed source.
Silver’s 5.3 per cent surge was the biggest gain since December 1. The price reached $17.23, the highest since October 29. Palladium rose 1.7 percent to $811.60 an ounce.
This year, gold is up 2.5 percent and palladium has climbed 13 percent while silver has slumped 12 percent and platinum dropped 9.2 percent. Silver has underperformed and looks very cheap relative to overvalued asset markets and indeed relative to gold and this is leading to robust demand for small coins and bars.
The U.S. Mint has sold a record number of silver coins this year as demand for silver bullion helped silver recover more than 20 percent since falling to a five-year low early this month.
Purchases of American Eagle silver coins reached 43.051 million ounces in 2014, data on the U.S. Mint’s website shows. That tops last year’s 42.7 million ounces, the previous all-time high, according to an e-mailed statement yesterday. There are still enough supplies to keep selling 2014 dated coins through the week starting December 15, the mint said.
A surge in demand prompted the mint to suspend sales in November for more than a week because of a lack of inventory. When the coins were again made available for purchase, it was on allocated basis.
Buying has increased with prices heading for a second straight annual loss, the longest slump since 1992 and as silver buyers accumulate on price weakness and in anticipation of higher of prices.
Get Breaking News and Updates On Gold Here
I urge you all to read the speech that Chris Powell delivered in Munich Germany, yesterday
(courtesy Chris Powell/GATA)
Chris Powell: Gold market manipulation — Why, how, and how long?
Remarks by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
German Precious Metal Society and the Foundation for Liberty and Ratio
Hotel Bayerischer Hof, Munich, Germany
Tuesday, December 9, 2014
Thank you for coming here tonight even though I can speak only English. I’m afraid that when it comes to German I don’t know scheisse.
Maybe I have an excuse. Mark Twain tried very hard to learn German and wrote afterward that German should be classified with the dead languages because only the dead had the time to learn it.
Still, I’m really glad to be here, since at least many of you speak English as well as German and since I’ve just come from London, where hardly anyone speaks English.
For the first 48 hours I was in London the only person I heard speaking English was the hotel desk clerk, and she didn’t seem too happy about it. The first time I heard English on the street it was from a guy who recognized me as an American rube and asked me for money.
Yes, in London only the panhandlers speak English.
But seriously, folks — You didn’t come here for my travelogue. So here goes.
* * *
Most financial journalism and most academic teaching maintain that gold is at best a quaint antique. But gold not only remains money but may again become the best and most important money. Even more than this, gold is in fact the secret knowledge of the financial universe, a secret desperately concealed by central banks.
Gold already is so important that Western central banks — particularly the U.S. Treasury and its Exchange Stabilization Fund, the Federal Reserve, and allied central banks — rig the gold market every day, even hour by hour, to control and usually suppress gold’s price.
Why do Western central banks rig the gold market?
It’s because gold is a powerful competitive international currency that, if allowed to function in a free market, will determine the value of other currencies, the level of interest rates, and the value of government bonds. Gold’s performance is usually the opposite of the performance of government currencies and bonds. So central banks fight gold to defend their currencies and bonds.
The problem is that the tactics of central banks in their war against gold affect far more than gold; they affect markets generally and eventually destroy markets generally. This destruction of markets now has a name, a name used even by former members of the U.S. Federal Reserve Board. That name is “financial repression.”
There is much academic literature confirming gold’s influence on currencies, interest rates, and government bonds throughout history. Prominent in this literature is the study written by Harvard University economics professor Lawrence Summers and University of Michigan economics professor Robert Barsky and published in August 1985 by the National Bureau of Economic Research, a study titled “Gibson’s Paradox and the Gold Standard.” As with all the documents I’ll cite today, the Summers and Barsky study is posted at my organization’s Internet site, GATA.org:
Summers went on to become deputy treasury secretary and then treasury secretary of the United States and president of Harvard University and recently almost became chairman of the Federal Reserve Board, so his study with Barsky about gold’s influence on currencies, interest rates, and bond prices may be good authority. The Summers and Barsky study implied that governments could achieve their ideal of low interest rates and strong government bond prices by controlling the price of gold.
As it turns out, controlling the currency markets long has been the most efficient mechanism of imperialism. There is much history of this as well.
Rigging the currency markets was the primary mechanism by which Nazi Germany expropriated occupied Europe during World War II. Expropriation by force of arms was actually only a small part of the Nazi conquest.
The rigging of the currency markets — that is, the gross distortion of exchange rates in Nazi Germany’s favor — turned every citizen of an occupied country into an agent of the occupation every time he used money. This currency market rigging directed all production in the occupied countries into Nazi Germany and blocked any return flow of production. It enabled Nazi Germany to run without consequence the same sort of fantastic trade deficit run in recent years by the United States.
The United States learned all about the Nazi expropriation of Europe through currency market rigging because it was documented by the November 1943 edition of the U.S. War Department’s monthly intelligence letter, Tactical and Technical Trends:
Nazi Germany’s manipulation of currency markets is also described in detail in the 2005 history “Hitler’s Beneficiaries” by Gotz Aly:
How do Western central banks and particularly the U.S. government rig the gold market?
They used to do it conventionally and in the open by dishoarding their gold reserves at strategic moments, and then by dishoarding their gold reserves regularly, more often, even every day, as the United States, United Kingdom, and seven of their Western European allies did during the 1960s through a public operation called the London Gold Pool. The London Gold Pool held the gold price at $35 per ounce until it collapsed in March 1968 under rising demand that drained the U.S. gold reserve from 25,000 tonnes down closer to the 8,133 tonnes officially reported today:
After the collapse of the London Gold Pool the United States and its allies regrouped to decide how to rig the gold market surreptitiously — not just with dishoarding but also with the so-called leasing of gold; with the purchase and sale of gold derivatives, including futures and options; and, more recently, with high-frequency trading undertaken through investment houses that are happy to serve as government’s intermediaries in the gold market, since they can front-run government trades. When the rigging is done surreptitiously like this, much less central bank gold has to be dishoarded and the dishoarding that is done has far more suppressive influence on the price.
But Western central bank market rigging goes far beyond gold.
In an essay published in 2001 and titled “The Debasement of World Currency — It Is Inflation, But Not as We Know It” —
— the British economist Peter Warburton discerned that central banks were using investment banks to issue derivatives throughout the commodity futures markets to siphon away money that was seeking a hedge against inflation. That is, derivatives divert money from the hoarding of real goods, hoarding that would drive up consumer price indexes and make inflation even more obvious to the markets and the public. Most of these derivatives are essentially naked short positions that cannot be covered.
Warburton concluded that the prerequisite of a hedge against monetary debasement would have to be some asset that was not attached to a futures market, since anyone with access to enough money can control any futures market, and central banks have access to infinite money. Inflation hedges Warburton suggested included farmland and clean water supplies. For as the saying goes: “The futures markets are not manipulated; the futures markets are the manipulation.”
This market rigging by central banks and their agents explains the great disparagement of gold today: that, despite its tremendous price increase over the last 15 years, gold has not kept up with inflation since the metal’s last great rise around 1980. Somehow no one who disparages gold asks why it has not kept up with inflation. The answer is that gold derivatives have created a vast imaginary supply of gold for which delivery has not been demanded, since most gold investors choose to leave their gold purchases on deposit with the bullion banks that sold them the imaginary gold.
As a result the world now has a fractional-reserve gold banking system that is leveraged in the extreme.
Yes, all commodity futures markets have created paper promises of supply that could not be covered by real product and have been settled in cash. But most commodity markets are for goods that eventually are delivered and consumed to a great extent.
Gold is different, for gold is not consumed but rather hoarded, as a means of exchange, as money, even as most gold purchased in the futures markets is never delivered at all but rather left on deposit with those financial institutions that purport to sell it.
This system has produced a very disproportionate amount of imaginary, elastic, but undeliverable supply, even as people buy gold precisely because they assume that its supply is not elastic, that its supply is limited to total past production plus annual mine production.
That assumption is a terrible mistake.
While the principle of most gold investment analysis is “You can’t print gold,” “paper gold” can be printed to infinity just like regular government currency — and indeed it has been printed practically to infinity.
You can get an idea of the vast imaginary supply of gold by reviewing the incomprehensibly huge gold and interest rate derivative positions attributed to the U.S. investment bank JPMorganChase in the reports of the U.S. Comptroller of the Currency.
These derivative positions are almost certainly not JPMorganChase’s own positions at all but, as GATA consultant Rob Kirby of Kirby Analytics in Toronto has written, rather U.S. government positions arranged through MorganChase:
As John Hathaway, manager of the Tocqueville Gold Fund, wrote last month:
“The modern-day central banker trades with counterparties that are giant commercial banks with derivative books of disturbing scale and complexity. It seems impossible that these commercial exposures could be constructed and maintained without the knowledge and complicity of the official sector. For example, Deutsche Bank, already a defendant in a thousand lawsuits, claims derivative exposure that is 20 times the gross domestic product of Germany and five times that of the entire Eurozone. It is not a great leap to suggest that central bank traders and their megabank opposites — spawn of the same gene pool, schooled in the same institutions, career paths intertwined, frequenters of the same conferences, and just a speed-dial away — are ideologically indistinguishable and intellectually and morally corrupt in equal proportion.”
After all, the U.S. Treasury Department’s Exchange Stabilization Fund is expressly authorized by law, the Gold Reserve Act of 1934, as amended, to trade secretly in all markets, including the gold market, on the U.S. government’s behalf. And the law expressly exempts the ESF from answering to anyone but the treasury secretary and the president:
Gold market expert Jeffrey Christian of CPM Group testified to a hearing of the U.S. Commodity Futures Trading Commission on March 25, 2010, that the ratio of “paper gold” to real metal in the so-called London physical market may be as high as 100 to 1:
In January 2013 a report by the Reserve Bank of India estimated the ratio of paper gold to real gold at 92 to 1:
CPM Group’s Christian described the manufacture of “paper gold” in his essay “Bullion Banking Explained” published in 2000:
Some international investment houses are on the short end of this enormous leverage and are existentially vulnerable to a short squeeze. It is not likely that they would put themselves in such a position without assurances of emergency support from central banks — and indeed the investment houses have received such assurances many times in public statements by central bankers.
For there are many official admissions of gold market rigging.
These include statements by four former chairmen of the U.S. Federal Reserve Board (Alan Greenspan, Paul Volcker, Arthur Burns, and William McChesney Martin); the minutes of the Federal Open Market Committee; declassified U.S. Central Intelligence Agency and State Department records, including one that cites the necessity for the U.S. government to remain “the masters of gold” —
— statements by central bankers from other countries, including three officials of the Bank for International Settlements; and documents from the BIS and the International Monetary Fund.
— In testimony to Congress in July 1998, Federal Reserve Chairman Alan Greenspan declared that “central banks stand ready to lease gold in increasing quantities should the price rise.” Thus Greenspan confirmed that the purpose of gold leasing was not what was usually claimed — to earn central banks a little money on their supposedly dead asset in their vaults — but rather to suppress the monetary metal’s price:
— In January 2012 former Federal Reserve Chairman Paul Volcker admitted to the German financial journalist Lars Schall, who is here tonight, that central banks need to suppress the gold price to stabilize exchange rates at what he called a “critical point”:
Volcker already had written in his memoirs that in 1973 as a U.S. Treasury Department official he advocated gold price suppression:
— In 2009 a remarkable 16-page memorandum was discovered in the archive of the late Federal Reserve Chairman William McChesney Martin. The memorandum is dated April 5, 1961, and is titled “U.S. Foreign Exchange Operations: Needs and Methods.” The memo is a detailed plan of surreptitious intervention by the U.S. government to rig the currency and gold markets to support the U.S. dollar and to conceal, obscure, or even falsify U.S. government records and reports so that the rigging might not be discovered. This document remains on the Internet site of the Federal Reserve Bank of St. Louis:
For safety’s sake it is also posted at GATA’s Internet site:
— In a letter to President Gerald Ford in June 1975, Federal Reserve Chairman Arthur Burns reported a secret agreement with the German Bundesbank to obstruct market pricing for gold. Burns wrote to the president: “I have a secret understanding in writing with the Bundesbank, concurred in by Mr. Schmidt” — Helmut Schmidt, West Germany’s chancellor at the time — “that Germany will not buy gold, either from the market or from another government, at a price above the official price of $42.22 per ounce.”
Burns added, “I am convinced that by far the best position for us to take at this time is to resist arrangements that provide wide latitude for central banks and governments to purchase gold at a market-related price.”
The Burns letter is posted at GATA’s Internet site here:
— In June 2004 the deputy chairman of the Bank of Russia, Oleg Mozhaiskov, told a conference of the London Bullion Market Association in Moscow that he suspected the United States of suppressing the gold price. Mozhaiskov mentioned the Gold Anti-Trust Action Committee, the only words he spoke in English, though at that time GATA had never knowingly had any contact with anyone in Russia:
— A president of the Netherlands Central Bank who was also president of the Bank for International Settlements, Jelle Zijlstra, wrote in his memoirs in 1992 that the gold price was suppressed at the behest of the United States:
— William R. White, the director of the monetary and economic department of the Bank for International Settlements, the central bank of the central banks, told a BIS conference in Basel, Switzerland, in June 2005 that a primary purpose of international central bank cooperation is “the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful”:
— The Bank for International Settlements actually advertises to potential central bank members that its services include secret interventions in the gold market. Here’s a slide from a PowerPoint presentation the bank made to prospective central bank members in at BIS headquarters in Basel in June 2008:
— Indeed, according to its annual report last year, the BIS functions largely as a gold banking and gold market intervention service for its member central banks. On Page 110 of the report the BIS says: “The bank transacts foreign exchange and gold on behalf of its customers, thereby providing access to a large liquidity base in the context of, for example, regular rebalancing of reserve portfolios or major changes in reserve currency allocations. The foreign exchange services of the bank encompass spot transactions in major currencies and Special Drawing Rights (SDR) as well as swaps, outright forwards, options, and dual currency deposits (DCDs). In addition, the bank provides gold services such as buying and selling, sight accounts, fixed-term deposits, earmarked accounts, upgrading and refining, and location exchanges.”
The only point of central banks trading in gold derivatives is to affect the price. See:
— Secret gold market interventions by the BIS have been going on for a long time. A long article in Harper’s magazine in 1983, based on a seemingly unprecedented interview with BIS officials, disclosed that the BIS was constantly intervening in the gold market in secret:
— Perhaps most incriminating is the secret March 1999 staff report of the International Monetary Fund that GATA obtained in December 2012. The secret IMF report says Western central banks conceal their gold swaps and loans to facilitate their secret interventions in the gold and currency markets:
Some records of surreptitious intervention in the gold market by Western central banks are quite current. The director of market operations for the Banque de France, Alexandre Gautier, told the London Bullion Market Association’s meeting in Rome in September 2013 that the French central bank trades gold for its own account “nearly on a daily basis” and is “active in the gold market for other central banks and official institutions.”
Speaking again to the LBMA, meeting last month in Lima, Peru, Gautier said central banks lately have been managing their gold reserves “more actively,” and the slides he presented indicated that this more active management is undertaken mainly through gold swaps, a mechanism of surreptitious market intervention. In what appeared to be a reference to the recent clamor for gold repatriation in Germany and Switzerland, Gautier cautioned his co-conspirators at the LBMA that what he called “auditability” is “becoming a crucial issue” for central bank gold reserves.
— The recent participation of the United States in gold market manipulation was confirmed by a member of the Board of Governors of the Federal Reserve System, Kevin M. Warsh, in a letter written in September 2009 denying GATA’s request for access to the Fed’s gold records. Warsh wrote that among the records the Fed was refusing to show GATA were records of gold swap arrangements between the Fed and foreign banks:
In commentary published in The Wall Street Journal in December 2011 Warsh wrote about what he called “financial repression” by governments. “Policy makers,” Warsh wrote, “are finding it tempting to pursue ‘financial repression’ — suppressing market prices that they don’t like.” Warsh added, “Efforts to manage and manipulate asset prices are not new.”
I later reached Warsh by e-mail and asked him if he had learned about “financial repression” through his service on the Federal Reserve Board. I also asked him if he would identify the asset prices under manipulation by policy makers. He cordially wished me a nice day.
The government of China knows all about the gold price suppression scheme and isn’t afraid to talk about it.
The U.S. State Department diplomatic cables obtained by the Wikileaks organization and published in 2011 included cables from the U.S. embassy in Beijing to the State Department in Washington that were translations of reports from the Chinese government-controlled news media. These translations included stories and commentaries about gold price suppression by the United States.
For example, the Chinese newspaper World News Journal wrote: “The United States and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or euro. Therefore, suppressing the price of gold is very beneficial for the United States in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries toward reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the renminbi.”
So not only does the Chinese government know all about the gold price suppression scheme — the U.S. government knows that China knows:
Many people in the gold business in China also know about gold price suppression by the U.S. government and its allies.
For example, thanks to GATA consultant Koos Jansen, now market analyst for Bullion Star in Singapore, last January GATA published the remarks of the president of China’s gold mining association, Sun Zhaoxue, to a financial conference in Shanghai, in which he said gold price suppression is U.S. government policy to maintain the dominance of the U.S. dollar in the ongoing international currency war:
And last December GATA distributed commentary by Zhang Jie, deputy editor of the Chinese publication Global Finance and a consultant to the China Gold Association, who said the U.S. Federal Reserve manipulates the gold market to protect the U.S. dollar’s standing as the world reserve currency. Zhang said:
“Through continuous gold leasing the gold in the market can be circulated and produce derivatives, creating more and more paper gold. This is very significant for the United States. Gold leasing is a major tool for the Federal Reserve and other central banks in the West to secretly control and regulate the gold market, creating gold credit derivatives and global credit conflict”:
The U.S. government’s public archives are actually full of records documenting the government’s longstanding objective of removing gold from the world financial system to maintain the dominance of the U.S. dollar as the world reserve currency.
Perhaps most descriptive are the minutes of a meeting at the U.S. State Department in April 1974 between Secretary of State Henry Kissinger and his assistant undersecretary of state for economic and business affairs, Thomas O. Enders.
The meeting addresses the growing desire among Western European countries to revalue their gold reserves upward, thereby increasing gold’s role in the international financial system and threatening the dollar’s status:
Secretary Kissinger asks: “Why is it against our interest to have gold in the system?”
Assistant Undersecretary Enders answers him.
Mr. Enders: It’s against our interest to have gold in the system because for it to remain there it would result in it being evaluated periodically. Although we have still some substantial gold holdings — about $11 billion — a larger part of the official gold in the world is concentrated in Western Europe. This gives them the dominant position in world reserves and the dominant means of creating reserves. We’ve been trying to get away from that into a system in which we can control. …
Secretary Kissinger: But that’s a balance-of-payments problem.
Mr. Enders: Yes, but it’s a question of who has the most leverage internationally. If they have the reserve-creating instrument, by having the largest amount of gold and the ability to change its price periodically, they have a position relative to ours of considerable power. For a long time we had a position relative to theirs of considerable power because we could change gold almost at will. This is no longer possible — no longer acceptable. Therefore, we have gone to Special Drawing Rights, which is also equitable and could take account of some of the less-developed-country interests and which spreads the power away from Europe. And it’s more rational in …
Secretary Kissinger: “More rational” being defined as being more in our interests or what?
Mr. Enders: More rational in the sense of more responsive to worldwide needs — but also more in our interest. …
So there you have it. Whoever has the most gold can control its valuation — and implicitly the valuation of every currency — and thereby create the most “reserves,” the most money.
Of course money is power and infinite money is infinite power. The interest of the United States, at least as it was perceived at that meeting at the State Department in April 1974, was to dominate the world through the power over money creation and currency valuation.
Documentation continues to be discovered. A few weeks ago the founder of the market research company Nanex in Illinois, Eric Scott Hunsader, called attention to documents filed with the U.S. Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission by CME Group, operator of the major futures exchanges in the United States.
In its filing with the CFTC, the CME Group reports that it is giving volume trading discounts to central banks for trading all major futures contracts in the United States — financial futures, metal futures, and agricultural futures:
In its filing with the SEC the CME Group reports that its customers include “governments and central banks”:
The CME Group letter to the CFTC justifies secret futures trading by central banks throughout the currency and commodity markets as a matter of adding “liquidity” that will benefit all traders. But “liquidity” here is actually an ocean, for central banks can create infinite money, and no ordinary investor can trade against a central bank.
That central banks and governments are secretly trading all major futures markets in the United States signifies that central bank intervention in markets is now likely comprehensive — that there really are no markets anymore, just interventions, that the main objective of central banking now is to prevent markets from happening at all,and that the market economy that has been the engine of progress and democracy has been destroyed.
This is the financial news story of the century.
GATA has sent all these documents to major financial news organizations throughout the world. But no mainstream financial news organization has yet reported about them and what they mean.
There are many, many more records about the Western government policy of gold price suppression. They are posted in the “Documentation” section of GATA’s Internet site —
— but the records located by GATA are almost certainly only a small fraction of the documents that exist.
These records are not mere speculation and “conspiracy theory.” They are the records of decades-long Western government policy conducted almost entirely in secret.
But there is nothing wrong with the word “conspiracy” here.
Conspiracy occurs when people meet in secret to decide and pursue a course of action.
For example, it was conspiracy when the central bank members of the European Central Bank met secretly over the last 15 years to formulate all four editions of their Central Bank Gold Agreement and said they would continue to meet secretly to plot their policy toward gold:
It also was conspiracy when the G-10 Gold and Foreign Exchange Committee, consisting of representatives of the central banks and treasury departments of the major industrial nations, met secretly in April 1997 at the BIS in Switzerland to coordinate their secret policies toward the gold market:
Indeed, even in nominally democratic countries, government itself is often conspiracy. Government is conspiracy whenever it functions in secret. How can any serious market analyst or journalist disparage the term?
Then there is the evidence of market action itself.
GATA also has exposed gold market manipulation by examining trading data, most notably in a study by our late board member and market analyst Adrian Douglas showing that the gold price during trading in the London market went down steadily for 10 years even as the world gold price went up steadily in that time. Anyone buying gold on the opening of the London market and selling it on the close every day over the last decade would have lost a huge amount of money even as the gold price rose steadily:
GATA consultant Dimitri Speck, who is here tonight, has written a whole book compiling the data of gold market manipulation, “Secret Gold Policy”:
That is, the London Gold Pool of the 1960s suppressing the price continues to operate today, only with different mechanisms.
In the last several years attacks on the gold price have become frequent and obvious, like the strange dumping of paper gold in the futures markets on April 12 and 15, 2013, where the nominal equivalent of maybe a quarter of annual gold mine production was sold in two days even though there was no special gold-related news. Many similar dumps are undertaken at particularly illiquid times as some entity with access to seemingly infinite money tries to pound the gold price down for psychological effect.
Even on October 1, 2013, as the U.S. dollar index broke below 80 and the government of the world’s only superpower, the issuer of the world reserve currency, was incapacitated and half shut down by political turmoil, the gold price suddenly fell by 5 percent under an avalanche of futures selling, sometimes at a rate of many thousands of contracts per second.
These overwhelming attacks on the gold market out of the blue are almost certainly incidents of government intervention. Nothing else can plausibly explain them.
Indeed, central banks refuse to explain their involvement in the gold market.
In 2009 GATA sued the Federal Reserve in U.S. District Court for the District of Columbia seeking access to the Fed’s gold records. Technically we won the case in 2011, as the court ordered the Fed to disclose one record, the minutes of that G-10 Gold and Foreign Exchange Committee meeting in April 1997.
The Fed was ordered to pay GATA court costs, which it did.
But the court allowed the Fed to conceal all its other gold records:
Since that time GATA has peppered Western central banks with specific questions about their gold activities, which is something financial journalism, mining companies, or any ordinary investor could do. The central banks largely maintain a guilty silence.
For example, in July 2013 the Bank of England reported on its Internet site that it was vaulting about 1,200 tonnes of gold less than it had listed in the bank’s annual report in February. GoldMoney research director Alasdair Macleod called attention to this. It raised suspicion that the departed gold had been used in the smashing of the gold price three months earlier. So GATA asked the Bank of England to explain the discrepancy.
The Bank of England replied only that the data posted on its Internet site for the public was “deliberately non-specific.” But that data had been fairly specific, and had given a number vastly different from the number published in the bank’s annual report. Sensing its vulnerability, the Bank of England concluded its brief statement arrogantly and defensively: “The bank will not be offering any further comment on this matter.” See:
The specific questions that GATA has put to central banks without receiving answers are posted at our Internet site and remain available to any serious financial journalist or gold investor:
As long as central banks refuse to answer some basic questions about their involvement in the gold market, it must be concluded that they have much to hide.
Why does all this matter? How might it end?
It matters because the rigging of the gold market is the rigging that facilitates the rigging of all markets — part of a much broader scheme by which a secretive and unelected elite in the United States and Western Europe controls the value of all capital, labor, goods, and services in the world — controls the value of everything and thereby impairs or destroys all markets and democracy itself everywhere and obstructs humanity’s progress.
This is an utterly totalitarian and parasitic system. It is also just the latest manifestation of the everlasting war of the financial class against the producing class, only it is hidden well enough that the producing class hasn’t yet figured it out.
This system might end in various ways.
First it’s a question of world politics at the highest levels.
The system may end at the insistence of the developing world with an official worldwide revaluation of gold and gold’s formal restoration to the international monetary system and the demotion of the U.S. dollar.
The system may end when one country pulls the plug on it, exchanging U.S. dollars and government bonds for more gold — real metal — than is available, or when ordinary investor demand exhausts supply, which is more or less how the London Gold Pool ended in 1968.
Or the system may end as part of a plan by the major central banks to avert the catastrophic debt deflation that now threatens the world.
For example, a study in 2006 by the Scottish economist Peter Millar concluded that to avert such a catastrophic debt deflation, central banks would need to raise the gold price by a factor of seven to 20 times in order to reliquefy themselves and devalue their currencies and society’s debts generally:
In May 2012 the U.S. economists and investment fund managers Lee Quaintance and Paul Brodsky published a report speculating that central banks likely are already redistributing gold reserves among themselves in preparation for just such an upward revaluation of gold and gold’s return as formal backing for currencies:
The current system’s end is an arithmetical question, a question of how much real gold is retained by the central banks participating in the price suppression scheme. Some metal is always draining away to support the gold derivatives system, and it seems lately that more is draining away every year than is being mined. How much do the gold-suppressing central banks really still have left? How much gold has been put into the market through swaps and leases?
Central banks refuse to say. For since the control of gold is the control of markets and the control of the valuation of everything, the amount, location, and disposition of central bank gold reserves are state secrets far more sensitive than the amount, location, and disposition of nuclear weapons.
The end of central bank market rigging is a question of education and publicity, a question of whether central banks that are not part of the gold price suppression scheme and investors alike will ever realize that as much as 90 percent of the world’s investment gold, supposedly being held in trust for its owners, has been, to put it politely, oversubscribed. That is, the gold may not exist. If there is ever such a realization and delivery is demanded, gold will rise to multiples of its current price.
While that prospect excites gold investors, will governments let them keep the resulting extraordinary gains, or will governments impose windfall profits taxes or even try to confiscate gold?
If the gold price soars, will governments let mining companies keep taking metal out of the ground at current royalty rates? Will governments even let private companies keep mining gold at all?
On the other hand, if there is no general realization of the fraud of “paper gold” and central bank intervention in markets, gold price suppression and the destruction of markets generally may go on forever.
Central banks are formidable enemies because of their power to create infinite money and debt. But that power is not their biggest advantage in the gold suppression scheme and the scheme to defeat markets and democracy generally.
For the scheme cannot work without deception, surreptitiousness, and misunderstanding.
And therefore to be overthrown the scheme needs only to be exposed, since when people realize that a market is rigged, they will not take the losing side of the trade.
That’s why the biggest advantage of central banks here is not their power of money and debt creation but rather the complicity of the financial news media and the gold mining industry itself.
Mainstream financial journalists will not press the vital questions. Indeed, the first rule of mainstream financial journalism is: Never put a critical question to a central bank and report the inadequate answer. The second rule of mainstream financial journalism is that the first rule goes double in regard to gold.
The journalistic questions for central banks could begin very simply:
1) Are central banks trading secretly in the gold market and other markets, directly or through intermediaries, or not?
2) If central banks are secretly trading in the gold market and other markets, directly or through intermediaries, does this trading have policy purposes or is it just for fun?
3) And if this secret trading does have policy purposes, what are they and why are they too being kept secret?
Then the answers from central banks could be compared with the documentation GATA has compiled.
As for the gold mining industry, it seems unaware of the monetary nature of its product and the way the price of its product is suppressed. Further, the gold mining industry has been intimidated by its governments and its bankers, all agents of central banks, and has consented to die quietly.
Will any of this ever really change?
I think it will eventually. Some central banks are growing suspicious of what presents itself as the gold market and are steadily accumulating gold reserves. And of course here in Germany your citizens campaign has induced the Bundesbank at least to claim that it is gradually repatriating your national gold reserves. Your citizens campaign has caused enormous trouble and embarrassment for the bad guys and has inspired similar movements in other countries. I salute you.
But will any of us live to see the defeat of totalitarian central banking as it is now practiced? I don’t know. Sometimes I can only get apocalyptic about it, with a little help from the American abolitionist poet James Russell Lowell:
Truth forever on the scaffold,
Wrong forever on the throne,
Yet that scaffold sways the future,
And, behind the dim unknown,
Standeth God within the shadow
Keeping watch above His own.
In this struggle we are up against nearly all the money and power in the world. But the Ascent of Man should continue, and if we’re doing the right thing we can hasten that ascent a little. We are all working to advance the ideals of democratic, transparent, and limited government, of fair dealing among nations and people, and, really, to advance individual liberty and the brotherhood of man, which, in the end, are what the monetary metals are about.
If you’d like more information about this issue or help in locating any of the documents I’ve mentioned, please e-mail me at CPowell@GATA.org.
Thanks for your kind attention.
Koos Jansen: Gold leased in China is not double-counted as in the West
8:45a CET Wednesday, December 10, 2014
Dear Friend of GATA and Gold:
While gold leased in the Western central banking and general banking systems is typically double-counted (or more), Bullion Star market analyst and GATA consultant Koos Jansen reports today, gold leased in China’s banking system is not. Jansen’s analysis is headlined “A Close Look at the Chinese Gold Lease Market” and it’s posted at Bullion Star here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Bron offers his opinion on the above:
(courtesy Bron Sucheck/GATA)
Bron Suchecki: PBOC paper recommends leasing its reserves to manipulate gold price
12:20p CET Wednesday, December 10, 2014
Dear Friend of GATA and Gold:
The Perth Mint’s Bron Suchecki today disputes Bullion Star market analyst and GATA consultant Koos Jansen’s interpretation of a 2011 analysis of gold leasing written for the People’s Bank of China. (Jansen’s commentary is here:https://www.bullionstar.com/blog/koos-jansen/a-close-look-at-the-chinese….)
Suchecki writes that the PBOC analysis cited by Jansen is most notable for indicating the Chinese central bank’s potential interest in using gold leasing to manipulate the currency markets, much as Western central banks do.
The disagreement may be important for Suchecki’s implicit reminder that it would be an exceedingly rare central bank that wanted free markets enough that it was willing to extend them to its own currency. Indeed, while gold advocates are inclined to root for China and Russia in the international currency war or competition because the governments of those countries seem to recognize gold’s monetary function, China and Russia don’t want free and transparent markets and limited and accountable government any more than Western governments do.
If free markets for international trade are ever to be established, they probably will be established only begrudgingly as nations form themselves into blocs and those blocs balance the power of each other, possibly returning to gold as the neutral arbiter.
It may happen as religious freedom happened in the United States — not by design but as a sullen compromise between sects that preferred to oppress other sects but lacked the power to do so and settled on toleration to ensure their own survival.
As your secretary/treasurer long has been arguing, and did again yesterday —
— currency market rigging is the primary mechanism of modern imperialism. So of course the People’s Bank of China may aspire to the same totalitarian power exercised by the U.S. Treasury Department and Federal Reserve Board. But if those powers counter and balance each other, the rest of the world might be able to scratch out a little economic freedom.
Suchecki’s commentary is headlined “PBOC Paper Recommends Leasing Its Reserves to Manipulate Gold Price” and it’s posted at his blog, Gold Chat, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Lawrence Williams of Mineweb talks about the huge demand for gold coming from China and India:
(courtesy Lawrence Williams/Mineweb)
Chinese and Indian gold demand boost fundamentals further
It appears Chinese gold demand this year will only be around 5% off last year’s record. Indian demand picking up strongly too.
Author: Lawrence Williams
Posted: Wednesday , 10 Dec 2014
LONDON (MINEWEB) –
Apologies for returning to Chinese and Indian gold demand again – but we do feel these two nations are so important for the future of the gold price given the huge amounts of gold they continue to absorb. This in total has to be close to, or even perhaps will exceed, annual new mined gold production.
It is often pointed out, particularly by those who consider gold irrelevant in today’s financial markets, that new mined production is of no consequence given the huge volumes of above ground gold stocks held by Central Banks globally, in the big gold ETFs and hoarded in private hands – much, perhaps most – held in the East. And they have a point if there was a propensity for the Central Banks and private gold holders to sell, but this is such a Western attitude to global gold holdings where profit is almost everything, that it completely ignores a totally different mind-set, which prevails elsewhere in the world.
As we have pointed out before, the value of gold is instilled into us even in the West from our mothers’ knees. Numerous fairy stories and legends revolve around gold and its perceived value as a store of wealth and the lengths people, seen as both good and evil, will go to to lay their hands on it. Gold’s inbuilt and ever ongoing PR has to be the envy of today’s spin doctors!
Now while some of this may have fallen away in the West with modern children’s books perhaps eschewing gold, an element still remains, while in many other parts of the world this inbuilt idea that gold is THE great wealth protector remains and never more so in countries like India where gold is often so tied up in religious mythology. But in reality far more of the world sees gold as the best store of wealth than does not. It is also instilled into much of European culture – and the further east one moves the more it seems to be wholly relevant, even in today’s world.
What this means is that in most of the world gold is held as a safety net against financial calamity and disaster, not for the opportunity of making a fast buck which seems to be the ethos adopted in much of the Western financial world. It thus does not come back on the market unless it is desperately needed, and only then as a last resort. It is for the most part just not traded based on rising and falling gold prices.
Central Bank gold holdings are yet another anomaly here. While gold seems to be anathema in theory to most central bankers, most of the world’s richest countries still hold the greater part of their foreign reserves in gold. Meanwhile some, who see their gold reserve proportions as too low, are building them up despite all gold’s bad press in Western media.
And this bad press is also seen in seemingly trying to talk down the levels of gold demand. The number of stories and articles out there, for example, emphasising any downturn in Chinese gold demand have been legion. Yet it now looks as though Chinese gold demand this year, as represented by withdrawals from the Shanghai Gold Exchange, will actually get pretty close to last year’s huge record of 2,199 tonnes. Withdrawals to the week ending November 28th have totalled 1,867 tonnes and with weekly withdrawal figures of comfortably over 50 tonnes (the latest reported week saw 54 tonnes withdrawn), we are heading for an annual total of close on 2,100 tonnes, particularly as the run up to the Chinese New Year tends to be a very strong period for gold demand in China. This suggests that the so-called ‘weak’ Chinese demand this year will only be around 5% down on last year’s huge record!
And what of India? Official figures showed Indian demand had been hugely depressed in the second half of last year and the first half of the current year due to a duty of 10% being imposed and the 80:20 rule which required 20% of any imported gold to be re-exported. This was imposed to help try and protect the country’s Current Account Deficit which had been significantly affected by the huge volumes of imported gold. Gold imports probably fell too because many gold dealers had been hoping for some respite from the new government which had been seen as much more pro-gold than its predecessor and had thus been holding off purchases. Indian official figures will have been misleading too because consumption will have been boosted by what may well have been a huge influx of smuggled gold across India’s porous borders, but of course no figures are available for this, but the amounts are thought to have been significant.
But with no action taken by the government early on, the dam burst and imports of gold shot up in the third quarter with some estimates suggesting that it was importing more gold than China over the period, although this writer thinks that is doubtful except perhaps for a very brief period given China’s ongoing high demand levels from around August onwards. India is in the heart of its Festival and Wedding seasons when gold gifting is incredibly important in Indian culture and demand may fall back, particularly as there have been further intimations that the government may further relax its gold import restrictions over and above the surprise withdrawal of the 80:20 rule just over a week ago. But even so, Indian gold imports will have been very strong again for the full year – perhaps back to the 1,000 tonne level if smuggled gold is taken into account.
So gold demand remains very high indeed in the East, while there has been evidence of gold shortages in the West from backwardation in the markets (traders having to pay a premium for immediate delivery over the futures price). There has been a continued bleed from the gold ETFs as weaker holders have been driven out as stop loss sellers, although the recent gold price pickup may reverse this trend if it continues – and sales out of the ETFs have been nowhere near as strong as they were last year when the gold price plunged.
So where do we stand now. There is thus strong evidence that gold demand is holding up really well while supplies may be becoming more and more limited. There won’t be a downturn in new mined gold production yet as big pipeline projects are still coming on stream or ramping up, more than replacing shuttered operations and falling grades elsewhere. As we have commented before, supply/demand fundamentals look to be improving all the time. Gold will react very positively sooner or later – it may already be doing so with the latest price rises, but it is still too early to tell.
New industrial uses for silver:
(courtesy Mineweb/Dorothy Kosich)
Industrial silver use will jump 27% by 2018 – CRU
Increased use of silver has driven consumption growth in China and India and is expected to continue.
Author: Dorothy Kosich
Posted: Wednesday , 10 Dec 2014
RENO (MINEWEB) –
More and more applications for silver are being invented, discovered, and, importantly, commercialized, said a new report from the Silver Institute and CRU Consulting, stoking the growth potential from several of the most important industrial silver applications.
Total industrial silver demand is forecast to reach nearly 680 million ounces annually by 2018, according to the “Glistening Particles of Industrial Silver” report scheduled for public release Wednesday morning.
Half of this growth will occur in the electrical and electronics sector, but additional demand will be due to growth in the use of silver in batteries, Ethylene Oxide (EO) in the chemical sector, anti-bacterial uses of silver, the automotive industry, silver coated bearings, and the brazing alloys/solders sector.
“Over the past decade, physical silver demand has seen strong growth, of which industrial demand for silver, has contributed the largest share,” said CRU. Loss from the photography sector have been offset by increasing demand from other sectors as well as new applications, such as silver-zinc batteries, clothing and hygiene.
“As a result of the ongoing recovery of the global economy and continuous technological development of silver applications, industrial demand for silver is expected to rally in the coming years,” said the report. “It is forecast that total silver consumption in industrial fabrication will be 4.4% larger than in 2013.”
In an interview with Mineweb Tuesday, CRU Consulting’s Alex Laugharne told Mineweb that EO silver consumption this year is expected to be 54Moz, increasing to 56Moz next year.
Over the past 10 years, the most significant change was the shift of silver demand towards emerging markets, especially China where per capita silver consumption has increased by 281% since the year 2000, according to the report. Meanwhile, increasing demand for silver in solar panels, automobile and anti-bacterial applications has attracted more consumers in both developed and developing countries.
Silver Oxide-Zinc Batteries
Silver oxide-zinc batteries are a major contributor to miniature power sources with small button sells used in hearing aids, toys, medical instruments, watches and other lower power devices.
Laptop manufacturers are encouraging silver oxide battery technological development, along with hearing aid rechargeable battery manufacturer ZPower Battery.
Large silver battery cells are used for military applications including missiles, torpedoes and submarines. Laugharne observed most military consumption of silver oxide-zinc systems tend to be one-time uses. Many of these missiles and missile-defense systems are approaching the end of their life cycles or are nearly obsolete, which will increase demand for missile defense replacements and upgrades even without regional military conflicts.
“With robust growth of national defense budgets, more expenditure will be spend on defense systems and missile weapons, which in turn will boost the demand for silver-contained batteries,” the report suggested. The total global defense budget in 2013 was $1,538 billion. China’s defense budget is expected to be $132 billion this year.
Ethylene oxide (EO) is a chemical reactive material, primarily used in the chemical sector. EO products are wildly used in the manufacturing of anti-freeze, polyester, solvents, cosmetics, pharmaceuticals, soaps, detergents, gas purification, emulsifiers and dispersants. “Demand for silver has grown continuously in the past decade along with the development of the EO industry,” said CRU.
Current global EO capacity has risen to over 26 million metric tons, which means the consumption of silver catalysts is around 53-56 million ounces annually. CRU expects annual silver consumption in EO to reach 63 million ounces by 2018, compared to 52 million ounces in 2013.
Anti-Bacterial Silver Uses
The use of silver in anti-bacterial applications can be traced back to ancient times when the Phoenicians stored water and other liquids in silver-coated bottles to discourage contamination.
“Out of all the metals with antimicrobial properties, silver has the most effective anti-bacterial action and least toxicity to human cells, so it is unsurprising that silver is commonly used to deter bacterial growth in a variety of medical applications as well as in our daily lives, including wound and burn care, consumer appliances, water purifications, food packaging and so on,” said the report.
Silver can also be used as a biocide in hospitals and other health care facilities to help reduce or remove the presence of so-called “superbugs” which are resistant to antibiotics.
Laugharne observed that since such miniscule amounts of silver are used in these applications and products, they are not expected to have a harmful impact on the environment or on human health.
Silver-coated bearings are used extensively in heavy-duty equipment and high-tech applications in which superior resistance to corrosion and fatigue is needed. The bearings play an important role in jet engines, allowing for a safe engine shut-down before any more serious damage can occur after a pump fails or oil stops lubricating the engines.
“With the fast development of the aviation industry, we believe demand for silver-coated bearings in jet engines will see continued stable growth,” the report stated. Global demand for these bearings is expected to increase 7.8% to US$96 billion by 2016.
CRU expects that silver use in bearings will reach 3 million ounces annually by 2018.
Silver is a primary component in photovoltaic (PV) applications, primarily in solar panels. However, to cut production costs, a number of large producers are trying to reduce the use of silver pastes in the cells.
Nevertheless, CRU predict that “global PV capacities will continue to expand and silver consumption in PV cells is expected to increase accordingly. However, the growth rate might be negatively impacted by declining intensity of silver use—i.e. new cells that consume less silver are expected to be widely used in the future.”
CRU forecasts that global silver consumption in PV will increased from 88 million ounces in 2913 to 109 million ounces by 2018.
“A fully-equipped automobile may have over 40 silver-tipped switches to start the engine, activate power steering, windows, mirrors, locks and other electrical accessories,” said the report. “Although the exact consumption of silver contacts in automobile(s) is uncertain, the demand outlook is bullish.”
Worldwide global car production growth is anticipated to accelerate from 2014 and reach 110 million units by the end of 2018. Therefore, the use of silver in the automotive industry could grow faster.
CRU predicts automotive sector silver consumption will grow from 56 million ounces in 2013 to 71Moz in 2018.
Silver brazing, also known as silver soldering, is brazing using silver alloy-based fillers. Silver brazing/soldering is a common method for joining or bonding ferrous and non-ferrous metals, like steel, stainless steel, copper and brass. Silver Brazing alloys are used in home appliances, power distribution, and from automobiles to aerospace.
The total consumption of silver in brazing/soldering last year was 70 million ounces.
“Indeed, demand for silver in brazing alloys is expected to grow following the gradual recovery of housing and infrastructure in the developed and developing regions,” said the report. “By the end of 2018, the demand for silver brazing alloys/solders is forecast to achieve 88Moz, adding more than 19 Moz of demand to current levels.”
Printed inks based on silver nanotechnology are designed to utilize the super conductivity of silver. Presently these are still at the stage of research and laboratory trials. But UK-based Archipelago Technology Group is working on commercializing new techniques of applying silver nanotechnology in printed inks.
Silver inks are now widely used in radio frequency identification devices (RFIDs) which transmit information using radio frequency. Many chains stores, including Target, Best Buy, and Kroger, have officially announce plans or are in the process of installing RFID systems. Wal-Mart has used the technology for over a decade.
RFIDs tags are being used in livestock management to detect unusual health conditions at an early stage.
Current total demand for RFID tags, each of which contains 10.9 milligrams of silver is now over 4 billion pieces, according to the report. Between 2012 and 2022, the market size value is expected to quadruple to US$26.2 billion.
“In total, CRU expects silver demand in printed inks to double from 2 Moz in 2013 to 4 Moz by 2018,” the report concluded.
The Danes will devalue their kroner without limit to match the euro.
It is amazing how countries are willing to destroy themselves:
Danish central bank will devalue without limit to match euro, deputy governor says
Draghi Stimulus Draws Danish Pledge on Limitless Krone Defenses
By Peter Levring
Tuesday, December 9, 2014
COPENHAGEN, Denmark — As Mario Draghi tries to pump as much as 1 trillion euros ($1.23 trillion) of liquidity into the euro area, a little nation on Europe’s northern rim is preparing its defense of a 30-year-old currency regime.
The unprecedented stimulus push by the European Central Bank president promises to test the euro peg in Denmark, where the benchmark interest rate is already below zero. Should ECB measures weaken the euro, Deputy Governor Per Callesen says, there is basically no limit on how far Denmark is willing to go to defend the krone’s peg to Europe’s single currency. …
… For the remainder of the report:
Words of wisdom from Egon Von Greyerz
(courtesy Egon Von Greyerz/GATA/Kingworldnews)
If a bank is too big, storing gold there is unsafe, von Greyerz tells KWN
8:50a CET Wednesday, December 10, 2014
Dear Friend of GATA and Gold:
Even allocated and segregated gold deposited with a bank whose derivative exposure is bigger than its host nation’s gross domestic product is not safe, Swiss gold fund manager Egon von Greyerz tells King World News. He adds that billionaire investor Frank Giustra has gotten bullish on the mining sector. An excerpt from the interview is posted at the KWN blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
So what else is new?
(courtesy Dow Jones newswires/GATA)
HSBC fires head of forex trading in London
From Dow Jones Newswires
via The Australian, Sydney
Wednesday, December 10, 2014
HSBC Holdings Plc has dismissed Stuart Scott, its London-based head of currencies trading, in connection with the global investigations that have led to the bank paying $620 million in fines on both sides of the Atlantic, according to a person familiar with the matter.
Mr Scott was fired on December 9 from a role that involved supervising the bank’s foreign-exchange trading operations. He joined the bank in 2007, according to the UK financial regulator’s register. Reached by phone, he declined to comment.
US, British, and Swiss regulators in November imposed a total of $4.3 billion in penalties against six banks, including HSBC, for failing to stop employees from improperly sharing confidential information with rival banks and for attempting to boost currencies-trading profits at their customers’ expense. HSBC and the other five banks didn’t dispute the regulators’ findings. HSBC said at the time that it “does not tolerate improper conduct.” …
… For the remainder of the report:
Another outstanding piece offered to us today Bill Holter
(courtesy Bill Holter/Miles Franklin)
Loss of control
Many who will read this work have been sitting patiently waiting for the house of cards to collapse. For me personally, I confess the current maniacal financial bubble has gone on much longer than I ever imagined. What did we miss? Are we wrong or just early? In my opinion, we were early, mathematically correct yet the “rules” changed. For my part, I can say that I missed just how much “leverage” could be used to extend the game. In the current instance, we are not even talking about garden variety leverage. We live in a world where leverage is leveraged, leveraged again and again and again. We have personal, public, and “private” (OTC) leverage. The garden variety leverage is bad enough as is sovereign leverage, but the real problem are derivatives piled on top of derivatives with collateral which in many cases no longer even exists. Too much leverage in the past has always led to burst bubbles. All bubbles eventually burst …and it looks like this one is bursting now.
Early Wednesday morning trading from Europe/Asia
1. Stocks mixed on major Asian bourses with a higher yen value rising to 119.30
2 Nikkei down 401 points or 2.25%
3. Europe stocks all up /Euro down/ USA dollar index up to 88.73/
3b Japan 10 year yield at .41% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 119.89
3c Nikkei now below 18,000
3fOil: WTI 62.56 Brent: 65.77 /all eyes are focusing on oil prices. A drop to the mid 60′s would cause major defaults.
3g/ Gold down/yen up;
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 Oil down this morning both WTI and Brent
3k Greece accelerates its bid for a new president/if they fail then a new election/Athens stock exchange down 10%
3l Chinese PPI minus 2.7 (huge miss)/CPI only 1.4% (not good for central bankers)/expect more central bank interventions to halt deflation in China
3m Gold at $1228 dollars/ Silver: $17.03
3n USA vs russian rouble: 54.30 ( slightly weaker against the dollar)
4. USA 10 yr treasury bond at 2.22% early this morning.
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid
(courtesy zero hedge)/your early morning trading from Asia and Europe)
China’s Stock Market Whiplash Extends As Greece, Crude Slump More
Now that China is on the same boat as the rest of the world, and its stock market is a direct reflection of hopes for constant liquidity injections by the central banks, nothing could be better for stocks than bad news, which is precisely what it got. After the biggest crash in the Shanghai Composite in 5 years, what China got just the bad economic update it needed, when it reported a PPI of PPI (-2.7%, Exp. -2.4%), the 33rd consecutive decline and a CPI (1.4%, Exp. 1.6%), lowest since November 2009,when the big banks’ RRR rate stood at 15.5% vs. current 20%. And so hope of yet more PBOC interventions to halt China’s deflation promptly reversed SHCOMP losses of over 4% on the session (at which point it was just shy of correction territory from recent highs hit just this week), and stocks surged to close up almost 3%, erasing half of yesterday’s losses. This spike came despite reports Chinese regulators may limit brokerages’ interbank borrowing.
And while the PBOC takes one day, it gives the next: the Yuan, which had earlier tumbled by 0.3% despite another stronger fixing by the PBOC, also proceeded to rise 0.14%after speculation the PBOC was injecting liquidity, according to HSBC. “Yuan recovered from yesterday’s fear of funding squeeze on the back of repo collateral rules, as the fear proved to be overdone and there was talk of liquidity injection by the central bank today,” Hong Kong-based senior FX strategist Ju Wang says in interview.
So there you have it: tightening with one hand, leading the major market sell offs, and easing with the other, resulting in an almost equal and opposite reaction.
Elsewhere in Asia, the Nikkei 225 (-2.25%) tumbled to print a fresh low for the month weighed on by a strong JPY amid flight to quality. Although judging by the now Swiss Watchy rebound in the USDJPY, the Nikkei should do just fine.
And while the biggest Asian markets, and the 2nd and 3rd largest in the world, now trade like Pennystocks on hopes of what central bankers may or may not do, the far more important market right now for everyone, that of crude oil, continues to plumb new depths, with Brent and WTI extending losses. In fact, crude may drop as low as $40/bbl if OPEC solidarity breaks, according to an Iran oil ministry official. API data yday showed crude stockpile gain, contrary to forecasts for decline in today’s EIA report. Jan. Brent -$1.20 at $65.64 at 10:28am London time; intraday low $65.64. Jan. WTI -$1.41 at $62.41; RSI for CL1 generic contract ~25%. Brent-WTI widens to $3.22, settled ydy at $3.02. “We got another set of bearish news overnight,” says Commerzbank commodity analyst Carsten Fritsch. “EIA shrinking is very unlikely given the API news yesterday”
European equities are trading higher having pared some of the China/Greece inspired sell-off that was seen yesterday. The turn in sentiment comes after lower than expected inflation data overnight in China (CPI/PPI) has increased expectations of potential easing from the central bank and as such has been supportive for the mainland stock index, where the Shanghai Comp closed up 2.9%. Despite the positive mood Greek assets have remained under pressure amid a continuation of Tuesday’s aggressive move with the GE/GR 10yr government bond yield spread trading wider by 62bps, while the Athens exchange is down another 2.0%.
In other US related news, The Fed passed a proposal on Tuesday for risk-based surcharges of up to 4.5% on the 8 US banks to maintain an additional capital supply based on the institution’s system importance. The framework for these charges would be phased in beginning January 2016 through January 2019. Says eight banks face aggregate USD 21bln shortfall today. Says most of eight banks already meet requirements. (CNBC/BBG)
US Congressional leaders have reached an agreement on an USD1.1trl spending bill ahead of Thursday evening’s deadline. This agreement would prevent a government shutdown and fund the federal government until September 2015 and is expected to be passed by Congress this week. (BBG)
To summarize: European shares remain higher with the financial services and tech sectors outperforming and basic resources, oil & gas underperforming. Greek market falls for second day. Brent crude resumed its decline. China’s CPI lower than expected. The German and Italian markets are the best- performing larger bourses, Swiss the worst. The euro is little changed against the dollar. Greek 10yr bond yields rise; Portuguese yields increase. Commodities decline, with WTI crude, Brent crude underperforming and soybeans outperforming. U.S. mortgage applications, monthly budget statement due later.
- S&P 500 futures little changed at 2057.1
- Stoxx 600 up 0.6% to 342.4
- US 10Yr yield down 1bps to 2.2%
- German 10Yr yield down 0bps to 0.68%
- MSCI Asia Pacific down 1.2% to 138
- Gold spot down 0.3% to $1226.9/oz
Bulletin headline Summary from RanSquawk and Bloomberg
- Shanghai Composite closes up 2.9% reversing some of yesterday’s sharp losses as weak inflation data (CPI/PPI) increases expectations of further easing from the PBoC.
- Greek assets remain under pressure in a continuation of yesterday’s move, however the news is having less of an effect on the broader market.
- Looking ahead today’s US session has a commodity focus with the DoE releasing their weekly oil inventory (1530GMT/0930CST) report and with the latest crop update due from the USDA at 1700GMT/1100CST.
- Treasuries steady, curves continue to flatten as week’s auctions continue with $21b 10Y notes; WI bid at 2.215% vs. 2.365% in November.
- OPEC cut the forecast for how much crude it will need to provide in 2015 to the lowest in 12 years amid surging U.S. shale supplies and reduced estimates for global consumption
- Brent crude traded near a five-year low as an Iranian official predicted a further decline in prices if solidarity among OPEC members falters
- China’s producer-price index dropped 2.7% in November from a year earlier, a record 33rd-straight decline and the biggest fall since mid last year. Consumer prices rose 1.4 percent, compared with the 1.6 percent increase in October
- ECB Executive Board member Peter Praet said falling oil prices could push euro-area inflation rate below zero, just as policy makers prepare to examine options for quantitative easing
- Greek bonds extended a rout that pushed 3Y yields above 10Y yesterday after Prime Minister Samaras renewed political turmoil by bringing forward the process for choosing a new president, a move that risks triggering parliamentary elections
- RBS will pull out of fixed-income trading in Japan, according to two people familiar with plan, who didn’t want to be named because details aren’t public; co. to slash staff numbers by >200 to ~30, with most jobs going by February, one person said
- Deutsche Bank eliminated or moved as many as CDS 10 traders in London and related indexes as it trims that part of its fixed-income business amid new regulations, said people with knowledge of the matter
- JPMorgan, already facing the highest capital surcharge under international rules, may need more than $20b in additional capital by 2019 to meet a new Fed requirement
- The ruble’s slide this year is damaging to Russia, prompting the government to start talks with large companies to ensure “more rhythmic” sales of their foreign revenue, Prime Minister Dmitry Medvedev said today
- Russia’s central bank will probably raise borrowing costs to avert threats to financial stability as oil prices near the lowest in more than five years and sanctions over Ukraine risk the ruble’s collapse
- Sovereign yields mixed. Asian stocks mixed, Nikkei -2%, Shanghai +2.9% after yesterday’s 5.4% gain. European stocks gain, U.S. equity-index futures decline. Brent crude and gold fall, copper gains
In FX markets, the JPY has continued its strengthening trend supported by its flight to quality bid given the macro-developments in China and Greece with USD/JPY trading down over 40 pips into the North American. Elsewhere, the USD-index remains broadly flat and that is being reflected in both EUR/USD and GBP/USD which has seen minimal movements today. More, specifically EUR/USD remains in close proximity to a vanilla option expiry at 1.2390-1.2400 for today’s NY cut 10am (1500GMT), according to an unconfirmed source.
WTI crude continues its downward trend with the low on Dec 8th coming in at USD 62.25 with focus on yesterday’s API Crude Oil Inventories data which showed a build of 4400k vs. Prev. -6500k, ahead of today’s DoE numbers. In addition, analysts at BofA said yesterday that WTI may drop to USD 50/bbl and there is a risk of Brent dropping to USD 60/bbl showing concern for a possible further slide in oil prices. Meanwhile, precious metals trade in minor negative territory however, have still maintained a bulk of the sharp gains seen yesterday on the back of the flight to quality bid and weaker USD.
DB’s Jim Reid concludes the overnight summary
Santa Claus got lost somewhere between Greece and China yesterday but the US launched a late rescue mission to give markets a chance of a happy Xmas. As we went to print yesterday China was trading notably higher, however a couple of hours later at the close the broader Shanghai Comp index was down -5.43% (a full intra-day swing of nearly 7.5%), the worst day since August 2009. Similar moves were felt in the CSI 300 yesterday which ended the day around -4.5% lower following the sharp intraday swings. The volatility has extended into the overnight session with the Shanghai Composite having crossed between gains and losses 10 times (and possibly still counting) and is +1.29% as we go to print with a peak-to-trough range of 3.3%. Elsewhere in Asia, sentiment is generally weaker with the Nikkei (-2.57%) and Kospi (-1.20%) all lower as we type, although the Hang Seng is +0.14%. China’s tightening announcement around onshore corporate bond repo transactions was the key story yesterday but the weak November CPI and PPI prints overnight is also a worrying sign for underlying fundamentals. We’ll delve a little deeper into these Chinese stories below but first let’s take a look at Greece which was a key driver for the European weakness yesterday.
As we discussed yesterday, the balance of probabilities are that we will have a general election early in the new year as the numbers look challenging for a successful presidential candidate being found by the current Government. This was always the most likely outcome over the next few months with the only change in the last 48 hours being the accelerated timing. However the market was clearly in a state of shock as the ASE was down 12.8%, the worst day since December 1987. It’s stunning that it was a worst day than any at the height of the sovereign crisis. There was also some significant price action in Greek bonds yesterday. 10y benchmark yields widened 93bps to 8.066% although the dramatic moves were at the shorter end of the curve as 3y yields surged 182bps to trade at 8.196% and inverting the yield curve in the process. The sovereign’s CDS also closed 93bps wider at 837bp. Our expert George Saravelos thinks the amount of likely yes votes went down the 180 needed yesterday, so the early election probabilities increased again. SYRIZA vs. the EU is shaping up to be potentially one of the big themes of early 2015.
Away from China and Greece, there was a notable turn around in equity markets in the US yesterday which saved the session. The S&P 500 (-0.02%) was virtually unchanged at the close after having pared back losses of some -1.3% in early trading. Similar moves were seen in Treasuries, with 10y benchmark yields trading as much 7.6bps tighter intraday only to then weaken towards the late-afternoon and close 4bps tighter at 2.213%. Energy stocks helped fuel part of the recovery. The component gained +0.85% following a rebound in both WTI (+0.77%) and Brent (+0.65%) to $63.82/bbl and $66.84/bbl respectively. Macro data was supportive yesterday. Indeed the NFIB small business optimism (98.1 vs. 96.5 expected) and IBD/TIPP economic optimism (48.4 vs. 47.0 expected) surprised to the upside – the former hitting a seven year high – whilst the JOLTS print showed job openings come in 0.1% higher at 3.3% with a modest 0.1% tick down in the quits rate to 1.9%.
Elsewhere wholesale inventories notched higher to +0.4% mom (vs. +0.2% expected).
In terms of other notable US stories yesterday, the Fed announced proposals to increase capital requirements for the larger banks in a bid to minimise the reliance on short term funding. Although the proposal is subject to public consultation, early reports from Fed officials estimate that banks face a surcharge of anything from 1 to 4.5% of risk weighted assets and that most of banks have adequate liquidity to comply, although the Fed’s Fisher did point out that one bank in particular will need to fund the majority of the shortfall.
Back to China, overnight the November CPI came in below consensus at +1.4% yoy (vs. +1.6% expected). This is a fall from +1.6% in October and marks the lowest monthly inflation reading since November 2009. PPI continued to struggle and came in at -2.7% yoy (vs. -2.4% expected). Chinese PPI has been in negative territory since Feb 2012 with little signs of this trend abating. Consumer prices may well be a reflection of the slump in global oil and commodity prices but PPI continues to signal the challenges around excess capacity in Chinese industrials. The bulls may well argue that soft prices are inevitably ‘policy friendly’ which gives authorities more room to ease although the bears would probably argue that the recent run up in Chinese equities may have complicated the planned easing bias.
Staying in China, for those interested in the specific tightening measures announced by the local regulator around repo rules our China rates strategist has published a note on it. In a nutshell the temporary approval suspension of lower quality bond issuance for repo is part of a cleaning up process of local government debt and also aimed at reducing the attractiveness of leveraged carry positions in these credits. We estimate about RMB460bn (c.US$80bn) of corp bonds are affected by this which accounts for about 9% of China’s total onshore credit markets.
Before we move on, our Global Macro colleagues published their world outlook yesterday. We’ve copied a link to the document below, but in terms of themes there’s a topical focus on oil as well as downgrades to global growth forecasts which they now have at 3.6% in 2015, rising to 3.8% in 2016 having previously expected 3.9% and 4.0% respectively. There are downward revisions to China, Russia, Brazil and other EM economies. Regionally our colleagues maintain their guidance for a midyear lift off in 2015 for the Fed, whilst expecting a sluggish pickup in growth in Europe along with public QE by the end of Q1 next year. They also expect above trend growth for Japan over the next two years.
Rounding up the market moves yesterday, before the recovery in US markets, markets in Europe closed at their lows yesterday with the Stoxx 600 receding -2.33% and Xover drifting 16bps wider. In terms of data, Germany printed a trade surplus wider than expected in October supported by a slower than expected decline in exports although imports softened greater than consensus (-3.1% mom vs. -1.7% expected). There was also softer data in the UK with both industrial (-0.1% mom vs. +0.2% expected) and manufacturing (-0.7% yoy vs. +0.2% expected) production coming in below consensus. On the micro side of things, Tesco was a notable underperformer yesterday after management significantly cut its earnings forecast following its fourth profit warning in a year. The share price was down as much as 17% at one point before recovering to around 6.6% lower on the day. Credit spread movement was also dramatic with Tesco’s 5Y CDS jumping 30bps yesterday to 168bps to the widest since December 2008. As credit analysts we are watching with some interest here if all this will translate into further pressure on its borderline IG rating. Tesco is rated Baa3/review for possible downgrade by Moody’s, BBB-/Neg by S&P and BBB-/Neg by Fitch.
Today’s calendar is particularly data light with just the October print for French industrial and manufacturing production and trade data out of the UK this morning. Over in the US the notable release is the November budget statement with the market looking for a reduction in the deficit to $65bn.
So all eyes on Greece and also whether China’s market move is already out of date by the time you read this!!
Royal Bank of Scotland totally abandons the Japanese bond trading
We expect all to leave this dead bond business:
(courtesy zero hedge)
RBS Abandons Japanese Bond Trading, Cuts 200 Jobs; Stocks, USDJPY, JGB Yields Are Re-Plunging
The Nikkei 225 has fallen over 300 points from the v-shaped recovery close at the end of the US day session and is now trading below the lows of the day at 2-week lows. USDJPY has plunged over 100 pips having briefly neared 120.00, now back below 119.00. JGB Futures are trading near record highs prices as yields collapse to near-record lows (30Y -23bps since QQE, 20Y -15bps) only seen during last year’s yield-crash. No surprise then with the bond market “dead” according to market participants and yields negligible, that RBS has decided to exit the Japanese fixed-income business, slashing 200 jobs, and surrendering its primary bond dealership.
Japanese consumer confidence missed once again, tumbling to 7 month lows (near 3 year lows) and business confidence missed expectations.
Japanese stocks have given up all the US day session v-shaped recovery gains and USDJPY is back under 119…
Yields are in freefall…
And entirely illiquid, which has led to this:
- *RBS SAID TO EXIT JAPAN FIXED-INCOME TRADING AS IT CUTS 200 JOBS
- *RBS SAID TO CUT MOST OF JAPAN JOBS BY FEBRUARY
- *RBS SAID TO PLAN TO SURRENDER PRIMARY BOND DEALERSHIP IN JAPAN
As Bloomberg reports,
Royal Bank of Scotland Group Plc will pull out of fixed-income trading in Japan and slash staff numbers by more than 200 to about 30, with most of the jobs going by February, according to a person familiar with the plan.
RBS Securities Japan Ltd. would surrender its primary dealership in the country’s government bond market and retain only enough people to service clients, said two people familiar with the proposal, who didn’t want to be named because the details aren’t public.
RBS’s loss in the 12 months to March widened by 78 percent to 5.7 billion yen, the filings show.
* * *
Of course this should come as no surprise given the BoJ’s dominance and our recent discussions of the JGB market being – for all intents and purpose – “dead”…
* * *
What an epic farce the largest bond market in the world has become…
The following is the biggest fear for Europe and for that matter, the entire global financial scene. An exit by Greece will no doubt blow up the underwriting banks who engaged in massive credit default swaps betting that Greece will stay alive. Then we must couple this with the derivative implosion on oil with the added bonus of oil strapped countries like Venezuela and Nigeria blowing up we surely have our multiple black swan events:
(courtesy zero hedge)
GREXIT Fears Spark European Peripheral Contagion, Silver Surging
Yesterday’s greek carnage continues as stocks and bonds in the Hellenic State collapse further. The Athens Stock Exchange Index is now down over 18% from Monday’s highs and yields on the 3Y GGB have exploded to 9.35% (pre-bailout levels) and are 75bps inverted to 10Y. The ongoing fear of fallout from a snap-election victory for anti-EU Syriza has also spread to the rest of the perihpery where Portuguese, Italian, and Spanish bond spreads have all started to crack wider. The beneficiary of this risk aversion so far are Bunds and Treasuries and precious metals where silver is surging higher.
Greek bonds are now inverted and trading at pre-bailout crisis levels…
As Greek stocks continue to crash…
and the anti-EU fear is spread to the periphery
and the rest of Europe’s stock markets are sliding…
And precious metals are bid…
* * *
Simply put – by lifting the possible veil of the ECB – the probability of GREXIT as it were – we are getting a glimpse at non-manipulated credit risk appetite in Europe… and it’s not pretty – nothing has been solved.
WTI crude crashes into the 60 dollar handle as the Saudis shun cuts.
This sent credit default swaps of Venezuela skyrocketing indicating a 93% chance of default.
(courtesy zero hedge)
WTI Crude Crashes To $60 Handle As Saudis Shun Cuts
(courtesy zero hedge)
WTI Crude Crashes To $60 Handle As Saudis Shun Cuts
Brent Crude crossed below $65 for the first time since 2009 this morning and WTI began to slide as inventories showed a bigger-than-expected build. But it was Saudi Arabia’s oil minister al-Naimi who sparked the latest dump:
- *NAIMI SAYS `WHY SHOULD I CUT PRODUCTION’?
And with that WTI plunged to a $60 handle on heavy volume…
For now Russia and Brazil have stabilized their FX somewhat but Mexico is beginning to suffer now among the oil producers…
* * *
Crude inventories rose 1.45 million barrels in the week ended Dec. 5, the EIA, the Energy Department’s statistical arm, said.
Analysts surveyed by Bloomberg expected a drop of 2.7 million.
The EIA yesterday reduced its price forecasts for next year while also downgrading its production outlook for a second month.
The Organization of Petroleum Exporting Countries reduced its demand estimate by about 300,000 barrels a day to 28.92 million next year, according to the group’s monthly oil market report.
That’s below the 28.93 million required in 2009, and the lowest since the 27.05 million a day OPEC supplied in 2003, the group’s data show.
* * *
It seems once again that credit was right.
This is big: the Giant commodities giant Philbro is calling it quits: it is liquidating after receiving no bids to buy the operation
(courtesy zero hedge)
Crashing Crude’s First Casualty: One-Time Commodities Giant Phibro Liquidating
While we were expecting that one-time “god of crude oil trading” would have a poor year as a result of his consistent bullishness on the crude space, we were quite astounded to learn, as Bloomberg first reported yesterday, that Andy Hall – the man whose name was for a decade legendary in the commodity space – would call it a day. And yet that pales in comparison to the WSJ report overnight than Phibro itself, Andy Hall’s 113 year old employer currently owned by Occidental Petroleum after its sale by Citigroup, would liquidate in the US after it failed to buy a buyer, marking the end of an era.
Phibro Trading’s Andrew Hall and his daughter, Emma, in 2012
What is paradoxical, and as we reported yesterday, Hall’s hedge fund Astenbeck, has not done badly in 2014. In fact, it was up another 1.2% in November and was up 7.2% year to date despite a roaring bear market in commodities.
Alas, that is cold comfort for Phibro. As the WSJ reports, “the 113-year-old company, founded in Germany by two scrap-metal dealers, is winding down its U.S. operations after it failed to find a buyer, according to a person familiar with the situation. The sale process for units in London and Singapore continues, the person said. Phibro specialized in physical trading of oil and other raw materials, seeking to profit by moving actual barrels and acting as an intermediary between producers and consumers. The pool of potential buyers for these kinds of operations has dwindled in recent years amid a regulatory crackdown on Wall Street banks’ involvement in these markets.”
As for Hall, while he will sever his relationship with Phibro, he will continue working for his $3 billion hedge fund Astenbeck, of which Occidental owns 20%.
Mr. Hall is expected to continue trading energy derivatives through his $3 billion hedge fund, Astenbeck Capital Management LLC, which has avoided taking much of a hit from this year’s plunge in oil prices because Mr. Hall curtailed bets and shifted to holding cash.
The end of Phibro is another stark reminder, that bull markets make geniuses out of everyone, but it is when the bear markets tide flows out that we truly learn who was swimming naked.
The effective demise of Phibro underscores investors’ fading interest and the challenging trading conditions in many energy and commodity markets, which in recent years have been pummeled by the combination of rising supplies and tepid demand growth. Mr. Hall reaped huge profits by correctly betting on rising commodity prices in the 2000s, which was driven by rapid growth in China.
That kind of strategy worked well during the commodities boom, but fared more poorly during a period of relatively stable oil prices that ended in the middle of this year. The price of benchmark U.S. oil futures has plunged about 40% in the past six months. On Tuesday, the front-month contract rose 1.2% to $63.82 a barrel on the New York Mercantile Exchange. The decline in prices accelerated in November after the Organization of the Petroleum Exporting Countries agreed to maintain its production target.
Phibro employees were being notified of the developments Tuesday, according to the person. Analysts have said Phibro added little to Occidental’s financial performance and that executives were uncomfortable with the volatility it sometimes brought to results. Earlier this year, Hess Corp. also sold its internal trading arm, Hetco.
In retrospect perhaps the liquidation of Phibro shouldn’t come as a surprise: “Occidental in February said it was pulling back from proprietary trading of crude oil and other commodities amid a corporate reorganization, and a spokesman on Tuesday reiterated the Houston company’s plans to reduce exposure to these activities. Phibro executives had been shopping the operation to prospective buyers since the February announcement, according to another person familiar with the situation.”
Still the complete lack of interest for a legendary name in the commodity trading space is somewhat stunning.
Founded as Philipp Brothers in the early 1900s, Phibro went on to become at one point the largest supplier of raw materials in the world. In 1981, it acquired investment bank Salomon Brothers, and the trading firm became part of Citigroup in 1998.
Mr. Hall and his traders were known for placing big, long-term bets. In 2007, Phibro accounted for 10% of Citigroup’s net income.
As for Hall, who as recently as September went “all in on a bet that the shale-oil boom will play out far sooner than many analysts expect, resulting in a steady increase in prices to as much as $150 a barrel in five years or less”, what is his outlook now?
Mr. Hall cut back sharply on his wagers in August, moving much of his portfolio to cash. “We think longer-term oil prices are supported in the $70-$80 range,” Mr. Hall said in a Dec. 1 letter to investors, which was reviewed by the Journal. But for now, near-term prices “will stay under pressure and could become very volatile as the market strives for equilibrium without intervention” from OPEC, he wrote.
And, like yesterday, we leave it off with the $64K question: has Hall [and Phibro] already liquidated his long positions yet, or is he yet to liquidate them? Judging by the relentless slide in Brent and WTI, with the latter just touching on a $61 handle, the market is less than eager to wait around for the answer.
I believe that we have had 3 black swans appear:
i) the rapid drop in oil pricing
ii) the rapid deterioration in the credit field for sovereign oil countries like Venezuela with huge credit default swaps bet on them by investors.
The underwriting banks are the big 5 from the USA (JPMorgan, Bank of America, Citibank, Goldman Sachs, Morgan Stanley) and over in Germany Deutsche Bank
iii) the fast re-emergence of Greece wishing to exit from the Euro area leaving behind huge debts and huge credit defaults written upon them.
Here Dave Kranzler talks about the first Black Swan:
(courtesy Dave Kranzler/IRD)
It’s overhead and landing: OPEC Sees Weakest Demand for Its Crude in 12 Years in 2015
I got news for all the analysts and investors who want to believe that the U.S. economy is fine and the rest of the world is in trouble: the U.S. is BY FAR the world’s largest oil consuming country – EIA link – consuming nearly twice as much oil as #2 China.
If oil demand is weak, it’s because end-user demand is weak. That means demand from U.S. companies and consumers is weak. That means the U.S. economy is much weaker than the narrative being vomited out by Wall Street, Obama and the Fed.
“Faith” is defined as “believe without evidence.” Anyone buying stocks and fiat money-based assets is placing faith in some money deity for which there’s no evidence of existence. Over 6,000 years of civilized history, fiat currencies have a 100% failure rate. That’s 100% evidence of paper money’s validity. Gold and silver have survived that 6,000 years and stand alone as real money. Again, that would be considered fact backed by evidence.
Willem Buiter can kiss my ass.
On top of the 17 billion in IMF funding already granted to the Ukraine, the new finance minister has now stated the country needs another 19 billion dollars next year.
(courtesy zero hedge)
Ukraine Bonds Crash To Record Low After Economy Minister Asks For More IMF Bailouts
Ukraine bond prices have crashed to new record lows this morning – with even 2015 maturing debt trading at a 25% discount to face – following calls (admissions) by Ukraine’s new (Lithuanian) economy minister that the government will need more IMF help on top oif its current $17 billion package. The country may need another $19 billion next year!!!
Ukraine’s new economy minister, Aivaras Abromavicius, said on Wednesday the government wanted the International Monetary Fund to expand its $17 billion bailout package due to Ukraine’s worsened economic outlook.
“We want to expand the programme given the difficult situation. Calculations are being made,” Abromavicius said at a briefing, adding that it was too early to say how much extra cash would be needed.
The IMF, which is visiting Kiev this week for talks on the bailout programme with the government, warned in September that if Ukraine’s conflict with pro-Russian separatists runs into next year, the country may need as much as $19 billion in extra aid.
* * *
So how long before the IMF has encumbered the assets of the entire (non-Russia) state?
It is now a race against the clock as Russia hastens to introduce its SWIFT system.
This is a huge dagger into the heart of the USA dollar scheme:
“Isolated” Russia Begins Testing De-Dollarization-Driven Payment System
Having announced its intention to create an alternative to the SWIFT payment system (following calls from Western politicians for SWIFT to cut off Russia – which the ‘independent’ firm rapidly denied), Russia recently said it would be ready in May. However, it seems the rapid drop in the Ruble (and the Yuan in recent days) has escalated the need for this de-dollarized payment system and, as RT reports, Russia’s Rossiya and SMP banks, which fell under Western sanctions, are among the eight lenders that will start testing the country’s new national payment system on December 15.
Russia’s Rossiya and SMP banks, which fell under Western sanctions, are among the eight lenders that will start testing the country’s new national payment system on December 15.
“The pilot project involves SMP Bank and Rossiya Bank, those for which the story is very critical and important. These are quite large banks,” the head of the Russian National payment system (NPS) Vladimir Komlev said in an interview with Rossiya 24 TV.
The move comes as a part of Russia’s ambitious initiative to move away from the Western dominance of its financial markets. Last month the Russian Central Bank said it would have its own international inter-bank payment system, an alternative to the global SWIFT network up and running by May 2015.
Another bank involved in NPS testing is Russia’s second largest VTB. Recently its management has been vocal about the need to make Russia’s financial system more self-sufficient and ditch the US Dollar, Vedomosti reports.
Komlev said the new system’s principle of operating will remain the same. The use of the existing formats will be more convenient for banks; they won’t have to reconfigure their software.
The latest version of the NPS technology is being tested by the Russian Openway Solutions company.
“The modules themselves are something unique, independent, only partly related to the Openway. Now all this belongs to us: our code, the knowledge of how the system is built, and its logic. We are able to develop it and provide support,” said Komlev.
NPS was established in 2014 after a number of Russian banks were hit by US and EU sanctions. In March international payment systems Visa and MasterCard stopped servicing cards issued by the banks following the introduction of the sanctions.
* * *
It appears that as sanctions and oil-price-declines pressure Putin, he is accelerating his gold-hording de-dollarization as unintended isolated consequences boomerang back at the US Dollar’s hegemony.
The following ought to rile up the Russians:
(courtesy zero hedge)
US Tanks Are Rolling Across Latvia
Having grown used to images and clips of “Russian” tanks rolling through Ukraine, crossing borders, and generally creating havoc, we thought the following clip was of note. With NATO and Russia rattling sabres ever louder, the site of a trainful of American tanks passing through Latvia will, we are sure, do nothing to calm both sides.
As LiveLeak reports,
According to the representative of national armed forces of Latvia, till December 6transportation of heavy military equipment of the first cavalry division of army of the USA from Adazhi and Estonia was carried out to Lithuania.
* * *
As NATO builds its forces…
and “incidents” surge…
European QE Postponed Indefinitely? Leaked EU Draft Shows “Lack Of Political Cover” For Draghi
One of the biggest wildcards for 2015 has been whether or not the ECB would proceed with US-style, “public debt” QE (considering the private QE has gone absolutely nowhere fast with just €21.5 billion in ABS and covered bonds monetized in the past few months) over both the objections of Germany and, increasingly, the ECB’s governing council itself. Recall that it was just last week when Germany’s Die Welt reported that, in a stunning turn of events, Draghi lost the majority vote on the ECB executive board when Benoit Coeure joined Sabine Lautenschlager and Yves Mersch in the “no” camp.
Today things for the former Goldman banker went from bad to worse, when as the FT reports, the ECB lost its “normal political cover” to make a bold decision, in fact the boldest decision in the ECB’s history: one which could lead to a political and legal retaliation by Germany itself. The reason, as FT’s Peter Spiegel explains, is that unlike previously when EU summits resulted in “greenlighting” blueprints which, if only on paper, enabled Draghi to proceed unconstrained, this time there was no such blank check compact.
Back in October at a eurozone summit, Draghi was able to get a little-noticed statement out of the assembled leaders committing them to another “Four Presidents Report”, a reference to the blueprint delivered in 2012 that set a path towards further centralisation of eurozone economic policy. The report helped kick-start the EU’s just-completed “banking union.”
Progress on that 2012 blueprint has since stalled, however, and at his last summit press conference, then-European Council president Herman Van Rompuy said the new “Four Presidents Report” would be delivered at the December EU summit, which starts next Thursday. Many in Brussels saw this as the quid for Draghi’s quo – once the leaders agreed to another blueprint for eurozone integration, Draghi would have a free hand to launch QE.
But according to a leaked draft of the communiqué for next week’s summit, Draghi may have to deliver his quo without a eurozone quid. The text makes clear that leaders have no intention of delivering a new blueprint any time soon.
What’s worse is that instead of merely leaving the bogey hanging, the draft actually put a time-period on the political limbo that the ECB will suddenly find itself under: “According to the draft, a debate on how to proceed will be pushed off until February, and the report itself will come no sooner than June. Here’s the relevant paragraph from the current draft, sent around to national capitals on Monday:”
Closer coordination of economic policies is essential to ensure the smooth functioning of Economic and Monetary Union. Work on the development of concrete mechanisms for stronger economic policy coordination, convergence and solidarity is being taken forward. Heads of State or Government will exchange views on these matters at their informal meeting in February. The President of the Commission, in close cooperation with the President of the Euro Summit, the President of the Eurogroup and the President of the European Central Bank, will report at the latest to the June 2015 European Council.
The bottom line, as Spiegel concludes, is that “Draghi won’t have the normal political cover he needs to make a bold decision early next year – a problem only compounded by the European Commission’s decision last month to put off the day of reckoning for France and Italy over whether they will face sanctions for failing to live up to the EU’s crisis-era budget rules.”
So with every bank praying to their Keynesian gods, and, of course, the ECB’s money printer which will be oh so very critical with the Fed out – at least indefinitely – did the world’s capital markets just get the worst possible news, namely that at least until the summer of 2015 the world will be reliant only on Japan’s Abenomics, which as most already know, has succeeded in only pushing Japan into a near-depressionary quadruple dip, and where the political capital of the prime minister can now be counted on one hand.
And with the ECB’s hands tied, what happens to the world’s biggest equity bubble if and when Japan’s population finally realizes it has had enough of unprecedented inflation coupled with wage deflation, and gets rid of Abe for the second and final time? Suddenly, what seemed like a distantly hypothetical “worst-case” scenario is looking all too realistic
Venezuela Default Probability Has Never Been Higher; Maduro “Working To Raise Oil Prices”
With OPEC slashing demand expectations to 12 year lows, oil prices have re-cratered today putting further pressure on socialist-utopia Venezuala which needs $121/bbl to break-even. Credit risk for the South American nation has exploded today to record highs – implying a 93% probability of default and President Maduro has taken to the airwaves to calm a benefit-needy nation… tensions are mounting…
Default risk has gone vertical…
As bond prices and black market FX crash further.
President Maduro explains:
- *MADURO SAYS VENEZUELA WORKING TO SOLVE `ECONOMIC CRISIS’
- *VENEZUELA WORKING TO RAISE OIL PRICES: MADURO
- *VENEZUELA OIL COSTS ABOUT $12/BARREL TO PRODUCE: MADURO
- *U.S. HYDRAULIC FRACTURING NEEDS $60/BBL OIL: MADURO
- *VENEZUELA’S 2015 BUDGET BASED ON $60/BBL OIL: MADURO
- *MADURO SAYS GUARANTEES NEEDED RESOURCES FOR ECONOMY IN ’15
- *MADURO SAYS THERE WILL BE `PROBLEMS’ WITH DOLLAR INCOME
- *VENEZUELA MUST `OPTIMIZE’ USE OF EACH DOLLAR: MADURO
* * *
We would do well to remember what happened earlier in the year as deadly protests were only calmed down by promises of generous redistibution of wealth from government coffers… that promised cash is not there any more…
Eur/USA 1.2369 down .0017
USA/JAPAN YEN 119.30 down .061
GBP/USA 1.5680 down .0002
USA/CAN 1.1460 up .0019
This morning in Europe, the euro is down fractionally, trading now well above the 1.23 level at 1.2369 as Europe reacts to deflation and announcements of massive stimulation . In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. And now he wishes to give gift cards to poor people in order to spend. The yen continues to deteriorate like a rotten banana. However this morning it continues with its dead cat bounce settling up in Japan by 6 basis points and settling just below the 120 barrier to 119.30 yen to the dollar ( still heading towards 123). The pound is down this morning as it now trades just below the 1.57 level at 1.5680.(very worried about the health of Barclays Bank and the FX/precious metals criminal investigation). The Canadian dollar is down today trading at 1.1460 to the dollar.
Early Wednesday morning USA 10 year bond yield: 2.22% !!! up 1 in basis points from Monday night/
USA dollar index early Wednesday morning: 88.73 up 4 cents from Monday’s close
The NIKKEI: Wednesday morning down 401 points or 2.25% (Abe’s helicopter route to provide free cash)
Trading from Europe and Asia:
1. Europe all in the green
2/ Asian bourses mixed … Chinese bourses: Hang Sang in the green ,Shanghai in the green, Australia in the red: /Nikkei (Japan) red/India’s Sensex in the green/
Gold early morning trading: $1227.00
Closing Portuguese 10 year bond yield: 2.96% up 14 in basis points from Tuesday
Closing Japanese 10 year bond yield: .41% !!! down 1 in basis points from Tuesday
Your closing Spanish 10 year government bond Wednesday up 4 in basis points in yield from Tuesday night.
Your Wednesday closing Italian 10 year bond yield: 2.07% up 3 in basis points from Tuesday:
trading 20 basis points higher than Spain:
IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Wednesday night/USA dollar index/USA 10 yr bond:
Euro/USA: 1.2432 up .0045
USA/Japan: 118.52 down 0.830 (kills the yen carry trade)
Great Britain/USA: 1.5708 up .0024
USA/Canada: 1.1481 up .0039
The euro rose smartly in value during the morning and again in the afternoon’s session, and it is up by closing time , finishing just above the 1.24 level to 1.2408. The yen rose sharply in the morning, and again in the afternoon and by closing it was up 83 basis points on the day closing well below the 119 cross at 118.52. The British pound gained some ground during the afternoon session and it was up on the day closing at 1.5708. The Canadian dollar was well down in the afternoon and was on on the day at 1.1481 to the dollar.
Currency wars at their finest today.
Your closing USA dollar index: 88.33 down 36 cents from yesterday.
your 10 year USA bond yield , down 1 in basis points on the day: 2.20%!!!!
European and Dow Jones stock index closes:
England FTSE down 29.43 or 0.45%
Paris CAC down 36.03 or 0.84%
German Dax up 6.02 or 0.06%
Spain’s Ibex down 64.70 or 0.62%
Italian FTSE-MIB down 172.31 or 0.89%
The Dow: down 268.05 or 1.51%
Nasdaq; down 82.44 or 1.73%
OIL: WTI 61.33 !!!!!!!
And now your final gold prices in the various currencies
And now for your big USA stories
Today’s NY trading:
“Some Market Folks Are Turmoiling…” As 6th Hindenburg Omen Spotted
A public service message from Kevin Henry:
The 6th Hindenburg Omen in 7 days… a confirmed cluster we have not seen in recent history…
* * *
Following yesterday afternoon’s exuberant USDJPY-driven no volume levitation v-shaped recovery dead-cat-bounce (breathe), it was different today. Wherever one looks there is likely blood on the streets as the scale of moves today (and yesterday) dwarf recent historical moves. It would appear some counterparty risk concerns are being voiced quietly on desks too… as financials fear commodioty derivatives exposure.
Here’s some context…
HYG at 18-month lows.. worst dasy since Nov 2011
S&P 500 at one-month lows – back to levels before the Nov payrolls data hit
On the week, yesterday’s bounce is over…
Having tried its best to rally yesterday, energy stocks crashed today…down 6.5% on the week
USDJPY was in charge of stocks…
As can be seen here – the manipulated volume appeared right on cue once again as UDJPY broke 118.00 and it lifted stocks… along with a VIX slam BUT it failed!!
“Most shorted” stocks were whacked lower which makes us a little nervous going into tomorrow as we get another completely rigged squeeze
Treasury yields plunged further…
Tresasury yields in context…
Energy credit markets are in total freefall and stocks catching down…
As HY starts to get infected by energy…
And financial credit is gettingh nervous as counterparty risk starts to rear its ugly head…
The USDollar slid for a 3rd day led by very notable JPY strength…
Oil continues to collapse (down over 20% from the initial OPEC leaks that everyone said was priced in) and gold and silver are stable and up from pre-OPEC…
Leaving oil at 5 year lows and suffering the biggest slump since Lehman…
Bonus Chart: Breadth….
I will leave you tonight with 2 commentaries: the first Clive Hale. a view from the bridge and the second from Greg Hunter with Ellen Brown
Clive Hale – www.viewfromthebridge.co.uk
At the latest ECB press conference Draghi said that. “The monetary policy team had this week discussed buying all assets except gold”; qualifying a claim by fellow member Yves Mersch two weeks ago that gold bullion could be included.”
If central bankers truly believed in sound monetary policy the headline would have said “We’ll buy all your gold”. That would have propelled both gold and the European equity markets upwards. As it is markets on the continent get cheaper as the good doctor fiddles. “We may not do anything until January at the earliest”. Code for “It’s taking us longer to convince the Germans than we thought”. This has all the makings of a horrible policy mistake when one of the protagonists blinks. Draghi may even decide he has had enough and return to Italy to be president of the country there. With Merkel and Schauble in control of “finances” Draghi won’t beat the Bundesbank at poker and Jens Weidmann at the ECB helm would complete the German triumvirate which would put the French in a spot.
Bond markets in European sovereigns continue to display heroic confidence in the central bank when in reality they have done nothing – the buying of ABS and MBS securities, hailed as a success by some European fund managers, has been an abject failure. “Banks can borrow at 10bps and lend at a tasty margin to eager borrowers, thus in one swoop solving bank profitability and boosting economic activity”, they said. Not so M’lud; the ECBs balance sheet continues to shrink.
And with the latest fall in the oil price (Brent was over $70 when I started writing this piece) deflation is a certainty, but for how long? There are a lot of marginal producers out there in shale world whose pips are squeaking as are their bondholders who have lent with expensive oil as collateral. Once wells start getting moth balled and bond holders get a series of haircuts (at best) the oil price will sky rocket, high yield will actually revert to being proper high yield ie junk and the myth of cheap oil and its “benefits” for the global economy will be over. In Japan oil is now more expensive in yen terms as the BoJ manage the erosion of the currencies purchasing power in true central bank fashion.
As ever it’s all in the timing but do remember that when the bell rings the door will instantly turn into a cat flap. Now is the time to take risk off the table and add to those berated insurance policies of cash, ultra-high quality bonds if you can find any, deep value equities with more than a semblance of a decent balance sheet and some gold. As Kyle Bass eloquently put it, “gold is simply a put against the stupidity of the political system”.
With deflation lurking in the background cash becomes a much more attractive asset in the short term as does gold which is nobody else’s liability, unlike fiat money which in many instances in the past has been transformed into decorative wallpaper. Credit markets will also throw up value but don’t get greedy for yield and be prepared to be a long term investor. Liquidity in bond markets is going to disappear one day soon, but if the companies have the balance sheets to redeem the debt then hang on in there.
Same story with deep value equities. There aren’t too many bargains around right now as valuations get stretched higher and higher. If we are about to get a significant market correction – and we are starting to hear this refrain more often from market “professionals” – then market psychology tells us that as prices fall most investors will find it difficult to “pull the trigger” and buy at cheaper prices and then when the recovery phase kicks in it becomes even harder to get on board. So better to have a small toe in the water now and remember why you bought deep value in the first place.
Big Banks Will Take Depositors Money In Next Crash -Ellen Brown
By Greg Hunter’s USAWatchdog.com
The G-20 met recently in Australia to make new banking rules for the next financial calamity. Financial reform advocate Ellen Brown says these new rules will allow banks to take money from depositors and pensioners globally. Brown explains, “It became rules we agreed to actually implement. There was no treaty, and Congress didn’t agree to all this. They use words so that it’s not obvious to tell what they have done, but what they did was say, basically, that we, the governments, are no longer going to be responsible for bailing out the big banks. These are about 30 international banks. So, you are going to have to save yourselves, and the way you are going to have to do it is by bailing in the money of your creditors. The largest class of creditors of any bank is the depositors.”
It gets worse, as Brown goes on to say, “Theoretically, we are protected by deposit insurance up to $250,000 in the U.S. and 100,000 euros in Europe. The FDIC fund has $46 billion, the last time I looked, to cover $4.5 trillion worth of deposits. There is also $280 trillion worth of derivatives that the five biggest banks in the U.S. are exposed to, and under the bankruptcy reform act of 2005, derivatives go first. So, they are basically exempt from these new rules. They just snatch the collateral. So, if you had a big derivatives bust that brought down JP Morgan or Bank of America, there is no way there is going to be collateral left for the FDIC or for the secured depositors. This would include state and local governments. They all put their money in these big banks. So, even though we are protected by the FDIC, the FDIC is not going to have the money. . . . This makes it legal for these big 30 banks to take our money when they become insolvent. They are too-big-to-fail. This was supposed to avoid too-big-to-fail, but what it does is institutionalizes too-big-to-fail. They are not going to go down. They are going to take our money instead.”
Part of the coming financial calamity will involve hundreds of trillions of dollars in un-backed derivatives. Brown contends, “If the derivative bubble pops, nobody knows what is going to happen, and it’s obvious it has to pop. It can’t just keep growing. Depending on who you read, some people say it is up to two quadrillion dollars. It’s virtual money, and it cannot keep going on.”
When a financial crash does happen, you can forget about getting immediate access to your money. Brown says, “The banks will say, well, we don’t have it. All the money goes into one big pool since Glass Steagall was repealed. They are allowed to gamble with that money and that’s what they do. I think maybe Bank of America is the most vulnerable because of Merrill Lynch. Everybody is concerned, and they do very risky deals and they are on the edge. I think they have over $50 trillion in derivatives and over $1 trillion in deposits. . . The Dodd-Frank Act says we, the people, are no longer going to be responsible for the big banks when they collapse. It is not clear the FDIC will even be able to borrow from the Treasury, but even if they could, who is going to pay that money back? Let’s say they borrowed $1 trillion. Who is going to pay that $1 trillion back? It will bankrupt all the small banks that had to contribute to this premium. They will say we’re raising your premium to everything you got, basically. Little banks will go out of business, and who is going to survive–the big banks. . . . What we’re going to have left is five big banks, and everybody else is going to be bankrupt.”
Join Greg Hunter as he goes One-on-One with Ellen Brown from the Web of Debt Blog.
(There is much more in the video interview.)
That is all for today
I will see you Thursday night
bye for now