My website is now ready You can find my site at the following url:
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: $1194.70 up $0.40
Silver: $15.89 unchanged
In the access market 5:15 pm
The gold comex today had a poor delivery day, registering 0 notices served for nil oz. Silver comex registered 0 notices for nil oz.
A few months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 247.02 tonnes for a loss of 56 tonnes over that period.
In silver, the open interest fell by 729 contracts despite yesterday’s rise in price of $0.17. The OI refuses to go down despite raids. Somebody has extremely strong hands and are very patient. The total silver OI still remains relatively high with today’s reading at 149,470 contracts. The big December silver OI contract fell by 79 contracts down to 101 contracts.
In gold we had a slight rise in OI with the rise in price of gold yesterday to the tune of $0.90. The total comex gold OI rests tonight at 373,815 for a gain of 2072 contracts. The December gold OI rests tonight at 764 contracts losing 7 contracts.
TRADING OF GOLD AND SILVER TODAY
Again, for the umpteenth time, gold surpassed the $1200 mark only to be repelled back. Gold’s zenith was $1212.00 set at 5 am early this morning and its nadir at $1193.50 at 11 am (well after London’s second fix). I strongly believe that gold at 1200 is very toxic to our bankers with the huge number of derivatives and forwards placed by them.
Silver’s zenith occurred at 5 am this morning at $16.21. Its nadir at
2:30 pm: $15.86.
It is useless to analyze trading because the bankers are manipulating gold and silver 24/7 for the entire 5 days of the week.
Today, we had no change of inventory with respect to gold inventory at the GLD /Inventory 721.56 tonnes
In silver, no change in silver inventory
SLV’s inventory rests tonight at 341.009 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.
OH OH!! Backwardation arrives in full force
First: GOFO rates:
all rates moved closer to the negative. The One month GOFO rates moved into negativity with the other others moving closer to backwardation.
Now, all the months of GOFO rates( one, two,three six and 12 month GOFO moved towards to the negative, with the one month, two month and 3 months already negative . On the 22nd of September the LBMA stated that they will not publish GOFO rates. However today we still received today’s GOFO rates. These rates are still fully manipulated. London good delivery bars are still quite scarce.
Dec 18 2014
1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate
–.0625.% – .0425 % -.025 % +. 0275 .% +. 11750%
Dec 17 2014:
-.0333% +.00667% +.0300 % +.075% +.1400%
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 2072 contracts from 371,743 all the way up to 373,815 with gold slightly up by $0.90 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 764 contracts for a loss of 7 contracts. We had 7 delivery notices served yesterday so we neither gained nor lost any contracts standing for the December contract month. The non active January contract month rose by 20 contracts up to 473. The next big delivery month is February and here the OI fell to 225,547 contracts for a loss of 945 contracts. The estimated volume today was poor at 88,467. The confirmed volume yesterday was very good at 181,283 although they had help from our high frequency traders. The comex now has no credibility and many investors have vanished from this crooked casino. Today we had 0 notices filed for nil oz .
And now for the wild silver comex results. Silver OI fell slightly by 729 contracts from 150,199 down to 149,470 even though silver was up by $0.17 yesterday.We are again losing more short covering from our bankers. The big December active contract month saw it’s OI fall by 79 contracts down to 101 contracts. We had 72 notices served upon on yesterday. Thus we lost 7 contracts or an additional 35,000 oz will not stand. The estimated volume today was awful at 20,894. The confirmed volume yesterday was huge at 51,041. We had 0 notices filed for nil oz today. It now seems that most of the volume at the comex is done off hours.
December initial standings
|Withdrawals from Dealers Inventory in oz||nil oz|
|Withdrawals from Customer Inventory in oz||1,478.99 oz (Brinks).|
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz||2,612.77 oz (Brinks,HSBC)|
|No of oz served (contracts) today||0 contracts(nil oz)|
|No of oz to be served (notices)||764 contracts (76,400 oz)|
|Total monthly oz gold served (contracts) so far this month||2648 contracts(264,800 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 0 dealer transactions
total dealer withdrawal: nil oz
we had 0 dealer deposit:
total dealer deposit: nil oz
we had 1 customer withdrawal
i) Out of Brinks: 1,478.99 oz
total customer withdrawal: 1,478.99 oz
we had 2 customer deposits:
i) Into Brinks: 683.71 oz
ii) Into HSBC; 1929.06 oz
total customer deposits; 2,612.77 oz
We had 0 adjustments
Today, 0 notice 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 0 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 (2648) x 100 oz to which we add the difference between the OI for the front month of December (764) minus the # gold notices filed today (0) x 100 oz = 341,200 the amount of gold oz standing for the December contract month.
Thus the initial standings:
2641 (notices filed for the month x 100 oz) + (764) the number of OI notices for the front month of December served upon – (0) notices served today equals 341,200 oz or 10.612 tonnes
we neither gained nor lost any gold contracts standing today.
Total dealer inventory: 737,866.946 oz or 22.95 tonnes
Total gold inventory (dealer and customer) = 7.943 million oz. (247.06) tonnes)
Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 56 tonnes have been net transferred out. We will be watching this closely!
This initiates the month of December for gold.
And now for silver
December silver: initial standings
December silver: initial standings
|Withdrawals from Dealers Inventory||nil oz|
|Withdrawals from Customer Inventory||34,082.382 oz ( Delaware )|
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||50,824.67 oz (Brinks)|
|No of oz served (contracts)||0 contracts (nil oz)|
|No of oz to be served (notices)||101 contracts (505,000 oz)|
|Total monthly oz silver served (contracts)||2933 contracts (14,665,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month||1,594,966.8 oz|
|Total accumulative withdrawal of silver from the Customer inventory this month||6,682,293.5 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 1 customer withdrawals:
i) Out of Delaware: 34,082.382 oz
total customer withdrawal 34,082.382 oz
We had 1 customer deposit:
i) Into Brinks: 50,824.67 oz
total customer deposits: 50,824.67 oz
we had 0 adjustments
Total dealer inventory: 64.594 million oz
Total of all silver inventory (dealer and customer) 175.433 million oz.
The total number of notices filed today is represented by 0 contracts for nil 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 (2933) x 5,000 oz to which we add the difference between the total OI for the front month of December (101) minus (the number of notices filed today (0) x 5,000 oz = the total number of silver oz standing so far in November.
Thus: 2933 contracts x 5000 oz + (101) OI for the November contract month – 0 (the number of notices filed today) =15,170,000 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 18.2014: no change in inventory at the GLD/721.56 tonnes
Dec 17.2014: no change in inventory at the GLD/721.56 tones
Dec 16.2015 we lost 1.80 tonnes in tonnage at the GLD/721.56 tonnes
Dec 15.2014: we lost 2.39 tonnes of gold inventory at the GLD/Inventory at 723.36 tonnes
dec 12.2014: we had no change in gold inventory/GLD inventory 725.75 tonnes
Dec 11.2014: we had another addition of .95 tonnes of gold inventory at the GLD/Inventory 725.75 tonnes
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 18 / we had no change in tonnage of inventory / 721.56 tonnes
inventory: 721.56 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 : 721.56 tonnes.
And now for silver:
Dec 18.2014: we lost 2.012 million oz of silver from the SLV vaults/inventory 338.997 million oz
Dec 17.2014: no change in silver inventory/SLV 341.009 million oz
Dec 16.2014/ no change in silver inventory/SLV 341.009 million oz
Dec 15.2014: we lost 1.341 million oz of silver at the SLV/Inventory 341.009 million oz
Dec 12.2014 no change in silver inventory at the SLV/Inventory at 342.35 million oz
Dec 11.2014: we lost 2.873 million oz of silver inventory at the SLV/Inventory 342.35 million oz
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
December 18/2014/ we lost 2.012 million oz of silver inventory at the SLV/inventory
registers: 338.997 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 9.7% percent to NAV in usa funds and Negative 9.6 % to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.8%
Percentage of fund in silver:37.7.%
( December 18/2014)
2. Sprott silver fund (PSLV): Premium to NAV falls to positive 0.03%!!!!! NAV (Dec 18/2014)
3. Sprott gold fund (PHYS): premium to NAV falls to negative -0.53% to NAV(Dec 18/2014)
Note: Sprott silver trust back into positive territory at 0.03%.
Sprott physical gold trust is back in negative territory at -0.53%
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 Thursday morning:
(courtesy Mark O’Byrne/Goldcore)
Is Russia Being Driven Into the Arms of China?
The “isolation of Russia” idea is one which has been receiving a lot of traction of late. Russia’s recent economic woes have sometimes been covered with barely contained glee despite the hardships that average Russians may have to endure if the rouble continues to collapse … not to mention the inevitable geo-political backlash.
Russia has become isolated from its western neighbours on account of the putsch in Ukraine which led to the predominantly ethnically Russian Crimea seceding from Kiev through a democratic process.
European governments slavishly adhere to U.S. imposed sanctions. So from a western elite point of view, Russia is indeed isolated.
Whether antagonising Russia is damaging to Russia is a moot point. Certainly in Russia’s current straits the bankrupt west is in no position to help. European farmers are suffering from loss of export markets while Europe is still dependent on Russian natural gas.
So how “isolated” is Russia in reality?
Firstly, it is worth pointing out the obvious fact that countries do not have “friends”, just “interests”. Representatives of countries may have good relationships but these are built on expediency – not friendship.
So while there may be a great deal of distrust between the major powers of Asia these issues are being overlooked for now because it is expedient. Standards of living across the board have been rising in Asia for twenty years. It is in no countries interest to enter into conflict.
By contrast, the west – led by the U.S. – has seen a remarkable fall in living standards over the same period. The bubble, prior to the 2008 crash, was not a golden-age for families as increasingly both parents were forced to work to just afford a roof over their heads.
The relationship between Russia and China has morphed with these changes. Russia supplies China with hi-tech military hardware. Russia has negotiated two major natural gas deals with China in the last year. China expects to double it’s gas usage by 2030. So from a Chinese point of view it is certainly expedient to keep Russia on side.
China may soon come to Russia’s aid and provide liquidity according to the South China Morning Post:
“Russia could fall back on its 150 billion yuan (HK$189.8 billion) currency swap agreement with China if the rouble continues to plunge”.
If the swap deal is activated for this purpose, it would mark the first time China is called upon to use its currency to bail out another currency in crisis. The deal was signed by the two central banks in October, when Premier Li Keqiang visited Russia.
“Russia badly needs liquidity support and the swap line could be an ideal tool,” said Bank of Communications chief economist, Lian Ping.
The swap allows the central banks to directly buy yuan and rouble in the two currencies, rather than via the U.S .dollar.
This highlights the long-term error of the west – pushing Russia into China’s sphere of influence.
For the first time in fifty years a country may be bailed out using a currency other than the dollar.
This, possibly, paves the way for the Chinese Yuan to assume the role of a global reserve currency.
Also, it is worth noting that a weak Russia is not in China’s military interest at this time of simmering geopolitical tensions.
In the event of problems in the international monetary system – sellers of tangible wealth will want payment in a currency with some intrinsic value.
GoldCore Insight: Currency Wars: Bye, Bye Petrodollar – Buy, Buy Gold
Today’s AM fix was USD 1,210.75, EUR 982.03 and GBP 773.64 per ounce.
Yesterday’s AM fix was USD 1,199.00, EUR 962.36 and GBP 763.16 per ounce.
Spot gold fell $7.40 or 0.62% to $1,188.90 per ounce yesterday and silver rose $0.03 or 0.19% to $15.77 per ounce.
Spot gold in London rose over 2% after the Federal Reserve stated yesterday that it would take a patient approach towards increasing interest rates. This led to rising stock and commodities markets and hurt the U.S. dollar.
Gold in Singapore rose nearly 1% to $1,202.08 an ounce, and traded at $1,201.11 at 2:49 p.m. in Singapore, noted Bloomberg.
U.S. Fed chief, Janet Yellen, said the Fed was not likely to raise rates for “at least a couple of meetings”, this has market participants focused on April 2015.
In London, spot gold climbed 1.8% to $1,209.46 an ounce after 1040 GMT.
Comex U.S. February gold was up 1.3% at $1,209.90 an ounce. Spot silver gained 3.2% to $16.19 an ounce.
Spot platinum was up 2.2% at $1,212.60 an ounce, while spot palladium rose 1.8% to $789.63 an ounce.
Get Breaking News and Updates On Gold Here
Switzerland imposes negative interest rates to keep franc from rising
Interest Rate Cut Shocks Swiss Franc Lower
By Jemima Kelly
Thursday, December 18, 2014
LONDON — The Swiss franc hit a 28-month trough against the dollar and fell against the euro on Thursday after the Swiss National Bank said it would introduce negative interest rates to stop further currency appreciation.
In a surprise statement, the SNB said it would impose an interest rate of -0.25 percent on some large deposits held by investors in Swiss francs, as it seeks to discourage buying of the currency as a safe haven.
SNB Chairman Thomas Jordan also confirmed on Thursday that the bank had intervened in foreign exchange markets, in another effort to defend the central bank’s three-year-old cap of 1.20 francs per euro. …
… For the remainder of the report:
Koos Jansen delves into the decision by Australia to audit the gold at the Bank of England. How on earth could there be something wrong with England’s figure of 80 tonnes for Australia?.
(courtesy Koos Jansen)
Written by Bullion Baron:
Two years ago the news was publicly broken on the BullionBaron.com website that 99.9% of Australia’s Gold reserves are stored at the Bank of England in the United Kingdom. Attempts by another blogger, interested in the whereabouts of Australia’s Gold, had been rejected by the Reserve Bank of Australia (RBA) only several months earlier, “The Bank does not publish the location of its gold reserves.”
Decisions like this don’t happen in a black hole. Something changed the RBA’s mind, between August 2012 and December 2012, on making the location of Australia’s Gold reserves public.
From my observation, the RBA tends to follow the lead of other Central Banks, so the decision to release information on the location of Australia’s Gold may have been a result of Germany’s Central Bank (Deutsche Bundesbank) deciding to do so in October 2012 (interview containing the information originally released is no longer published on the site, butavailable via Web Archive). Only a month later, in November 2012, the Austrian Central Bank released the location of their Gold reserves, revealing that 80% resided in the UK, 3% in Switzerland and 17% in Austria. Cue the RBA feeling comfortable to release the location details of Australia’s Gold around 1 month later.
A recent experience of mine with the RBA further highlighted their desire to follow in the footsteps of other Central Banks rather than to think for themselves. A Freedom Of Information (FOI) request I made for the Gold bar list was initially rejected, but after lodging an appeal with the Office of the Australian Information Commissioner (OIAC), highlighting that the United States published a list of their Gold bars details (sans the serial number), the RBA decided to follow suit (RBA Gold Bar Details).
Earlier this year I spotted a line in the RBA’s 2014 Annual Report indicating an audit had been performed (not something I have seen mentioned in previous years):
Gold holdings at the end of June 2014 were around 80 tonnes, unchanged from the previous year. Gold prices rose by 9 per cent in Australian dollar terms in 2013/14, increasing the value of the Reserve Bank’s holdings of gold by around $0.3 billion to $3.6 billion. Activity in the gold lending market remained subdued, with the Bank having only 1 tonne of gold on loan during the year. Income earned on that loan amounted to $0.2 million. During the year in review, the Bank audited its gold holdings, including that portion held in safe custody at the Bank of England.
A question posed by email to the RBA earlier in the year suggested that RBA officials had performed the audit themselves. I decided to lodge another FOI request.
“I request that a copy of the following documents be provided to me: All documents pertaining to the audit of the RBA’s gold holdings performed during the 2013/14 financial year, as was specified in the ‘Operations in Financial Markets’ section of the Reserve Bank of Australia Annual Report 2014 (“During the year in review, the Bank audited its gold holdings”).”
Two months later (decision on the documents was delayed due to consultation with the Bank of England) I received the following list of documents that would be provided (on payment of fees, which were reduced from an original quote due to the small number of documents that could be released):
And today the documents arrived. Here’s what we know…
In February 2013, the Assistant Governor (Financial Markets) requested the Audit Department to include in its audit program a review of the Bank’s gold holdings at the Bank of England (BoE). The Chief Representative in EU approached the BoE to facilitate this review and in late May 2013 initial planning discussions were held with BoE staff with tentative agreement that the review would take place in September 2013.
The audit included:
- An on-site physical verification on September 23, 2013, which will take 4-5 days to complete, assuming two RBA auditors are involved given the proposed scope.
- Inspecting a sample of RBA Gold bars (list to be provided in advance), including checking the details of these bars against the Bank’s inventory list and weighing of the bars by BoE staff using their equipment.
- Randomly selecting additional Gold bars from the inventory list and observing these bars being located and retrieved from their vault (plus verifying the details and weighing them).
- Obtain a high level understanding of the BoE gold safe custody service.
- Continuing discussions for a comprehensive safe custody agreement between the RBA and BoE.
As the above document list shows, those relating to final audit results were not provided. I would assume the audit was successful, but no doubt that would be a highly contested opinion in the Gold blogosphere. The following reason was provided for denying access to the report:
Documents 10, 11 and 12 are drafts of the report prepared by the RBA’s Audit Department detailing the findings of the audit and document 13 is the final of that report.
Denial of access to these four documents in terms of s33(a)(iii) is appropriate because release of the information (which relates to procedures for the conduct of the audit with the BoE and the subsequent results) ‘would, or could reasonably be expected to, cause damage to’ the relationship between the RBA and the BoE. This belief is soundly held by us on the basis that we are aware that the BoE provides safe custody services not only to the RBA, but also to other central banks around the world. Disclosure of the information in these documents could damage the relationship between the BoE and its other central bank clients, and by extension (as the source of the information), the relationship between the BoE and RBA. As foreshadowed to you in earlier correspondence, we consulted with the BoE in relation to these documents and they affirmed the views we held regarding the damage that would be done to the relationship between the BoE and RBA if the redacted information were disclosed.
Denial of access to these four documents is also appropriate in terms of s47E(a) (‘disclosure would, or could be reasonably expected to, prejudice the effectiveness of procedures or methods for the conduct of tests, examinations or audits’ by the Bank) and (b) (‘disclosure would, or could be reasonably expected to, prejudice the attainment of the objects of particular tests, examinations or audits conducted, or to be conducted’, by the Bank). The documents in question concern the ‘procedures and methods’ within both the RBA and the BoE regarding the conduct of the physical check of a sample of gold bars (for the purpose of conducting the audit). Disclosure of this information would, of course, reveal those procedures and methods, and by logical extension render them less effective. Also, the ability of the Bank to attain the objects of the audit (which is to reveal whether the Bank’s arrangements are robust and secure) would be prejudiced. These considerations apply to both the audit currently the subject of your FOI request and also any other audits undertaken by the RBA. A key requirement for undertaking a successful audit (of any aspect of the RBA’s work) is that there is as little opportunity as possible for individuals to take steps to predict what an auditor may choose to focus on, and/or how they will conduct the audit. It is self-evident that if such procedures and methods are revealed, then the opportunity to circumvent them is greatly increased. As s47E is a public interest conditional exemption, I must take into account whether the giving of access is in the general public interest (in terms of s11A(5)). When deciding whether access is in the public interest, I must take into account the following from s11B(3) and have noted my views in each case:
Section 11B(3) factors favouring access to the document in the public interest include whether access to the document would do any of the following:
(a) promote the objects of this Act (including all the matters set out in sections 3 and 3A); release would be contrary to some sections, particularly sections 2(a) and 3(3)
(b) inform debate on a matter of public importance; the Bank’s gold holdings, while important and of interest to some, are not a matter of public importance generating any level of debate.
(c) promote effective oversight of public expenditure; release of the information would not do this.
(d) allow a person to access his or her own personal information; the request is not seeking personal information.
Taking into account these factors, and the implications release of the information would have on the Bank’s audit processes, I have decided that it is clearly not in the public interest to disclose the information in these four documents (10, 11, 12 and 13). Disclosure of these documents would manifestly harm the public interest by way of reducing the ability of the RBA to successfully conduct audits and tests of its operations going forward.
The released documents (mostly a chain of various emails) also suggested the RBA has been invited back for another review in 12 months.
One interesting point from the documents; the Bank of England was emailing clients in June 2013 (those for whom they’re providing custodial services) inviting them to audit samples of their Gold:
Given that the RBA has followed the lead of other countries to release reserve location details, perform audits and release (some) bar list details, it will be interesting to see whether they go further and follow the lead of the many countries now deciding to repatriate some or all of their Gold reserves…However discussions on the RBA audit were already well advanced at that time.
I’m sharing links and opinions daily on Twitter (@BullionBaron).
E-mail Koos Jansen on: email@example.com
The United States declared economic war on Russia. It is hard to pinpoint the why of the matter but in this author’s opinion it always comes back to US dollar dominance. Russia has made no secret of its disdain for the global pricing mechanism of oil. The chart below shows what matters in the pricing of oil and it has zero to do with shale miracles or over supply.
It is the dollar and only the dollar that matters in the pricing of oil with an exception being an act of nature.
Much like the gold market, supply and demand fundamentals are completely ignored as the pricing of gold revolves around the dollar. Countries such as Russia understand fully that this dynamic of dollar dominance leaves them very vulnerable to shocks. The same is true of all resource rich countries. While some of them see the US as an ally and go along with this, Saudi being the obvious one, the Russian’s have made it clear they want change. Make no mistake about it the Russian’s will get the change they desire.
The chart below shows the dollar against the Ruble. That chart is an act of economic war as the West has attacked the currency of a sovereign nation for UNECONOMIC reasons.
Let me explain the previous sentence. Russian debt to GDP is roughly 14%. Their debt to GDP is pristine. Japan’s is 227%, Greece 175%, Italy 132%, and the US 105%. Now can someone kindly explain why a currency would implode like the Ruble when their financial condition relative to the West and Japan looks like a Ferrari among a bunch of Ford Pintos? You could argue that they are highly dependent on oil. True, but so are other nations and are you certain oil will remain this low for an extended period?
The next chart is the dollar against the Kuwati Dinar, a nation wholly dependent on hydrocarbons. Certainly the dollar has rallied against it but that chart is not even a faint resemblance to the Ruble.
Now, how is the US able to pull this off without a hitch? Ladies and Gentlemen may I show you why the Saudis are NEVER spoken ill of in the US no matter what they do. The Saudi Riyal is PEGGED to the dollar at 3.75 to 1. This occurred in 1986. Why is this crucial? Simply compare the chart below to that of the Ruble and you have your answer.
Isn’t it odd that you don’t hear anyone talking or writing about challenging this currency peg?
And finally in March of this year, Louis Woodhill began a column for Forbes with the following:
“How should the U.S. deal with Vladimir Putin’s invasion of the Ukraine? We should do to Russia what Ronald Reagan did to its predecessor, the old Soviet Union. We should drive them into bankruptcy by stabilizing the U.S. dollar.”
Simple question…who is we?
Written by: It’s a Mystery
We brought this article to your attention a few days ago. It is worth repeating..
(courtesy Koos Jansen/Investcafe.ru/In Gold we Trust)
Very few people understand what Putin is doing at the moment. And almost no one understands what he will do in the future.
No matter how strange it may seem, but right now, Putin is selling Russian oil and gas only for physical gold.
Putin is not shouting about it all over the world. And of course, he still accepts US dollars as an intermediate means of payment. But he immediately exchanges all these dollars obtained from the sale of oil and gas for physical gold!
To understand this, it is enough to look at the dynamics of growth of gold reserves of Russia and to compare this data with foreign exchange earnings of the RF coming from the sale of oil and gas over the same period.
Moreover, in the third quarter the purchases by Russia of physical gold are at an all-time high, record levels. In the third quarter of this year, Russia had purchased an incredible amount of gold in the amount of 55 tons. It’s more than all the central banks of all countries of the world combined (according to official data)!
In total, the central banks of all countries of the world have purchased 93 tons of the precious metal in the third quarter of 2014. It was the 15th consecutive quarter of net purchases of gold by Central banks. Of the 93 tonnes of gold purchases by central banks around the world during this period, the staggering volume of purchases – of 55 tons – belongs to Russia.
Not so long ago, British scientists have successfully come to the same conclusion, as was published in the Conclusion of the U.S. Geological survey a few years ago. Namely: Europe will not be able to survive without energy supply from Russia. Translated from English to any other language in the world it means: “The world will not be able to survive if oil and gas from Russia is subtracted from the global balance of energy supply”.
Thus, the Western world, built on the hegemony of the petrodollar, is in a catastrophic situation. In which it cannot survive without oil and gas supplies from Russia. And Russia is now ready to sell its oil and gas to the West only in exchange for physical gold! The twist of Putin’s game is that the mechanism for the sale of Russian energy to the West only for gold now works regardless of whether the West agrees to pay for Russian oil and gas with its artificially cheap gold, or not.
Since Russia has a constant flow of dollars from the sale of oil and gas, it will be able to convert these dollars to buy gold at current gold prices, depressed by all means by the West. This equates gold price, which had been artificially and meticulously lowered by the Fed and ESF many time…via artificially inflated purchasing power of the dollar through market manipulation.
Interesting fact: The suppression of gold prices by the special department of US Government – ESF (Exchange Stabilization Fund) – with the aim of stabilizing the dollar has been made into a law in the United States.
In the financial world it is (generally) accepted as a given that gold is anti-dollar…i.e. the gold price runs inverse to value of the dollar.
- In 1971, US President Richard Nixon closed the ‘gold window’, ending the free exchange of dollars for gold, guaranteed by the US in 1944 at Bretton Woods.
- In 2014, Russian President Vladimir Putin has reopened the ‘gold window’, without asking Washington’s permission.
Right now the West spends much of its efforts and resources to suppress the prices of gold and oil. Thereby, on the one hand to distort the existing economic reality in favor of the US dollar …and on the other hand, to destroy the Russian economy, refusing to play the role of obedient vassal of the West.
Today assets such as gold and oil look proportionally weakened and excessively undervalued against the US dollar. It is a consequence of the enormous economic effort on the part of the West.
And now Putin sells Russian energy resources in exchange for these US dollars, artificially propped by the efforts of the West. With these dollar proceeds Putin immediately buys gold, artificially devalued against the U.S. dollar by the efforts of the West itself!
There is another interesting element in Putin’s game. It’s Russian uranium. Every sixth light bulb in the USA depends on its supply, which Russia sells to the US too…for dollars.
Thus, in exchange for Russian oil, gas and uranium, the West pays Russia with dollars, purchasing power of which is artificially inflated against oil and gold by the efforts (manipulations) of the West. However, Putin uses these dollars only to withdraw physical gold from the West in exchange at a price denominated in US dollars, artificially lowered by the same West.
This truly brilliant economic combination by Putin puts the West led by the United States in a position of a snake, aggressively and diligently devouring its own tail.
The idea of this economic golden trap for the West is probably not authored by Putin himself. Most likely it was the idea of Putin’s Advisor for Economic Affairs – Dr. Sergey Glazyev. Otherwise, why seemingly not involved in business bureaucrat Glazyev, along with many Russian businessmen, was personally included by Washington on the sanction list? The idea of an economist, Dr. Glazyev was brilliantly executed by Putin…but with full endorsement from his Chinese colleague – XI Jinping.
Especially interesting in this context looks the November statement of the first Deputy Chairman of Central Bank of Russia Ksenia Yudaeva, which stressed that the CBR can use the gold from its reserves to pay for imports, if need be. It is obvious that in terms of sanctions by the Western world, this statement is addressed to the BRICS countries, and first of all China. For China, Russia’s willingness to pay for goods with Western gold is very convenient. And here’s why:
China recently announced that it will cease to increase its gold and currency reserves denominated in US dollars.Considering the growing trade deficit between the US and China (the current difference is five times in favor of China), then this statement translated from the financial language reads: “China stops selling their goods for dollars”. The world’s media chose not to notice this grandest in the recent monetary historic event . The issue is not that China literally refuses to sell its goods for US dollars. China, of course, will continue to accept US dollars as an intermediate means of payment for its goods. But, having taken dollars, China will immediately get rid of them and replace with something else in the structure of its gold and currency reserves. Otherwise the statement made by the monetary authorities of China loses its meaning: “We are stopping the increase of our gold and currency reserves, denominated in US dollars.” That is,China will no longer buy United States Treasury bonds for dollars earned from trade with any countries, as they did this before.
Thus, China will replace all the dollars that it will receive for its goods not only from the US but from all over the world with something else not to increase their gold currency reserves, denominated in US dollars. And here is an interesting question: what will China replace all the trade dollars with? What currency or an asset? Analysis of the current monetary policy of China shows that most likely the dollars coming from trade, or a substantial chunk of them, China will quietly replace and de facto is already replacing with Gold.
In this aspect, the solitaire of Russian-Chinese relations is extremely successful for Moscow and Beijing. Russia buys goods from China directly for gold at its current price. While China buys Russian energy resources for gold at its current price. At this Russian-Chinese festival of life there is a place for everything: Chinese goods, Russian energy resources, and gold – as a means of mutual payment. Only the US dollar has no place at this festival of life. And this is not surprising. Because the US dollar is not a Chinese product, nor a Russian energy resource. It is only an intermediate financial instrument of settlement – and an unnecessary intermediary. And it is customary to exclude unnecessary intermediaries from the interaction of two independent business partners.
It should be noted separately that the global market for physical gold is extremely small relative to the world market for physical oil supplies. And especially the world market for physical gold is microscopic compared to the entirety of world markets for physical delivery of oil, gas, uranium and goods.
Emphasis on the phrase “physical gold” is made because in exchange for its physical, not ‘paper’ energy resources, Russia is now withdrawing gold from the West, but only in its physical, not paper form. China accomplishes this by acquiring from the West the artificially devalued physical gold as a payment for physical delivery of real products to the West.
The West hopes that Russia and China will accept as payment for their energy resources and goods…the “shitcoin” or so-called “paper gold” of various kinds also did not materialize. Russia and China are only interested in real gold and only the physical metal as a final means of payment.
For reference: the turnover of the market of paper gold, only of gold futures, is estimated at $360 billion per month. But physical delivery of gold is only for $280 million a month. This equates to a ratio of trade of paper gold versus physical gold to 1000 to 1.
Using the mechanism of active withdrawal from the market of one artificially lowered by the West financial asset (gold) in exchange for another artificially inflated by the West financial asset (USD), Putin has thereby started the countdown to the end of the world hegemony of petrodollar. Thus, Putin has put the West in a deadlock of the absence of any positive economic prospects.
The West can spend as much of its efforts and resources to artificially increase the purchasing power of the dollar, lower oil prices and artificially lower the purchasing power of gold. The problem of the West is that the stocks of physical gold in possession of the West are not unlimited. Therefore, the more the West devalues oil and gold against the US dollar, the faster it loses devaluing Gold from its not infinite reserves.
In this brilliantly played by Putin economic combination, physical gold from the reserves of the West is rapidly flowing to Russia, China, Brazil, Kazakhstan and India (i.e. the BRICS countries). At the current rate of reduction of reserves of physical gold, the West simply does not have the time to do anything against Putin’s Russia until the collapse of the entire Western petrodollar world. In chess the situation in which Putin has put the West, led by the US, is called “time trouble”.
The Western world has never faced such economic events and phenomena that are happening right now. The former USSR rapidly sold gold during the fall of oil prices. Today, Russia rapidly buys gold during the fall in oil prices. Thus, Russia poses a real threat to the American model of petrodollar world domination.
The main principle of world petrodollar model is allowing Western countries led by the United States to live at the expense of the labor and resources of other countries…based on the role of the US currency, dominant in the global monetary system (GMS) . The role of the US dollar in the GMS is that it is the ultimate means of payment. This means that the national currency of the United States in the structure of the GMS is the ultimate asset accumulator, to exchange which to any other asset does not make sense.
Led by Russia and China, what the BRICS are doing now is actually changing the role and status of the US dollar in the global monetary system. From the ultimate means of payment and asset accumulation, the national currency of the USA, by the joint actions of Moscow and Beijing is turned into only an intermediate means of payment. Intended only to exchange this interim payment for another and the ultimate financial asset – gold. Thus, the US dollar actually loses its role as the ultimate means of payment and asset accumulation, yielding both of those roles to another recognized, denationalized and depoliticized monetary asset – GOLD!
Traditionally, the West has used two methods to eliminate the threat to the hegemony of petrodollar model in the world and the consequent excessive privileges for the West:
One of these methods – colored revolutions. The second method, which is usually applied by the West, if the first fails – military aggression and bombing.
But in Russia’s case both of these methods are either impossible or unacceptable for the West.
Because, firstly, the population of Russia, unlike people in many other countries, does not wish to exchange their freedom and the future of their children for Western kielbasa (meat sausage). This is evident from the record ratings of Putin, regularly published by the leading Western rating agencies. Personal friendship of Washington protégé Navalny with Senator McCain played for him and Washington a very negative role. Having learned this fact from the media, 98% of the Russian population now perceive Navalny only as a vassal of Washington and a traitor to Russia’s national interests. Therefore Western professionals, who have not yet lost their mind, cannot dream about any color revolution in Russia.
As for the second traditional Western way of direct military aggression, Russia is certainly not Yugoslavia, not Iraq nor Libya. In any non-nuclear military operation against Russia, in the territory of Russia, the West led by the US is doomed to defeat. And the generals in the Pentagon exercising real leadership of NATO forces are aware of this. Similarly hopeless is a nuclear war against Russia, including the concept of so-called “preventive disarming nuclear strike”. NATO is simply not technically able to strike a blow that would completely disarm the nuclear potential of Russia in all its many manifestations. A massive nuclear retaliatory strike on the enemy or a pool of enemies would be inevitable. And its total capacity will be enough for survivors to envy the dead. That is, an exchange of nuclear strikes with a country like Russia is not a solution to the looming problem of the collapse of a petrodollar world. It is in the best case, a final chord and the last point in the history of its existence. In the worst case – a nuclear winter and the demise of all life on the planet, except for the bacteria mutated from radiation.
The Western economic establishment can see and understand the essence of the situation. Leading Western economists are certainly aware of the severity of the predicament and hopelessness of the situation the Western world finds itself in, in Putin’s economic gold trap. After all, since the Bretton Woods agreements, we all know the Golden rule:“Who has more gold sets the rules.” But everyone in the West is silent about it. Silent because no one knows now how to get out of this situation.
If you explain to the Western public all the details of the looming economic disaster, the public will ask the supporters of a petrodollar world the most horrific questions, which will sound like this:
– How long will the West be able to buy oil and gas from Russia in exchange for physical gold?
– And what will happen to the US petrodollar after the West runs out of physical gold to pay for Russian oil, gas and uranium, as well as to pay for Chinese goods?
No one in the west today can answer these seemingly simple questions.
And this is called “Checkmate”, ladies and gentlemen. The game is over.
The above article was translated by Kristina Rus
E-mail Koos Jansen on: firstname.lastname@example.org
Russia Has Begun Selling Its Gold, According To SocGen
A few days ago, we first reported a rumor that was floating around Wall Street desks, and which, according to some, was the “reason” that gold was being kept lower even as sovereign risk was exploding around the globe. The rumor was that Russia was selling its gold holdings:
This led to Bloomberg speculating, and us rhetorically asking, if “Putin’s next step will be to sell gold”
“Russia is at a critical juncture and given the sanctions placed upon them and the rapid decline in oil prices, they may be forced to dip into their gold reserves, if it happens it will push gold lower.” That is what, according to some people Bloomberg has quoted, is in the cards.
While some suggest the accumulation was “tradition” it is still nonetheless an impressive aggregation of the barbarous relic:
So given the efforts to build this gold-backing for their nation’s currency, do we really expect Putin to now dump his physical: or perhaps more strategically suggest a true gold-backed currency and jawbone the currency that way?
So what is the truth? Well, we won’t for sure until the next official report by the Central Bank of Russia hits the IMF database, but in the menatime, SocGen just reported that the selling may have started:
Looking at the correlation between gold and oil prices, the chart above illustrates that both commodities were moving closely in tandem over the July to September period. However, this link was broken in early October when gold embarked upon the new rally on weaker US dollar and some physical support, while oil prices continued to slide. The rally, nonetheless, proved to be short lived, as gold returned to its downtrend after hitting the $1,250 level on 21 October, and continued to move down, along with oil, for the remainder of the month.
Starting from November we have seen gold and oil prices moving in opposite directions again. As we mentioned earlier, oil prices came under significant pressure on concerns about a growing global oil supply glut. On the contrary, gold recovered some of its earlier losses, supported by fresh buying interest in India on the news that the Reserve Bank of India (RBI) was reviewing gold import restrictions that were introduced last year. Towards the end of November, the RBI surprised the markets by announcing the withdrawal of the 80:20 rule, which saw gold imports surging to 150 tonnes that month, according to the latest statistics from the Indian Ministry of Commerce and Industry. In addition, worries over the potential impact of stronger US dollar on the global economy spurred some safe-haven buying.
It is not surprising that Russia has been tackling its financial problems by selling the gold they have been accumulating. According to the IMF data this year, one of the world’s largest oil exporters acquired 115 tonnes in the January to September period, and added another 18.9 tonnes to their reserves in October. Russia has been purchasing the yellow metal at a faster pace this year, taking advantage of lower gold prices and, perhaps, preparing for the possibility of a long-lasting restrained relationship with the West and economic downturn. It appears possible that the Central Bank of Russia has started to sell off some of its gold reserves in December, with some sources reporting that official gold reserves dropped by $4.3 billion in the first week of the month.
Of course, it should be noted that SocGen and its “sources” have a conflict: in an indirect way, none other than SocGen is suddenly very interested in Russia stabilizing its economy because as we wrote before, “Russia Contagion Spreads To European Banks : French SocGen, Austrian Raiffeisen Plummet” which also sent SocGen’s default risk higher in recent days. So if all it will take to stabilize the RUB sell off, reduce fears of Russian contagion, and halt the selloff of SocGen stocks is a “source” reporting what may or may not be the case, so be it.
In any event, keep a close eye on the next update of Russian official gold holdings: it may well be the next big story of where gold is headed and, if true, an even more important question will be who is Russia selling its gold to.
And now for the important paper stories for today:
Early Thursday morning trading from Europe/Asia
1. Stocks up on major Asian bourses as the yen continues to rise to 118.70, a rise of 4 basis points.
1b Chinese yuan vs USA dollar/ yuan weakens terribly to 6.2157
2 Nikkei up 390 points or 2.32%
3. Europe stocks all up /Euro down/ USA dollar index up to 89.09/
3b Japan 10 year yield at .36% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 116.25
3c Nikkei now above 17,000
3e The USA/Yen rate just above the 118 barrier
3fOil: WTI 57.71 Brent: 62.72 /all eyes are focusing on oil prices. This should cause major defaults.
3g/ Gold up/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 rises this morning for both WTI and Brent/
3k Switzerland joins the EU with negative interest rates (NIRP)
3l Obama passes lethal aid bill to provide direct aid to the Ukrainians/also passes more sanctions against Putin.
3m Gold at $1206 dollars/ Silver: $16.13
3n USA vs Russian rouble: ( Russian rouble up in value) 61.13!!!!!! Russian currency stabilizies
3o First round of Greek Presidential elections/needs 180 votes but only 160 votes garnered for the candidate Dimas .
4. USA 10 yr treasury bond at 2.18% early this morning. Thirty year rate well below 3% (2.77%!!!!)
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid
(courtesy zero hedge)/your early morning trading from Asia and Europe)
Futures Soar On Swiss NIRP Stunner, “Considerably Patient” Fed
After drifting unchanged for much of the overnight session, US futures exploded higher shortly after thepreviously noted SNB’s NIRP announcement, which took place at 2 am eastern, which made it explicit that yet another banks will herd the bouncing dead cats right into new all time stock market highs, and following the European open, were carried even higher as the global “risk-on” momentum ignition algos woke up, spiking all recently depressed assets higher, including energy as Brent rose almost 3% despite Saudi Arabia’s oil minister Ali al-Naimi once again saying “it is difficult if not impossible” for OPEC and his kingdom to reduce output.
Paradoxically, the Saudi also agreed with Janet Yellen in stating that the oil price drop was “temporary” suggesting that the oil price shock is not supply-driven, but is merely a function of the financialization of oil as collateral and an asset. And now that the SNB has made it clear that it too will urge depositors to put their money into risk assets, preferably stocks but crude also works, crude is once again becoming disconnected from recent supply (and demand) concerns and rising higher, in the process taking energy equities (and junk bonds) higher with it.
Elsewhere overnight, Chinese stocks took a breather last night (the SHCOMP was basically unchanged) from the breakneck surge in recent weeks that has seen the Shanghai Composite rise from under 2500 to over 3000 in one month on hopes of even more imminent central bank intervention. Ironically this happened even as the central bank offered short-term loans to commercial lenders as the benchmark money-market rate jumped the most in 11 months (yes, another central bank intervention).
European equities followed suit from their US counterparts and trade firmly in the green in the aftermath of yesterday’s FOMC release, whereby the Fed decided not to fully remove the ‘considerable time pledge’. Despite some hawkish undertones that left the door open to a potential rate hike as early as 2015, equity markets trade in positive territory in a pullback of this week’s heavy losses, with Fed rate lift-off still not immediately on the cards. The strength in equities saw flows out of USTs late in the US session yesterday, although have since pulled off their worst levels while Bunds ebbed lower after the German IFO report. Albeit in-line with analyst exp. release, it failed to deliver the dreary outlook that perhaps the market was positioned for. Further upside for European equities has stemmed from the surprise decision by the SNB to cut their key interest rate, with the SNB head Jordan attributing the move to act as a deterrent to CHF inflows. Additionally, positive sentiment from a stock perspective has also been enhanced by a seemingly stabilization of Russian asset classes and a bounce in oil prices.
Whatever the reason behind the latest epic, V-shaped move in stocks, US equity futures are now some 70 points higher from where they were just 48 hours ago, having recouped a week’s worth of losses in 2 days, and are on route to recovering virtually all losses incurred since the first week of December. And while one can debate if the energy tumble is supply or demand driven, one thing is certain: markets are about to do what they do best – completely ignore yet another warning signal that not all is well. And why not: after all central banks will always be there to nudge and bail anyone out.
And while macro fundamentals remain completely irrelevant in a world where “markets” are purely the plaything of central banks, looking ahead algos will respond to flashing red headlines from US weekly jobs data, services PMI, Philadelphia Fed business outlook and EIA natural gas storage change
Bulletin headline Summary
- European equities follow suit from the US and enter the North American open in the green.
- SNB surprises markets by introducing negative rates in an unscheduled release.
- Looking ahead, attention turns towards the release of the US weekly jobs data, services PMI, Philadelphia Fed business outlook and EIA natural gas storage change
- Treasuries decline amid global surge in stocks and other risk assets after Fed yesterday pledged patience on raising rates; volumes may decline as Christmas holiday approaches.
- Putin said Russia shouldn’t waste currency reserves protecting the ruble as the country braces for a recession brought on by the collapse of the oil price and sanctions over the Ukraine conflict
- Swiss National Bank imposed the country’s first negative deposit rate since the 1970s as the Russian financial crisis and the threat of further euro-zone stimulus heaped pressure on the franc
- As Draghi signals he’ll override German-led concerns on government bond purchases if needed, the ECB is under attack in Germany amid concern that central bank is taking risks that the Bundesbank would never tolerate
- China’s central bank offered short-term loans to commercial lenders as the benchmark money-market rate jumped the most in 11 months
- China new-home prices fell y/y by the most in 2014 last month in Beijing, Shanghai, Guangzhou and Shenzhen, according to govt data released today.
- China is aiming to purge most foreign technology from banks, the military, state-owned enterprises and key government agencies by 2020, stepping up efforts to shift to Chinese suppliers, according to people familiar with the effort
- China is becoming more willing to let the yuan depreciate modestly and add flexibility to the currency’s trading, WSJ reports, citing unidentified Chinese officials and others familiar with China’s policy making
- German business confidence rose for a second month, with the Ifo institute’s index advancing to 105.5 in December from 104.7 in November, when it rose for the first time in seven months
- U.K. retail sales rose more than economists forecast in November as Black Friday boosted sales of electrical appliances and household goods
- Obese workers may claim discrimination in the work place, the European Union’s highest court said in a case that will pave the way for severely fat people to be protected as disabled
- Sony Pictures’ decision to let Seth Rogen make “The Interview,” a comedy about a plot to kill a head of state will potentially cost the studio hundreds of millions of dollars after a devastating cyber- attack linked to North Korea; Sony canceled to film’s release yesterday
- Sovereign yields mixed. Asian, European stocks, U.S. equity-index futures surge. Brent crude, gold and copper gain
In FX markets, USD strength has dictated the state of play in the wake of the FOMC decision, with the USD-index pulling away from its recent lows and now remains in favour heading into the year-end. This initially saw USD out-muscle its major counterparts, although has since comes off its best levels. CHF has since pared some off its post-SNB weakness, with participants booking profits on earlier gains in EUR/CHF, while GBP benefited in a fast-money move from a particularly strong UK retail sales report (ex-auto M/M 1.7% vs Exp. 0.3%). Elsewhere, NZD has also modestly recovered from overnight losses stemming from a largely mixed NZ GDP report.
WTI and Brent crude futures initially opened lower in a continuation of yesterday’s losses, although have since spiked higher amid no fundamental news, although from a technical perspective WTI and Brent broke back above USD 57/bbl and USD 62/bbl respectively. In metals markets, spot gold and silver remain at their post FOMC levels, while Copper prices traded relatively flat overnight to hold on to yesterday’s gains following mixed signals from the region after the China Beige Book suggested mild improvement in sales, profit and unemployment for H2, while the latest China property price data showed China New Home Prices declined at a faster pace. Additionally, this helped steel rebar bounce of 2-week lows.
* * *
DB’s Jim Reid concludes the recap as is customary
A big part of our outlook is that central banks still hold all the power in financial markets as they have done for several years. It was the Fed’s turn last night to demonstrate this as the S&P 500 (+2.04%) had its biggest day of the year. Net-net they probably gave something for both the doves and the hawks and a lot now seems to depend on whether inflation stays low or gravitates back towards 2%. If it’s the former then rates are unlikely to rise in 2015 and if it’s the latter then the Fed will want to raise rates. Overall the statement and press conference reflected a Fed confident they can start normalising soon but as ever they make this data dependant. If you’d have told me yesterday morning that the S&P was going to have its best day of the year I would have thought the meeting would have been more dovish than it actually was though.
Running through the statement itself, much of the focus was on the ‘considerable time’ language which, whilst not removed, was replaced with ‘patience’ in regards to timing of the first rate hike. The committee did however make an effort to note that they see this as consistent with the previous statement – perhaps as a way to try to minimize the market impact. Yellen followed this up in the Q&A shortly after by saying that ‘the timing of the initial rise in the fed funds target as well as the path for target thereafter are contingent on economic conditions’. More pressing was perhaps the news that ‘it is unlikely to begin the normalization process for at least the next couple meetings’ which in effect rules out the January-March period but potentially brings April into play should we see encouraging signs from macro data through early next year. Dot points for the Fed Funds rate were lowered. The Median forecast now sits at 1.125% for 2015 (down from 1.375%) rising to 2.5% in 2016, down from 2.875% in the previous forecast.
On inflation the message was generally mixed and difficult to argue either way for the doves or the hawks. The statement acknowledged that inflation continued to run below the long-run objective but did make a point to highlight the impact of lower energy prices on the headline. It was noted that market-based measures of inflation have declined further but survey measures on long-term expectations have remained unchanged. Hawks will argue for Yellen’s comments in her press conference that declines in oil prices will only have a transitory impact on inflation and that the committee expects inflation to still move gradually back towards 2% by 2016. Doves on the other hand however will look at the downgraded forecasts to the core reading to 1.2%-1.3% this year (from 1.5-1.7%) and 1-1.6% in 2015 (from 1.6%-1.9%).
There were some modestly more positive comments with regards to the economic picture. Specifically the statement mentioned that ‘economic activity is expanding at a moderate pace’ whilst also noting that the recent drop in oil prices is a net plus for the economy. GDP expectations have been kept relatively unchanged for 2015 and 2016 although the forecast for this year was narrowed to 2.3%-2.4% and revised up from the 2.0%-2.2% September projection. Labour market chatter was encouraging. The FOMC noted that labour market conditions had ‘improved further’ and that a range of indicators ‘suggests that underutilization of labour resources continues to diminish’. The unemployment rate forecast was notched modestly lower for 2015 to 5.2%-5.3% (from 5.4%-5.6%).
Both Fisher and Plosser joined Kocherlakota as dissenters. Plosser stated that the statement should not focus on the importance of time with regards to rate guidance whilst Fisher noted that improvement to the US economy has been quicker than expected and ahead of committee expectations. Kocherlakota – the lone dissenter in the October statement – noted ongoing low inflation and falling expectations as creating downside risks to the credibility of the 2% target.
It’s hard to say how much influence yesterday’s CPI print had on the statement. A decline in the headline to -0.3% mom (and below consensus of -0.1% mom) was largely as a result of a 3.8% drop in energy costs which lowered the annualized rate to +1.3% yoy from +1.7% yoy. The core reading on the other hand came in as expected at +0.1% mom. Energy prices are projected to fall further in December so downward surprises to the headline continue to be a risk.
Coming back to markets, as mentioned the S&P 500 closed firmer although bounced around post FOMC statement and then again during Yellen’s Q&A. The latter helped the index rally +1.2% into the close. Oil markets closed stronger with both WTI (+0.97%) and Brent (+1.95) firming to $56.47/bbl and $61.18/bbl respectively. Both grades traded some 5% higher intraday post-FOMC only to then pare those gains into the close. The flash-rally was enough to support energy stocks however, with the sector finishing +4.22%. Credit markets also firmed. CDX IG closed 7bps tighter whilst US HY energy names rallied 35bps in cash spread terms – the first day since December 5th that they have closed firmer. Treasuries bounced around with the changes in sentiment. Benchmark 10y yields closed 7.7bps higher at 2.136%. The Dollar closed firmer, the DXY ending +1.14%.
Before all this in Europe the Stoxx 600 firmed into the close to end +0.14% – driven by similar gains to energy names (+3.13%). 10y German yields closed relatively unchanged at 0.592% as the final CPI reading for the euro-area came in unchanged with the headline +0.3% yoy and the core at +0.7% yoy. Peripheral yields closed anywhere from 3-7bps tighter, supported by comments from the ECB’s Coeure who was quoted as saying that ‘there is a large consensus in the governing council to do more, and we are discussing now on what tools to use’. Just wrapping up the data yesterday, UK unemployment remained steady at 6.0% although the claimant count ticked down a notch to 2.7%.
Much of yesterday’s focus however was on Greece and Russia. Starting on the former, the results of the presidential election went largely as expected with Dimas – nominated by PM Samaras– gaining 160 votes (which included 5 from independent deputies) and well short of the 200 needed in the first two rounds. The result comes at the lower end of our resident expert George Saravelos’s range and is therefore something of a disappointment. The result means attention shifts to the second round on the 23rd and then a likely third round on the 29th when the number of votes needed drops to 180. Interestingly Greek assets closed firmer. The ASE finished +3.33% and Greek yields rallied across the curve – the 10y in particular tightening 29.7bps to 8.765%. Moving to Russia, the volatile swings in the ruble continue after a +9.31% rally yesterday to close at 61.59 versus the Dollar – bouncing off Tuesday’s all time lows. The move came about following an announcement from the Bank of Russia that they intend to support the banking sector through liquidity injections and looser capital requirements. The Dollar RTS index closed +14.16% whilst 10y hard currency yields tightened 49bps to 7.104%. Bank stocks rose significantly – Sberbank (+28.85%) and VTB Group (10.65%) both rallying in London trading. The moves also come before the anticipated press conference for Putin today.
Before we look at the day ahead, bourses in Asia are trading firmer as we got to print – following the lead from the strong US close. The Nikkei (+2.25%) and Hang Seng (+0.96%) are stronger, whilst Chinese equities have reversed earlier losses after reported new home prices dropped 3.7% yoy to mark the third straight decline with prices falling in 67 out of 70 cities. The CSI 300 and Shanghai composite are +0.69% and +0.67% respectively.
Looking ahead to today we kick off this morning in Europe with the German IFO and quickly follow up with retail sales in the UK. Later today we will also get construction output for the Euro-area as well as Italian trade data. In the US this afternoon, we start with the claims print and then quickly follow this up with flash composite and services PMI readings. We round out the releases with the Philadelphia Fed business outlook print and conference board leading index.
Now we have the 2nd financial unit to enter into the negative interest rates. That is you pay to put your money in the Swiss bank. This follows the ECB’s negative NIRP. The reason for the move stated was Russian billionaires parking their money in Switzerland. The SNB has now stated that they are not welcome!!
(courtesy zero hedge)
Swiss Central Bank Plunges Into NIRP, Sends Deposit Rates Negative, Scrambles Against Safe-Haven Capital Flight
Submitted by Tyler Durden on 12/18/2014 06:43 -0500
Everyone thought that any major monetary policy surprises and/or capital controls today would come from Putin during his annual press conference. Boy were they wrong: just after 2 am Eastern, none other than the Swiss National Bank joined the ranks of the ECB in scrambling to stem the wave of capital flight, not to mention the cost of money, when it announced it too would start charging customers for the privilege of holding cash in its banks, when it revealed a negative, -0.25% interest rate on sight deposits: a step which according to the SNB was critical in maintaining the 1.20 EURCHF floor.
The Swiss National Bank (SNB) is imposing an interest rate of –0.25% on sight deposit account balances at the SNB, with the aim of taking the three-month Libor into negative territory. It is thus expanding the target range for the three-month Libor to –0.75% to 0.25% and extending it to its usual width of 1 percentage point. Negative interest will be levied on balances exceeding a given exemption threshold.
The SNB reaffirms its commitment to the minimum exchange rate of CHF 1.20 per euro, and will continue to enforce it with the utmost determination. It remains the key instrument to avoid an undesirable tightening of monetary conditions resulting from a Swiss franc appreciation. Over the past few days, a number of factors have prompted increased demand for safe investments. The introduction of negative interest rates makes it less attractive to hold Swiss franc investments, and thereby supports the minimum exchange rate. The SNB is prepared to purchase foreign currency in unlimited quantities and to take further measures, if required.
The factors from the “past few days” in question that the SNB was envisioning to justify becoming the latest entrant to the NIRP monetary twilight zone: Russian capital flight. Per Bloomberg, “the SNB move follows Russia’s surprise interest-rate increase this week and hints at the investment pressures that resulted after that decision failed to stem a run on the ruble. Swiss officials acted as the turmoil, along with the imminent threat of quantitative easing from the ECB, kept the franc too close to its 1.20 per euro ceiling for comfort.”
“This is not the magic bullet, but will buy them time,” said Peter Rosenstreich, head of market strategy at Swissquote in Gland, Switzerland. “This will relieve pressure from the floor in the short term, but not in the long term.”
The franc weakened after the announcement, trading at 1.2045 per euro at 11:08 a.m. in Zurich. Against the dollar it fell to 97.82 centimes.
To be sure, Russia’s recent shocking rate hike to 17% was a factor in the Swiss decision. Then again to say that a few Russian billionaires took on the SNB and forced it to do a historic monetary policy move would be just a little bit naive. Surely, the reason for the capital flight had much more to do with the capital flight from “everywhere” as a result of the latest market turbulence which has seen a major flight out of risk assets and into fixed income assets, and also safe-haven currencies, at least until Janet Yellen’s “renormalization” statement yesterday which purely coinicdentally had both keywords sought for by algos:“considerable time” and “patient.”
What was also left unsaid is that the Swiss central bank is also worried about the pressure from the Eurozone as the ECB launches full-blown QE in 2015. And in a purely reflexive fashion, the SNB move also makes it that much more likely that the ECB itself will have to act even further, as central bank actions have now become a tit for tat exchange with other central banks in creeping global capital controls, even if nobody is willing to call it for what it is. One thing is clear: if and when the ECB does more, the SNB will again have no choice but to respond: as Bloomberg strategist Richard Jones writes “SNB’s decision today to introduce negative rates of -0.25% next month may be escalated if external factors like a large scale QE from ECB threatens the EUR/CHF floor, analysts say, adding that FX interventions will likely continue. Jan. 22 start date for SNB’s negative interest on sight deposits coincides with next ECB meeting, increasing the likelihood of QE announcement by the latter next month.”
In any event, at least the Swiss were kind enough to give the Russians an advance notice that their cash is not welcome in the country. After all Russian billionaires could have been merely “Cyprused”, all over again.
Finally, here is Goldman’s take on the SNB move:
Bottom line: The Governing Board of the SNB surprisingly announced this morning that it will introduce a negative rate of -0.25% on sight deposit account balances at the SNB. The SNB’s target range for the three-month Libor was also widened from 0.0% – +0.25% to -0.75% – +0.25%. In our view, today’s rate decision simply underlines the determination of the SNB to enforce the minimum exchange rate target for the CHF against the Euro.
1. This morning, the SNB surprisingly announced that, on January 22, it will introduce a negative interest rate of -25bp on reserve holdings from banks at the SNB, above a threshold of 20 times the minimum reserve requirement. The SNB’s target range for the three-month Libor was also widened from 0.0% – +0.25% to -0.75% – +0.25%. Over the last couple of days, the CHF has traded very close to the 1.20 level on the back of rising market volatility. The subsequent demand for safe investments attracted large capital inflows into Switzerland, eventually prompting the SNB to react.
2. According to the SNB, the measure is aimed at making investments into CHF less attractive. Although it is only banks that will have to pay the negative deposit rate, banks will pass on, to some extent at least, the negative rates to customers. It is noteworthy in that respect that some German banks – in response to the ECB’s negative rates – have also started charging some clients negative deposit rates.
3. It remains to be seen how effective this measure will be and the SNB will continue to rely on FX interventions to defend the minimum exchange rate. But the measure in any case shows the determination of the SNB to maintain the lower bound for the CHF against the Euro.
It looks like China is bailing out Russia but activating the swap lines authorized in October. This is why there is no need for Russia to sell her gold. Russia may send gold as collateral to China for its aid to Russia.
(courtesy zero hedge)
China Prepares To Bailout Russia
Submitted by Tyler Durden on 12/17/2014 23:17 -0500
Earlier this evening China’s State Administration of Foreign Exchange’s (SAFE) Wang Yungui noted “the impact of the Russian Ruble depreciation was unclear yet, and, as Bloomberg reported, “SAFE is closely watching Ruble’s depreciation and encouraging companies to hedge Ruble risks.” His comments also echoed the ongoing FX reform agenda aimed at increasing Yuan flexibility which The South China Morning Post then hinted in a story entitled “Russia may seek China help to deal with crisis,” which noted that Russia could fall back on its 150 billion yuan ($24 billion) currency swap agreement with China if the ruble continues to plunge, that was signed in October. Furthermore, two bankers close to the PBOC reportedly said the swap-line was meant to reduce the role of the US dollar if China and Russia need to help each other overcome a liquidity squeeze.
As Bloomberg reported, earlier in the evening, China’s Wang Yungui noted
- *CHINA IS CLOSELY WATCHING RUBLE’S DEPRECIATION: SAFE’S WANG
- *CHINA ENCOURAGES COS. TO HEDGE RUBLE RISKS, SAFE’S WANG SAYS
- *REAL IMPACT OF RUBLE DEPRECIATION UNCLEAR YET, SAFE’S WANG SAYS
Adding that China plans sweeping reforms to promote FX flexibility.
Russia could fall back on its 150 billion yuan (HK$189.8 billion) currency swap agreement with China if the rouble continues to plunge.
If the swap deal is activated for this purpose, it would mark the first time China is called upon to use its currency to bail out another currency in crisis. The deal was signed by the two central banks in October, when Premier Li Keqiang visited Russia.
“Russia badly needs liquidity support and the swap line could be an ideal tool,” said Bank of Communications chief economist Lian Ping.
The swap allows the central banks to directly buy yuan and rouble in the two currencies, rather than via the US dollar.
Two bankers close to the People’s Bank of China said it was meant to reduce the role of the US dollar if China and Russia need to help each other overcome a liquidity squeeze.
China has currency swap deals with more than 20 monetary authorities around the world. Swaps are generally used to settle trade.
“The yuan-rouble swap deal was not just a financial matter,” said Wang Feng, chairman of Shanghai-based private equity group Yinshu Capital. “It has political implications as it is a sign of mutual trust.”
The rouble has lost more than 50 per cent against the US dollar this year, pushing Russia to the brink of a currency crisis, though measures announced by the central bank helped it recover some ground yesterday.
Li Lifan, a researcher at the Shanghai Academy of Social Sciences, said the swap would not be enough for Russia even if it is used in its entirety. “The PBOC might agree to extend something like 15 billion yuan initially as a way of showing China’s commitment to Russia.”
* * *
…as if to assure all involved parties that there will be enough capital support on both sides, the PBOC released a surprising announcementthat the central banks of China and Russia signed a 3-year, 150 billion yuan bilateral local-currency swap deal today, according to a statement posted on PBOC website. Deal can be expanded if both parties agree, statement says. Deal aims to make bilateral trade and direct investment more convenient and promote economic development in 2 nations.
To be sure, some such as Bloomberg, are skeptical that the unprecedented pivot by Russia toward China as it shuns the west, will merely harm the Kremlin. Others, however, wonder: who will be left standing: Europe, with its chronic deficit of energy and reliance on Russia; or Russia, a country overflowing with natural resources, whose economy is currently underoing a dramatic and painful shift, as it scrambles to dissolve all linkages to the Petrodollar and face the Gas-O-Yuan?
* * *
Is ‘isolated’ Russia about to be bailed out by the world’s largest economy China?
Perhaps, they already started…
But then again – with the BRICS currencies all turmoiling… (ZAR -22% not shown)
The punchline, however, is that using bilateral swaps, the BRICS are effectively disintermediating themselves from a Fed and other “developed world” central-bank dominated world and will provide their own funding.
We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have apositive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements….The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures.
Incidentally, the role of the dollar in such a world is, well, nil.
For those who have forgotten who the BRICS are, aside from a droll acronym by a former Goldman banker, here is a reminder of the countries that make up 3 billion in population.
This is getting quite dangerous. Two important points;
1. Obama passed legislation for direct lethal aid to the Ukrainians, something that may cause Putin to enter the fray
2. Obama stated that he will sign the sanctions bill against Russia by the end of the week.
(courtesy zero hedge)
World Awaits Russian Response As Obama Makes “Lethal Aid” To Ukraine Legal
As we explained previously, quietly hidden within thehumanitarian-sounding “The Ukraine Freedom Support Act of 2014”, under the premise of enabling further sanctions on Russia, is the provision of “lethal aid” to Ukraine. Today, President Obama signed it into law…
- *OBAMA SIGNED RUSSIAN SANCTIONS BILL TODAY, but
- *OBAMA SAYS HE DOESN’T PLAN TO IMPOSE SANCTIONS UNDER NEW LAW
Because he knows full well that is not the important part.The “lethal-aid” aspect is a direct provocation to Russia.. and he knows exactly how Putin will respond.
* * *
As we reported over the weekend, in the tumult surrounding Citigroup’s annexation of Congress with the passage of the theatrically dramatic $303 trillion derivative quid-pro-$1.1 trillion spending quo, what most missed is that Congress also unanimously passed the The Ukraine Freedom Support Act of 2014, which not only expands Russian sanctions (read the details here) but far more impotantly, provides “lethal assistance to Ukraine’s military.” And as we explained, passage of this law is just the pretext some Russian legislators needed to push for a full-blown, preemptive military incursion in east-Ukraine.
“The decision of the US Senate is extremely dangerous. If it is supported by the House of Representatives and signed by their president, Russia must reply with adequate measures,” Mikhail Yemelyanov of the Fair Russia party told reporters on Friday.
“It is quite possible that we should return to the decision by our Upper House and give the Russian president an opportunity to use military force on Ukrainian territory preemptively. We should not wait until Ukraine is armed and becomes really dangerous,” the lawmaker stated.
Yemelyanov also noted that in his opinion the US Senate’s decision to arm Ukraine had revealed that Washington wasn’t interested in the de-escalation of the Ukrainian conflict. He then said that US actions gave him the impression they was seeking to turn Ukraine into some sort of an “international militant targeting the Russian Federation.”
“In a few years Ukraine will turn into a poor and hungry country with an anti-Russian government that will teach its population to hate Russia. They will be armed to the teeth and Ukraine and US reluctance to recognize the Russian Federation within its current borders would always provoke conflicts,” the MP said.
Furthermore, we asked if “this means that what was a lingering proxy cold civil war in east Ukraine between NATO-armed Ukraine troops and Russia-armed Separatists and local militias is about to escalate into a shooting precursor to something greater? There is still hope an all out escalation can be avoided” and we cited White House press secretary Joshn Earnest who last week said that “the administration hadn’t finished reviewing the language and isn’t ready to take a position on the legislation. He said the administration wants to ensure that the U.S. and its European allies are working together, that any sanctions are effective and that they minimize harm to U.S. and European companies. “This is delicate work,” Earnest said.”
Apparently, not delicate enough, and moments ago we got confirmation that the epic collapse in the USDRUB is just a jovial preview of the main event. To wit:
- OBAMA DOES INTEND TO SIGN RUSSIAN SANCTIONS LEGISLATION:EARNEST
- OBAMA LIKELY TO SIGN SANCTIONS BILL BEFORE END OF WEEK: EARNEST
And with that, US “lethal aid” will shortly begin arriving in Kiev, which in turn will be just the pretext needed by Sergey Lavrov and the Kremlin to escalate the recent events in Russia as a direct attack by the West, and to demand retaliation against a US president who “does not reason” as the Russian media will appeal to the population in an attempt to “rally round the flag“, and as a result Russian tanks may have no choice but to enter the separatist territories in East Ukraine.
What the western, and certainly NATO, response at that point will be, is far beyond our meager prediction skills.
Mr Putin is one angry fellow:
He responds to reporters in a 3 1/2 hour televised report”
(courtesy zero hedge)
Putin Defiant, Lashes Out At West, Tells Russians Economy May Stay Weak For Two Years
Having started at noon Moscow time (4am Eastern), Putin’s annual Q&A run for a massive three and a half hours, during which the Russian leader took numerous questions from the public and as expected, reiterated the key “rally around the flag” talking points that have permeated Russian rhetoric over the past few weeks as the economic situation in Russia deteriorated.
As Bloomberg notes, the conference was attended by hundreds of reporters and carried live on television around the world, the event took on heightened importance this year as the president sought to reassure a Russian public unnerved by the ruble’s plummet.
While he did acknowledge the difficult economic reality, Putin sought to reassure his countrymen that the current weakness “would last no longer than two years.” Putin promptly pivoted against the west and accused the U.S. and European Union of trying to undermine his country and blaming external factors for the sharp plunge in the ruble, notably the drop in oil saying that “the economy will naturally adapt to the new conditions of low oil prices.”
As caught by the WSJ, when he was asked by a Russian television reporter about the sense that new divisions in Europe have emerged since the Ukraine crisis, Putin blamed the tensions on the West, saying “they didn’t stop building walls” after the end of the Cold War. He accused the West of building up the North Atlantic Treaty Organization toward Russia’s borders and expanding an antimissile systems.
“It’s not a matter of Crimea. We are defending our independence, our sovereignty and our right to exist, we should all understand this,” he said later in response to a question about whether the current economic troubles were “payment for Crimea.”
In tough language, Mr. Putin returned to an analogy he’d used earlier this fall, comparing Russia to a bear in the Siberian Taiga wilderness, saying it was naive to hope that the West would leave Russia alone.
“They will always try to put it in chains and once they have it in chains, they will take out its teeth and claws, which in this case means our strategic nuclear deterrent,” he said. “Once they’ve got the Taiga, they won’t need the bear,” he said, accusing Western leaders of saying publicly that Russia should be deprived of its vast natural resources.
Asked about tensions with the West, Putin struck a harsh tone, accusing it of seeking to subdue and disarm Russia. Acknowledging that Western sanctions over the country’s role in Ukraine were biting, he said the current economic troubles “are payment for our independence, our sovereignty.”
Putin did reserve some blame for his Russian peers, criticizing the central bank for not responding faster and halting the Ruble collapse. He vowed to guide the country through the current situation in the same way he steered Russia through the 2008 financial crisis, and warned citizens to brace for a recession. Somewhat ironically, Putin said that Russia shouldn’t waste currency reserves protecting the ruble as the country prepares for a downturn brought on by the collapse of the oil price and sanctions over the Ukraine conflict, he said.
“Under the most negative external economic scenario, this situation can last two years,” Putin said. “If the situation is very bad, we will have to change our plans, cut some things.”
Some of the other notable highlights: “Putin sparred with a Ukrainian journalist, reeled off statistics on the fall harvest and spoke about guiding gifted children. He even told reporters that he has a good relationship with his ex-wife and is in love with someone new. The tone of the back-and-forth was captured in an answer about the freeing from prison of former oil tycoon and political opponent Mikhail Khodorkovsky: “I don’t regret anything. I did everything absolutely correctly.”
So will the presser do anything to change the status quo? Hardly: Putin will continue to be viewed as a pariah by the west, certainly for as long as he continues to challenge the US state department-imposed regime in the Ukraine. Meanwhile in Russia Putin is still enjoying popular support because the simple equation is that for the vast majority the recent territorial expansion courtesy of the full Crimean annexation is seen as worth the hardship and the soaring prices. Which is why Putin again accused the U.S. and European Union of using the Ukraine conflict as way to contain Russia as they have done since the end of the Cold War through the expansion of NATO, comparing the current situation to a new division akin to the Berlin Wall.
“This is payback for our natural desire to preserve ourselves as a nation, as a civilization and state,” Putin said. “The crisis in Ukraine should make our partners understand that it’s time to stop building walls.”
Finally, Putin said he’s firmly in control of the country and is not in any way worried about a coup from within his ranks. “People in their hearts and souls feel that we, and I in particular, are acting in the interests of the vast majority,” he said. Judging by his record high popularity numbers, the people appear to believe him.
The oil fall is due to weak demand according to the Saudi oil minister:
(courtesy zero hedge)
Is The Oil Implosion Supply Or Demand Driven? Here Is The Very Simple Answer, Thanks To Saudi Arabia
There has been much debate whether the crude price implosion has been due to excess supply or not enough demand. Here, courtesy of the oil minister at the world’s largest crude supplier, is the answer:
- NAIMI SAYS DEMAND FOR OIL SLOWED MORE THAN EXPECTED: SPA
- NAIMI SAYS GLOBAL ECONOMY SLOWDOWN LARGELY BEHIND MKT PROBLEM
Which, of course, to anyone with even the most rudiemntary logic and charting skills, should not come as any surprise.
Comstock Suspends Drilling In Eagle Ford Due To Plunging Oil Prices
Shale 0 – Saudi Arabia 1
Following one after another major and shale company announcing plans to trim capex (even as they miraculously still get to keep their revenue and EPS projections intact, for now), the latest victory handed to Saudi Arabia on a silver platter comes courtesy of Comstock Resources (Total Debt/EBITDA 2.4x, EBITDA $421MM, CapEx $674MM) Comstock Resources said earlier today that in response to low oil prices, plans to suspend oil directed drilling activity in its Eagle Ford shale properties and in Tuscaloosa Marine shale.
It was not immediately clear how many high-paying oilfield jobs would be promptly terminated as a result of this unambiguously good development.
Full press release:
Comstock Resources, Inc. (“Comstock” or the “Company”) (NYSE:CRK) announced that it has budgeted $307 million in 2015 for its drilling and completion activities. In response to low oil prices, the Company plans to suspend its oil directed drilling activity in its Eagle Ford shale properties in South and East Texas and in the Tuscaloosa Marine shale in Mississippi. Comstock has released its rig in the Tuscaloosa Marine shale and will postpone its drilling activity there until oil prices improve. Comstock currently has four operated rigs drilling on its Eagle Ford shale properties. The Company will release two of these rigs in early 2015 and will move the other two rigs to North Louisiana to start up a drilling program on its Haynesville shale natural gas properties. Comstock believes that improved completion technology, including longer laterals, will provide strong returns on drilling projects at current natural gas prices.
Comstock has budgeted to drill 19 (18.6 net) horizontal wells in 2015. The Company expects to spend $161 million for drilling 14 (14.0 net) Haynesville/Bossier shale natural gas wells and $34 million for drilling five (4.6 net) wells on its East Texas and South Texas Eagle Ford shale acreage. The 2015 budget includes $49 million for completion costs of 13 (11.9 net) Eagle Ford shale wells that were drilled in 2014 but will be completed in 2015 and $63 million on facilities, recompletions and for other capital projects. Comstock plans to refrac ten of its existing Haynesville shale producing wells as part of the 2015 program.
Comstock estimates that the drilling program will generate Company-wide oil production of 3.5 to 3.9 million barrels in 2015 and natural gas production of 55 to 60 Bcf.
After three years of natural gas production declines, 2015 will mark a turnaround for the Company’s natural gas production. The Company will continue to assess the oil and natural gas markets throughout 2015 and will adjust its drilling program to reflect the appropriate mix of oil and natural gas wells in order to maximize returns.
Here is how oil traded today: WTI finished at $54.76. Brent at $59.58
(courtesy zero hedge)
“Not” Stabilized – Crude Crashes 7% Intraday: WTI $54 Handle, Brent Below $60
Crude is over 7% off its intraday highs.. But “Ignore it” – Yellen said it’s great news (and transitory)… The last time Crude was here, the S&P 500 was 65 points lower… [WTI closed at its lows $54.05 in Jan ’15 futures]
January 2015 WTI Futures $54.35…
entirely decoupled from stocks…
Your more important currency crosses early Thursday morning:
Eur/USA 1.2309 down .0030
USA/JAPAN YEN 118.70 down 0.035
GBP/USA 1.5649 up .0078
USA/CAN 1.1594 down .0074
This morning in Europe, the euro is well down , trading now well below the 1.24 level at 1.2309 as Europe reacts to deflation and announcements of massive stimulation and crumbling bourses. In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31 and Sunday night won his big election. And now he wishes to give gift cards to poor people in order to spend. The yen continues to trade in yoyo fashion. This morning it continues to exhibit extreme havoc to our yen carry traders as it settled up in Japan by 14 basis points and settling just above the 117 barrier to 117.19 yen to the dollar. This would certainly blow up our yen carry traders with this rapid ascent. The pound is down this morning as it now trades just above the 1.57 level at 1.5714.(very worried about the health of Barclays Bank and the FX/precious metals criminal investigation). The Canadian dollar is down today trading at 1.1641 to the dollar.
Early Thursday morning USA 10 year bond yield: 2.18% !!! up 5 in basis points from Tuesday night/
USA dollar index early Thursday morning: 89.09 up 4 cents from Wednesday’s close
The NIKKEI: Thursday morning up 390 points or 2.32%
Trading from Europe and Asia:
1. Europe all in the green
2/ Asian bourses mostly green (except Shanghai)… Chinese bourses: Hang Sang in the green ,Shanghai in the red, Australia in the green: /Nikkei (Japan) green/India’s Sensex in the green/
Gold early morning trading: $1206.00
Closing Portuguese 10 year bond yield: 2.77% down 9 in basis points from Wednesday
Closing Japanese 10 year bond yield: .36% !!! par in basis points from Wednesday
Your closing Spanish 10 year government bond, Thursday ,down 3 in basis points in yield from Wednesday night.
Spanish 10 year bond yield: 1.74% !!!!!!
Your Thursday closing Italian 10 year bond yield: 1.96% par in basis points from Wednesday:
trading 22 basis points higher than Spain:
IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Thursday night/USA dollar index/USA 10 yr bond:
Euro/USA: 1.2284 down .0052
USA/Japan: 118.76 down 0.008
Great Britain/USA: 1.5673 up .0100
USA/Canada: 1.1596 down .0040
The euro fell badly again in value during the afternoon , and it was way down by closing time , finishing well below the 1.23 level to 1.2284. The yen hardly moved in the afternoon, and it was up by closing to the tune of 1 basis points and closing just above the 118 cross at 118.76. The British pound gained considerable ground during the afternoon session and it was up on the day closing at 1.5673. The Canadian dollar was well up in the afternoon and was up on the day at 1.1596 to the dollar.
Currency wars at their finest today.
Your closing USA dollar index: 89.20 up 7 cents from Wednesday.
your 10 year USA bond yield , up 7 in basis points on the day: 2.21%!!!!
European and Dow Jones stock index closes:
England FTSE up 129.52 or 2.04%
Paris CAC up 137.58 or 3.35%
German Dax up 266.63 or 2.79%
Spain’s Ibex up 341.80 or 3.40%
Italian FTSE-MIB up 491.96 or 2.65%
The Dow: up 421.28 or 2.43%
Nasdaq; up 104.09 or 2.24%
OIL: WTI 54.76 !!!!!!!
Closing USA/Russian rouble cross: 61.62 (same as yesterday)
And now for your more important USA economic stories for today:
Your trading today from the New York:
Fed Cat Bounce: Stocks Soar Most In 3 Years As Crude Crash Continues
This is indeed “madness”…
Just 1 word… “Patient” and this idiotic market soars 700 Dow points! (and S&P 90 Up ) – Quad Witching Machines in full retard mode... This is the biggest 2-day swing since Dec 2011.
Up 4-5% in 48 hours…
“Most Shorted” stocks are up 4.75% from yesterday’s lows – the biggest squeeze since October 2011.
Since The FOMC…
Dismal Data… Buy Stocks
HY Credit dumping… Buy Stocks
VIX protection bid… Buy Stocks
Crude Carnage… Buy Stocks
JPY Carry unwinds… Buy Stocks
Inflation expectations collapsing… Buy Stocks
You’re getting the picture.
The USDollar rallied…
Treasury yields rose quite notably…
And commodities generally flatlined as oil roundtripped…
Finally, Russia “stabilized” overnight following Putin’s annual Q&A…
(courtesy zero hedge)
Philly Fed Crashes From 21-Year High; Employment, New Orders Collapse
What a farce. After printing 40.8 in November – a 21 year high – Philly Fed collapsed back to 24.5 (missing expectations of 26.0). New Orders, employment (lowest since April), and the workweek plunged as The Philly Fed notes the survey suggests aslower pace of expansion of the region’s manufacturing sector. Despite plunging oil prices, the prices paid index only fell modestly… on the heels of the PMIs, it appears the “US economy is awesome” meme is coming unglued rapidly.
And the full breakdown…
The December Manufacturing Business Outlook Survey suggests a slower pace of expansion of the region’s manufacturing sector.
Firms were less optimistic about employment increases over the next six months, however, andconcerns about rising health?care costs continue to be reported.
Service PMI in the USA collapses. They expect Q4 GDP to be below 2%:
(courtesy zero hedge)
“Q4 GDP Below 2%, December Payrolls Under 200,000” Markit Warns As Service PMI Crashes To 10-Month Low
“Another bumper month of non-farm payroll growth looks unlikely in December, with private sector payroll growth unlikely to breach the 200,000 mark,” warns Markit after The US Services PMI plunged to 53.6, missing expectations of 56.3 by the most on record. This is the 6th straight month of declines. Job creation slumped to 8-month lows. The Composite (Services & Manufacturing) PMI plunged to its lowest level since October 2013. Still exuberant? Still hopeful? Here’s Markit’s summary, “A sharp slowing in service sector activity alongside a similar easing in the manufacturing sector takes the overall rate of economic expansion down to the weakest since October 2013. The extent of the slowdown suggests that economic growth in the fourth quarter could come in below 2%“
All the mid-year exuberance, demolished in its cyclically adjusted reality…
As Employment plunges…
Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said:
“A sharp slowing in service sector activity alongside a similar easing in the manufacturing sector takes the overall rate of economic expansion down to the weakest since October 2013. The extent of the slowdown suggests that economic growth in the fourth quarter could come in below 2% which, with the exception of the downturn caused by adverse weather in the first quarter, would be the worst performance for two years.
“The slowdown is linked to weaker growth of new business as customers becoming increasingly worried about the economic outlook both at home and abroad, with the prospect of higher interest rates cooling demand alongside side rising global geopolitical concerns. Across both manufacturing and services, new business grew in December at a pace well below the rates of expansion seen earlier in the year.
“Job creation has also slowed sharply alongside the cooling of demand, and payroll numbers across both sectors showed the smallest rise for eight months. Another bumper month of non-farm payroll growth looks unlikely in December, with private sector payroll growth unlikely to breach the 200,000 mark.”
I will leave you tonight with this piece from Brandon Smith.
He believes that the IMF is now ready to replace the dollar with the new SDR’s we have been hearing about for the past several years.
(courtesy Brandon Smith/Alt-Market.com)
IMF Now Ready To Slam The Door On The U.S. And The Dollar
Wednesday, 17 December 2014 06:29 Brandon Smith
As I write this, the news is saturated with stories of a hostage situation possibly involving Islamic militants in Sydney, Australia. Like many, I am concerned about the shockwave such an event will create through our sociopolitical structures. However, while most of the world will be distracted by the outcome of this crisis (for good or bad) for at least the week, I find I must concern myself with a far more important and dangerous situation.
Up to 40 people may be held by a supposed extremist in Sydney, but the entire world is currently being held hostage economically by international banks. This is the crisis no one in the mainstream is talking about, so alternative analysts must.
As I predicted last month in “We Have Just Witnessed The Last Gasp Of The Global Economy,” severe volatility is now returning to global markets after the pre-game 10 percent drop in equities in October hinted at what was to come.
We expected such destabilization after the wrap-up of the Fed taper, and the markets have not disappointed so far. My position has always been that the taper of QE3 made very little sense in terms of maintaining the manipulated illusion of economic health — unless, of course, the Federal Reserve was implementing the taper in preparation for a renewed financial catastrophe. That is to say, the central bankers have established the lie of American fiscal recovery and then separated themselves from blame for the implosion they KNOW is coming. If the markets were to collapse while stimulus is officially active, the tragedy would be forever a millstone on the necks of the banksters. And we can’t have that now, can we?
This is not to say that individual central banks and even currencies are not expendable in the grand scheme of things. In fact, the long-term goal of globalists has been to consolidate all currency systems and central banks under the outward control of the International Monetary Fund and the Bank Of International Settlements, as I outlined in “The Economic Endgame Explained.”
That particular article was only a summary of a dangerous trend I have been concerned about for years; namely the strategy by international financiers to create a dollar-collapse scenario that will be blamed on prepositioned scapegoats. I have no idea what form these scapegoats will take – there are simply too many possible triggers for fiscal calamity. What I do know, though, is the goal of the endgame: to remove the dollar’s world reserve status and to pressure the American people into conforming or even begging for centralized administration of our economy by the IMF.
The delusion perpetuated in the mainstream is that the IMF is a U.S.-dominated institution. I have outlined on many occasions why this is false. The IMF like all central banks is dominated by the international corporate banking cartel. Central banks are merely front organizations for globalists, and I am often reminded of the following quote from elitist insider Carroll Quigley when I hear people suggest that central banks are somehow independent from one another or that the Federal Reserve is itself the singular “source” of the world’s economic ills:
It must not be felt that these heads of the world’s chief central banks were themselves substantive powers in world finance. They were not. Rather, they were the technicians and agents of the dominant investment bankers of their own countries, who had raised them up and were perfectly capable of throwing them down.
The substantive financial powers of the world were in the hands of these investment bankers (also called “international” or “merchant” bankers) who remained largely behind the scenes in their own unincorporated private banks. These formed a system of international cooperation and national dominance which was more private, more powerful and more secret than that of their agents in the central banks.
No one can now argue against this reality after we have witnessed hard evidence of Goldman Sachs dictating Federal Reserve policy, as outlined here.
And, most recently, we now know that international bankers control political legislation as well, as Congress passed with little resistance a bill that negates the Frank-Dodd restrictions on derivatives and places the U.S. taxpayers and account holders on the hook for more than $303 trillion in toxic debt instruments. The bill is, for all intents and purposes, a “bail-in” measure in disguise. And it was pushed through with the direct influence of JPMorgan Chase CEO Jamie Dimon.
The Federal Reserve, the U.S. government and the dollar are as expendable to the elites as any other economic or political appendage. And it can be replaced at will with yet another illusory structure if this furthers their goal of total centralization. This has been done for centuries, and I fail to see why anyone would assume that globalists would change their tactics now to preserve the dollar system. They call it the “New World Order,” but it is really the same old-world monetary order out of chaos that has always been exploited. Enter the IMF’s old/new world vision.
While the investment universe has been mesmerized by the deterioration of the Russian Ruble and oil prices, the IMF has been a busy little bee hive…
In articles over the past year, I have warned that the plan to dethrone the dollar and replace it with the special drawing rights basket currency system would be accelerated after it became clear that the U.S. Congress would refuse to pass the IMF reforms of 2010 proclaiming “inclusiveness” for developing economies, including the BRICS nations. The latest spending bill removed any mention of IMF reforms. The IMF, under Christine Lagarde, has insisted that if the U.S. did not approve its part of the reforms, the IMF would be forced to pursue a “Plan B” scenario. The details on this “plan B” have not been forthcoming, until now.
The Financial Times reported on the IMF shift away from the U.S. by asserting the authority to remove the veto power America has always enjoyed over the institution. This action is a stark reminder to mainstream talking heads and to those who believe the U.S. is the core economic danger to the world that the IMF is NOT an extension of American policy. If anything, the IMF and the U.S. are extensions of international banking power, just as the BRICS are nothing more than puppets for the same self-serving financial oligarchy clamoring for the same IMF-controlled paradigm, as Vladimir Putin openly admitted:
“In the BRICS case we see a whole set of coinciding strategic interests. First of all, this is the common intention to reform the international monetary and financial system. In the present form it is unjust to the BRICS countries and to new economies in general. We should take a more active part in the IMF and the World Bank’s decision-making system. The international monetary system itself depends a lot on the US dollar, or, to be precise, on the monetary and financial policy of the US authorities. The BRICS countries want to change this…”
And of course the Chinese have pronounced their fealty to the IMF global currency concept:
The world economic crisis shows the “inherent vulnerabilities and systemic risks in the existing international monetary system,” Gov. Zhou Xiaochuan said in an essay released Monday by the bank. He recommended creating a currency made up of a basket of global currencies and controlled by the International Monetary Fund and said it would help “to achieve the objective of safeguarding global economic and financial stability.”
The BRICS are not the only nations demanding the U.S. lose its supposed “influence” over the IMF. Germany, the core economic pillar of the EU, called for America to relinquish its veto power back in 2010 just as the reforms measure was announced.
The IMF decision to possibly eliminate U.S. veto power and, thus, influence over IMF decisions may come as early as the first quarter of next year. This is the great “economic reset” that Largarde has been promoting ad nauseam in multiple interviews and speeches over the past six months. All of these measures are culminating in what I believe will be a more official announcement of a dump of the U.S. dollar as world reserve currency.
Along with the imminent loss of veto power, I have also written on the concerns of the coming SDR conference in 2015. This conference is held only once every five years. My suspicion has been that the IMF plans to announce the inclusion of the Chinese yuan in the SDR basket and that this will coincide with a steady dollar dump around the globe. Multiple major economies have already dropped the dollar in bilateral trade with China, and engineered tensions between the U.S. and the East have exacerbated the issue.
The timing of the SDR conference has now been announced, and the meeting looks to be set for October of 2015. Interestingly, this linked article from Bloomberg notes that China has a “real shot” at SDR inclusion and official “reserve status” next year, but warns that the U.S. “may use its veto power” to stop China’s membership. I have to laugh at the absurdity of it all, because there are many people in the world of economic study who still believe the developments of globalization and fiscal distress are all “random.” I suppose that if it is all random, then it is a rather convenient coincidence that the U.S. just happens to be on the verge of losing veto power in the IMF just before they are about to bring the BRICS into the SDR fold and supplant the dollar.
This is it, folks; this is the endgame right in front of our faces. The year of 2014 is the new 2007, with all the negative potential but 100 times more explosive going into 2015. Our nation has wallowed in slowly degrading financial conditions for years, hidden by fake economic statistics and manipulated stock prices. All of it has been a prelude to a much more frenetic and shocking event. I believe that we will see continued market chaos from now on, with a steep declining trend intermixed with brief but inadequate “dead cat” stock bounces. I expect a hailstorm of geopolitical crises over the next year to provide cover for the shift away from the dollar.
Ultimately, the death of the dollar will be hailed in the mainstream as a “good and necessary thing.” They will call it “karma.” They will call it “progress.” They will even call it “decentralization” and a success for the free market. But it will not feel like a positive development for the American public, who will suffer greatly as the dollar crumbles. Only those educated in the underpinnings of shadow banking will understand the whole thing is a charade designed to hide the complete centralization of sovereign economic governance into the hands of the globalists, using the IMF and BIS as “fiscal heroes,” saving the world from a state of economic destruction the elites themselves secretly created.
That is all for today.
I will see you Friday night
bye for now