Gold: $1081.90 up $15.90 (comex closing time)
Silver $14.30 up 22 cents
In the access market 5:15 pm
At the gold comex today, we had a good delivery day, registering 92 notices for 9200 ounces.Silver saw 17 notices for 85,000 oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 198.88 tonnes for a loss of 104 tonnes over that period.
In silver, the open interest fell by 2632 contracts even though silver was up in price by 40 cents with respect to Friday’s trading and without a doubt we had more short covering. We have an extremely low price of silver and a very high OI coupled with backwardation in silver at the LBMA. (negative SIFO rates). The total silver OI now rests at 163,252 contracts. In ounces, the OI is still represented by .816 billion oz or 116% of annual global silver production (ex Russia ex China).
In silver we had 17 notices served upon for 85,000 oz.
In gold, the total comex gold OI fell 3363 contracts to 399599 contracts despite the fact that gold was up $15.40 in price with respect to yesterday’s trading. Again short covering by the banks was the order of the dday.
We had a huge deposit tonight in gold inventory at the GLD, a total of 15.77 tonnes of gold added/ thus the inventory rests tonight at 645.94 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. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold, after they deplete the GLD will be the FRBNY and the comex. In silver, we had a withdrawal in inventory at the SLV of 1.43 million oz/Inventory rests at 322.079 million oz
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver fall by 2632 contracts down to 163,252 despite the fact that silver was up in price to the tune of 40 cents with respect to Friday’s trading. The total OI for gold fell by 3,363 contracts to 399,599 contracts despite the fact that gold was up $15.40 in price
2 a) Gold trading overnight, Goldcore
3. ASIAN AFFAIRS
Last night, SUNDAY night, MONDAY morning: Shanghai up , Hang Sang falls, Chinese yuan finally rises a bit to 6.4874. Stocks in Asia mixed, including a downfall in Japan . Oil falls in the morning,. Stocks in Europe up with the exception of Spain as we have no clear winner and forming a coalition to lead will be difficult:
ii) Huge mud slide in Shenzen causes 33 buildings to disappear as well as 91 people are missing
iii) Fukushima disaster exposed as radiation is spreading towards the west coast of Canada and the uSA
iv) We now have moves from the west trying to curtail the powers of the east.
4. EUROPEAN AFFAIRS
i) Spanish election inconclusive as they will need a coalition government to run the country. Probably we will see another election my March
ii) And the Germans believe that the taking of these migrants is a success?
iii) Let’s move onto Portugal where we now have a second bank in trouble and they are rushing to provide over 3 billion euros in bailout money to save Portugal’s seventh largest bank; Now that we have a left government in power who will not be in sync with Brussels
(courtesy zero hedge)
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
i) NATO sends a message of support to Turkey but urges them to be responsible:
( Sputnik news)
ii) We now have 3 alliances set up in the middle east:
i) France, Germany and Great Britain : anti Assad, anti terror,
ii) Turkey, Saudi Arabia, Qatar (pro sunni extremeist and funding terror, anti Assad,
iii) Russia, Iran, Iraq, Syria: pro Assad and anti terror
( zero hedge)
iv) After several years, Turkey finally reaches out to Israel for help
( Shoshana Bryen/Gatestone Institute)
v) The middle east tension gets hotter by the minute. Israel assasinates a notorious terrorist in a big airstrike on Damascus despite the SAM 300 missiles:
( zero hedge)
6. GLOBAL ISSUES
Container volumes falling rapidly. This should give you a good snapshot on global trade and it is getting worse:
( SouthBay Research)
7. EMERGING MARKETS
Argentinians woke up poorer with this massive devaluation
( zero hedge)
8. OIL MARKETS
i)Moody’s just places 29 investment grade oil/natural gas companies on credit watch for possible downgrades.
Moody’s is suggesting that oil/natural gas companies are going to have a terrible time of it in the coming year:
( zero hedge/Moody’s)
ii) Oil plunges into the 33 dollar handle:
9. PHYSICAL MARKETS
i) Koos Jansen gives a good review as to why gold withdrawals from the SGE equate to Chinese demand ex sovereign purchases
ii) Times of India reports on the reluctance of temples to part with their value gold relics
(Times of India)
iii) Rangold departs from the big Ghana gold project
iv Bill Holter’s dynamic piece tonight is entitled:
“In your face “Black Swan”!
v)Gold demand from Russia: a very large 21.8 tonnes
10. IMPORT USA STORIES WHICH WILL INFLUENCE GOLD AND SILVER
i) When the Fed orchestrates QE they always provide liquidity as they purchase securities for cash and put these securities on the Balance Sheet. The cash is the liquidity used by the financial community. When you tighten the opposite must happen in that the Fed always sells securities for cash and thus withdrawing that liquidity. For the first time, the Fed did not drain liquidity save for 3 billion dollars. The interest rates rose by decree and not by any draining…
very important read
ii) Apple stock falters as the company lowers its price of Apple I 6 by 16%/sales are faltering
iii) Huge gas leak (methane gas) in California that is not contained
iv) I guess that the Chicago Fed is not part of your dependent data. It missed expectations again as it tumbled to lows last seen since May/ Strange that they caused interest rates to rise with a lousy national Chicago Fed data!!
v) Money is leaving hedge funds by the bucketful!
vi) Since the USA will be paying up .5% interest per year in excess reserves, it looks like the Fed will be handing out 11 billion USA dollars in riskless profits to foreign banks courtesy of USA taxpayers:
Let us head over to the comex:
The total gold comex open interest fell to 399,599 for a loss of 3363 contracts despite the fact that gold was up by $15.40 in price with respect to Friday’s trading. For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest: 1) total gold comex collapse in OI as we enter an active delivery month, and 2) a continual drop in the amount of gold standing in an active month. Today, the latter scenario stopped cold as the outstanding OI in that front month actually rose. We are now in the big December contract which saw it’s OI rose by 8 contracts from 1121 up to 1129. We had 94 notices filed on Friday, so we gained 102 contracts or an additional 10,200 oz will stand for delivery in this active delivery month of December. Somebody was in urgent need of physical gold today. The next contract month of January saw it’s OI fall by 26 contracts down to 566. The next big active delivery month is February and here the OI fell by 4665 contracts down to 280,730. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 120,599 which is poor. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was also poor at 126,982 contracts. The comex was in backwardation in gold up to April. The spread from December to January is an unheard of $1.30. It seems that the comex is out of gold to supply longs.
December contract month:
INITIAL standings for DECEMBER
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz nil||6430.000 oz
|Deposits to the Dealer Inventory in oz||
|Deposits to the Customer Inventory, in oz||nil|
|No of oz served (contracts) today||92 contracts
|No of oz to be served (notices)||1037 contracts
|Total monthly oz gold served (contracts) so far this month||1130 contracts(113,000 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month||nil|
|Total accumulative withdrawal of gold from the Customer inventory this month||200,301.0 oz|
Total customer deposits nil oz
DECEMBER INITIAL standings/
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||305,244.630 oz
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||594,850.820 oz
|No of oz served today (contracts)||17 contracts
|No of oz to be served (notices)||335 contracts
|Total monthly oz silver served (contracts)||3630 contracts (18,150,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month||nil oz|
|Total accumulative withdrawal of silver from the Customer inventory this month||6,024,102.0 oz|
Today, we had 0 deposit into the dealer account:
total dealer deposit; nil oz
we had no dealer withdrawals:
total dealer withdrawals: nil
we had 1 customer deposit:
i) Into JPM: 594,850.820 oz
total customer deposits: 594,850.820 oz
total withdrawals from customer account: 305,244.630 oz
we had 1 adjustments:
Out of CNT:
we had 25,153.100 oz leave the customer account and this landed into the dealer account of CNT
And now the Gold inventory at the GLD:
Dec 21/tonight a huge deposit of 15.77 tonnes of gold was added to the GLD/Inventory rests tonight at 645.94 tonnes
(With gold in backwardation it is highly unlikely that physical gold was added/probably a paper gold addition.)
Dec 18.2015: late last night: a huge withdrawal of 4.46 tonnes of gold/Inventory tonight rests at 630.17 tonnes
DEC 17.no changes in gold inventory at the GLD/Inventory rests at 634.63 tonnes/
dec 16/no changes in gold inventory at the GLD/inventory rests at 634.63 tonnes.
Dec 15.2105/no changes in gold inventory at the GLD/Inventory rests at 634.63 tonnes
Dec 14.no change in gold inventory at the GLD/Inventory rests at 634.63 tonnes
DEC 11/no change in gold inventory at the GLD/inventory rests at 634.63 tonnes
Dec 10.2015/no change in gold inventory at the GLD/inventory rests at 634.63 tonnes
And now your overnight trading in gold and also physical stories that may interest you:
5 Key Charts Show Rising Interest Rates Good For Gold Bullion
Gold fell to the lowest level in dollar terms since 2009 yesterday after the Fed’s “historic” 25 basis point interest rate rise on Wednesday. The rate hike has been heralded as the “end of cheap money.” This may or may not be the case but what is more important for precious metal buyers is the impact of potential rising rates on gold prices.
Most pundits on Wall Street are nearly universal in seeing the rate increase as negative for gold. Especially vocal in this regard has been Goldman Sachs. One headline this week, screamed ‘Gold sags as higher U.S. rates are ‘very negative’ for bullion’. However, the consensus is likely once again wrong and it is important to examine the widely held belief that rising rates are bad for gold, by looking at the data and the historical record.
Firstly, let’s look at the basis for the simplistic “rising rates will lead to lower gold prices” narrative. It comes about due to the belief that rising rates will lead to higher yields and thus investors allocating more funds to bonds and deposits. As gold is a non yielding asset, this therefore is negative for gold or so the narrative goes.
Goldman Sachs is the leading propagator of the narrative and is unquestioningly quoted in the media as seen in this article from Bloomberg in October:
“The Federal Reserve will probably raise interest rates in December and follow that with a further 100 basis points of increases over 2016, according to Goldman Sachs Group Inc., which said the shift in U.S. monetary policy will hurt gold”
As with all narratives, there is a small degree of truth to it. However, as ever the devil is in the detail. Janet Yellen increased the Fed’s key interest rate by a meager 25 basis points to between 0.25 percent and 0.50 percent. Thus, ultra loose monetary policies will continue for the foreseeable future – an environment that is unquestionably favourable to gold.
Despite the rate rise, depositors are not getting the benefit of the rate rise. Quite the opposite, immediately after the decision, many of America’s leading banks announced that they were increasing their prime lending rates — the rate at which individual banks lend to their most creditworthy customers — to 3.5 percent effective the following day. Already, many American companies are being impacted by the rate rise. The deposit rate, however, which is the interest rate banks pay to its account holders, will remain unchanged.
The average interest rate on a savings account is a tiny 0.5 percent right now, according to Bankrate. Even after the rate hike, interest on deposits will remain near zero and are negative when inflation is taken into account. Thus, savers are losing money keeping their cash on deposit and today they are also at risk of having their savings expropriated due to the real risk of bail-ins in most G20 nations.
Negative real interest rates is positive for non-yielding, but counterparty risk free gold bullion.
Having looked at the basis for the simplistic narrative, lets now look at the data and historical record.
The most recent example we have of rising interest rates is when the Fed increased interest rates from 2003 to 2006. As can be seen in the charts and table above, in June 2003, the Fed funds rate was at 1% and by June 2006, it had been increased to over 5.5%.
At the time, there was a similar narrative that rising interest rates would scupper the gains gold had seen in 2001 and 2002. Instead, the period of rising interest rates saw gold rise from $361/oz in June 2003 to $633/oz in June 2006 – a gain of 75%.
The other data set and a second clear example of a rising interest rate environment and rising gold prices is from the 1970s. The Federal Funds Rate rose from below 4% in 1971 to over 18% in 1980. During the same period, gold rose by 2,400% – from $35/oz to $850/oz.
In the short term, increases in interest rates can be negative for gold. But, in the medium to long term rising interest rates are positive for gold as they were in the 1970s and the 2003 to 2006 period. When interest rates return to more normal levels – above 5% – and positive real returns, only then gold will be vulnerable to weakness as savers and investors become enticed by higher yields.
We are a long way from there yet and gold is likely to be correlated with rising interest rates and only fall towards the end of an interest rate hiking cycle. It is important to remember that the 1970s gold bull market only ended with interest rates close to 20%.
Also rising interest rates are not positive for margin and debt-dependent, equities and property and volatility or further falls in these asset classes should lead to renewed safe haven demand for gold.
As long as central banks continue to debase their currencies by trying to inflate their way out of weak economic growth and recessions through zero interest rate policies and massive digital currency creation, gold will be supported and should indeed begin to make new gains.
Today, interest rates remain close to zero not just in the U.S but in most major economies. Thus, there is no opportunity cost to owning the non yielding gold. Indeed there remains significant counterparty and systemic risk in keeping one’s savings in a bank and government bonds look like a bubble that is being supported by money printing and debt monetisation.
Today, after a near 50% correction in recent years, gold again has significant potential for substantial capital gains. This and gold’s important safe haven diversification attributes make gold increasingly attractive for investors internationally.
Today’s LBMA Gold Prices: USD 1065.85, EUR 982.71 and GBP 713.06 per ounce.
Yesterday’s LBMA Gold Prices: USD 1065.75, EUR 975.65 and GBP 710.33 per ounce.
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LAWRIE WILLIAMS: Russia adds another 21.8 t gold and 46t more drawn out of China’s SGE
Friday saw two announcements demonstrating that physical gold demand remains at a strong level as the year draws to a close. The Russian central bank continued to expand its gold reserves by just under 22 tonnes in November, while in China another 45.99 tonnes of gold were withdrawn from the Shanghai gold Exchange.
The Russian Central Bank has been the main purchaser of gold for its reserves this year if one disregards China’s announcement of a leap of 604 tonnes in July – but as this was China’s first reported increase in six years we could assume that it had thus been only buying at the rate of eight or nine tonnes a month over the period, However there remain doubts about this rate of buying with many assuming that China’s actual purchases may have been three or four times this amount, maybe more, and that the country’s total holdings are far, far higher than the figure of a little over 1,700 tonnes reported to the IMF, with the balance held in unreported government accounts.
Russia has so far added around 187 tonnes into its reserves this year, while China has added around 70 tonnes since it started announcing monthly increments to its reserves in August. Between them Russia and China are adding to reserves at a rate of close to 400 tonnes of gold a year.
With regard to withdrawals from China’s Shanghai Gold Exchange (SGE), total withdrawals year to December 11th reached 2,451 tonnes – with almost three more weeks to be reported on until the year end. Assuming similar withdrawal levels from now until the New Year the full annual total will likely be in the high 2,500 tonne levels – around 18% higher than the previous record of 2,181 tonnes achieved in 2013 when a further 107 tonnes were taken out of the Exchange over the same period.
While some equate SGE withdrawals to total Chinese gold demand, others disagree coming up with often conflicting reasons why this may not be the case, but as an overall indicator of the strength of Chinese demand the figures have to be revealing. It does indeed look as though the centre of gravity of the global gold market is indeed moving east – and to China in particular and with the latest reports suggesting the SGE will have its own benchmark price setting system in yuan in place by April next year, to rival that of the dollar denominated LBMA Gold Price set in London, this speed of this process will likely be further increased. What this will actually do to the gold price itself obviously remains uncertain, but with the SGE dealing very much in physical gold, while London and New York are primarily paper gold markets, one suspects true supply/demand fundamentals for physical gold may serve to play a bigger role going forwards.
The USA demand for silver eagle coins is now around 48 million oz of silver.
The USA produces 85 metric tones or 27.3 million oz Remember that the demand for silver also includes silver in pharmaceuticals, solar panels, photography etc.
So you can see the huge shortage!!! This is why the comex must import massive amounts of silver from Mexico.
Canada’s silver production is utilized 100% inside Canada.
U.S. Silver Production Plunges by 20%
The U.S. Geological Survey (USGS) released their September silver production numbers this week and the results were incredible. Only 82.6 metric tons (mt) of silver were produced domestically in September versus 103 tons during September of last year. This represents amassive decline of 20% and is part of a greater trend of declining silver supply (-6% YTD).
As you can see from the chart below, 2015 silver production started the year higher than 2014. But in the spring, things started to shift. Production dropped 4% in March and has been declining ever since for six straight months. This trend of falling silver production culminated with the sharpest decline on record during the latest period, down 20%! Indeed, many analysts believe that we may have already seen PEAK SILVER production.
During 2014, production ramped up significantly in the winter months, but this year is shaping up to be quite different. Even if production were to rebound a bit in the coming months, we are still likely to see the gap versus widen comparing this year vs. last year. And if production does not rebound sharply, we are going to see declines of 30% or more in the coming months.
This is a significant development for silver investors, as sharply dropping supply and steady demand is a clear recipe for higher prices. Remember, sales of American Silver Eagles are on pace to set a new record for the third year in a row. Total sales through the end of November stand at 44.7 million ounces passing last year’s record of 44.0 million ounces.
Silver demand has also been hot in Canada, with the most recent quarterly silver sales on pace to break 2014’s record. Silver sales increased 76% year over year from 5.4 million to 9.5 million ounces. Year to date through the third quarter of 2015, the Royal Canadian Mint has sold 25.2 million ounces of silver, on pace to surpass 2014’s record silver sales.
If we haven’t see the bottom in silver yet, these fundamentals factors suggest that we are close.
While silver miners have reduced their costs in recent years, many are still unprofitable at current silver prices. There aren’t many things that you can buy for less than the cost to produce it. There simply wouldn’t be anyone making the product anymore and silver is no different. These conditions can persist in the short-term, particularly with the leverage paper markets having such a large impact on pricing. However, I don’t believe that the silver price can remain below the average cost of production for long. Eventually the fundamentals force prices back to correct equilibrium given the supply and demand in the marketplace.
I have long anticipated that as a growing number of miners would suspend operations, pushing silver supplies down sharply. We are finally seeing this manifest with the latest monthly production data. It holds true for primary silver miners, but also for base metals producers where silver is a by-product. They are also facing plunging prices in industrial metals and are having a hard time remaining profitable. As they are forced to suspend or shutter operations, silver production is going to fall even lower.
The decline in silver supply is not going to be a short-term phenomenon. Not only is current production impacted as miners shut down operations, but future production is also impacted as exploration budgets are slashed. Even if the silver price were to double in 2016 and miners increased cash flows, it would still take a few years to increase exploration back to previous levels and have the type of production pipeline needed to sustain production levels. Anyway that you slice it, the industry is likely to face declining silver production for years to come.
And while the U.S. represents less than 10% of global silver production, the same reversal from growth to contraction has taken place this year in top producers such as Mexico, Peru and Australia. This phenomenon is not unique to the United States.
I am not convinced that we have seen the absolute low in silver prices quite yet. But this type of data is encouraging for silver investors and suggests that the bottom may be near. Rather than attempting to time the exact bottom, I think it makes sense to begin purchasing in tranches around current levels. This is true of physical silver, but also the severely undervalued silver mining stocks that could offer leverage of 3X to 5X during the next upleg.
And although the FED finally pulled the trigger and raised rates by 25 basis points this week, there is plenty of evidence to suggest that silver (and gold) prices can climb higher along with interest rates. There is also the distinct possibility that the FED will not be able to continue raising rates beyond a token amount and will need to reverse course at some point in 2016. So, I do not believe that precious metals investors should fear increases rates.
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A review as to why we state that Chinese withdrawals from Shanghai equals ( or is very close) to Chinese gold demand:
(courtesy Koos Jansen)
Koos Jansen: The Chinese gold market essentials guide
Submitted by cpowell on Sat, 2015-12-19 15:10. Section: Daily Dispatches
10:10a ET Saturday, December 19, 2015
Dear Friend of GATA and Gold:
Gold researcher and GATA consultant Koos Jansen, the foremost expert on China’s gold market, has assembled a guide to that market, perhaps in the hope that fewer people will be misled by the disinformation coming out of the World Gold Council. Jansen’s guide, a compendium of his research, is headlined “The Chinese Gold Market Essentials Guide” and it’s posted at Bullion Star here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
(courtesy Press Trust of India/Times of India
Indian temples not wild about using religious offerings for gold price suppression
Submitted by cpowell on Sun, 2015-12-20 16:54. Section: Daily Dispatches
Gold-Rich Temples Weigh Monetisation Scheme, But ‘Melting’ a Dampener
From the Press Trust of India
via The Times of India, Mumbai
Sunday, December 20, 2015
NEW DELHI, India — As the government seeks to monetise gold worth an estimated $1 trillion lying idle, all eyes are on their biggest repositories — the temples — but many of them fear that “melting” of the ornaments donated by devotees may hurt religious sentiments.
Officials at a number of rich and famous temples across the country said they may not be able to immediately participate in the scheme, while a few others said the scheme was worth exploring but a final decision was yet to be taken.
For some temples, including Sree Padmanabhaswamy Temple in Kerala and the Shirdi Sai Baba temple in Maharashtra, ongoing court cases are getting in the way.
The interest remains lukewarm among major temples in Kerala, Karnataka, Telangana, and Rajasthan among other states, while a few in Andhra Pradesh, West Bengal, and Gujarat have shown initial interest.
However, most of them are concerned about issues like loss of value in the melting process and the religious sentiments of the devotees who donate gold ornaments in the name of the deities of the respective temples. …
… For the remainder of the report:
Rangold pulls out of Ghana project:
Randgold Resources pulls out of Ghana gold mine project
Submitted by cpowell on Mon, 2015-12-21 13:30. Section: Daily Dispatches
By Jon Yeomans
The Telegraph, London
Monday, December 21, 2015
Randgold Resources has abandoned plans to redevelop a gold mine in Ghana, just three months after announcing its interest in the “world-class resource.”
The FTSE 100-listed miner, which operates in central and West Africa, has scrapped a potential joint venture with South African firm AngloGold Ashanti to reopen and expand the Obuasi mine, which has some 5 million ounces of gold reserves below ground, after it failed to pass due diligence.
“We spent more time on it than most people would do on a normal merger and acquisition. But it got to the point where whichever way we cut the cake, we couldn’t get it to pass our criteria,” said Mark Bristow, Randgold’s chief executive. “Anglo has never made any money out of this asset, ever,” he added.
In September, gold mining specialist Randgold said it would fund and lead a plan to modernise the loss-making mine, which was shut down by AngloGold in 2014, with a view to forming a joint venture to manage its output.
AngloGold said it would now continue to operate the mine — which dates to 1907 — on a limited basis. “In the current environment, we believe it is prudent to conserve our resources and to revisit this opportunity when market conditions improve,” said Srinivasan Venkatakrishnan, chief executive. …
… For the remainder of the report:
An extremely powerful piece from Bill Holter tonight:
(courtesy Bill Holter/Holter-Sinclair collaboration)
In your face “Black Swan”!
I believe the “tell” on Friday was a weak dollar. Much of what happened in the markets could have been expected as reaction to the Fed tightening credit conditions …but not a weak dollar. The meeting between Mr. Lavrov, Mr. Putin and John Kerry far overrides anything the Fed could have done or said in my opinion. The foreign policy about face where Mr. Assad no longer “needs to go” and Turkey being ordered to withdraw troops from northern Iraq was astonishing! These statements were followed by Mr. Putin establishing a no fly zone over northern Syria. In another twist, Turkey still maintains Mr. Assad must go and they are refusing to withdraw troops from Iraq http://www.zerohedge.com/news/2015-12-19/turkey-blasts-breakthrough-un-resolution-syria-it-lacks-perspective-assad-must-go . When in your lifetime have you ever seen anything like this? An “ally”, ANY ALLY publicly denying U.S. will? We all saw an IN YOUR FACE BLACK SWAN but few have recognized it yet!
We have no idea what was “told” to Mr. Kerry, we do however know he was “TOLD” something and in no uncertain terms. As you know, I have been in the camp thinking Mr. Putin (supported by China) would drop some sort of “truth bomb”. I originally thought this truth bomb would have at least some ties to 911 because the outrage this would create amongst the U.S. population. No doubt it would create a stir but I’m afraid we are just to dumbed down to really even care anymore. After pondering this further it occurred to me I have missed the obvious. What is the ONLY thing the U.S. has left and the final pillar of support? What is the Achilles heel? The dollar and the ability to issue endless debt!
I believe it is a high probability Mr. Kerry was told what he already knows. Russia and China know, you know, I know, the whole world knows …the U.S. is broke! We have “faked” solvency for many years. The insolvency really appeared in 2007-2008 but “damn the torpedoes, full steam ahead” we went … We were even “aided” in this effort to hide our insolvency by China who bought our debt until the 2011-12 timeframe. In short, we were given enough time and “rope” to hang ourselves!
I believe it is most likely Mr. Kerry was given an ultimatum by Mr. Putin who spoke on the behalf of China …either play the game by our rules or we will pull the plug financially on your shell game. The U.S. has toppled regimes and assassinated rulers over the petrodollar and the recirculation of capital back through our Treasury market. It is highly likely the threat of wholesale dumping of Treasury securities was unveiled! Please do not tell me China would never do this, they know the position is ultimately valueless and the reason they have accumulated so much gold and gone all over the world tying up resource properties http://www.mining.com/feature-chinas-scramble-for-africa/ . China (and Russia as their bulldog) hold the key to exposing the fraudulent financial system of the West. Everything, and I do mean EVERYTHING we in the West believe in as value has “Treasuries” as the foundation. Kill the Treasury market and everything goes. Stocks, bonds, real estate, pensions, retirement accounts …it ALL GOES and “power goes with it. China has the ability to do this!
Think about this for a moment, Russia and China have been stockpiling physical gold for years. China is in the process of “pricing” gold with their equivalent to the London fix …only theirs will be physical where actual physical trades set price as opposed to paper contract shenanigans. We know gold has been in backwardation in London for quite a while, this impossible market scenario finally reached the COMEX last week. We also know the December delivery will take everything the COMEX claims to be able to deliver. Do you really believe Mr. Putin does not know all of this? Do you really believe he doesn’t know the “gold scam” is at the very center of our grand Ponzi scheme? Mr. Kerry now knows, “they know”?
Please do not laugh at this because the gold China has been gobbling up has pushed the supply demand equation into deep deficit for quite a few years now …and the gold had to come from “somewhere”. For the U.S. to all of a sudden acquiesce geopolitically after ruling the world with an iron and immovable fist is a HUGE change. This “change” obviously has a reason behind it. The reason can only be military or financial and could be both? Can a country fight a war if it is bankrupt and cannot finance the war? Was John Kerry informed of this little inconvenience?
Rational minds do not want World War III, those who need to cover up fraud must have it. I can only think the threat of exposure and or destruction of the mechanism (Western financial markets) used to project power has forced the U.S. to back off. The Fed does not have the power to absorb Chinese selling and no amount of market/mind/media manipulation can stand against the destruction of our paper markets should the Chinese choose to do so. The other side of the Treasury dump card is of course breaking the paper metals market. In today’s scheme of things, less than half a ham sandwich could do it! And the irony of it all? They only need threaten to do this …
The above is speculation on my part but it is obvious “something” really HUGE just changed and the U.S. no longer appears to be calling the shots! In my eyes it is also obvious “what” it was. The U.S would not back down for ANY reason other than one financial. Then one must ask where the U.S. vulnerable? The ability to issue the world’s reserve currency the dollar, the ability to issue unlimited debt and the dirty little “empty secret” called Fort Knox! I believe we are seeing the very beginnings of a “new world order”, decisions are being made where the public can deduce were not “made in America”. This could be a very interesting shortened week after the gyrations Thursdayand Friday. I have said for quite some time, once the unravelling begins it will go very quickly. We will soon know for sure whether the great unwinding has truly begun. I believe it has!
Could it be the black swan we have been looking for already landed and in your face fashion but very few have recognized it yet? No one could have foreseen the U.S. being “ordered” to do anything, yet this is exactly what appears happened last week!
Comments welcome firstname.lastname@example.org
1 Chinese yuan vs USA dollar/yuan rises in value , this time to 6.4874/ Shanghai bourse: in the green , hang sang: red
2 Nikkei closed down 70.78 or 0.38%
3. Europe stocks all in the green except Spain /USA dollar index up to 98.74/Euro up to 1.0865
3b Japan 10 year bond yield: falls to .275 !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 121.43
3c Nikkei now just above 18,000
3d USA/Yen rate now well above the important 120 barrier this morning
3e WTI: 35.66 and Brent: 36.34
3f Gold up /Yen down
3g Japan 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.
3h Oil down for WTI and down for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to .565% German bunds in negative yields from 5 years out
Greece sees its 2 year rate fall to 7.64%/: still expect continual bank runs on Greek banks
3j Greek 10 year bond yield rises to : 8.09% (yield curve flattening)
3k Gold at $1069.35/silver $14.15 (7:45 am est)
3l USA vs Russian rouble; (Russian rouble down 44/100 in roubles/dollar) 71.19
3m oil into the 35 dollar handle for WTI and 36 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar.
30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning 0.9945 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0808 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.
3p Britain’s serious fraud squad investigating the Bank of England on criminal charges/arrests 10 traders for Euribor manipulation
3r the 5 year German bund now in negative territory with the 10 year falls to + .565%/German 5 year rate negative%!!!
3s The ELA at 75.8 billion euros,
The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Next step for Greece will be the recapitalization of the banks and that will be difficult.
4. USA 10 year treasury bond at 2.21% early this morning. Thirty year rate at 3% at 2.92% /POLICY ERROR
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Futures Jump After Friday Drubbing, Despite Brent Sliding To Fresh 11 Year Lows, Spanish Political Uncertainty
In a weekend of little macro newsflow facilitated by the release of the latest Star Wars sequel, the biggest political and economic event was the Spanish general election which confirmed the end of the PP-PSOE political duopoly at national level, with Rajoy’s leading block losing the absolute majority it had enjoyed since the last elections while rewarding the anti-austerity Podemos and the liberal Ciudadanos party, who between them took 109 seats in the 350-member parliament. As a result no clear governing majority emerged.
But the main surprise was the extent of the underperformance of liberal-reformist Citizens relative to opinion polls. This changes the post-election scenarios – a center-right coalition cannot reach a majority – and injects even greater political uncertainty. This is unlikely to be a positive development for markets.
“The [Spanish] election outcome failed to provide us a clear picture of who will take power,” said Anders Moller Lumholtz, chief analyst with Danske Bank in Copenhagen. “It is likely to take time before we get clarity, and uncertainty is not a friend of the market. ECB QE buying could cushion some of the knee-jerk reaction, but as Monday is the last day before the QE goes on pause we probably shouldn’t expect much effect from that side.”
As a result, there was some early underperformance in SPGBs and initial equity weakness across European stocks, which however was promptly offset and at last check the Stoxx 600 was up 0.4% to 363, even as China’s Shanghai Composite surged +1.8% with sentiment supported by the PBoC injecting CNY100 billion of funds into the interbank market, and US equity futures were up nearly 1% after Friday’s oversold drubbing.
In other key news, the commodity slide continues with Brent Oil dropping to a fresh 11-year low as futures fell as much as 2.2% in London after a 2.8% drop last week.
This is where markets are right now:
- S&P 500 futures up 0.9% to 2011
- Stoxx 600 up 0.4% to 363
- FTSE 100 up 0.6% to 6091
- DAX up 1.5% to 10762
- German 10Yr yield up 1bp to 0.56%
- Italian 10Yr yield up 2bps to 1.59%
- Spanish 10Yr yield up 9bps to 1.79%
- MSCI Asia Pacific up less than 0.1% to 130
- Nikkei 225 down 0.4% to 18916
- Hang Seng up 0.2% to 21792
- Shanghai Composite up 1.8% to 3642
- US 10-yr yield up 1bp to 2.21%
- Dollar Index up 0.07% to 98.77
- WTI Crude futures down 0.8% to $34.45
- Brent Futures down 0.7% to $36.61
- Gold spot up 0.6% to $1,072
- Silver spot up 1% to $14.24
A closer look at regional markets shows Asian stocks trading mixed as stocks shrugged off Friday’s lacklustre close on Wall St. Nikkei 225 (-0.4%) underperformed albeit off worst levels amid JPY weakness, which pared earlier Toshiba led losses, while gains in energy name WorleyParsons, offset the healthcare sector pressure in the ASX 200 (+0.10%). Shanghai Comp. (+1.8%) traded higher with sentiment supported following reports that regulators approved the first cross-border mutual funds and the PBoC injecting CNY 100 bln of funds into the interbank market. JGBs finished marginally lower with trade lacking any significant price direction ahead of the holiday season, while the BoJ were in the market to purchase JPY 1.08trl in government bonds. Elsewhere, USD/CNH fell after the PBoC firmed the reference for the 1st time in 11 days. Finally, heading into the European open, JPY saw a bout of weakness as risk sentiment picked up.
Top Asian News:
- Yuan Crunch Spurs Banks to Hoard Abroad as China Curbs Outflows: Lenders from H.K. to London sell certificates of deposit
- Kuroda Sparks a Bond-Market Rally and Keeps His Powder Dry, Too: 2-year JGB yield falls to record
- Stevens Gets Aussie Christmas Wish as Westpac Sees Jawboning End: RBA Governor declines to nominate weaker level for currency
- Rajan’s 2015 Rate Cuts Offer No Cheer for Bonds Battered by Modi: Record govt borrowing plan, Fed rate bets capped gains
- Packer Quits Crown Board, Raising Expectations of Offer: Standing aside gives him freedom to mount bid
- Toshiba Sees Record $4.5 Billion Loss, Plans More Job Cuts: Plans up to 6,800 job cuts in segment for TVs, PCs, appliances
- Taiwan’s Nov. Export Orders Fall 6.3% Y/y; Est. -5.3%
- BOJ: Japan Output Gap Shrank to -0.44% in 3Q from -0.67% in 2Q
The week has kicked off with much of the focus in Europe on the Spanish elections and, as such, has seen notable underperformance in Spanish asset classes . The Spanish election results failed to provide an outright majority, with the Spanish Popular party likely set to try and form a coalition. However, this remains a particularly difficult task with the second place Socialist party seemingly unwilling to enter such a deal. In terms of the market fall out, the IBEX resides in firm negative territory (-1.70%), while Euro Stoxx (+0.80%) resides in the green to pare some of the losses seen on Friday.
In line with the underperformance in the IBEX, the SP/GE spread is wider by 8.7bps this morning, while the 10yr yield resides near November highs. Bunds have pared opening losses to now trade flat with analysts suggesting that the initial move lower in German paper was amid thin volumes and no significant fundamental factors that would warrant testing notable support levels to the downside. Elsewhere in fixed income markets, Gilts marginally outperform their
Top European News:
- Banks to Face Tough Loss-Absorbing Requirement: Europe’s largest banks may need to build up more loss-absorbing capacity under EU rules, Single Resolution Board President Elke Koenig says
- Syngenta Advances After ChemChina Said to Improve Takeover Offer: ChemChina offered to buy 70% of Syngenta now, with option to acquire remaining 30% later, according to people familiar.
- TeliaSonera to Exit Nepal in $1 Billion Ncell Sale to Axiata: Co. sold its stake in Nepalese phone carrier Ncell to Axiata Group for more than $1b in move to retrench in core mkts
- French Grocer Casino Rejects Block’s Claims as Quarrel Escalates: “Casino strongly rejects all arguments put forward by Muddy Waters Capital,” co. said earlier today.
- Santander Buys Portugal’s Banif for $163m Amid Resolution: Acquisition is chairman Ana Botin’s first since taking over last year
- Germany Nov. PPI -2.5% y/y vs survey -2.4%
- Netherlands Nov. housing price index +3.8% y/y
FX markets have seen a relatively subdued start to the week, with touted light volumes due to Christmas seeing relatively limited price action. However the European session has seen the USD move higher gradually, with EUR and GBP paring their modest overnight gains against the greenback. BoE’s Weale said that further downward pressure on inflation and a ‘pause’ in wage growth means there is less urgency for the BoE to raise rates. UK interest rates could stay low for even longer because of David Cameron’s referendum timetable, economists have warned. The in-out referendum looks likely to be held in June or September — close to when the BoE, is expected to start raising rates.
Fed’s Powell (voter, hawk) stated that the Fed rate lift-off should be seen as a vote of confidence in the economy and that gradual small hikes would be the correct action to take, but also added a return to zero is possible if conditions change. Fed’s Williams (voter, hawk) said that every meeting is live in regards to a possible rate increase and that he expects 4 further hikes in 2016 which is inline with what Fed members forecast. Fed’s Lacker (voter, hawk) stated that public thinking should be that a rate increase could occur at any meeting and that he is in favour of decreasing the Fed’s balance sheet ASAP.
In commodities, Brent continued to see weakness in early European trade, however now trades off 11 year lows reached overnight and has been gradually grinding higher towards the North American crossover . WTI has also continued its recent trend of weakness however is currently trading off recently-reached 6 year lows. Gold trades higher (USD + 6.20) amid no new fundamental news following last weeks Fed hike in line with a relatively flat USD Index (+0.10%). Elsewhere, copper prices held Friday’s highs amid prospects of further output cuts from Chinese smelters, while Dalian iron ore futures rallied around 4% alongside a continued recovery in steel prices.
There is no tier 1 data scheduled for release today ASIA
* * *
Top Global News
- Spain Uncertainty Looms as Rajoy Has First Shot at Governing: PM Mariano Rajoy’s People’s Party lost 1/3 of its seats while still beating out Socialists to take most votes, earning first shot at forging a govt
- Panasonic to Pay $1.5b for U.S. Fridge Maker Hussmann: Co. buying U.S.-based maker of refrigeration systems to bolster housing operations, move further away from consumer electronics
- Nomura Said to Seek Stake in American Century for $1b: Nomura plans to pay ~$1b for stake of ~40% in U.S. money manager American Century Investments, according to people familiar
- Shire to Offer GBP8b Cash in Baxalta Bid: Sunday Times: As much as 40% of offer may be cash after little progress made on all-share bid made 5 months ago
- Goldman Fund Said Buying $750m of Debt for Petco Takeover: Fund agreeing to buy bonds that will help finance deal for Petco Animal Supplies by CVC Capital, Canada Pension Plan Investment Board, according to a person familiar.
- ‘Star Wars’ collected $238m in U.S. and Canadian ticket sales, topping $208.8m hauled in by Universal Studios’ “Jurassic World” in June, market researcher Rentrak says
- Brent Oil Slides to 11-Yr Low as Producers Seen Worsening Glut: Futures fell as much as 2.2% in London after a 2.8% drop last week.
- Amazon Said to Mull Leasing Planes to Control Delivery Chain: Co. considering leasing 20 Boeing Co. 767 freighter jets to help gain more control over delivery methods, costs, according to a person familiar.
- China Loses Another Economic Indicator as Minxin Suspends PMI: Publishers of China Minxin PMI said they will stop updating that gauge to make “major adjustment” to their calculations
- FIFA Panel Bans Blatter, Platini From Soccer for 8 Years: Blatter was fined CHF50,000, Platini fine CHF80,000, adjudicatory chamber of FIFA’s Ethics Committee said earlier
Bulletin Headline Summary from Bloomberg and RanSquawk
- The week has kicked off with much of the focus in Europe on the Spanish elections and, as such, has seen notable underperformance in Spanish asset classes
- FX markets have seen a relatively subdued start to the week, with touted light volumes in the run up to Christmas
- No tier 1 data scheduled for release today
- Treasuries little changed, curve flattens in quiet trading, as Christmas holiday and year-end approaches; Brent crude tumbled to lowest level in 11 years while Spanish bonds slid after an indecisive election.
- Spanish voters rewarded the anti-austerity Podemos and the liberal Ciudadanos party, who between them took 109 seats in the 350-member parliament, no clear governing majority emerged
- Germany said too early for Merkel for call Rajoy as standard practice is to congratulate election victors after new government is in place and that’s not the case yet in Spain, German government spokeswoman Christiane Wirtz said
- China’s leaders intend to boost the deficit and make monetary policy more “flexible,” according to a statement from a meeting of top economic policy makers, in a sign the government is preparing more stimulus
- Publishers of the China Minxin PMI said they will stop updating the gauge to make a “major adjustment’’ to their calculations, dealing a second setback in recent months to investors looking for an early read on the economy
- The offshore yuan climbed for a second day, after the PBOC raised its fixing for the onshore currency for the first time in two weeks
- Sovereign 10Y bond yields higher. Asian stocks mostly higher, European stocks and U.S. equity-index futures gain. Crude oil lower, gold and copper gain
US Event Calendar
- 8:30am: Chicago Fed Nat Activity Index, Nov., est. 0.2 (prior -0.04)
- 11:00am: U.S. to announce plans for auction of 4W bills
- 11:30am: U.S. to sell $28b 3M bills, $26b 6M bills
DB’s Jim Reid concludes the overnight and weekend event wrap
As our in-house expert Marco Stringa pointed out in his overnight note, the Spanish general election confirmed the end of the PP-PSOE political duopoly at national level. But the main surprise was the extent of the underperformance of liberal-reformist Citizens relative to opinion polls. This changes the post-election scenarios – a centre-right coalition cannot reach a majority – and injects even greater political uncertainty. This is unlikely to be a positive development for markets. Overall the main risk remains political impasse due to the unprecedentedly fragmented parliament. Even if a new government is formed the DB economics team here doubt it would last the full legislature. The note provides a timetable and the mechanics of government formation. Avoiding chronic politically uncertainty will become increasingly important.
Asian markets are a bit of a mixed bag this morning with the Nikkei (-3.1%) largely following the US lead on Friday but equities in Greater China generally doing better. Japanese markets are weaker in response to some confusing signaling from the BoJ on Friday after initial hope it would herald in fresh easing. The BoJ issued a statement saying it would start buying longer dated JGBs and would buy an additional JPY300bn of equities a year however Kuroda later said that these changes were no more than a technicality and does not represent additional easing.
Back to China, the Shanghai Composite (+1.4%) and Hang Seng (+0.27%) are up on the day as we type. The Shanghai Composite is up at a 3 week high led by property developers and consumer related stocks. It is an old theme but SOE reforms in China seem to be a renewed focus overnight. Asian credit spreads are weak with the iTraxx index 3bp wider on the day and IG corporate cash spreads also modestly wider across the board.
Recapping Friday’s session briefly now. The fall in US equities coincided what was again another bad day for commodities. Brent and WTI were down -0.49% and -0.63%, respectively. For the record the pair are down by another -1.44% and -0.58% overnight as we go to print. Brent is now trading at an 11-year low for the first time this cycle. The decline in S&P 500 on Friday was pretty broad based with all ten major sector groups finishing the day in the red. Losses were led by Financials (-2.5%), IT (-2.0%) and Consumer staples (-1.8%). Credit spreads also drifted wider with CDX IG and HY index +1bp and +6bp wider, respectively.
Looking at this week’s holiday shortened calendar now. Of note in the European session this morning will be the latest German PPI and Euro area consumer confidence data. In the US this afternoon the November Chicago Fed national activity index reading is the sole release there. Turning to Tuesday the early interest out of Asia will be China’s conference board leading economic index for November. In the UK we’ll get the latest public sector net borrowing data out of the UK along with German and UK consumer confidence data. In the US the main interest will be on the third reading for Q3 GDP (expected to be revised down to +1.9% from +2.1%), while also expected are existing home sales for November and the December Richmond Fed manufacturing activity print. Wednesday kicks off in Japan with the BoJ minutes from the November meeting. In France we get the final Q3 GDP print and consumer spending report. We’ll also see the third Q3 GDP read for the UK. In the US the main focus will be on the preliminary November prints for durable and capital goods orders (both expected to weaken) while the November PCE core and deflator readings will also be important to watch out for as well as personal income and spending. November new home sales data is also due along with the final December University of Michigan consumer sentiment print. There’s no