May 18/Greece ready to default by June 5/Euro whacked/Peripheral bond yields rise/gold silver rise/

Good evening Ladies and Gentlemen:



Here are the following closes for gold and silver today:

Gold:  $1227.80 up $2.30 (comex closing time)

Silver $17.71 up 17 cents (comex closing time)


In the access market 5:15 pm

Gold $1225.40

Silver: $17.73



Gold/Silver trading: see kitco charts on the right side of the commentary

Following is a brief outline on gold and silver comex figures for today:


At the gold comex today, we had a poor delivery day, registering 0 notice serviced for nil oz.  Silver comex filed with 2 notices for 10,000 oz


Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 242.39 tonnes for a loss of 61 tonnes over that period. Looks to me like the comex is bleeding profusely!!


In silver, the open interest fell slightly by 1781 contracts as Friday’s silver price was up by 9 cents as some of the bankers covered their silver shortfall.  The total silver OI continues to remain extremely high with today’s reading at 178,529 contracts maintaining itself near multi-year highs despite a record low price. This dichotomy has been happening now for quite a while and defies logic. There is no doubt that the silver situation is scaring our bankers to no end.


In silver we had 2 notices served upon for 10,000 oz.


In gold,  the total comex gold OI rests tonight at 428,757 for a gain of 5,566 contracts as gold was up by $0.10 on Friday. We had 0 notices served upon for nil oz.


Today, we had another huge withdrawal of 5.67 tonnes of  gold Inventory at the GLD. It rests tonight at 718.24  tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. Last Tuesday  Koos Jansen informed me that last week 38 tonnes of gold was demanded by the Chinese.On Friday, another 38 tonnes of gold was demanded. India reported that 110 tonnes of gold was imported into the country in the month of March. ( That does not include the smuggled gold) .


In silver, /we lost another 1.625 million oz of  silver inventory at the SLV / and thus the inventory tonight remains at 319.125 million oz


We have a few important stories to bring to your attention today…


1. Today we had the open interest in silver fall by a tiny 1781 contracts as  silver was up in price yesterday by 14 cents.  The OI for gold rose by 5,475 contracts up to 423,191 contracts as the price of gold was up  by $7.00 yesterday. GLD had SLV had no changes to their inventory levels.

(report Harvey)

2,Today we had 3 major commentary on Greece today:

(zero hedge,Kaltesy)

3.  Koos Jansen reports on another 38 tonnes of gold demand this week emanating from China

(Koos Jansen)

4. Andrew Maguire and Turd Ferguson discuss the new Alternative Bullion exchange coming up which will challenge the LBMA and the comex.

(Andrew Maguire/Ted Ferguson)

5. Ukraine issues ultimatum to bondholders that they must allow a haircut on debt they hold


 6. Gold rises, peripheral bond yields rise/Euro falls/


Let us now head over to the comex and assess trading over there today.

Here are today’s comex results:

The total gold comex open interest rose by 5566 contracts from 423,191, up to 428,757 as gold was up by $0.10 yesterday (at the comex close).  We are in our next non active delivery month of May and here the OI fell by 0 contracts remaining at  141. We had 0 notices filed on Friday.  Thus we neither lost nor gained any  gold contracts  standing for delivery in May. The next big active delivery contract month is June and here the OI fell by 1,784 contracts down to 192,868. June is the second biggest delivery month on the comex gold calendar. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 84,652. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day) was fair at 149,720 contracts as the bankers continued to use non backed paper against all of that demand. Today we had 0 notices filed for nil oz.


And now for the wild silver comex results.  Silver OI fell by 1781 contracts from 180,310  down to 178,529 as the price of silver was up  in price by 9 cents, with respect to Friday’s trading. We no doubt had some considerable short covering by the banks. We are into the active delivery month of May where the OI fell by 4 contracts down to 340. We had 14 contracts filed upon with respect Friday’s trading.  So we gained 10 contracts or an additional 50,000 oz will stand for delivery in this May delivery month. The estimated volume today was poor at 23,231 contracts (just comex sales during regular business hours. The confirmed volume  yesterday (regular plus access market) came in at 49,544 contracts which is excellent  in volume. We had 2 notices filed for 10,000 oz today.


May initial standings

May 18.2015



Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz   nil
Deposits to the Dealer Inventory in oz 4500.000 oz (HSBC)
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices)  141 contracts(14,100) oz
Total monthly oz gold served (contracts) so far this month 7 contracts(700 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month 164,151.8 oz
Total accumulative withdrawal of gold from the Customer inventory this month  53,054.3 oz


Today, we had 0 dealer transactions



total Dealer withdrawals: nil oz


we had 0 dealer deposit

total dealer deposit: nil oz
we had 0 customer withdrawals


total customer withdrawal: nil  oz


We had 1 customer deposit: and the farce continues


ii) Into HSBC: 4,500.000 oz ???how is this exact weight possible

total customer deposit: 4500.00  oz


(on Friday we had an exact 4,000.00 oz deposit.) 

We had 0   adjustments:


Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 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 May contract month, we take the total number of notices filed so far for the month (7) x 100 oz  or 700 oz , to which we add the difference between the open interest for the front month of May (141) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.


Thus the initial standings for gold for the May contract month:


No of notices served so far (7) x 100 oz  or ounces + {OI for the front month (141) – the number of  notices served upon today (0) x 100 oz which equals 14,800 oz standing so far in this month of May. (.46 tonnes of gold)

we neither gained nor lost any gold ounces standing in the May delivery month.


Total dealer inventory: 372,835.022 or 11.596 tonnes

Total gold inventory (dealer and customer) = 7,792,944. (242.39) tonnes)

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 242.25 tonnes for a loss of 61 tonnes over that period. Lately the removals  have been rising!



And now for silver


May silver initial standings

May 18 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 600,439.32 oz ( Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  300,442.98 oz (CNT,Delaware)
No of oz served (contracts) 2 contracts  (10,000 oz)
No of oz to be served (notices) 338 contracts (1,690,000 oz)
Total monthly oz silver served (contracts) 2548 contracts (12,740,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  126,359.680 oz
Total accumulative withdrawal  of silver from the Customer inventory this month 3,699,925.5  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 2 customer deposit:

i) Into Delaware: 975.500 oz

ii) Into CNT: 299,467.48 oz

total customer deposits;  300,442.98 oz


We had 1 customer withdrawals:

i) Out of Scotia:  600,439.32 oz

total withdrawals;  600,439.32 oz


we had 0 adjustments


Total dealer inventory: 60.162 million oz

Total of all silver inventory (dealer and customer) 177.185 million oz


The total number of notices filed today is represented by 2 contracts for 10,000 oz. To calculate the number of silver ounces that will stand for delivery in May, we take the total number of notices filed for the month so far at (2548) x 5,000 oz  = 12,740,000 oz to which we add the difference between the open interest for the front month of April (340) and the number of notices served upon today (2) x 5000 oz equals the number of ounces standing.

Thus the initial standings for silver for the May contract month:

2548 (notices served so far) + { OI for front month of April (340) -number of notices served upon today (2} x 5000 oz = 14,430,000 oz of silver standing for the May contract month.

we gained 10 contracts or an additional 50,000 silver ounces will stand for delivery in this active May delivery month.

for those wishing to see the rest of data today see: or



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:

May 18/we lost another 5.67 tonnes of gold inventory at the GLD/Inventory rests at 718.24 tonnes

May 15./no change in gold inventory at the GLD/Inventory rests at 723.91 tonnes

May 14./ a huge withdrawal of 4.41 tonnes of gold/Inventory rests at 723.91 tonnes

May 13.2015: no change in inventory at the GLD/Inventory rests at 728.32 tonnes

May 12/no change in inventory at the GLD/inventory rests at 728.32 tonnes

May 11/ no changes at the GLD/Inventory rests at 728.32 tonnes

May 8/ they should call in the Serious Fraud squad as the owners of the GLD just saw 13.43 tonnes of gold leave its vaults heading for China:

Inventory tonight:  728.32 tonnes

May 7. no change in gold inventory at the GLD/741.75 tonnes

May 6/no change in gold inventory at the GLD/741.75 tonnes

may 5/no change in gold inventory at the GLD/741.75 tonnes

may 4/no change in gold inventory at the GLD./741.75 tonnes

May 1/ we had a huge addition of 2.69 tonnes of gold into the GLD/Inventory rests tonight at 741.75 tonnes

April 30/ no change in gold inventory/739.06 tonnes of gold at the GLD

April 29/no change in gold inventory/739.06 tonnes of gold at the GLD

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).

May 18 GLD : 718.24  tonnes.




And now for silver (SLV)

May 18.2015: we lost another 1.625 million oz of inventory at the SLV/Inventory rests tonight at 719.125 million oz

May 15./no change in silver inventory at the SLV/inventory rests tonight at 320.75 million oz

May 14/ a huge withdrawal of 1.912 million oz from the SLV/Inventory at 320.75 million oz.

May 13.2015: no changes at the SLV/Inventory rests at 322.662 million oz

May 12/no changes at the SLV/Inventory rests at 322.662 million oz

May 11/no changes at the SLV/Inventory rest at 322.662 million oz

May 8/ today we lost a huge 2.87 million oz of silver from the SLV/Inventory 322.662

May 7/no change in silver inventory/325.53 million oz

May 6/we had a huge withdrawal of 2.143 million oz of silver from the SLV/325.53 million oz

May 5/no change in silver inventory at the SLV/327.673 million oz

May 4/ no change in silver inventory at the SLV/327.673 million oz

May 1/no change in silver inventory at the SLV/327.673 million oz

April 30/no change in silver inventory at the SLV/327.673 million oz

April 29/ we lost 2.963 million oz of silver inventory from the SLV/inventory tonight 327.673 million oz

May 18/2015  a withdrawal of 1.625 million oz from the SLV/ inventory rests at 319.125 million oz




And now for our premiums to NAV for the funds I follow:

Central fund of Canada data not available today/Canadian holiday

Note: Sprott silver fund now for the first time into the negative 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 7.0% percent to NAV in usa funds and Negative 6.9% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 60.7%

Percentage of fund in silver:37.9%

cash .4%

( May 15/2015)

2. Sprott silver fund (PSLV): Premium to NAV falls to-0.76%!!!!! NAV (May 18/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to -.27% to NAV(May 18/2015

Note: Sprott silver trust back  into negative territory at -0.76%.

Sprott physical gold trust is back into negative territory at -.27%

Central fund of Canada’s is still in jail.





Early morning trading from Asia and Europe last night:


Gold and silver trading from Europe overnight/and important physical


(courtesy Mark O’Byrne/Goldcore)

Eurozone Banks ‘As Vulnerable Today’ As Before 2008 Crisis – Bail-ins?


– Euro banks no more stable now than in run-up to 2008 crash
– Banks in France, Spain and Italy are “highly vulnerable to failure”
– Low quality bank equity not sufficient to withstand shock
– Risk to system “enormously underestimated”
– Investor deposits at risk of “bail-ins”

New research shows that European banks are as likely to fail today as they were preceding the global economic crash seven years ago.

Leading economists say that the European banking system is still highly vulnerable to financial and economic shocks despite the various policies which have been put in place to protect against such events since the collapse in 2008.

According to research by the University of Portsmouth Business School which was published in the Journal of Banking and Finance European banks are as vulnerable today as they were in the run up to the crisis of 2008.

The research suggests that southern European banks – particularly those of France, Italy and Spain – are “highly vulnerable to failure.”


The economists modelled a range of interconnected, dynamic economic shocks on 170 Eurozone banks in 16 countries, and the spread of that effect to other countries from 2005-2013.

The research focussed on threats emerging from three independent sources of risk – the interbank loan market, the sovereign credit risk market and the asset-backed loan market.

The models sought to determine the resilience of various systemically important European banks and “to track how shocks spread between domestic and international banks.”

Researchers found that “the European banking system remains highly vulnerable and conducive to financial contagion” and that speed of contagion and bank failures in southern Europe were “markedly more prominent”.

France, Spain and Italy appear to be dramatically more exposed to failing compared to their neighbours in one of the models. This showed France losing 73 billion euro compared to Belgium’s 6 billion euro after the same economic shock from the same source.

Dr Nikos Paltalidis, who led the research, is skeptical of the conclusions of stress tests which claim that banks could withstand a 10% drop in the value of their equity or that the banking system in the euro area is solvent.

He believes that the quality of the assets held by some key banks is of poor quality and in the event of a shock to the system they would cause the value of bank capital to below the required regulatory minimum.

“In theory, the new capital rules adopted by ‘systemically important’ banks should be able to endure a 10 per cent fall in the value of their assets before placing panicky calls to the central bank. Also, the euro area banking system seems to be fundamentally solvent, according to several stress tests.”

“However, our study provides ample evidence that this hypothesis does not hold in practice, indicating that similar to the pre-2009 period systemic risk is enormously underestimated once again.”

Dr. Paltalidis states the following:

“Our findings indicate that despite all the efforts to improve the resilience of banking, some banks are as vulnerable today as they were before the last banking crisis, they are just as likely to fail.”

Frequent readers of our blog will be well aware of the risks posed to bank deposits by a bank failure.

While governments have sought to assure the public that their savings are safe due to bank deposit guarantee schemes they have been working behind the scenes to extricate themselves from that responsibility.

We reported last month on how the Austrian government was pushing through an EU law earlier than scheduled which removes all responsibility of the government for the bank deposits of its citizens. This legislation is due to be rolled out across Europe this year.

Long time readers will be aware that Irish Finance Minister Michael Noonan is on record as saying “bail-ins” are now the rule.

Bank deposits are increasingly vulnerable given the risks to the banking system and the likelihood of government reneging of deposit guarantees and of bank bail-ins in the event of a crisis.

Allocated and segregated gold bullion coins and bars held out-side of the banking system in stable jurisdictions like Switzerland,Hong Kong and Singapore will again protect in the likely event of another financial or economic crisis.

Must-read guide and research on bail-ins here:
Protecting Your Savings In The Coming Bail-In Era


Today’s AM LBMA Gold Price was USD 1,228.15, EUR 1,079.41 and GBP 784.12 per ounce.
Friday’s AM LBMA Gold Price was USD 1,216.30, EUR 1,071.23 and GBP 772.95 per ounce.

Gold in USD - 1 Week

Gold  climbed $3.10 or 0.25 percent to $1,224.90 an ounce on Friday, and silver rose $0.10 or 0.57 percent to $17.53 an ounce.

Gold and silver both performed strongly for the week – gold gained 3 percent and silver outperformed once again and surged 6.4 percent.

Gold in Singapore rose to $1,232.20 an ounce near the end of day trading – its highest price since February. In London, gold climbed for its fifth consecutive session making it the longest winning streak since March.

Gold in GBP - 1 Week

Silver was up 1.3 percent at $17.80 an ounce, while platinum was up 0.4 percent at $1,174.50 an ounce and palladium was flat at $795 an ounce.

Asian shares were mixed as are European shares today on Grexit and bond market jitters. These risks do not appear likely to recede anytime soon and this should keep gold supported.  The weaker dollar and expectations that the U.S. Fed will not raise interest rates in June is also supporting the precious metals.

Gold in EUR - 1 Week

Recent poor economic data is leading to concerns about the health of the U.S. economy as U.S. share prices look “toppy” and remain near historic all time record highs.

The U.S. FOMC April meeting minutes are released on Wednesday and may provide further clues on the possible  timing of the Fed’s first interest rate hike in ten years.

Norilsk Nickel and other investors aim to complete a purchase of palladium bullion from Russia’s central bank by the end of 2015, deputy chief executive Pavel Fedorov said today.  It outlined the deal last year and is still working to get it done.

London Platinum Week kicks off today after a few preliminary events over the weekend.

At the opening of the annual industry gathering, the World Platinum Investment Council said in a report it expected the platinum market deficit to shrink this year and platinum stockpiles to reach the lowest level in at least 10 years.

Above-ground stocks will fall to a very small 2.6 million oz in 2015, according to the WPIC. That compares with a peak of 4.5m in 2010, 2011, Director of Research Trevor Raymond told Bloomberg on the phone.

The WPIC do not believe that platinum stocks will be completely depleted and reach zero because the amount includes long term holdings by private investors, sovereign wealth funds and hedge funds. It said that stocks typically held in vaults, excludes ETFs.

Overall demand is set to to grow 3% to 8.2million ounces. The market will see a deficit of 190,000 in 2015, down from earlier prediction of 235,000, report showed. Total supply should increase 10% to 8 million ounces. Mine supply is seen up 12% and autocatalyst recycling may rise 10%.

Reuters reports that producers, refiners, recyclers, traders, bullion brokers and analysts are gathering in the UK capital to make contacts, strike deals, and discuss the state of a market that has been weighed down by falling prices for much of the last year.

GoldCore are in attendance in London this week and available for meetings and interviews.

In late morning London trading gold is at $1,229.45 an ounce or up 0.48 percent. Silver is at $17.67 an ounce or has surged 1.14 percent and platinum is up 0.58 percent at $1,169.54 an ounce.

Storing Bullion? 7 Key Must Haves – GoldCore




A very important commentary from Koos Jansen released on Saturday morning:

SGE withdrawals = Chinese demand for gold for thew week 38 tonnes of gold.

He asks:  which country is supplying China with all of its gold imports?

(courtesy zero hedge)


Posted on 16 May 2015 by

SGE Withdrawals vs WGC Demand Q1 2015.

Welcome back to my weekly post on the Chinese gold market, usually centered around data regarding Shanghai Gold Exchange (SGE) withdrawals from the vaults. I’ve been away for a short while because I had some health issues – I’ll be fine, I just need a little time. The good news is I slowly started working a few days ago! Let’s see what I didn’t cover in recent weeks in terms of SGE withdrawals, trading volume and Chinese gold imports. I’ll try to catch up in a few post that cover important developments.

SGE withdrawals from May 4 until May 8 (week 18) accounted for 37 metric tonnes. As a rule of thumb this amount of gold is equal to Chinese wholesale gold demand – read this post for a comprehensive analysis of the mechanics of the Chinese gold market and all metrics used to measure demand. Year to date an incredible 858 tonnes has been withdrawn from SGE designated vaults, up 9 % y/y from 2013, up 19 % y/y from 2014.

Screen Shot 2015-05-15 at 1.20.56 PM
Blue (本周交割量) is weekly gold withdrawn from the vaults in Kg, green (累计交割量) is the total YTD.

Shanghai Gold Exchange SGE withdrawals delivery 2015 week 18 dip

Shanghai Gold Exchange SGE withdrawals delivery only 2014 - 2015 week 18 dip

To get a better grip on SGE withdrawals let’s have a look at trading volume on the Shanghai International Gold Exchange (SGEI), as this can distort Chinese wholesale gold demand measured by SGE withdrawals – read this post for an analysis on SGEI volume in relation the SGE withdrawals.

Weekly volume SGE SGEI contracts

We learned on April 11, trading volume of the most popular contract on the SGEI (iAu99.99) transcended all other SGE contracts. However, this appeared not to be sustainable in the succeeding weeks; SGEI volume dropped to low levels. I would say the potential impact of SGEI volume on SGE withdrawals is limited at this stage.

Capturing Chinese wholesale gold demand and mainland import derived from SGE withdrawals for Q1 2015 gives, roughly, 600 tonnes and 400 tonnes, which are both conservative. Total withdrawals in Q1 were 625 tonnes, but let’s assume some of this was exported through the SGEI – read this post for an analysis on the workings of the Shanghai International Gold Exchange.

According to the China Gold Association domestic mine output was 111 tonnes in Q1. If we use the basic equation (SGE withdrawals = mine + scrap + import) to subtract 111 (mine) and 89 (scrap) from withdrawals (600), this leaves 400 tonnes (import).

Record Q1 SGE withdrawals and strong import numbers are very significant data points for the gold industry (if not the global financial system). Did the World Gold Council publish anything about extraordinary Chinese gold demand? Nope. To get a more clear view on Chinese gold demand, I have collected gold export data from three major gold hubs; Hong Kong, the UK and Switzerland. Hong Kong has net exported 210 tonnes of gold to China mainland in January – March 2015.

Hong Kong - CN yearly gold trade January 2009 - March 2015

Hong Kong - CN monthly gold trade January 2009 - March 2015
China exports to Hong Kong have collapsed.

Switzerland has net exported 90 tonnes in Q1 2015. In March the Swiss exported 46 tonnes directly to China, which is only 14 % less than the all-time record set in May 2013 at 53 tonnes.

Switzerland China gold trade Q1 2015

The UK has exported 20 tonnes directly to China in Q1.

UK - CN Gold Trade 2012 - March 2015

The UK’s direct export to China YTD is not a shocking amount, though, most gold in China is still supplied by the UK – home of the London Bullion Market. In the next chart we can see UK total net gold trade and UK net gold trade with Switzerland versus SGE withdrawals. It’s not hard to see the correlation between demand in China (SGE withdrawals) and net export from the UK, which is send through Switzerland and Hong Kong to China mainland.

UK Gold Trade 2012 - March 2015

So, just three countries have exported 320 tonnes to China in three months. Chinese gold import added by mine supply (111 tonnes) and a little scrap easily exceeds 460 tonnes. So, 460 tonnes is the minimum of Q1 total supply for China, yet, demand as disclosed by the World Gold Council (WGC) was 273 tonnes; the mystery continues.

From what I’m seeing Chinese gold demand in Q1 was 500-600 tonnes, though the WGC wants us to believe it’s only slightly more than half of this (273 tonnes). The gap, as I’ve previously called it, has mushroomed to over 3,000 tonnes of gold in total since 2009!

More clearly we can see this gap between SGE withdrawals and WGC demand growing in the chart below. In addition, the gap between SGE withdrawals and import from Hong Kong, the UK and Switzerland is also growing. The gap between import and WGC demand has diminished in 2015 compared to 2014.

Technically, the only way the gap between SGE withdrawals and import – from Hong Kong, the UK and Switzerland – and WGC demand can be filled is by scrap supply or additional imports. However, in my opinion scrap (/recycled gold) couldn’t have supplied the SGE to such an extent, which leaves the question; what country is supplying vast amounts of gold to China?

Chinese supply and demand WGC vs SGE Q1 2013 - 2015

That’s it for now. In upcoming posts we’ll continue to analyze international gold trade and the gap between WGC demand and SGE withdrawals.

Koos Jansen
E-mail Koos Jansen on:




An extremely important podcast courtesy of Andrew Maguire/and Turd Ferguson. Andrew explains that once the new Alternate Bullion Exchange is up and running, this will put pressure on the phony London gold fix and also put tremendous pressure on the comex:

(courtesy Andrew Maguire/Turd Ferguson)


New exchange will pressure London bullion banks, Maguire tells TF Metals Report


2:45p ET Friday, May 15, 2015

Dear Friend of GATA and Gold:

London metals trader Andrew Maguire tells the TF Metals Report’s Turd Ferguson today that the London bullion banks are losing control of the gold market to other exchanges and will be struck particularly hard by the new Allocated Bullion Exchange. But Maguire adds that the London bullion banks are still exporting huge amounts of gold to Switzerland. He also offers price targets and resistance levels. His interview is a half-hour long and can be heard at the TF Metals Report here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.



Alasdair Macleod..


US Dollar Weakens AS Gold Price & Silver Price Firm

May 15, 2015

The US dollar continued to lose ground this week, contributing to a firmer trend for precious metals. Gold rose over $40 to $1223, and silver by $1.13 to $17.45, though prices initially opened a little lower in early European trading this morning, perhaps anticipating some pre-weekend profit-taking. Gold has now risen over 3% on the year, marginally beating the S&P 500 Index, which is up 2.5%, but far better than bonds, the US 10-year Treasury price being down about 4%.

On the COMEX futures market there appears to be increasing demand for gold and silver, with both volumes and open interest rising with the price. The next chart is gold.

If the rise was fueled by bear closing, open interest would tend to contract. While there is almost certainly bear closing involved, it is clear that new buying is the dominant feature. Similarly, open interest in silver has recovered towards the record levels seen last month. This is illustrated in the next chart.

There has been significant volatility in bond markets this week, with yields along the curve steepening, and the difference between two and ten year Treasury yields increasing from 1.2% to 1.6% since early February. A widening differential (known as a steeper yield curve) is normally associated with bond markets discounting higher rates of inflation, or increased financial uncertainty, or both. So if the yield curve continues to steepen, the dollar is likely to weaken further so long as the Fed is reluctant to raise interest rates. I expect this topic to receive growing attention in the coming months.

Gold has fared less well priced in sterling and euros, which have also risen against the US dollar, but it is still up by 1.5% and 9% respectively on the year. The attraction to Eurozone residents was recorded in this week’s release from the World Gold Council’s Gold Demand Trends for the first quarter of 2015, which showed a 20% increase in gold bar and coin demand from German citizens.

There are two obvious reasons for Eurozone citizens to buy gold. The first is the prevelance of negative short-term interest rates coupled with the banks’ reluctance to pay out large amounts of physical cash, making gold an attractive alternative. The second reason is the continuing tragedy that is Greece.

Meanwhile, in Greece ordinary people are reported to be buying motor cars in order to dispose of bank deposits, with German manufacturers presumably benefiting most. The thinking must be that a mobile asset is a good thing to own at a time of financial crisis instead of bank deposits, confirming they have lost all faith in the banking system.




(courtesy Bloomberg)


Obama seeks to keep U.S. veto at IMF as China’s influence is expanded


By Andrew Mayeda
Bloomberg News
Sunday, May 17, 2015

The Obama administration has signaled it won’t jeopardize the U.S. power to veto IMF decisions to achieve its goal of giving China and other emerging markets more clout at the lender, according to people familiar with the matter.

That message was delivered at the International Monetary Fund’s spring meetings in Washington last month, the people said, where officials discussed how to overcome congressional opposition to a 2010 plan to overhaul the lender’s voting structure.

A solution backed by Brazil would have enabled an end-run around Congress — while potentially sacrificing the veto the U.S. has held since World War II. With that option off the table, the people said, IMF member nations are considering a watered-down proposal that risks alienating China and India, which are already challenging the postwar economic order by setting up their own lending and development institutions. …

… For the remainder of the report:




(courtesy Chris Powell/GATA)


Peru is another rich country insisting on being poor and pockmarked


11:56a ET Sunday, May 17, 2015

Dear Friend of GATA and Gold:

National Public Radio today broadcast and published a long report about the environmental devastation done by wildcat gold miners in Peru, a phenomenon common throughout the part of the developing world that has mineral resources:…

What the NPR report missed is that this devastation is to a great extent the consequence of gold price suppression by Western central banks.

Yes, while the extractive industries are the prerequisites of modern civilization, they can damage the environment. Gold mining is only one of those industries. As with all extractive industries, the costs of environmental safeguards and remediation must be built into the price of their products.

When the gold price is suppressed by central banks, corporations — which government easily can regulate and through which government enforces environmental safeguards and remediation — won’t mine as much of the metal and won’t employ as many people. For amid price suppression, the metal can’t be mined legally and responsibly; its price won’t support responsible practices.

But amid gold price suppression, desperate individuals — people who otherwise might be employed by a regulated mining industry — will mine it in ways that escape the costs of environmental safeguards and remediation and will abscond with the metal itself, leaving a mess. Government may not have the resources to police huge mining districts against thousands of wildcat miners with no fixed addresses. Indeed, in impoverished countries government may accept the environmental damage in exchange for the income it brings to an underemployed population.

As it accepts gold price suppression particularly and commodity price suppression generally as part of the Western central bank system of currency market rigging, Peru is one of the many resource-rich countries insisting on being poor, insisting on remaining the slaves of a largely invisible colonialism that is far more effective than a military occupation would be.

Of course National Public Radio will never be permitted to tell that story, and some weeks ago your secretary/treasurer sought but failed to receive an invitation to speak at a big mining conference planned in Peru’s capital, Lima, in November:

GATA’s work, telling resource investors what they’re up against, can be inconvenient for mere stock touts.

But there must be some patriots in Peru, and someone in that country might be permitted to tell the story, with the help of the documentation GATA has compiled here:

If you know any such people, please pass this along to them.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.




(courtesy Agence-France Press/GATA/yahoo)


To central bankers, these deaths are just collateral damage of currency market rigging


Buried Alive: Young Liberians Risk All in Deadly Mines

By Zoom Dosso
Agence France-Presse
via Yahoo News, New York
Sunday, May 17, 2015

DARK FOREST, Liberia — Peter Kollie was digging for gold in the forests of southeastern Liberia when the deep shaft he had carved out of the earth collapsed, turning into a dark, airless tomb.

But that was a risk the 20-year-old, like thousands of desperate and impoverished young men working the illegal gold-mining camps of the border region by Ivory Coast, had been prepared to take.

“In such cases there is nothing we can do. We leave the body there and abandon the area for a while,” Lomax Saydee, a fellow miner and youth welfare volunteer, told AFP a few days after Kollie’s death. “After a certain period of time we go back and re-open the place and generally in that case you discover a huge quantity of gold in the area where the person died underground.

“So it is like you are digging your own grave sometimes, because if it closes on you no one can help you.”

Kollie had been working in the Dark Forest in the heart of Grand Gedeh County, where Liberia’s unofficial alluvial gold sector is a booming but poorly regulated business. …

… For the remainder of the report:…


(courtesy Kingworldnews/John Embry)

It’s metal fundamentals vs. open interest again, Embry tells KWN


11:25a ET Monday, May 18, 2015

Dear Friend of GATA and Gold:

Fundamentals for gold and silver again are bumping up against huge open interest in the futures market, Sprott Asset Management’s John Embry today tells King World News, cautioning that such circumstances usually end in a smash down. Embry adds that disinformation is deluging the markets, a sign of the growing desperation of the central planners. An excerpt from the interview is posted at the KWN blog here:…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


(courtesy WashingtonTimes/Harper/GATA)


Save the rhinos: Create a futures market for their horns and have the NY Fed short it


At $60,000 a Pound, Illegal Rhino Horn Declared More Valuable than Gold, Diamonds, and Cocaine

By Jennifer Harper
The Washington Times
Sunday, May 17, 2015

Could a human hankering for exotic elixirs, curatives, and aphrodisiacs turn rhino horn into a $20 billion-a-year industry and take out an entire species of animals at the same time?

Looks like it. A study from a team of international scientists says so — saying the call for rhino horn and other substances derived from animal parts has “drastic implications” for rhinoceroses, along with elephants, hippopotamuses, and even gorillas.

“One of the critical factors behind the disturbing trend is the tremendous financial incentive for poachers to sell animal parts for consumer goods and food. For example, rhinoceros horn is more valuable by weight than gold, diamonds, or cocaine,” says lead author William Ripple, an Oregon State University professor of ecology. The research appeared in Science Advances, an online academic journal.

The horn — thought to have powers as a cure for cancer, an aphrodisiac, and a cure-all in some Asian nations — currently goes for $60,000 a pound, the professor reports. There’s some activity in the United States as well. An Iowa taxidermist recently pleaded guilty to selling two black rhino horns to a trafficker; he now faces up to five years of jail time. A similar fate awaits a Texas taxidermist who had participated in a rhino horn sale in March. …

… For the remainder of the report:…




(courtesy Peter Cooper/



Q1 physical gold sales up 20% in Germany as gold price hits $1,233

Posted on 18 May 2015 with no comments from readers

Gold prices began the week at their best for three months and immediately bounced higher again to $1,233 an ounce with silver outperforming with higher percentage gains at $17.74.

Meantime, the latest World Gold Council data revealed that the total demand for gold bars and coins was up by 20 per cent in Germany in the first quarter in a rush to get out of the then slumping euro.

Euro’s impact

The German economy may be the best performing in Europe at the moment but that has been partly down to a devaluing currency, and one sure fire way to protect against devaluation was to buy gold which is priced in US dollars.

There is also a good historical precedent for Germans to buy gold as twice in less than a hundred years paper money has become worthless: in the hyperinflation of the early 1920s and when the Nazi regime was annihilated.

Could the European Central Bank’s $1.3 billion bond buying program result in similar inflation? With deflation more of a pressing problem it seems unlikely but then again printing money does usually end up with money losing its value.

Then there are worries about the Greek debt crisis and whether that might produce a second round of the global financial crisis and concern about growing Russian nationalism and its invasion and annexation of Ukrainian territory.

Euro strength

Still we will have to see if Germans continue to buy gold now that the euro is rising against the US dollar in a spectacular reversal that has caught out many pundits in the foreign exchange market. Some later buyers of gold will have lost money in euros.

Demand for gold bars and coins was actually waning in other parts of the world in the first quarter with total global demand down 10 per cent while US demand for these physical hard assets dropped by 12 per cent.

However, with fears of rising US interest rates now being kicked further and further down the road, the recent weakness of the gold price looks overdone and return to $1,300 seen earlier this year looks likely.

Posted on 18 May 2015

And now overnight trading in stocks and currency in Europe and Asia


1 Chinese yuan vs USA dollar/yuan strengthens to 6.2040/Shanghai bourse red and Hang Sang: red

2 Nikkei closed up by 157.35 points or .80%

3. Europe stocks all in the red/USA dollar index up to 93.60/Euro falls to 1.1403/

3b Japan 10 year bond yield: slight fall to .39% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 119.68/

3c Nikkei still just above 20,000

3d USA/Yen rate now well below the 120 barrier this morning

3e WTI 60.44 Brent 67.15

3f Gold up/Yen down

3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

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. Last night Japan refused to increase it’s QE

3h Oil up for WTI and up for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund rises to 65 basis points. German bunds in negative yields from 5 years out.

Except Greece which sees its 2 year rate rise greatly to 24.13%/Greek stocks down 1.78%/ still expect continual bank runs on Greek banks./Greek default inevitable/

3j Greek 10 year bond yield falls to: 10.81%

3k Gold at 1225.60 dollars/silver $17.59

3l USA vs Russian rouble; (Russian rouble up 1/4 rouble/dollar in value) 49.14 , the rouble is still the best acting currency this year!!

3m oil into the 60 dollar handle for WTI and 67 handle for Brent/Saudi Arabia increases production to drive out competition.

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation. This can spell financial disaster for the rest of the world/China may be forced to do QE!!

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9189 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0480 well below the floor set by the Swiss Finance Minister.

3p Britain’s serious fraud squad investigating the Bank of England/

3r the 3 year German bund remains in negative territory with the 10 year moving further away from negativity at +.67/the ECB losing control over the bond market.

3s Last week the ECB increased the ELA to Greece by another large 2.0 billion euros.This week, they raised it another 1.1 billion and thus at this point the new maximum was 80 billion euros. The ELA is used to replace depositors fleeing the Greek banking system. The bank runs are increasing exponentially. The ECB is contemplating cutting off the ELA which would be a death sentence to Greece and they are as well considering a 50% haircut to all Greek sovereign collateral which will totally wipe out the entire Gr. banking and financial sector.

3t Greece  paid the 700 million plus payment to the IMF last Wednesday but with IMF reserve funds.  It must be paid back in 24 days.

3 u. If the ECB cuts off Greece’s ELA they would have very little money left to function. So far, they have decided not to cut the ELA

4. USA 10 year treasury bond at 2.15% early this morning. Thirty year rate well below 3% at 2.94% / yield curve flatten/foreshadowing recession.


5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.


(courtesy zero hedge/Jim Reid Deutsche bank)


Gold Jumps Despite Stronger Dollar As Grexit Gets Ever Nearer, Futures Flat

With equities having long ago stopped reflecting fundamentals, and certainly the Eurozone’s ever more dire newsflow where any day could be Greece’s last in the doomed monetary union, it was up to gold to reflect that headlines out of Athens are going from bad to worse, with Bloomberg reporting that not only are Greek banks running low on collateral, both for ELA and any other purposes, that Greece would have no choice but to leave the Euro upon a default and that, as reported previously, Greece would not have made its May 12 payment had it not been for using the IMF’s own reserves as a source of funding and that the IMF now sees June 5 as Greece’s ever more fluid D-day. As a result gold jumped above $1230 overnight, a level last seen in February even as the Dollar index was higher by 0.5% at last check thanks to a drop in the EUR and the JPY.

Over in commodities, Brent has extended gains into 2nd day  amid heightened geopolitical tensions across Middle East, including resumption of Saudi-led air-strikes against Yemen Houthi because nobody could have possibly foreseen the “Ukrainization” of that particular ceasefire. Saudi air strikes in Yemen fall under rules of engagement, Houthi rebels moved missile launchers to border, says U.S. Sec. of State John Kerry. “Under the rules of engagement, it was always understood that, if there were proactive moves by one side or the other, then that would be in violation of the cease-fire agreement.” says Kerry.  Also of note: the previously noted Iranian aid ship is approaching Yemen’s coastline, raising the risk of a showdown with the Saudi-led military coalition  that’s blockading Yemeni ports, battling Houthi rebels. Iran’s navy has vowed to protect vessel, the government said it won’t allow any nation involved in Yemen war to inspect cargo.

Looking at stocks, Asian equity markets trade mixed following Friday’s lacklustre Wall Street close, with IPO buying overshadowing demand for equities in the region, as BHP Billiton (-6.2%) declined the most since 2008 after spinoff South32’s debut, which pressured the ASX 200 (-1.33%). The Nikkei 225 (+0.8%) rose amid JPY weakness and also further bolstered by strong earnings. Shanghai Comp (+0.6%) opened negative as several IPO’s drained liquidity in the market to hit limit up. However, some of these losses were paired after Chinese Property Prices showed declines in fewer cities than prior.

The first European session of the week has kicked off with major equities indices in positive territory, with the exception the FTSE MIB which underperforms after a number of Co.’s trade Ex-div, taking 385 points off the index. Elsewhere, Greek assets have seen some softness today (ASE: -2.6%), with Greek 2y yields up +168bps, 4y yields +130bps and 10y +26bps after a leaked IMF memo over the weekend suggested Greece will not be able to make their June 5th IMF payment unless an aid package is reached.

The only Treasury supply to be aware of this week is a USD 13bln 10yr TIPS auction due on Thursday the 21st. Meanwhile, the recent run of large corporate issuance is set to continue with analysts at IFR estimating a potential USD 25bln to USD 30bln, which would tip the volume in May well over the USD 100bln mark. Keep in mind, that the slate will also be front loaded in the week given the FOMC minutes on Wednesday and that earlier close on Friday for Memorial Day on the 25th

The dampened Greek sentiment has also weighed on EUR/USD with the pair falling around 60 pips after European participants came to their desks today, contributing to the USD-index strengthening 0.5% on the day following last week’s greenback weakness. This comes alongside comments from Fed’s Evans stating that if the Fed are confident in the strength of the economy, there is a possibility that rates could still rise at the June meeting.

Elsewhere, antipodean currencies have weakened today with NZD coming under pressure after the government’s announcement of tighter tax rules for residential properties, which follows on from the RBNZ’s plans to conduct lending restrictions on Auckland housing, while AUD/USD fell following comments from RBA Deputy Governor Lowe stating that scope remains for the RBA to cut rates.

In the commodity sector, gold printed fresh highs heading into the European open to reach its highest levels since Feb 17th, breaking above the 50% Fib from Jan high to March low at USD 1225.27 and consolidating a break above the  200DMA seen last week. The energy complex has also seen upside today with both WTI and Brent in positive territory, this comes after last week saw the former print its 6th consecutive week of gains, the longest such record in the US  benchmark crude in history. Today’s strength in energy has been attributed to the ongoing conflict in Yemen after the cease-fire reportedly ended with no further agreements being announced.

In summary: European shares remain mixed, close to intraday lows, with the banks and utilities sectors underperforming and autos, basic resources outperforming. Dollar snaps 4-day losing streak, most European bonds resume declines. The Italian and Dutch markets are the worst-performing larger bourses, the Swiss the best. The euro is weaker against the dollar. Italian 10yr bond yields rise; Spanish yields increase. Commodities little changed, with nickel, natural gas underperforming and silver outperforming. U.S. NAHB housing market index due later.

Market Wrap:

  • S&P 500 futures down 0.1% to 2116.5
  • Stoxx 600 down 0.1% to 396
  • US 10Yr yield up 2bps to 2.17%
  • German 10Yr yield up 4bps to 0.66%
  • MSCI Asia Pacific up 0.1% to 153.5
  • Gold spot up 0.5% to $1230.5/oz
  • 4 out of 19 Stoxx 600 sectors rise; autos, basic resources outperform, banks, utilities underperform
  • 42.2% of Stoxx 600 members gain, 55.2% decline
  • Eurostoxx 50 -0.3%, FTSE 100 little changed, CAC 40 -0.4%, DAX +0.4%, IBEX -0.4%, FTSEMIB -1.5%, SMI +0.5%
  • Asian stocks rise with the Sensex outperforming and the ASX underperforming.
  • MSCI Asia Pacific up 0.1% to 153.5
  • Nikkei 225 up 0.8%, Hang Seng down 0.8%, Kospi up 0.3%, Shanghai Composite down 0.6%, ASX down 1.3%, Sensex up 1.3%
  • Euro down 0.45% to $1.14
  • Dollar Index up 0.48% to 93.58
  • Italian 10Yr yield up 11bps to 1.88%
  • Spanish 10Yr yield up 10bps to 1.83%
  • French 10Yr yield up 4bps to 0.95%
  • S&P GSCI Index up 0.1% to 451
  • Brent Futures little changed at $66.8/bbl, WTI Futures up 0.5% to $60/bbl
  • LME 3m Copper down 0.4% to $6387.5/MT
  • LME 3m Nickel down 0.7% to $13885/MT
  • Wheat futures up 1.2% to 517.3 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

  • A leaked IMF memo over the weekend suggested Greece will not be able to make their June 5th IMF payment unless an aid package is reached
  • The dampened Greek sentiment has also weighed on EUR/USD with the pair falling around 60 pips after European participants came to their desks today, contributing to the USD-index strengthening 0.5% on the day
  • WTI and Brent crude futures both reside in positive territory, bolstered by the ongoing conflict in Yemen after the cease-fire reportedly ended with no further agreements being announced
  • Treasuries decline led by long maturities as EGB selloff resumes, led by Italy and Spain; data calender light today, Fed minutes due Wednesday before long holiday weekend.
  • Greek banks are running short on the collateral they need to stay alive, a crisis that could help force PM Tsipras’s hand after weeks of brinkmanship with creditors
  • Greece probably has no choice but to leave the euro if it defaults as it would likely be unable to source the funds needed to recapitalize its banks, according to Commerzbank chief economist Joerg Kraemer
  • Greece’s standoff with creditors is threatening the surge in tourism that helped drag the country out of a six-year slump in 2014, with particular slowdown in bookings from Germany
  • The new China-led Asian infrastructure bank is considering giving senior staff more power over loan approval than at existing multilateral lenders to speed up the decision process, officials familiar with the talks said
  • The rally in crude prices may not last as U.S. shale output remains robust, according to Malaysia’s state oil company;  “It will take many years until we see oil prices anywhere near the $100 mark,” Petronas CEO Wan Zulkiflee Wan Ariffin at a conference in Kuala Lumpur
  • BOJ economist Eiji Maeda sees no need for policy adjustment, says inflation expectations haven’t fallen in Japan, despite recent CPI data
  • EU governments are set to take a first step toward combating the smuggling of refugees from Libya by beefing up patrols and intelligence gathering in the Mediterranean Sea
  • Islamic State took control of Ramadi, the capital of Iraq’s largest province, after overrunning security and tribal forces just as the government prepared to send Shiite Muslim militias into the battle
  • An Iranian aid ship is approaching Yemen’s coastline, raising the risk of a showdown with the Saudi-led military coalition blockading Yemeni ports as it battles the country’s Shiite Houthi rebels
  • Sovereign bond yields mixed, with peripheral Europe higher; Greece 10Y +62bps. Asian stocks mixed, European stocks,  U.S. equity-index futures lower. Crude oil, gold gain; copper falls


DB’s Jim Reid concludes the remaining news from the weekend and overnight


It’s not infeasible that the US economy will have shrunk in H1 2015. This is perhaps not the most likely scenario but with Q1 likely to be revised down to around -1.0% and with Atlanta Fed GDPNow forecasting +0.7% for Q2 then it’s a distinct possibility. The street is still around 2.5% for Q2 but we probably need some decent hard data soon to justify it. As you’ll see in the week ahead, after the usual quiet post payroll data week, we’ll have more data over the next few days to gauge the recovery including April’s building permits and housing starts tomorrow.

Elsewhere our European economists think that the upward trend in consensus forecasts for the EU economy in 2015 – now at 1.5% yoy – will not continue. Their SIREN-Surprise indicator turned negative in mid-April and SIREN-Momentum weakened slightly along with declining global growth expectations. One can only wonder how much global bond yields would have spiked over the last month if the data had actually been strong. Having said that the recent rise in Oil has perhaps convinced investors that the lows in inflation may not be far away. This week sees UK, Europe (both Tues) and US inflation numbers (Fri) which will be closely watched.

As we know the softer data across different regions has led to a new Chinese stimulus round, should ensure that the ECB go deep into their planned QE timetable and that the Fed takes a June hike completely off the table. We’ll have a few more clues from the last FOMC minutes released on Wednesday but it’s difficult to see them deviating much from their recent message of preparing the markets for rate hikes but only when the data goes the way they expect it to. So overall it’s still a fragile financial system and global economy in our opinion but the plates are still being spun with ample central bank liquidity so one can’t under-estimate the impact of this on asset prices.

One thing that is starting to come to a head is Greece. With an EU leaders summit in Riga scheduled for Thursday and Friday, we should have a good idea of where current negotiations stand by the end of the week. Talks may well pick up in pace over the next few days with a spokesman for the Syriza party saying on Greek TV (Mega) that ‘we’re striving for a mutually beneficial agreement by Friday’ while pushing the party line that ‘our mandate from the Greek people is to reach an agreement where we stay in the euro area without harsh austerity measures’. Comments from the ECB’s Mersch saying that ‘we are in an endgame’ and that the situation is ‘not tenable’ will only add to the pressure while German Economy Minister Gabriel has once again reiterated that a third aid package for Greece is only possible if reforms are implemented.

One other factor that will likely add pressure to accelerate negotiations this week is the news over the weekend that Greece came close to being unable to pay the May 12th IMF repayment. According to Greek press Ekathimerini, PM Tsipras sent a letter on May 8th to the IMF’s Lagarde saying that the Greek government would not be able to repay the €750m unless the ECB allowed for Greece to issue more T-Bills. In the end, the government decided that it would only be able to repay after it emerged that Greece could use €650m of Special Drawing Rights issued by the IMF (and in turn exhaust their reserves). Since this, another memo sent by the IMF and reported by the UK’s Channel 4 on Saturday has suggested that Greece will be unable to make the IMF payment due June 5th unless a release of funds is achieved (this marks the next significant payment date).

So with an end game appearing to creep closer now, any disbursement of funds will be unlikely unless a Staff Level Agreement and some sort of implementation of an agreement through Greek parliament is achieved. As it stands, a referendum is a very real possibility with this having now also been mentioned by both Greece and its creditors. As DB’s Mark Wall noted, the ECB may well be flexible if Greece runs out of time and there is goodwill, however the ECB is likely to be strict unless Greece shows greater willingness to compromise. The outcome paths still remain fairly complicated with a range of scenarios still in play. If Greece shows enough goodwill and progress, then we still consider an agreement that avoids capital controls the most likely. In the meantime though, expect headlines to persist in the run up to the summit at the end of the week.

Moving on, with the exception of the Nikkei (+0.64%) most major bourses are off to a softer start in Asia this morning. The Hang Seng (-0.74%), CSI 300 (-0.18%) and ASX (-0.88%) in particular are trading lower as we type while bond markets in the region are largely following the lead from the US on Friday and trading around 1-4bps tighter. The Dollar has pared back some of Friday’s losses however with the DXY +0.26%.

Touching on China briefly, despite the disappointing data of late in the region and the expectation that more stimulus will be needed to help support the economy, our colleagues in China published a report on Friday looking at comprehensive financial liberalization reforms and the impact this may have on the financial markets there. They argue that new reforms over the next 18 months will likely bring many positive surprises to the market which, if successful, will ‘substantially boost China’s productivity growth and economic potential for years to come’. The attached article takes a look at both the reforms that have been put in place so far and also a comprehensive outlook at what we could expect in the future.

Recapping markets on Friday, a host of disappointing US data points helped drag both yields and the Dollar lower. In terms of price action, 10y (-8.8bps) and 30y (-12.1bps) Treasury yields in particular fell for the second consecutive day to close at 2.143% and 2.930% respectively. The Dollar made it four consecutive days of declines meanwhile with the DXY dropping 0.34% and extending recent four month lows. Equity markets were fairly muted for the most part however, eventually finishing modestly up on the day with the S&P 500 (+0.08%) extending its recent record high.

Friday’s economic data did little to help fulfill confidence of a meaningful bounce back for Q2 so far. The preliminary May University of Michigan consumer sentiment reading dropped 7.3pts to 88.6 and came in well below expectations of 95.9. There were similar falls for both the current conditions (99.8 from 107.0) and expectations (81.5 from 88.8) components although both 1y (2.9% from 2.6%) and 5-10y (2.8% from 2.6%) inflation expectations firmed slightly from last month, likely supported by the recent rise in oil prices. Elsewhere, there was similar disappointment for the NY Fed’s manufacturing index (3.09 vs. 5.00 expected) although the index did bounce from -1.19 last month. The April industrial (-0.3% mom vs. 0.0%) and manufacturing (0.0% mom vs. +0.2% expected) production readings softened, while capacity utilization (78.2% vs. 78.3% expected) fell 0.4% versus last month and lower than expected.

Over in Europe on Friday, with little in the way of data, equity markets pared some earlier gains to close lower on the day. The Stoxx 600 (-0.39%), DAX (-0.98%) and CAC (-0.71%) in particular declining as energy stocks dragged most bourses lower following a 2% fall in oil. WTI (-0.32%) and Brent (+0.16%) did eventually recover through the US session however to close at $59.69/bbl and $66.81/bbl respectively. The focus was once again on the bond market in Europe however as yields declined for the second consecutive day. Indeed, 10y Bunds fell -7.8bps to 0.622%. Despite yields rising for a fourth consecutive week, the +7.7bps move higher in yields last week in Bunds was lower than the previous three weeks (+17.4bps, +21.8bps, +7.8bps) and was helped by the bounce back on Thursday and Friday. There were similar moves in other core European bond markets on Friday while in the periphery, Spain (-10.7bps), Italy (-8.5bps) and Portugal (-11.1bps) generally outperformed. Greece was the notable underperformer on Friday, as 10y yields rose 20.7bps (to 10.423%) and Greek equities declined 2.57%.

As well as his comments regarding Greece, the ECB’s Mersch also reiterated earlier comments in the week from Draghi that the ECB is so far satisfied with the effects that QE is having and that there are no plans from the central bank to end the programme early or to alter the current trajectory of €60bn of purchases a month.




Saturday morning:  The IMF leaks a document showing that Greece will not make its June 5 payment unless a deal is struck:

(courtesy zero hedge)


Greece Will Default On June 5 Without Deal, IMF Leaks

Another week came and went with no breakthrough in negotiations between Greece and its creditors. The IMF is now fed up and has reportedly refused to be a part of any new bailout program for Greece, after Athens drew down its SDR reserves to makes its latest payment to the Fund. That money will now need to be repaid and in a move that surely marks the new gold standard for absurd circular funding schemes, Greece will likely look to use the next tranche of IMF money to payback its IMF SDR reserve which it tapped to pay the IMF. The country’s public sector employees live in limbo, not knowing from one week to the next whether they will be paid and commuters arenow subjected to a 50 second looped highlight reel of the Nazi occupation meant to rally the country behind the government’s quarter trillion euro war reparations claim (they might as well just ask for a ‘gagillion’) on Germany which has now become the symbol of tyranny and debt servitude for many Greek citizens.

Given the situation, one would be inclined to think that Alexis Tsipras would be falling all over himself to cut a deal with creditors because while giving up on campaign promises to voters isn’t ideal, it’s better than going down in history as the PM who sent the country careening into a drachma death spiral, and besides, giving up on campaign promises is something most politicians do all the time (it’s a job requirement for the US presidency). Alas we were back to the now ubiquitous ‘red line’ rhetoric on Friday as Tsipras continued to employ the “tell EU officials one thing behind close doors and tell the public the exact opposite a day later” negotiating technique. Here’s more from Bloomberg:

Greece won’t cross its red lines in negotiations with international creditors just because time is pressing to close a deal, Prime Minister Alexis Tsipras said.


“Those who think that our red lines will fade as time goes on would do well to forget it,” Tsipras said at a conference in Athens late Friday. “I want to assure the Greek people that there’s no way the government will back down on the issue of pension and wage cuts,” he said. “A deal must be reached but it must be mutually beneficial.”

Europe is once again set to take the stalled negotiations down to the wire as it now appears the next serious round of talks will come in Riga (the site of an epic Varoufakis meltdown that saw the FinMin tweeting out melodramatic FDR quotes after he was forced to have dinner by himself while his EU counterparts attended a gala) when Tsipras will try to close a deal by the end of the month.

Tsipras will address the standoff in bailout negotiations on the sidelines of a meeting of European Union leaders to be held May 21-22 in Riga, Latvia, according to a Greek government official who asked not to be identified as the diplomacy is not public.

If a deal isn’t struck by the end of May, it is truly game over. Here’s the ECB’s Yves Mersch:

“We are in an end game in Greece where the situation is grave. This situation is not tenable. There has been an accord between Europe and Greece to go through a program. This hasn’t been the case since December last year, because the new government said it doesn’t want to have anything to do with the program. But then they can’t demand money that was attached to that program either. In the meantime, they haven’t managed to bring other measures to the table that could lead to the same goal as foreseen in the first program. Greece is convinced it can play along the line of other rules than” the other 18 euro-area members.”

Despite the obviously dire circumstances, the Syriza government still insists it will somehow scrape together cash to meet its obligations…

“Greece Will Pay Wages, Pensions, Varoufakis Tells Skai TV”

…while EU officials (who one imagines are at this point completely amazed at how obtuse the Greek government has proven to be) are left with no option but to remind Greece that Brussels is still waiting on a list of reforms…

“Dombrovskis Reminds Greece to Submit Reform List, Bild Reports”

….and at the end of the day, here is the reality (via Bloomberg)…

“Greece won’t be able to make IMF repayments, beginning with a June 5 payment, unless an agreement is reached with international partners, U.K.’s Channel 4 reports, citing a leaked IMF memo dated May 14.”

*  *  *

As a reminder, here is the IMF procedure for a default and a matrix which outlines what a missed IMF payment would mean in terms of accelerated payment rights for Greece’s other creditors:

Monday morning:  Are we to have a Cyprus like end game?  Unlikely as most of Greek depositors are less than 100,000 Euros. Default is looming; Greek banks have a total of 93 billion euros of liquidity left or 13 billion above the amount of ELA supplied.  In other words the banks have at best 3 to 6 weeks of liquidity left.

Shape Of Greek Endgame Emerges: IMF Discussed “Cyprus-Like” Plan After Tsipras Warned Of Looming Default

As we said over the weekend, it’s all about Riga again for Greece. EU leaders will meet on Thursday and Friday in Latvia where PM Alexis Tsipras will try to secure a more favorable outcome than did FinMin Yanis Varoufakis who, last month in Riga, reportedly did more chiding and lecturing than negotiating, a performance that may ultimately cost him his job once all is said and done. The situation is far more urgent this time around, with Greece having tapped its IMF SDR account to make a payment to the Fund and with the banking sector running dangerously low on collateral that can be pledged for emergency liquidity.

A bit more color from Deutsche Bank:

One thing that is starting to come to a head is Greece. With an EU leaders summit in Riga scheduled for Thursday and Friday, we should have a good idea of where current negotiations stand by the end of the week. Talks may well pick up in pace over the next few days with a spokesman for the Syriza party saying on Greek TV (Mega) that ‘we’re striving for a mutually beneficial agreement by Friday’ while pushing the party line that ‘our mandate from the Greek people is to reach an agreement where we stay in the euro area without harsh austerity measures’…

One other factor that will likely add pressure to accelerate negotiations this week is the news over the weekend that Greece came close to being unable to pay the May 12th IMF repayment. According to Greek press Ekathimerini, PM Tsipras sent a letter on May 8th to the IMF’s Lagarde saying that the Greek government would not be able to repay the €750m unless the ECB allowed for Greece to issue more T-Bills.In the end, the government decided that it would only be able to repay after it emerged that Greece could use €650m of Special Drawing Rights issued by the IMF (and in turn exhaust their reserves). Since this, another memo sent by the IMF and reported by the UK’s Channel 4 on Saturday has suggested that Greece will be unable to make the IMF payment due June 5th unless a release of funds is achieved (this marks the next significant payment date).

More details have indeed emerged about Tsipras’ recent dealings with the IMF. As it turns out, Tsipras sent a letter to Christine Legarde early this month warning her that no payment would be forthcoming on May 12 without some manner of lifeline from EU creditors. Here’s more via FT:

Greece came so close to defaulting on last week’s €750m International Monetary Fund repayment that the prime minister warned IMF chief Christine Lagarde he could not pay it without EU aid.

Athens ultimately made the payment without financial assistance from the bloc but only by tapping a rarely used emergency account Greece holds at the fund — an unorthodox transaction that amounted to borrowing IMF funds to pay the IMF.

Alexis Tsipras wrote to Ms Lagarde, warning that the IMF repayment would be missed unless the European Central Bank immediately raised its curbs on Greece’s ability to issue short-term debt.

The letter, first reported by the Greek daily Kathimerini but independently confirmed by the Financial Times, raises questions about how close Athens is to bankruptcy. In addition to payments due to the IMF next month totalling €1.5bn, the Greek government has struggled to meet its wage and pension bills, which must be paid at the end of the month…

Varoufakis, Bloomberg reports, was tipped about the SDR option on a trip to Washington last month:

Greek Finance Minister Yanis Varoufakis had been told about possibility of using IMF SDR holding account on visit to Washington in April, govt still needed permission from IMF before could use it to make May 12 IMF payment, Greek govt spokesman Gabriel Sakellaridis tells reporters.

As far as pensions are concerned, Greece says it will pay government employees in May.


Assuming the government makes good on that promise, it will quickly run up against another IMF payment on June 5 and as noted above, Athens will default if no deal has been struck by then. The following graphs show government revenues, government spending, and the payment schedule and demonstrate quite clearly why the situation is so urgent:

Here’s Bloomberg’s assessment of the fiscal situation:

How long can Greece carry on? With revenues just about covering the pay and pensions bill, there’s not much left over to make even the small(ish) payments due to the IMF in June. If Greece and its banking sector can limp a little further, the state should get a boost from income tax receipts that usually flow in July. Unfortunately, that might come too late to pay the ECB 3.5 billion euros due on July 20, and the repayment that follows in August looks like an impossible challenge without a disbursement of Eurogroup funds…

Should Greece’s citizens begin to lose faith in a positive outcome to negotiations, it’s quite possible that receipts could falter as more of the usual tax payments are held back and taxable activity is curtailed. Still, some boost to the Treasury’s bank balance is likely in July. General government revenues could be lifted by about 3.8 billion euros compared with the average for the other months of the year. That would get some way towards the figure needed to pay the ECB, though it might not come soon enough to avoid a missed payment…

Of course, making it as far as July depends on how long the Greek banking sector can survive. Absent a change to the haircut imposed by the ECB on Greek banks’ collateral, limitations on emergency liquidity assistance are unlikely to pose serious constraints before mid-July. Greek banks have enough collateral to access 93 billion euros in liquidity. That’s 13 billion euros above the current cap. The four-week average of increases by the ECB stands at 1.5 billion. At the current pace of increase, Greek banks could keep borrowing more for about eight weeks to offset deposit flight.

But the idea that the ECB will continue to prop up the Greek banking sector is becoming more tenuous as Mario Draghi recently came under fire from Bundesbank chief Jens Weidmann who openly accused the central bank of breaking the monetary financing taboo. Rumors that the ECB will soon begin to tighten the screws by raising the haircut on collateral pledged for cash have been making the rounds for weeks and as Bloomberg warns, the move could come at anytime:

A crunch will come if the ECB increases the haircut on Greek collateral to levels not seen since last year. That could be prompted by anything from a complete breakdown in talks to a missed debt payment, the official said. A continuation of the current impasse could even be all that’s needed, the official said.

While talks are centering on whether to give Greece more money, the ECB could raise the stakes if it increases the discount on the collateral Greek banks pledge in exchange for cash under its Emergency Liquidity Assistance program. That could happen as soon as this week, after the Governing Council next meets in Frankfurt on May 20.

Meanwhile, Commerzbank doesn’t seem to buy the idea that the equivalent of a DIP loan would be sufficient to keep Greece from collapsing in the event Grexit becomes a reality:

Greece probably has no choice but to leave the euro if it defaults as it would likely be unable to source the funds needed to recapitalize its banks, Commerzbank chief economist Joerg Kraemer writes in client note.

If the country were to default, the banks’ claims on the state would be essentially worthless and they wouldn’t be allowed access to new money through the ELA.

Only a fraction of the equity capital needed could be gained from Greek bank bond creditors.

A recourse to bank deposits may also yield little as most accounts are probably under the threshold of EU100k per person which would be spared in any restructuring.

As you can see, the bail-in hints are starting to be dropped, suggesting that in the final analysis, some Greeks may be Cyprus’d. Indeed, the IMF has already discussed this possibility behind closed doors. Here’s FT again:

According to two officials briefed on the talks, at least one board member raised the possibility of presenting a “take it or leave it proposal” to Greece…

The idea of a “Cyprus-like” presentation to Greek authorities has gained traction among some eurozone finance ministers, according to one official involved in the talks.

As for Greek officials, they’ve become quite adept atwholesale denials:

There should be a solution in May so we can resolve our liquidity issues,” Gabriel Sakellaridis told a news conference.

He ruled out a levy on bank deposits to raise cash and said the government would not sign a third bailout program.

*  *  *

Touch Capital Markets’ Andreas Koutras summed up the situation nicely when he gave Bloomberg his best Schaeuble impression:

“There were too many people crying wolf before. But as Hemingway wrote: How did you go bankrupt? Two ways: Gradually, then suddenly.”

And then we have this viewpoint as to what will happen. Kaletsy belives that Tsipras will blink:
(courtesy Kaletsy)

Guest Post: Why Syriza Will Blink

Authored by Anatole Kaletsy, originally posted at Project Syndicate,

Once again, Greece seems to have slipped the financial noose. By drawing on its holdings in an International Monetary Fund reserve account, it was able to repay €750 million ($851 million) – ironically to the IMF itself – just as the payment was falling due.

This brinkmanship is no accident. Since coming to power in January, the Greek government, led by Prime Minister Alexis Tsipras’s Syriza party, has believed that the threat of default – and thus of a financial crisis that might break up the euro – provides negotiating leverage to offset Greece’s lack of economic and political power. Months later, Tsipras and his finance minister, Yanis Varoufakis, an academic expert in game theory, still seem committed to this view, despite the lack of any evidence to support it.

But their calculation is based on a false premise.Tsipras and Varoufakis assume that a default would force Europe to choose between just two alternatives: expel Greece from the eurozone or offer it unconditional debt relief. But the European authorities have a third option in the event of a Greek default. Instead of forcing a “Grexit,” the EU could trap Greece inside the eurozone and starve it of money, then simply sit back and watch the Tsipras government’s domestic political support collapse.

Such a siege strategy – waiting for Greece to run out of the money it needs to maintain the normal functions of government – now looks like the EU’s most promising technique to break Greek resistance. It is likely to work because the Greek government finds it increasingly difficult to scrape together enough money to pay wages and pensions at the end of each month.

To do so, Varoufakis has been resorting to increasingly desperate measures, such as seizing the cash in municipal and hospital bank accounts. The implication is that tax collections have been so badly hit by the economic chaos since January’s election that government revenues are no longer sufficient to cover day-to-day costs. If this is true – nobody can say for sure because of the unreliability of Greek financial statistics (another of the EU authorities’ complaints) – the Greek government’s negotiating strategy is doomed.

The Tsipras-Varoufakis strategy assumed that Greece could credibly threaten to default, because the government, if forced to follow through, would still have more than enough money to pay for wages, pensions, and public services. That was a reasonable assumption back in January. The government had budgeted for a large primary surplus (which excludes interest payments), which was projected at 4% of GDP.

If Greece had defaulted in January, this primary surplus could (in theory) have been redirected from interest payments to finance the higher wages, pensions, and public spending that Syriza had promised in its election campaign. Given this possibility, Varoufakis may have believed that he was making other EU finance ministers a generous offer by proposing to cut the primary surplus from 4% to 1% of GDP, rather than all the way to zero. If the EU refused, his implied threat was simply to stop paying interest and make the entire primary surplus available for extra public spending.

But what if the primary surplus – the Greek government’s trump card in its confrontational negotiating strategy – has now disappeared? In that case, the threat of default is no longer credible. With the primary surplus gone, a default would no longer permit Tsipras to fulfill Syriza’s campaign promises; on the contrary, it would imply even bigger cutbacks in wages, pensions, and public spending than the “troika” – the European Commission, the European Central Bank, and the IMF – is now demanding.

For the EU authorities, by contrast, a Greek default would now be much less problematic than previously assumed. They no longer need to deter a default by threatening Greece with expulsion from the euro. Instead, the EU can now rely on the Greek government itself to punish its people by failing to pay wages and pensions and honor bank guarantees.

Tsipras and Varoufakis should have seen this coming, because the same thing happened two years ago, when Cyprus, in the throes of a banking crisis, attempted to defy the EU. The Cyprus experience suggests that, with the credibility of the government’s default threat in tatters, the EU is likely to force Greece to stay in the euro and put it through an American-style municipal bankruptcy, like that of Detroit.

The legal and political mechanisms for treating Greece like a municipal bankruptcy are clear. The European treaties state unequivocally that euro membership is irreversible unless a country decides to exit not just from the single currency but from the entire EU. That is also the political message that EU governments want to instill in their own citizens and financial investors.

If Greece defaults, the EU will be legally justified and politically motivated to insist that the euro remains its only legal tender. Even if the Greek government decides to pay wages and pensions by printing its own IOUs or “new drachmas,” the European Court of Justice will rule that all domestic debts and bank deposits must be repaid in euros. That, in turn, will force a default against Greek citizens, as well as foreign creditors, because the government will be unable to honor the euro value of insured deposits in Greek banks.

So a Greek default within the euro, far from allowing Syriza to honor its election promises, would inflict even greater austerity on Greek voters than they endured under the troika program. At that point, the government’s collapse would become inevitable. Instead of Greece exiting the eurozone, Syriza would exit the Greek government. As soon as Tsipras realizes that the rules of the game between Greece and Europe have changed, his capitulation will be just a matter of time.




This morning gold hit a 3 month high on the Greek news of an impending default:

(courtesy zero hedge)

Gold Hits 3-Month Highs Amid “Frenetic Liquidity”

Gold topped $1230 this morning – breaking to 3-month highs and up over 4% year-to-date – up 5 days in a row for the best run in 4 months. The surge comes causally or correlatedly coincidental with China’s explicit shift into extraordinary measures (LTROs) but, as The FT reports,market participants are concerned that algo-based funds have created a “frenetic liquidity” environment as everyone from real money to central banks “aren’t trading the gold market the way they used to.”

With most gold trading screen-based and a decline in bank-to-bank activity — the anchor of the over-the-counter (OTC) bullion market — as many institutions have scaled back or exited commodities, The FT reports, thishas made the gold market more frenetic and pushed up the costs of hedging and doing larger trades, according to market participants…

“If you’re just transacting in small sizes then probably you have benefited from the changes as you can transact directly through a bank’s electronic platform,” says one veteran trader.

“The issue is if you want to transact in a decent size, which used to be 100,000 to 200,000 ounces. That has become harder to get away with without influencing the price unduly.”

The decline in interbank trading has prompted a debate about the most appropriate structure for the bullion market, with some people suggesting physical gold should be traded on an exchange.

While algorithm-based hedge funds are more active that has created a “frenetic liquidity”, market participants say, causing choppiness in the market. That exacerbates any price moves on lower volumes but also means liquidity can disappear just when it is most needed, for example in the event of a market rout.

“The algos use similar sorts of momentum-driven models — it can all be liquidity in the same way, particularly around economic data releases or when gold prices are at well-identified technical levels,” one gold market participant says.

Coming under greater scrutiny now that ‘rigging the game’ is more closely monitored, banks have scaled back their operations in the gold market, in the face of greater regulatory costs. Last year Deutsche Bank said it would exit precious metals trading after it withdrew from participating in the gold fix.

“A lot of the trading centres around the fixing and the futures market. London has already seen that massive decline in trading liquidity and volumes,” Ross Norman, head of broker Sharps Pixley, says, referring to the twice daily gold auction used to set a price.“The fix has more prominence than ever given the spot rate has less of a role.”

And more existential problems exist…

London faces competition from China’s Shanghai Gold Exchange after it launched an international trading board in the city’s free trade zone, which allows for freer flow of capital than in the rest of the country.

In September, HSBC, one of the world’s largest bullion banks, said it was approved to be a member of the board.

That could fracture the global gold market, given that China is the largest producer and consumer of gold.

“We will undoubtedly have a Chinese fixing price before the end of the year and we will see a rapid development of a Chinese gold options market — they’ve got a very deep liquid lending market and so the idea that liquidity is moving east is correct,” one market participant says. “They do need to take stock of where the London market is going and what role it’s got to play going forward.”




And the preceding caused the Euro/USA cross to plummet as well as peripheral bond prices (yields rising).  The German bund 10 yr remains constant:

(courtesy zero hedge)


EURUSD & Peripheral Bonds Tumble As Greek Fears Re-Emerge

The exuberant bounce of last week’s IMF default/IMF payment workaround is fading fast as peripheral European bonds and the euro are being sold aggressively this morning, after headlines continue to suggest Greek bank collateral is dropping faster than the pressure in Patriot’s footballs. Most notably, bunds are eeerily stable – almost as if some central planner figured out German bonds were the world’s flashing red indicator and decided to suppress volatility some more.

PIIGS blowing out…

Euro fading…

But bunds are deadstick…

As Bloomberg reports,

Greek banks are running short on the collateral they need to stay alive, a crisis that could help force Prime Minister Alexis Tsipras’s hand after weeks of brinkmanship with creditors.

As deposits flee the financial system, lenders use collateral parked at the Greek central bank to tap more and more emergency liquidity every week. In a worst-case scenario, that lifeline will be maxed out within three weeks, pushing banks toward insolvency, some economists say.

“The point where collateral is exhausted is likely to be near,” JPMorgan Chase Bank analysts Malcolm Barr and David Mackie wrote in a note to clients May 15. “Pressures on central government cash flow, pressures on the banking system, and the political timetable are all converging on late May-early June.”

Charts: Bloomberg


The month of June will see 3 major areas where default can bring the entire financial system down.  I have been highlighting the Greek inevitable default to you for the past several months.


The second major default crisis is the Ukraine situation,


The third crisis, is the Austrian Hypo bank collapse which will no doubt see much turmoil once June rolls around.


With respect to the Ukraine situation, the IMF is to unleash a 40 billion usa pkg to help this worn torn nation. However the IMF has stated that all bond holders must take a considerable haircut so the iMF can then advance its funds and be first in line in case of default.  The problem of course is Russia which has given in Dec 2013, a loan for $3 billion dollars.  The IMF wants this loan to receive a haircut, Putin says no.  As a matter of fact, most bondholders are forcibly saying no haircut:




(courtesy Reuters and special thanks to Robert H for sending this to us)
Ukraine says creditors must accept debt proposals
Fri, May 15 14:45 PM BST

By Natalia Zinets

KIEV (Reuters) – Foreign creditors must agree to the “legitimate” deal offered by Ukraine in talks on restructuring some $23 billion (£14.6 billion) worth of its debt, Prime Minister Arseny Yatseniuk said on Friday.

Negotiations turned sour this week after a group of Ukraine’s largest bondholders repeated objections to any writedown of the principal owed, while the Finance Ministry accused creditors of being unwilling to negotiate in good faith.

Speaking to parliament on Friday, Yatseniuk said that bondholders should appreciate the parlous state of Ukraine’s finances.

“The country is at war. We have lost 20 percent of our economy. We approached creditors with a clear position on the procedure and terms of restructuring,” he said.

“We ask, appeal and insist that external creditors appreciate the current situation and accept Ukraine’s offer, which is legitimate and a way to help Ukraine.”

The deal put forward by Kiev foresees extending the maturity of the bonds and reducing the principal and the coupon – a “haircut.”

“It requires all three … it’s important our creditors understand,” Finance Minister Natalia Yaresko told the European Bank for Reconstruction and Development on the sidelines of its annual meeting in Tbilisi on Friday.

The creditor committee said on Tuesday it had submitted new, detailed restructuring proposals, but the plan still rejects any haircut. The committee includes investment firm Franklin Templeton and represents investors holding about $10 billion worth of bonds.

Ukraine is under pressure to reach a deal. The International Monetary Fund says it wants an agreement in place before it concludes its latest review of Ukraine’s $17.5 billion bailout programme, which is slated to go to the IMF board in June.

A second tranche of about $2.5 billion hinges on the outcome of the IMF review. Ukraine sorely needs the cash to shore up its foreign currency reserves.

Concluding restructuring talks by June was always considered optimistic, but the divisions that emerged this week further undermine prospects for a quick deal.

Ukraine has accused bondholders of not being constructive, while the bondholder committee said neither Kiev nor its advisers had shown substantive engagement with its initial plans, delivered four weeks ago.

“I ask them (bondholders) to be constructive, to come to the table in a transparent fashion, to come in a responsive fashion and in good faith. We need to talk, we need to talk face to face and we need to do that in the very near future,” Yaresko said.


(Reporting by Natalia Zinets; Additional reporting by Margarita Antidze in Tbilisi; Writing by Alessandra Prentice; Editing by Richard Balmforth, Larry King)


Our next big problem:  the elimination of cash from the global system:
(courtesy zero hedge)

Leading German Keynesian Economist Calls For Cash Ban

It’s official: the world has gone central-planner crazy.

Monetary policy, whether in the form of “conventional” methods such as the micromanagement of policy rates or so-called “unconventional” measures such as QE, has proven utterly ineffective when it comes to both “smoothing out” the business cycle and reigniting economic growth in the wake of severe downturns. If anything, recent history has shown the exact opposite to be true. That is, the Fed helped to engineer the housing bubble and has now succeeded in inflating a similar bubble in stocks and fixed income. Meanwhile, the Japanese experience with QE has plunged the country into what we have affectionately dubbed “The Kuroda Zone”, wherein the BoJ has cornered both the stock and bond markets while failing to promote wage growth or meaningfully raise inflation expectations. In China, the PBoC has taken to cutting policy rates at the first sign of weakness in the stock market, helping to sustain what will perhaps go down in history as the second coming of the tulip bulb mania, while the ECB has taken the insane step of adopting a trillion euro bond buying program while simultaneously demanding fiscal discipline, meaning the central bank’s bond monetization efforts are set against a backdrop of meager supply.

In sum, the collective actions of the world’s most influential central banks have done wonders when it comes to inflating asset bubbles but have done very little to revive robust economic growth. In fact, far from smoothing out the business cycle and resuscitating DM demand, post-crisis monetary policy has actually had the exact opposite effect: it has set the stage for an even more spectacular collapse while simultaneously creating a worldwide deflationary supply glut.

At this stage, a sane person might be tempted to call it a day on the monetary experiments, especially considering that at this point, the limits have been reached. That is, there are literally no more assets to buy and rates have hit the effective lower bound where rational actors will eschew bank deposits in favor of the mattress. But not so fast, say folks like Citi’s Willem Buiter and economist Ken Rogoff: the world could always ban cash because if you eliminate physical currency and force people to use a debit card linked to a government controlled bank account for all transactions, you can effectively centrally plan everything. Consumers not spending? No problem. Just tax their excess account balance. Economy overheating? Again, no problem. Raise the interest paid on account holdings to encourage people to stop spending. So with Citi, Harvard, and Denmark all onboard, we bring you the latest call for a cashless society, this time from German economist and member of the German Council Of Economic Experts Peter Bofinger.

Via Spiegel (Google translated):

Coins and bills are obsolete and only reduce the influence of central banks.This position represents the economy Peter Bofinger. The federal government should stand up for the abolition of cash, he calls in the mirror…


The economy Peter Bofinger campaigns for the abolition of cash. “With today’s technical possibilities coins and notes are in fact an anachronism,” Bofinger told SPIEGEL.


If these away, the markets for undeclared work and drugs could be dried out. In addition, it would have the central banks easier to enforce its monetary policy.The teaching in Würzburg economics professor called on the federal government to promote at the international level for the abolition of cash. “That would certainly be a good topic for the agenda of the G-7 summit in Elmau,” he said. (Click here to read the full interview in the new mirror .)


Even the former US Treasury Secretary Larry Summers and economist pleaded for an end to the already cash . Likewise, the US economist Kenneth Rogoff . He also argued that the interest rates of central banks have less clout when banks or consumer credit rather than hoard cash.


Critics warn, however , such debates would only distract from the real problems of the current monetary policy.

Yes, the “real problems” with current monetary policy. Like the fact that by design it can’t possibly work (but it can and will push stocks to unprecedented highs). Paging Mr. Weidmann, your countrymen are going Keynesian crazy.



And now Martin Armstrong warns the globe:
(courtesy Martin Armstrong)

Martin Armstrong Warns Of The Coming Crash Of All Crashes

Submitted by Martin Armstrong via Armstrong Economics,

Why are governments rushing to eliminate cash?

During previous recoveries following the recessionary declines, the central banks were able to build up their credibility and ammunition so to speak by raising interest rates during the recovery. This time, ever since we began moving toward Transactional Banking with the repeal of Glass Steagall in 1999, banks have looked at profits rather than their role within the economic landscape.

They shifted to structuring products and no longer was there any relationship with the client. This reduced capital formation for it has been followed by rising unemployment among the youth and/or their inability to find jobs within their fields of study. The VELOCITY of money peaked with our Economic Confidence Model 1998.55 turning point from which we warned of the pending crash in Russia.

The damage inflicted with the collapse of Russia and theimplosion of Long-Term Capital Management in the end of 1998, has demonstrated that the VELOCITY of money has continued to decline.

Long-Term Capital Managment

There has been no long-term recovery. This current mild recovery in the USA has been shallow at best and as the rest of the world declines still from the 2007.15 high with a target low in 2020, the Federal Reserve has been unable to raise interest rates sufficiently to demonstrate any recovery for the spreads at the banks between bid and ask for money is also at historical highs. Banks will give secured car loans at around 4% while their cost of funds is really 0%. This is the widest spread between bid and ask since the Panic of 1899.

We face a frightening collapse in the VELOCITY of money and all this talk of eliminating cash is in part due to the rising hoarding of cash by households both in the USA and Europe.

This is a major problem for the central banks have also lost control of the ability to stimulate anything.The loss of traditional stimulus ability by the central banks is now threatening the nationalization of banks be it directly, or indirectly.

We face a cliff that government refuses to acknowledge and their solution will be to grab more power – never reform.

The shale boys are not giving up on oil production in the uSA. This may be the start of a huge oil price war:
(courtesy Any Tlly/

This May Just Be The Start Of The Oil Price War Says IEA

Submitted by Andy Tully via,

Saudi Oil Minister Ali al-Naimi may be one of the most powerful individuals in the global oil industry.After all, as the top oil official in arguably the world’s most influential oil-producing country, he has enormous influence.

But for all his power, is he the most ingenious? That question arises from the release of two reports on the current state of the oil industry that look at whether or not OPEC’s strategy of forcing US shale to cut back is succeeding.

The first, issued on May 12 by OPEC, says, in essence, that Saudi Arabia’s effort to keep its own oil production at near-record highs is succeeding in wresting market share back from US producers of shale oil, also called “light, tight oil” (LTO). The second, issued a day later by the International Energy Agency (IEA), agrees, but only up to a point.

“In the supposed standoff between OPEC and U.S. light tight oil (LTO), LTO appears to have blinked,”the IEA reported. “Following months of cost cutting and a 60 percent plunge in the U.S. rig count, the relentless rise in U.S. supply seems to be finally abating.”

But the report from the Paris-based IEA, which advises 29 industrialized countries on energy policy, also pointed to a rebound in oil prices that could benefit US shale producers.

As both the OPEC and IEA reports point out, the decline in US shale oil output has somewhat reduced the oil glut and led oil prices to rally up to about $65 per barrel. And the IEA adds that this brings LTO back above the threshold where its production becomes profitable again.

But that, evidently, isn’t good enough for both domestic and foreign shale drillers in the United States, and this is where ingenuity enters the picture. “Several large LTO producers have been boasting of achieving large reductions in production costs in recent weeks,” the report said.

For example, Statoil, Norway’s huge state-owned energy company, is trying out new techniques of hydraulic fracturing, or fracking, in Texas’ Eagle Ford shale field. They include using different grades of sand to mix with water and chemicals, and drilling at varying depths, to increase oil yields.

“There’s a proverb in Norway that says necessity teaches the naked woman how to knit,” Bjorn Otto Sverdrup, a Statoil vice president, told The New York Times, during a tour of the company’s shale operations in Kennedy, Texas.

Evidently this mother of invention is showing some success. Statoil may have cut the number of its rigs at Eagle Ford from three to two in 2014, but its production from the shale field is up by one-third.The new fracking method has also cut the cost of extraction from an average of $4.5 million per well to $3.5 million, in part because it’s been able to reduce drilling time from an average of 21 days to 17.

Against this backdrop, then, it’s not surprising that the IEA isn’t so sure that OPEC in general, and al-Naimi in particular, have the upper hand – yet. “It would thus be premature to suggest that OPEC has won the battle for market share,” the agency’s report said. “The battle, rather, has just started.”


Your more important currency crosses early Monday morning:


Euro/USA 1.1403 down .0042

USA/JAPAN YEN 119.68 up .587

GBP/USA 1.5677 down .0031

USA/CAN 1.2057 up .0065

This morning in Europe, the Euro fell by a considerable 42 basis points, trading now just above the 1.14 level at 1.1403; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, a possible default of Greece and the Ukraine, rising peripheral bond yields and today 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. The yen continues to trade in yoyo fashion as this morning it settled down again in Japan by 59 basis points and trading just below the 120 level to 119.68 yen to the dollar.

The pound was well down this morning as it now trades well below the 1.57 level at 1.5677,still celebrating a conservative victory but still very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation.

The Canadian dollar is down by a considerable 65 basis points at 1.2057 to the dollar.

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies

2, the Nikkei average vs gold carry trade (still ongoing)

3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure). Swiss franc is now 1.0280 to the Euro, trading well above the floor 1.05. This will continue to create havoc with the Hypo bank failure.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this morning : up 157.35 points or 0.80%

Trading from Europe and Asia:
1. Europe stocks all in the red

2/ Asian bourses mostly in the red … Chinese bourses: Hang Sang red (massive bubble forming) ,Shanghai in the red (massive bubble ready to burst), Australia in the red: /Nikkei (Japan) green/India’s Sensex in the green/

Gold very early morning trading: $1225.60



Early Monday morning USA 10 year bond yield: 2.15% !!! down 1 in basis points from Friday night and it is trading under resistance at 2.27-2.32%.

USA dollar index early Monday morning: 93.60 up 34 cents from Friday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Monday morning

And now for your closing numbers for Monday:


Closing Portuguese 10 year bond yield: 2.42 up 13 in basis points from Friday (continual central bank intervention)

Closing Japanese 10 year bond yield: .39% !!! down 1 in basis points from Friday/


Your closing Spanish 10 year government bond, Monday, up 10 points in yield (massive central bank intervention/yet still losing control)

Spanish 10 year bond yield: 1.83% !!!!!!


Your Monday closing Italian 10 year bond yield: 1.89% up 10 in basis points from Thursday: (massive central bank intervention/)

trading 6 basis point higher than Spain.




Closing currency crosses for Monday night/USA dollar index/USA 10 yr bond: 4 pm

Euro/USA: 1.1300 down .0143 ( Euro down 143 basis points)

USA/Japan: 120.01 up .910 ( yen down 91 basis point)

Great Britain/USA: 1.5643 down .0065 (Pound down 65 basis points)

USA/Canada: 1.2169 up .0177 (Can dollar down 177 basis points)

The euro fell sharply today. It settled down 143 basis points against the dollar to 1.1300 as the dollar rose on all fronts.  The yen was down 91 basis points and closing just above the 120 cross at 120.01. The British pound lost some ground today, 65 basis points, closing at 1.5643. The Canadian dollar lost considerable ground to the USA dollar, 177 basis points closing at 1.2169.

As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system. The losses on the oil front and huge losses on the USA dollar will no doubt produce many dead bodies.

Your closing 10 yr USA bond yield: 2.23% up 9 in basis points from Friday (close to  the resistance level of 2.27-2.32%)


Your closing USA dollar index:

94.23 up 110 cents on the day.


European and Dow Jones stock index closes:


England FTSE up 8.38 points or 0.12%

Paris CAC up 18.49 points or 0.37%

German Dax up 147.25 points or 1.29%

Spain’s Ibex up 27.70 points or 0.24%

Italian FTSE-MIB  down 275.36 or 1.17%


The Dow up 26.32 or 0.14%

Nasdaq; up 31.61 or 0.63%


OIL: WTI 59.14 !!!!!!!

Brent: 66.34!!!!


Closing USA/Russian rouble cross: 49.01 up 3/10 rouble per dollar on the day.




And now your important USA stories:


NYSE trading for today


Volumeless VIXtermination Fuels Stock-Buying Frenzy To Record Highs

Homebuilder Sentiment Slides, Misses For 5th Of Last 6 Months

Since November, HAHB homebuilder sentiment has only beaten expectations once. May printed 54 (notably short of the 57 expectation). Despite all the previous hope for future sales, buyer traffic has fallen as The Midwest saw the biggest drop in sentiment (what about the post-weather bounce?) and The West rising modestly.

The story was well-known: pessimism now offset by optimism later: present single family sales falls to 59 vs 61 last month, while future single family sales rise to 64 vs 63 last month, even as prospective buyers traffic falls to 39 vs 40 last month.

As for the report punchline:

Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home,” said NAHB Chief Economist David Crowe.

Which may suggest that the S&P at all time highs hasn’t quite trickled down to consumers just yet. Oh well, a few more years of record S&P highs should surely seal the deal.

Despite the lower oil price, gasoline prices in California rise to over $4.00 per gallon.
(courtesy zero hedge)

So Much For The Oil Crash: Cali Gas Price Almost Back To Year Ago Levels; Los Angeles Gallon Rises Over $4.00

Back when oil was crashing from $100 to $40, every day various economists and pundits, oblivious of the bloodbath in energy junk bonds and the imminent capex collapse, would explain how plunging gas prices were “unambiguously good” for consumer spending in the US. Well, the oil crash came and went, and retail sales since November have been unambiguously bad, not to mention US GDP in the first half is now poised for a negative print.

But while one could, at least superficially, make the case that for the US consumer (if nobody else) lower oil prices are indeed better than the opposite, we wonder how the same pundits will spin that according to AAA, not only are Los Angeles gas prices now back over $4.00 per gallon, erasing almost all losses from a year ago…

… but that the mecca of US motorists, the entire state of California, has seen its average gas prices soar from a low of $2.55 in January, a 40% discount to the $4.15 price a year ago to just above $3.80, a single-digit decline from May of 2014, and a difference which at this rate will be completely erased in less than two weeks time.

At this rate a gallon of gas may soon cost as much as a gallon of water in California.

Let’s wrap up today with Greg Hunter interviewing Hugo:
(courtesy Greg Hunter/USAWatchdog/Hugo Salinas Price)

By Greg Hunter’s  (Early Sunday Release)


Mexican retail mogul Hugo Salinas-Price is worried about the common man and the upcoming currency calamity that is approaching the globe.  Salinas-Price says, “It certainly isn’t getting better when you have some intellectuals going so crazy as to say they want to ban cash.  We can’t go too much further along this road.  This is utter madness.  We’re not supposed to use cash anymore?  Salinas Price goes on to say, “If we have these lunatics running things, it can’t get any better.  We have people running things that have forgotten about what motivates the common man. . . . I want people to have silver because it is going to protect them.”

Why does the common man need the protection of precious metals?  Salinas-Price says, “I just read today the global debt is $200 trillion, and it’s grown from the last crisis in 2008.  Something has to happen to take care of that debt.  Either it’s going to be repudiated or it’s going to be inflated away, or it’s going to be paid with taxation. . . . We are headed over Niagara Falls.”

Salinas-Price, 83 years old and a billionaire, warns currencies can suffer huge inflation risks.  Since the mid 1970’s, Salinas-Price points out the peso exchange rate has plunged compared to the U.S. dollar.  Salinas-Price says, “From 1976 to date, from 12.50 pesos (to $1 US) we are now at 15,100 pesos (to $1 US) and going further down.  Savings can become worthless, and that’s what I tell people.  Don’t save money that is going to devalue.  This inflation that is going on that is presently debt that is like a cloud that is up there.  When it begins to liquidate, it’s going to be pouring down.  People will be rushing around trying to buy things.  The money is going to be worthless because in a liquidation, what can you buy with all this water (fiat money) that is coming down.  As long as it is up there in credit, it’s okay.  It’s up there in the cloud, but if it begins to liquidate, watch out.”

So, is Salinas-Price predicting the same huge devaluation for the U.S. dollar as what has happened to the Mexican peso?  Salinas-Price contends, “Same cause, same effect.  It is absolutely unavoidable.  That’s why I have been urging people to have silver and gold.”

Salinas-Price is trying to implement an idea involving silver coins that just might save the common man.  Salinas-Price goes on to explain, “It is a silver coin that is given a monetary value by a quote and not by stamping the number on the coin. . . . It would receive a quote from the Treasury (not a central bank).  Don’t give it to the Fed, give it to the Treasury.  Then you are saving in silver money which makes it 10 times or 100 times more attractive.  When this takes place–boom, it’s going to change the whole thing.  It’s going to shake up the world.”

Salinas-Price thinks what is coming is going to be an “apocalypse.”  Salinas-Price predicts, “This is apocalyptic.  We are in a terrible mess, and there is no way out without suffering.  Apocalypse means prices are going to go haywire.  Business is going to stagnate.  Unemployment is going to prevail.  There is going to be enormous disorder.  That’s what I see will happen.  We are not going to get out of this mess easily.  It is going to be painful.  One way to avoid pain is to have something you will be able to trade for what you need and that is gold and silver, especially gold.”

Join Greg Hunter as he goes One-on-One with retail mogul Hugo Salinas-Price.

(There is much more in the video interview.)

After the interview: Hugo Salinas-Price has 18 grandchildren and one of his sons if running the company he started.  Salinas-Price also has a free website that contains information and articles in both Spanish and some English.  Click here for     Here are articles in English from



Well that about does it for today.

Tomorrow will be another big test for gold/silver.  If they advance again, the bankers would definitely be losing control over our metals.

see you tomorrow


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