May 18/Beige book report suggests a “likely” rate hike/If so China will massively devalue/Saudi Arabia has a full blown liquidity crisis as they are paying their contract workers in notes rather than cash/Inthe USA Target misses top line, bottom line and slashes guidance/


Good evening Ladies and Gentlemen:

Gold:  $1,273.70 DOWN $2.50    (comex closing time)

Silver 17.12  DOWN 11 cents

In the access market 5:15 pm

Gold $1258.25

silver:  16.87

No doubt that the entire trading of gold and silver today was orchestrated by our crooked banks. They were massively selling paper gold throughout the night and early morning. Even the one billion dollar bid for gold early this morning did not spook the crooks.  At 2 pm they released the beige book report and the Fed stated that it is likely that they will raise rates in June. The USA should raise rates but the problem will be China who has threatened to lower dramatically the yuan and in so doing would absolutely kill Japan, South Korea and the emerging markets. Besides no Fed would be stupid enough to raise rates three months before a USA election.

 

 

The amount standing for gold in May is simply outstanding at 6.504 tonnes, rising again by 100 oz.  The previous May 2015, we had only .08 tonnes standing so you can certainly witness the difference as the demand for gold by investors/sovereigns is on a torrid pace. This makes the excitement for June gold that much more intense as more players are refusing fiat and demanding only physical metal. I will be reporting daily as to how which is standing for delivery through the active month of June.  June is the second largest delivery month after December.

Let us have a look at the data for today

.

At the gold comex today we had a SMALL delivery day, registering 8 notices for 800 ounces for gold,and for silver we had 3 notices for 15,000 oz for the non active May delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 236.257 tonnes for a loss of 67 tonnes over that period

.

In silver, the open interest rose by 1,180 contracts up to 207,394 as the price was silver was UP  by 9 cents with respect to yesterday’s trading.  In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.037 BILLION TO BE EXACT or 148% of annual global silver production (ex Russia &ex China)

In silver we had 1 notice served upon for 5,000 oz.

In gold, the total comex gold OI fell by a tiny 1,436 contracts down to 595,077 as the price of gold was up $2.80 with yesterday’s trading(at comex closing).

 

As far as the GLD, no changes in inventory at the GLD. The inventory rests at 855.89 tonnes. We had no changes in silver inventory at the SLV. Inventory rests at 335.073 million oz.

.

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver rise by 1,180 contracts UP to 207,394 as the price of silver was UP ONLY by 9 cents with yesterday’s trading. The gold open interest FELL by 1,436 contracts as  gold was up $2.80 yesterday. Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.I also believe that for the first time we are witnessing players wishing to stand for real physical in gold.  Gold investors, in the May contract month are refusing the tempting fiat offer as they want only physical.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;

(Harvey/zero hedge)

3. ASIAN AFFAIRS

i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN  BY 36.10 PTS OR 1.27%  /  Hang Sang closed DOWN 292.39 OR 1.45%. The Nikkei closed DOWN 8.11 POINTS OR 0.06% . Australia’s all ordinaires  CLOSED DOWN 0.74% Chinese yuan (ONSHORE) closed DOWN at 6.5362 as China fired another shot across the bow telling the USA not to raise rates.  Oil ROSE to 47.76 dollars per barrel for WTI and 48.80 for Brent. Stocks in Europe  MOSTLY IN THE GREEN . Offshore yuan trades  6.5581 yuan to the dollar vs 6.5362 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS.

REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) REPORT ON JAPAN

none today

b) REPORT ON CHINA

i)Just take a look at Tier 1 house prices in China, up a staggering 26-28% year over year.

This is a huge bubble and it will burst as there is not enough money earned to sustain the prices.

( zero hedge)

 

ii)A good illustration of the huge debt problem inside China.  Kyle Bass has done huge research on China and he comes up with a total debt of 31 trillion USA with non performing loans of 20%.

This is an atomic bomb waiting for ignition:
( zero hedge)
 

4.EUROPEAN AFFAIRS

The Pound/USA dollar rises due to the latest Evening Standard newspaper poll indicating the stay crowd ahead of the leave sector!

( zero hedge)

 

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

Saudi Arabia has a full blown liquidity crisis and they can only pay government contractors with IOU’s!

( zero hedge)

 

6.EMERGING MARKETS

Rubber bullets are fired into the crowd as police clash with protesters. Conditions inside Venezuela worsens:

(courtesy zero hedge)

7.OIL ISSUES

DOE shows a huge 3.5 million build against expectations of a 3.5 million draw. Crude production fell again to the lowest level since 2014. Cushing inventories rose again but less than expected.  Oil initially dumped and then rose

( zero hedge)

 

8.PHYSICAL STORIES

i)Texas begins the construction of its own gold depository

( Ryan McMaken/Mises Institute)

 

ii)U. of Michigan is setting up a fund to invest in gold and copper mining companies

( Lorin/Bloomberg news/GATA)

iii)John Paulson has lost big on many of his bets as he was forced to liquidate some of his investment in GLD.  However Soros and others have rushed back into GLD.  When this is over they will probably be shocked that the GLD has no physical behind it only paper obligations of others:( Kumar/Bloomberg news/GATA)

 

iv)For your enjoyment:  After Maduro nationalized just about all the mines in Venezuela he needs good mining companies to go back into business and mine the precious metals.  He has one problem:  armed gangs are illegally mining and they enjhoy a cozy relationship with local military commanders

( Wall Street Journal/Kurmanev /GATA)

 

v)There is now an increased movement at Congress to Audit the Fed

( CNBC/GATA)

 

vi)The TF Metals report is a must read.  Craig Hemke discusses the fraudulent exercise orchestrated by the bankers by supplying non backed paper gold as they try and contain the gold price.  Note the huge increase in OI in the comex gold complex and the great difficulty that the banks are now experiencing trying to cover their shortfall.

a must read.
( TFMetals/Craig Hemke/GATA)
vii) A thorough look at the huge change in trends with respect to gold throughout these past 15 years or so:( SRSRocco/SRSReport)

 

9.USA STORIES WHICH MAY INFLUENCE THE PRICE OF

GOLD AND SILVER

i)Fun and games! After the government stated that retail sales jumped the most in years, Target, misses on top line and worst of all , they slash guidance!

( zero hedge)

ii BEIGE BOOK RELEASE SENDS MARKETS SOUTHBOUND!

First:
FOMC states that the cornered Fed will “likely” hike rates in JUne and the masrket is underpricing risk of that hike:
(courtesy zero hedge)
iii)And the initial reaction:( zero hedge)

 

iv)With the rise in the USA dollar, we are now again seeing the China panic trade once again rear its ugly head.  China has continued to warn the USA that if they raise rates,  the POBC will devalue the yuan which will set off a massive deflation throughout the globe and totally kill Japan and South Korea as well as the emerging markets.

 

v) A must see interview of Rob Kirby/USAWatchdog

 

Let us head over to the comex:

The total gold comex open interest FELL to an OI level of 595,077 for a SMALL LOSS of 1,436 contracts AS  THE PRICE OF GOLD WAS UP  $2.80 with respect to YESTERDAY’S TRADING.  We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses. IT SURE SEEMS THAT THE LATER HAS STOPPED.   The month of May saw its OI FALL 1011 contracts DOWN to 119. We had 1012 notices filed  YESTERDAY so we gained 1 gold contracts or an additional 100 gold ounces will stand for delivery. The next big active gold contract is June and here the OI FELL by 11,702 contracts DOWN to 321,206 as those paper players that wished to stay in the game rolled to August AND THE REST STAYED PUT FOR NOW. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was VERY GOOD at 199,728. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was VERY GOOD at 248,645 contracts. The comex is not in backwardation. We are LESS THAN 2 weeks away from first day notice for the huge June contract.(9 trading sessions)

Today we had 8 notices filed for 800 oz in gold.

 

And now for the wild silver comex results. Silver OI ROSE by 1180 contracts from 206,214 UP to 207,394 as the price of silver was UP BY ONLY 9 cents with YESTERDAY’S TRADING.We HAVE NOW SURPASSED the all time high OI in silver of 206,748. For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 1 contract DOWN to 729. We had 1 notice filed yesterday so we neither gained nor lost any silver ounces standing in this non-active delivery month of May. The next non active month of June saw its OI RISE by 124 contracts UP to 839 OI. The next big delivery month is July and here the OI ROSE by 553 contracts UP to 140,749. The volume on the comex today (just comex) came in at 54,909 which is VERY GOOD. The confirmed volume YESTERDAY (comex + globex) was  very good at 43,345. Silver is  in backwardation up to June. London is in backwardation for several months.
THE HIGH OPEN INTEREST FOR THE ENTIRE COMPLEX PLUS THE HIGH OI FOR THE FRONT MAY GOLD AND SILVER CONTRACTS MUST BE SCARING OUR BANKERS TO NO END.
 
We had 3 notices filed for 15,000 oz.
 

MAY contract month:

INITIAL standings for MAY

May 18.
Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  96.45 OZ

MANFRA

 

3 KILOBARS

Deposits to the Dealer Inventory in oz 64,235.700 OZ

BRINKS

1998 KILOBARS

Deposits to the Customer Inventory, in oz    80,294.53 OZ

HSBC

BRINKS

INCL 2 KILOBARS

 

No of oz served (contracts) today 8 contracts
(800 oz)
No of oz to be served (notices) 111 CONTRACTS

11,100 OZ

Total monthly oz gold served (contracts) so far this month 1980 contracts (198,000 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month  270,987.65 OZ

Today we had 1 dealer deposit

I) iNTO BRINKS: 64,235.700 (1998 KILOBARS)

total dealer deposit: 64,235.700 oz

 

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

 

Today we had 2 customer deposit:

i)INTO HSBC:  80,230.23 OZ

ii) INTO BRINKS: 64.30  (2 KILOBARS)

Total customer deposits;80,294.53 OZ

Today we had 1 customer withdrawals:

i) Out of Manfra:  96.45 oz

 

total customer withdrawals: 96.45 OZ  3 kilobars)

Today we had 1 adjustment:

i) Out of Brinks:

50,268.100 oz was removed from the dealer Brinks and into the customer Brinks and that will be deemed a settlement:  1.5635 tonnes

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 8 contracts of which 2 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (1980) x 100 oz  or 198,000 oz , to which we  add the difference between the open interest for the front month of MAY (119 CONTRACTS) minus the number of notices served upon today (8) x 100 oz   x 100 oz per contract equals 209,000 oz, the number of ounces standing in this non active month.  This number is huge for May. IT NOW SEEMS THAT THE AMOUNT STANDING FOR GOLD IN MAY WILL HOLD AND WITH THAT IT WILL BRING MUCH EXCITEMENT TO JUNE 
 
Thus the initial standings for gold for the MAY. contract month:
No of notices served so far (1980) x 100 oz  or ounces + {OI for the front month (119) minus the number of  notices served upon today (8) x 100 oz which equals xxxx oz standing in this non  active delivery month of MAY(6.5038 tonnes).
WE GAINED 1 CONTRACT OR AN ADDITIONAL 100 OZ WILL STAND FOR DELIVERY IN THIS NON ACTIVE DELIVERY MONTH OF MAY.
Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you. 
 
We thus have 6.5038 tonnes of gold standing for MAY and 21.697 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing.
We now have partial evidence of gold settling for last months deliveries We now have 6.5038 TONNES FOR MAY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes  = 19.3875 tonnes still standing against 21.697 tonnes available.
 
Total dealer inventor 697,565.649 tonnes or 21.697 tonnes
Total gold inventory (dealer and customer) =7,595,492.258 or 236.25 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 236.25 tonnes for a loss of 67 tonnes over that period. 
 
JPMorgan has only 22.79 tonnes of gold total (both dealer and customer)
May is not a very good delivery month and yet 6.5079 tonnes of gold is standing.  What is different from other months is that the bankers cannot offer any fiat to those standing. They want the real stuff. We are extremely close to the all time highs in both gold and silver OI.
 end
And now for silver
 

MAY INITIAL standings

 May 18.2016

Silver
Ounces
Withdrawals from Dealers Inventory nl oz
Withdrawals from Customer Inventory  727,003.291 oz

CNT, SCOTIA

Deposits to the Dealer Inventory  NIL
Deposits to the Customer Inventory  603,348.900 OZ

,JPM,

No of oz served today (contracts) 3 CONTRACTS 

15,000 OZ

No of oz to be served (notices) 726 contracts

3,630,000 oz

Total monthly oz silver served (contracts) 2053 contracts (10,265,000 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  7,288,223.8 oz

today we had 0 deposit into the dealer account

total dealer deposit:NIL oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 1 customer deposits:

i) Into JPM: 603,348.900 oz

Total customer deposits: 603,348.900 oz.

We had 2 customer withdrawals

i) out of CNT: 606,181.371 oz

ii) Out of SCOTIA: 120,821.92 oz

:

total customer withdrawals:  727,003.291 oz

 
 

 

 we had 1 adjustment

i) OUT OF BRINKS:  612,179.045 OZ WAS ADJUSTED OUT OF THE DEALER AND THIS LANDED INTO THE CUSTOMER ACCOUNT OF BRINKS

The total number of notices filed today for the MAY contract month is represented by 3 contracts for 15,000 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 (2053) x 5,000 oz  = 10,265,000 oz to which we add the difference between the open interest for the front month of MAY (729) and the number of notices served upon today (3) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the MAY contract month:  2053 (notices served so far)x 5000 oz +(729{ OI for front month of MAY ) -number of notices served upon today (3)x 5000 oz  equals 13,895,000 oz of silver standing for the MAY contract month.
WE NEITHER GAINED NOR LOST ANY SILVER CONTRACTS TODAY
 
Total dealer silver:  29.67 million
Total number of dealer and customer silver:   153.339 million oz
The open interest on silver is NOW AT an all time high with the record of 207,394 being set in the last week of April. The registered silver (dealer silver) is close to multi year lows as silver is being drawn out and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver.
end
And now the Gold inventory at the GLD
May 18 /no changes in inventory at the GLD/Inventory rests at 855.89 tonnes.
May 17/ we had a huge deposit of 4.76 tonnes of gold into the GLD/Inventory rests tonight at 855.89 tonnes/in the last two and 1/2 weeks we have added 50 tonnes of gold and this most likely was all paper gold addition..
May 16./ today we had no changes in inventory at the GLD/Inventory rests at 851.13 tonnes
May 13./another addition of 5.94 tonnes of gold into the GLD/Inventory rests at 851.13 tonnes
May 12/another huge deposit of 3.27 tonnes in gold inventory at the GLD/inventory rests at 845.19 tonnes
May 11/another huge deposit of 2.67 tonnes in gold inventory at the GLD/Inventory rests at 841.92 tonnes
May 10/Another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 839.25 tonnes
May 9/Surprisingly we had another deposit of 2.68 tonnes of gold into the GLD with gold down!! Inventory 836.87 tonnes
May 6 SURPRISINGLY WE HAD ANOTHER HUGE DEPOSIT OF 8.65 TONNES OF GOLD INTO THE GLD/ INVENTORY RESTS AT 834.19 TONNES
May 5/SURPRISINGLY WE HAD A HUGE DEPOSIT OF 3.90 TONNES OF GOLD WITH THE PRICE OF GOLD DOWN???
May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes
May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes
May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes
April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes
April 28/we gained 1.49 tonnes of gold at the GLD/Inventory rests at 804.14
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 18.:  inventory rests tonight at 855.89 tonnes

end

Now the SLV Inventory
May 18/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz/
May 17/no change in silver inventory at the SLV/Inventory rests at 335.073 million oz/
May 16./no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz
May 13./no change in silver inventory at the SLV/inventory rests at 335.073 million oz
May 12/no change in silver inventory/rests tonight at 335.073 million oz/
 May 11.2016/no change in silver inventory/rests tonight at 335.073 million oz/
May 10.2016/we had a huge withdrawal of 1.046 million oz in silver leaving the SLV,no doubt for Shanghai which lately has been gobbling up whatever inventory it could lay its hands on/Inventory rests at 335.073 million oz.
May 9. no change in silver inventory/rests at 336.119 million oz.
May 6/ SURPRISINGLY WE HAD A WITHDDRAWAL OF 1.142 MILLLION OZ FROM THE SLV
INVENTORY RESTS AT 336.119 MILLION OZ
MAY 5.2016: NO CHANGE IN INVENTORY/rests tonight at 337.261 million oz
May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz
May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz
May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz
April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580
April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz
.
May 18.2016: Inventory 335.073 million oz
end
 
1. Central Fund of Canada: traded at Negative 2.8 percent to NAV usa funds and Negative 2,9% to NAV for Cdn funds!!!!
Percentage of fund in gold 61.5%
Percentage of fund in silver:37.2%
cash .+1.3%( May 17/2016).
2. Sprott silver fund (PSLV): Premium FALLS   to -.48%!!!! NAV (MAY 18.2016) 
3. Sprott gold fund (PHYS): premium to NAV  FALLS 1.22% to NAV  ( MAY 18.2016)
Note: Sprott silver trust back  into NEGATIVE territory at -48% /Sprott physical gold trust is back into positive territory at +1.22%/Central fund of Canada’s is still in jail.
It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to -.48%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.
 
 
 

END

And now your overnight trading in gold,WEDNESDAY MORNING and also physical stories that may interest you:

Trading in gold and silver overnight in Asia and Europe
Mark O’Byrne (goldcore)/ off today

end

 

Gold trading today:  8,500 contracts bought in 5 minutes!!??

(courtesy zero hedge)

 

Gold Spikes Above $1275 On Sudden Billion Dollar Bid

As an equal opportunity information-provider, we thought it worth noting that following yesterday’s panic-selling puke in precious metals, this morning we are greeted with panic-buying as Gold and Silver spike higher on heavy volume as US stocks open…

8,500 contracts in 4 minutes – or just over a billion dollars notional paper gold bid…

end

Texas begins the construction of its own gold despository

(courtesy Ryan McMaken/Mises Institute)

Texas Begins Construction Of Gold Depository

Submitted by Ryan McMaken via The Mises Institute,

Last year, we covered a story coming out of Texas in which the state government was planning to institute a state-controlled “gold depository” that would allow individuals to store their gold in a presumably safe place outside the United States banking system.

This proposition was met with emotionally-charged denunciations from Americans in far away northeastern American states where it was claimed this measure was contrary to the “supremacy clause” and just a terrible idea in general because it undermined faith in the US’s central government and the Federal Reserve System.

Well, in spite of the disapproval of New Yorkers, the Texas legislature passed the bill, and the governor signed it into law last June

“With the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state,” Abbott said when he signed the bill.

The depository won’t just store state gold and other precious metals. The law requires that individual customers, and even school districts, be allowed to open accounts. Capriglione has described it as a bank that doesn’t do any lending. 

Originally, the bill appears to have envisioned Texas tax dollars being used to create the facility, but the bill only passed when it was modified to create what is seemingly a state-chartered gold depository that will be privately owned and paid for via fees for gold storage. 

Thus, not surprisingly, several private firms are now trying to become the creators of one of these depositories. The Ft. Worth Star-Telegramyesterday reported:

Saab’s company, one of many interested in being involved with the state’s plan to create a depository, proposes building a potentially $20 million facility — with no Texas tax dollars — on 40 acres of land it has in Shiner, about 250 miles south of Fort Worth.

The original sponsor of the bill, State Representative Giovanni Capriglione appears pleased with the progress being made:

“I am optimistic that the depository will be up and running at the end of this year or the beginning of next year,” Capriglione said. “The most important factor is making sure that the process is completed with considerable thought and care.”

At the depository, Texans will be able to open accounts similar to checking or savings accounts at traditional banks — and monitor them online.

The physical construction of the facility is very humdrum compared to the implications of the creation of a depository of this sort.

Laying the Ground Work for Electronic Gold-Based “Money”

For one, many state politicians hope that the State of Texas will be able to relocate its own gold holdings into Texas from New York where it currently sits. The state spends a million dollars per year on its storage.

Moreover, existence of the depository opens up the possibilities for users creating a new type of currency in which purchases are made electronically with the backing of the gold in the depository. In other words, one could potentially use the depository’s infrastructure to make purchases using gold, and to have gold either directly deposited into another’s account, or converted to US dollars and deposited in a conventional bank. Arguably, this is just an electronic version of gold-backed money.

Ironically, Zero Interest Rate Policy Has Made Gold Depositories More Practical

And now more than ever, the idea of paying fees on gold deposits has become relatively economical thanks to near-zero interest rates on ordinary bank accounts. In ages past when banks actually paid meaningful interest on deposits, one might wonder why anyone would pay a fee to store gold when one could collect interest on cash at a bank.

Thanks to the central banks’ commitment to near-zero or even negative interest rates, though, holding cash in a bank no longer brings any benefit in terms of investment earnings. That is, the opportunity cost of storing gold in a depository is getting lower and lower thanks to central bank policy.

 end
U. of Michigan is setting up a fund to invest in gold and copper mining companies
(courtesy Lorin/Bloomberg news/GATA)

University of Michigan to invest in gold, copper mining fund

Section:

By Janet Lorin
Bloomberg News
Monday, May 16, 2016

The University of Michigan plans to invest $30 million in a fund that will buy North American gold and copper mines from distressed companies.

The school, with a $10 billion endowment as of June 30, plans to make the investment with Waterton Mining Parallel Fund, which is managed by Waterton Global Resources Management in Toronto, according to an agenda for the Board of Regents meeting on May 19.

Gold is the best-performing major metal this year after silver amid rising concern over negative rates in Europe and Japan and whether the Federal Reserve will be able to tighten further.

“These opportunities arise from the financial distress of mining companies who took on significant amounts of debt for M&A activity prior to the collapse in commodity prices since 2011,” Kevin Hegarty, chief financial officer at University of Michigan, wrote in the request for approval. “Now looking to strengthen their balance sheets, these financially distressed companies are selling assets to raise cash and reduce debt levels.” …

… For the remainder of the report:

http://www.bloomberg.com/news/articles/2016-05-16/university-of-michigan…

 

END

 

John Paulson has lost big on many of his bets as he was forced to liquidate some of his investment in GLD.  However Soros and others have rushed back into GLD.  When this is over they will probably be shocked that the GLD has no physical behind it only paper obligations of others:

(courtesy Kumar/Bloomberg news/GATA)

Paulson cut gold bets again as Soros, others rushed back

Section:

By Devika Krishna Kumar
Bloomberg News
Tuesday, May 17, 2016

Gold bull John Paulson slashed his bets on bullion while billionaire investor George Soros and other big funds returned to the metal for the first time in years, filings showed on Monday, as prices staged their biggest rally in nearly 30 years.

New York-based hedge fund Paulson & Co, led by John Paulson, one of the world’s most influential gold investors, slashed its investment in SPDR Gold Trust, the world’s biggest gold exchanged-traded fund, by 17 percent to 4.8 million shares, U.S. Securities and Exchange Commission filings showed on Monday.

It was Paulson’s third cut to his SPDR stake in a year and saw him drop to the third largest investor in the fund from second, behind BlackRock and First Eagle Investment Management.

“If you were already long, which clearly Paulson was, maybe he’s just taking some profits off the table,” Mike Dragosits, senior commodities strategist at TD Securities said. …

… For the remainder of the report:

http://www.reuters.com/article/us-investments-funds-gold-idUSKCN0Y72C4

 

END

 

For your enjoyment:  After Maduro nationalized just about all the mines in Venezuela he needs good mining companies to go back into business and mine the precious metals.  He has one problem:  armed gangs are illegally mining and they enjhoy a cozy relationship with local military commanders

(courtesy Wall Street Journal/Kurmanev /GATA)

Armed gangs confound Venezuela’s bid to exploit gold mines

Section:

By Anatoly Kurmanaev
The Wall Street Journal
Tuesday, May 17, 2016

LA PARAGUA, Venezuela — Five years after Venezuela nationalized much of its mining industry, President Nicolas Maduro is inviting multinational firms back in to try to revive the country’s dying economy. But standing between the companies and the minerals are up to 100,000 illegal miners and armed gangs, some of which evidently enjoy cozy relations with local military commanders.

In February, Mr. Maduro unveiled a plan to auction 27 million acres of new concessions in an area he designated as the Orinoco Mining Arc. The government estimates the area holds 7,000 tons of gold, which if certified would make Venezuela’s gold deposits second only to Australia’s.

Mr. Maduro signed deals that month with China’s fourth-largest coal miner Yankuang Group, construction giant China CAMC Engineering Co. and Spokane, Washington-based independent miner Gold Reserve Ltd. He said more contracts worth billions of dollars are coming.

“This is a magnificent source of wealth that will begin substituting petroleum as our only source of foreign earnings,” he said.

But at the illegal Arenosa gold mine in the heart of the Orinoco Mining Arc, gang leader Ramon said he had other plans. On a recent day, dozens of his henchmen armed with pistols, shotguns, and machine guns stood guard surrounding the mines. Around them, hundreds of wildcatters dug pits with shovels amid blaring salsa music. …

… For the remainder of the report:

http://www.wsj.com/articles/armed-gangs-confound-venezuelas-bid-to-explo…

 

END

 

There is now an increased movement at Congress to Audit the Fed

(courtesy CNBC/GATA)

‘Audit the Fed’ movement is taking a big step forward in Congress this week

Section:

By Jeff Cox
CNBC, New York
Monday, May 16, 2016

An effort to conduct an unconventional audit of the Federal Reserve is gaining traction in Washington and on its way to a potentially important milestone this week.

The Federal Reserve Transparency Act will undergo the markup process this week in the House Oversight and Government Reform Committee. A product of the “Audit the Fed” movement, the bill seeks not a financial exam of the U.S. central bank but rather a peek behind the curtain of how monetary decision-making happens. The markup comes after several failed efforts to move the legislation ahead, and supporters believe there now is enough backing in Congress to go forward.

The Fed’s policymaking arm, the Federal Open Market Committee, does not meet in public and only communicates its decisions through carefully worded statements at the end of its meetings and through officials’ remarks at speaking engagements and through the press. …

… For the remainder of the report:

http://www.cnbc.com/2016/05/16/the-audit-the-fed-movement-is-taking-a-bi…

END
The TF Metals report is a must read.  Craig Hemke discusses the fraudulent exercise orchestrated by the bankers by supplying non backed paper gold as they try and contain the gold price.  Note the huge increase in OI in the comex gold complex and the great difficulty that the banks are now experiencing trying to cover their shortfall.
a must read..
(courtesy TFMetals/Craig Hemke/GATA)

TF Metals Report: The epic battle continues

Section:

7:29p ET Tuesday, May 17, 2016

Dear Friend of GATA and Gold:

The TF Metals Report’s Turd Ferguson shows today how yesterday’s seemingly unprovoked smash of gold futures prices was another attack by the bullion banks that have — or have been lent by central banks — the power to create infinite amounts of imaginary metal for price suppression.

Ferguson writes: “Having the ability to create an endless supply of anything gives you direct control over whatever market you ‘make.’ And for three years this has provided a stream of easy profits for these bank trading desks. They would simply issue as many new contracts as necessary to wait out the specs. Eventually price would top out and momentum would stall. All it would take was usually one good shove from the banks and down would go price. The specs would all rush for the exits and the banks would use the ensuing selling to buy back and cover nearly all their recently issued shorts.”

Ferguson’s analysis is headlined “The Epic Battle Continues” and it’s posted at the TF Metals Report here:

http://www.tfmetalsreport.com/blog/7631/epic-battle-continues

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

And now the report by Craig Hemke:

(courtesy Craig Hemke)

The Epic Battle Continues

On one side, we have The Specs. These” investors” seek an exposure to gold through ownership of the paper derivative offered by The Comex. On the other side, we have The Banks. These “criminals” fraudulently create unlimited amounts of unbacked paper gold and sell them to The Specs in an attempt to cap price and, ultimately, profit by covering at lower prices. Which side will win? With open interest near record levels in both gold and silver, we’re likely not going to have to wait much longer to find out.

If you somehow managed to sleep through yesterday, here’s a recap. It was typical of the new, post-April 19 norm. Prices rose on the Sunday evening Globex. They rose further in Asia and they even extended through the London session. However, after hitting highs above $1290 in early Comex trading, prices were slammed for $15 in 15 minutes in a move that left many “analysts” searching for explanations: http://www.cityam.com/241192/analysts-puzzled-as-gold-and-silver-prices-suddenly-drop-during-us-morning-trading-

Perhaps your sweet, loving and harmless local analyst can help these “puzzled” folks out a bit?

The action on The Comex yesterday was simply another act of desperation on the part of The Banks. The issued and dumped an inordinate amount of paper gold, calculated by ZeroHedge to be in excess of $2.3B notional: http://www.zerohedge.com/news/2016-05-16/gold-silver-are-being-dumped

Were these Banks suddenly in a rush to sell an accumulated long position? Was immediate liquidation so important that an entire position needed to be blown out in minutes? Or we’re The Banks simply dumping a whole bundle of new paper contract supply onto the “market”? In doing so, The Banks would clearly be attempting to manipulate prices lower, either to simply cap the days gains or to protect against the incredible losses that would be incurred if/when price surges through $1300. Recall that as of the most recent Bank Participation Report, The Banks were NET short nearly 200,000 Comex contracts. This means that every $10 move in price equates to a $200M paper loss. Accordingly, a gold price that surges from $1300 to $1400 would force another $2B+ in losses upon The Banks. Do you think they’d like to avoid this fate?

Thus we have days like yesterday. And how do we know this to be true? The answers can be found in the CME’s own open interest numbers which are updated daily. If yesterday’s massive contract dump had emanated from a Spec long, Comex history and paper market dynamics would have suggested a significant decrease in total open interest. The Specs would have sold longs. The Banks would have taken the other side of the trade and bought to cover shorts. Open interest would have been retired and the total number of contracts outstanding would have declined. On the flip side, if the massive dump emanated from a Bank issuing a whole bundle of new paper shorts, we would expect to see a significant increase in total open interest.

Well, the open interest numbers for yesterday are out and what do we have??? An increase of 16,767 contracts to a new, multi-year high of 596,513 paper contracts.

So now that we know just which parties were responsible for the raid and selling yesterday, it’s time to once again discuss WHY The Banks operate this way. Aside from their BIS and Central Bank mandate to manage price, The Banks manage and manipulate the precious metals because they profit from it! Having the unlimited ability to create an endless supply of anything gives you direct control over whatever market you “make”. And, for the past three years, this has provided a stream of easy profits for these Bank trading desks. They would simply issue as many new contracts as necessary to wait out The Specs. Eventually, price would top out and momentum would stall. All it would take was usually one good shove from The Banks and down would go price. The Specs would all rush for the exits and The Banks would use the ensuing selling to buy back and cover nearly all of their recently issued shorts.

The most recent and egregious example of this was last October and we documented the entire process as it unfolded, hopefully saving all of you some fiat and undue anxiety in the process. Here are two charts from the archives that effectively describe the process. These are dated 11/18/15 and labeled in such a way as to make it all quite clear:

The Banks are attempting the same maneuver now, writ large. Writ very, very large! Check the chart below and notice the same style of open interest flooding and price capping, only on a much larger scale and with much higher stakes:

Let’s have some fun with math. Shall we?

As noted above, on January 28 of this year, total Comex gold open interest was 373,252 contracts representing 37,325,200 ounces of paper gold. That night price was $1116 and the CME Gold Stocks report showed a total vaulting of 6,427,038 ounces.

By March 11, price had risen to $1261 and total open interest was 506,363 contracts representing 50,636,300 ounces of paper gold with the CME Gold Stocks showing a total Comex vault of 6,815,280 ounces.

As of last night, price was $1274 and total open interest was 596,513 contracts representing 59,651,300 ounces of paper gold with the CME Gold Stocks showing a total Comex vault of 7,595,687 ounces.

So, over the period January 28 to May 16:

  • Paper price has risen by $158 or 14.16%
  • Total Comex open interest has risen by 223,261 contracts representing 22,326,100 ounces of paper gold or an increase of 59.82%.
  • Total Comex vault stocks have risen by 1,168,649 ounces of gold or an increase of 17.15%
  • Leverage of paper ounces to total Comex stocks has increased from 5.81:1 to 7.84:1 or an increase of 34.94%.

If The Comex Banks had just been forced to maintain the already-fraudulent 5.81:1 ratio of paper to vault stocks from January 28, then total open interest allowed as of yesterday would only have been 441,309 contracts. And if total open interest was 155,000 contracts LESS than what it currently is, do you suppose that price would be a bit higher than $1272?

So, what’s the point of all this? Once again, we’re simply attempting to draw attention to the hopelessly corrupt and fraudulent, paper derivative pricing scheme. In the absence of any meaningful physical delivery, the “price” discovered on the Comex is not a price for gold (or silver) at all. Instead, the only price being discovered is the price of the derivative, itself. Nothing more.

However, there is a secondary point worth noting. Go back up and check that chart from November 18. Note the size of the “Commercial” NET short positions. Back then, the Gold Commercials saw their NET position reach 166,000 contracts and the 24 Banks included in the Bank Participation Report saw their NET position reach to 99,119 contracts short. As of last week, the Gold Commercial NET short position hit 285,000 contracts and this month’s BPR revealed a 24 Bank NET short position of 195,262 contracts. Are The Banks beginning to get squeezed? Is there a limit to the amount of unbacked, naked short positions that they are willing to create and maintain. Is it possible that they are blindly putting good money after bad in a desperate attempt to save their accumulated positions? Could The Banks actually lose and be forced to cover, all the while sustaining massive losses? These are good questions. Perhaps we should consult “The London Whale” for answers: http://www.wsj.com/articles/london-whale-breaks-silence-1456189964

At the end of the day, be patient yet remain firm. Recognize the forces aligned against you, however, and know that they are conspiring against you. Will they lose control? Only time will tell. In the meantime, simply remain alert and prepare accordingly for all possible outcomes.

TF

END

 

A thorough look at the huge change in trends with respect to gold throughout these past 15 years or so:

 

(courtesy SRSRocco/SRSReport)

 

Huge Trend Changes Point To Something Big In The Gold Market

by SRSrocco on May 18, 2016

Very few precious metals investors realize how recent trend changes will greatly impact the gold market going forward. The reason many investors fail to grasp the huge change in the gold market is that they look at data or information on an individual basis. To really understand what is going on, we must look at how all segments of the market compare to each other… a BIRD’S EYE VIEW.

Let’s start off with one segment of the gold market that has changed significantly in the past 15 years. The Global Gold Hedge Book hit a peak of nearly 3,100 metric tons (mt) in 1999:

(chart courtesy of the World Gold Council)

Here we can see that after the Global Gold Hedge Book peaked in 1999, it fell to a low at a little more than 100 mt in 2013. Not only was this a significant change in the hedging strategy of the gold mining industry, it also was impacted by the price change from an average price of $279 in 1999 to $1,411 in 2013.

So, as the price of gold jumped five times from 1999 to 2013, the Global Gold Hedge Book fell 96%. Even though it increased a bit in the first quarter of 2016 to the present 253 metric tons, it’s still a fraction of the massive hedge book the gold industry held in 1999.

Now, if we add another segment of the gold market, we will see another large trend change. Global Gold Bar & Coin demand increased significantly since 2000. In 2000, total Global Gold Bar & Coin demand was 166 mt. However, this hit a record high of 1,705 mt in 2013:

If we were to super-impose the Global Gold Hedge Book chart with the Gold Bar & Coin chart, we would see an interesting trend. As the gold industry’s hedge book fell to a low in 2013, Global Bar & Coin demand hit a peak. Furthermore, if we consider the net change in Central Bank Gold purchases, it’s even more interesting:

When the gold industry held a very large gold hedge book, Western Central Banks were dumping gold on the market HAND-over-FIST. I imagine this was a two-tiered approach in controlling the gold price. We can see that in 2003, Central Banks dumped 620 mt of gold into the market and another whopping 663 mt in 2005. However, this all turned around in 2010, when (Eastern) Central Banks became net buyers of gold at 79 mt.

Moreover, Central Bank gold purchases also hit a record 625 mt in 2013 along with Gold Bar & Coin Demand of 1,705 mt. These two record gold demand figures took place the very year the Global Gold Hedge Book fell to a record low.

While these three different segments of the gold market provide the investor with a different understanding when we look at them all together, there is another factor that is even more compelling.

Global Gold ETF Demand Is The Major Trend Changer

Even though investors don’t trust a lot of the figures coming out of the Gold ETF market, it is by far the most critical factor in the gold market going forward. Why? Because this is where the Main Stream Investors enter in BIG NUMBERS.

This chart shows the change of Gold Bar & Coin demand versus Gold ETF demand in the past two quarters:

Even though gold went up $200 in the first quarter of 2016, Gold Bar & Coin demand actually declined from 272 mt (Q4 2015) to 254 mt (Q1 2016). However, Global Gold ETF’s saw a huge spike in demand from a negative 68 mt in Q4 2015 to 364 mt in Q1 2016. While Gold Bar & Coin demand fell 7% in Q1 2016 compared to the previous quarter, Global Gold ETF’s experienced a huge 300+% increase.

Okay, I realize many investors don’t trust the data put out by the World Gold Council, but its the best we can go by. Even if the data is manipulated or under-reported, the trend changes discussed here are important to understand. Furthermore, if the figures are manipulated, then the trend changes are even more severe and bullish for the gold investor going forward.

Regardless, the big change of Global Gold ETF demand will be the major factor to focus on in the future. It won’t matter if the GLD ETF has all the gold it states, spiking demand in this sector will be the factor that overwhelms the entire market. Again, if we look at the chart above we can see that Gold Bar & Coin demand did not really increase during the $200 gold price increase. Which means, the 1% of investors who have been acquiring physical gold for years didn’t feel motivated to buy much more.

On the other hand, FEAR entered into the Main Stream Investor as the broader stock markets were crashing during the first quarter of 2016. This was the motivation of the main stream investor to get into the safety trade of gold. I see this segment of the gold market surging as the Dow Jones finally falls off a cliff.

Lastly, the gold market was in serious trouble at the end of 2012 when the price of gold hit an average high of $1.669. This is why the gold price was knocked lower in 2013 and lower still over the next two years. This forced gold out of the Global Gold ETF’s. This last chart represents Net Global Gold Investment since 2013:

Even though total Gold Bar & Coin demand for 2013 was 1,705 mt, when we subtract out the outflows from Global Gold ETF’s, total net gold investment was only 885 mt. This figure does not include Central Bank purchases. By pushing the price of gold down for the past three years, gold was taken out of Global Gold ETF’s to supplement the market.

However, this all changed during the first quarter of 2016 as Global Gold ETF demand surged to 354 mt versus a negative 68 mt in Q4 2015. Thus, total gold investment for Q1 2016 is already 618 mt. What happens for the next three-quarters?

Take a look at Global Gold Holdings over the past 10 days:

What is interesting here is as the price of gold declined from $1,289 on May 6th to $1,277 on May 17th, total Global Gold Holdings increased 1.8 million oz (shown on the dark blue line). Basically, Gold ETF’s, similar products and exchanges total inventories increased from 75 million oz to 76.8 million oz as the price of gold declined.

This means investors are still highly concerned about the economic and financial markets to move into gold investments as the price declines.

Keep an eye on Global Gold ETF demand going forward. This will be the key that totally overwhelms the gold market in the future.

-END-

Your early WEDNESDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight

 
 

:

1 Chinese yuan vs USA dollar/yuan DOWN to 6.5362 ( DEVALUATION DEEPENS ) / Shanghai bourse  CLOSED DOWN 36.10 OR 1.27%  / HANG SANG CLOSED DOWN 292.39 OR 1.45%

2 Nikkei closed DOWN 8.11 OR 0.06% /USA: YEN RISES TO 109.42

3. Europe stocks opened ALL IN THE RED  /USA dollar index UP to 94.83/Euro DOWN to 1.1273

3b Japan 10 year bond yield: FALLS   TO -.100%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 109.42

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  48.46  and Brent: 49.28

3f Gold DOWN  /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 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 FALLS to 0.146%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 9.06%/: 

3j Greek 10 year bond yield RISE to  : 7.38%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1274.40/silver $17.07(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble DOWN 42 in  roubles/dollar) 65.21-

3m oil into the 48 dollar handle for WTI and 49 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/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.08 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9841 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1093 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 IN LAST LEG OF ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year FALLS to  + .146%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 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 1.784% early this morning. Thirty year rate  at 2.605% /POLICY ERROR)

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

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

end

 

Copper Slides To Three Month Low Despite Flat Futures, Oil; Dollar Rise Continues

After two violently volatile days in which the market soared (Monday) then promptly retraced all gains (Tuesday), the overnight session has been relatively calm with futures and oil both unchanged even as the BBG dollar index rose to the highest level since April 4. This took place despite a substantial amount of macro data from both Japan, where the GDP came well above the expected 0.3%, instead printing 1.7% annualized, which pushed stocks lower as it meant the probability of more BOJ interventions or a delay of the sales tax hike both dropped. Meanwhile, in China we got proof of the ongoing housing bubble when new property prices were reported to have soared 12.4% Y/Y in April, which in turn pushed the local stock market to two month lows amid concerns the rampant housing bubble sector could divert funds from stocks. Yes, China is trading on the “risk” one bubble will burst another bubble.

At the end of the day, however, it was all about two Fed speakers yesterday and, as Bloomberg put it, financial markets reawakening to the risk that the U.S. expedites interest-rate increases, and that’s buoying the dollar while denting emerging markets and commodities. Additionally, the US 2s10s curve hit its flattest level since 2007. As noted above, the USD has risen rapidly in the past few weeks and as of this morning climbed to a seven-week high and Treasuries fell, pushing two-year yields to highest since April, after Atlanta Federal Reserve President Dennis Lockhart and San Francisco’s John Williams said Tuesday two rate hikes may be warranted this year. Chinese stocks tumbled to a two-month low, while the rand led the selloff versus the greenback amid mounting political tension in South Africa. Copper and gold fell for the first time in four days.

Looking at markets, DB’s Jim Reid summarized the situation relatively well as follows:

The mood of markets is pretty temperamental at the moment with sudden reversals in sentiment seemingly occurring every few days. The S&P 500 closed -0.94% last night, wiping out Monday’s gains. Fedspeak seemed to be a driver and it was interesting to see the US 2s10s curve hit its flattest level since 2007. Specifically it was the joint comments from Atlanta Fed President Lockhart and also San Francisco Fed President Williams that sparked interest after both suggested that they continue to see two to three rate hikes this year. Lockhart also added that markets are currently more pessimistic than he is, while Williams made mention of June being a live meeting and even went as far as to say that his view of gradual hikes also means 3-4 hikes in 2017. Balancing all this were comments from Dallas Fed President Kaplan shortly after who said that a hike may well be warranted in the ‘not-too-distant future’ but warned of the need to consider uncertainty including Brexit risk.

In any case it was the initial hawkish comments which helped to fuel a decent flattening across the Treasury curve. 2y yields ended 4.5bps higher at 0.833% with 10y yields ‘just’ 1.9bps higher at 1.773%. That means the current 2s10s spread of 94bps has marked a new tight for the year and you have to go back to December 2007 to find the last time the spread was this narrow. All of this has also resulted in a decent repricing in Fed Funds futures. The probability of a hike next month has now risen to 12% from 4% on Monday while a July hike has increased to 28% from 19%. The December meeting odds are now sitting at 65% from 56%.

And while oil is largely unchanged as of this moment with WTI trading in the mid-$48 range, buoyed by renewed fears from the Canadian wildfires which appear set to keep millions of barrels of production offline for several more days, keep a close eye on copper, which this morning is down 1.6% to $2.06/lb, hitting its lowest price in three months.

But going back to the story of the day, especially ahead of today’s only notable news release the FOMC April minutes, all eyes remain on the dollar and the suddenly renewed probability of a rate hike. The dollar has rebounded in May after declining in the previous three months as the Fed pushed back expectations for rate increases this year. A strengthening U.S. economy and the biggest jump in consumer prices in three years have led traders to boost the odds of a move in June threefold to 12 percent. The Fed will release the minutes of its April policy meeting on Wednesday.

“Expectations appear to be that minutes will signal that a summer hike is on the cards,” said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA in London. The “solidly hawkish” rhetoric from Fed non-voting members of late is proving to be dollar positive, as the possibility of a hike is not priced in by markets, he said.

Futures on the S&P 500 were little changed after equities tumbled on Tuesday. Investors will look Wednesday to earnings from retailers including Target Corp., Staples Inc., Lowe’s Cos. and Urban Outfitters Inc. for further indications on the health of U.S. consumers after a slew of disappointing results cast doubt on their willingness to spend. The Stoxx Europe 600 Index slipped 0.1 percent. Burberry Group Plc dropped 3.7 percent after the luxury-goods retailer added to the industry’s gloom by posting a second straight drop in annual earnings. Sonova Holding AG tumbled 7.1 percent after the Swiss hearing-aid maker’s second-half earnings missed estimates.

Minutes from the Fed’s April meeting will also be in focus for clues on the trajectory of interest rates after hawkish comments from regional presidents. The first month with even odds of higher borrowing costs also moved up to November from December.

Market Snapshot Summary

  • S&P 500 futures down less than 0.1% to 2043
  • Stoxx 600 down 0.1% to 335
  • FTSE 100 down 0.4% to 6141
  • DAX down 0.3% to 9864
  • MSCI Asia Pacific down 0.7% to 127
  • Nikkei 225 down less than 0.1% to 16645
  • Hang Seng down 1.5% to 19826
  • Shanghai Composite down 1.3% to 2808
  • S&P/ASX 200 down 0.7% to 5356
  • US 10-yr yield up 1bp to 1.78%
  • German 10Yr yield up 1bp to 0.14%
  • Italian 10Yr yield down less than 1bp to 1.45%
  • Spanish 10Yr yield up less than 1bp to 1.57%
  • Dollar Index up 0.37% to 94.9
  • WTI Crude futures down 0.3% to $48.16
  • Brent Futures down 0.5% to $49.05
  • Gold spot down 0.5% to $1,272
  • Silver spot down 1.2% to $17.04

Top Global News

  • Mitsubishi Motors President Resign as Mileage Scandal Widens
  • Eletrobras Sees U.S. Delisting on Deadline Miss Amid Graft Probe
  • Nasdaq Bears at 5-Year High Just as Berkshire Sees Apple Bargain
  • Goldman’s Hatzius Says Flattest Yields Since 2007 Misprice Fed
  • Goldman’s India Blue-Chip Bond Picks Gain After 2015 Junk Flop
  • BlackRock Hires Ex-Hedge Fund Founder Ferrier for Private Credit
  • Goldman Sachs Asset Said to Consider Aussie Equities Unit Sale
  • Fed Alarm Has $8.5b Swedish Fund Manager Dumping Risk

Looking at regional markets, Asia stocks traded mostly lower following losses on Wall St. where several Fed speakers suggested prospects for a June hike were still alive. This pressured ASX 200 (-0.7%) & Nikkei 225 (-0.1%) at the open, however Japanese stocks briefly staged a recovery as participants digested better than expected GDP with the annualised figure printing at a 1 year high at 1.7% vs. Exp. 0.3%, although selling later resumed. Shanghai Comp (-1.8%) was negative despite continued gains in Chinese property prices amid concerns the rampant sector could divert funds from stocks, while tech names underperformed after reports overseas users of Alipay may be restricted from the service from Friday. In addition, some analysts also noticed disappointment as NPC Head Zhang was did not mention the HK-Shenzhen stock connect at a speech in Hong Kong. 10yr JGBs were mildly lower with the increased risk appetite for Japanese equities dampening demand for the paper, despite the BoJ also entering the market to purchase over JPY 1.2tr of JGBs.

Japanese GDP SA (Q1 P) Q/Q 0.4% vs. Exp. 0.1% (Prey. -0.3%, Rev. -0.4%)

  • GDP Annualised SA (Q1 P) Q/Q 1.7% vs. Exp. 0.3% (Prey. -1.1%, Rev. -1.7%)
  • GDP Nominal SA (Q1 P) Q/Q 0.5% vs. Exp. 0.5% (Prey. -0.2%). (BBG)

China April New Home prices rose 6.2% Y/Y vs. Prey. 4.9% in March. (BBG)

Top Asian News

  • Japan Dodges Recession on Modest Increase in Consumer Spending: Expansion of GDP exceeds forecasts by all surveyed economists
  • Suzuki Plunges After Finding Flaw in Mileage Testing Method: co. used improper method to test fuel efficiency of its vehicles
  • Goldman Sachs Asset Said to Consider Aussie Equities Unit Sale: Sale or management buyout of unit said to be among options
  • China Leader Asks Hong Kong for ‘Broader Mind’ Amid Protests: Communists’ No. 3 urges integration with Beijing’s development
  • Malaysia May Bar Overseas Travel for Those Who Insult Government: Human rights activist prevented from going to South Korea
  • Midea Makes Offer to Become Biggest Shareholder in Kuka: German robot maker already helping Midea to automate factories
  • Forget About Shenzhen Link Date, Just Buy In, Legg Mason Says: Investors should seize opportunity to position for it instead of guessing a start date

European equities have followed on from yesterday’s trend to trade lower this morning (Euro Stoxx: -0.4%), with energy and material sectors weighing on the index. As such, the FTSE 100 is the worst performing of the major indices, with the likes of Glencore, Anglo America and Rio Tinto among the worst performers in Europe. Bunds have continued to trade within a relatively tight range around the 164.00 level , with the German benchmark initially seeing downside given the supply due out today, combined with the recent downside in T-notes given the rise in expectations of a potential rate hike from the Fed in June. However, heading back into mid-morning , Bunds have pared some of their losses and are moving back towards the aforementioned 164.00 level.

Top European News

  • Stoxx 600 down 0.2% to 334
  • FTSE 100 down 0.4% to 6141
  • DAX down 0.3% to 9864
  • German 10Yr yield up 1bp to 0.14%
  • Italian 10Yr yield down less than 1bp to 1.45%
  • Spanish 10Yr yield up less than 1bp to 1.57%
  • S&P GSCI Index down 0.6% to 368.7

In FX, the Bloomberg Dollar Spot Index advanced 0.4 percent at 6:04 a.m in New York, hitting the highest since April 6 in early trade. Australia’s dollar lost 0.8%. The yen slipped 0.3 percent to 109.43 per dollar, after earlier strengthening as much as 0.4 percent. The euro weakened 0.4 percent to $1.1268. The MSCI Emerging Markets Currency Index fell 0.5 percent, the most in two weeks. South Korea’s won, Russia’s ruble, the Mexican peso and Malaysian ringgit dropped at least 0.8 percent.

The UK jobs report was a risk for GBP this morning, and duly continued the healthy data series to show the employment change rising a more than expected +44k, while jobless claims also fell. Earnings were healthy, but a little more mixed when looking at ex-bonus. Nevertheless, the initial Cable response was positive, but extremely short lived, with the look above 1.4450 brief and sellers keen to get long USD’s against the Pound. Elsewhere, EUR/USD made fresh cycle lows just ahead of 1.1255, but USD/JPY gains — so far – have stopped just short of the 109.65 highs seen yesterday . AUD, NZD and CAD have all pushed lower again, but held off their respective (recent) lows. AUD/USD is finding buyers ahead of .7250, as is NZD/USD ahead of .6750. USD/CAD continues to eye 1.3000+ again but Oil prices keep ratcheting higher to deter a full on attack. FOMC minutes ahead are also adding to hesitation, and we expect ranges to tighten up after midday.

In commodities, WTI and Brent had been advancing overnight after draw in API’s last night, but in the EU session prices have fallen from overbought levels with Brent at USD 49.00/bbl and WTI at USD 48.79/bbl respectively. Gold and Silver have also been falling in the European session alongside a broad based sell off in commodities, with Silver testing the USD 17.00/oz level and starting to consolidate at around USD 17.050/oz. Copper fell along with other metals amid rising supplies and an uncertain demand outlook in China, the world’s top consumer. Antofagasta Plc, a Chilean copper producer, said it isn’t counting on an improving global economy and expects low copper prices for another year or two, according to a statement from Chairman Jean-Paul Luksic.

There’s no data due out in the US this afternoon so the focus will be on the FOMC minutes at 7.00pm (BST) a nice warm up for the kick off in Basel 45 minutes later. Away from the data we’ll also hear from the BoE’s Haldane this evening.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities have followed suit from US and Asian equity performance with material and energy names also lagging in the region
  • GBP failed to benefit from a largely upbeat employment report with the USD remaining firmer against its major counterparts following relatively hawkish Fed speak
  • Looking ahead, highlight include US Fed Releases Minutes, DOE Inventories & BoE’s Haldan
  • Treasuries fall during overnight trading with global equities, while USD strengthened after Fed’s Williams and Lockhart said Tuesday two rate hikes may be warranted this year; April 26-27 FOMC minutes will be released at 2pm ET.
  • Fed fund futures fully pricing next rate hike around Jan. 2017, implied rate 63bps, near midpoint of 50-75bp target range
  • A decision by the British electorate to withdraw from the European Union in a June 23 referendum could delay the next tightening move from U.S. policy makers by about three months, according to an economic model designed by analysts Jamie Murray, Carl Riccadonna and Dan Hanson
  • Jan Hatzius, the chief economist at Goldman Sachs Group Inc., warned bond investors aren’t prepared for the Federal Reserve to raise interest rates
  • The U.K. jobs market showed signs of cooling in the first quarter as Britain prepares for an increasingly bitter referendum on its European Union membership
  • A thicket of risks from the U.K.’s Brexit vote next month to the U.S. presidential election may lift gold prices even further by year-end, according to Denmark’s Saxo Bank A/S
  • With $2.7 trillion of European bonds yielding less than zero, some of the biggest fixed-income investors are looking 50 years ahead to buy government debt they consider decent value
  • Haruhiko Kuroda’s pain is China’s gain. The BOJ’s efforts to bolster economic growth have been undermined by the yen’s surge, which is a tailwind for China after the yuan dropped this month to the lowest level versus the yen since 2014
  • $28.2b IG Credit priced yesterday, brings weekly volume to $35.475b as May tops $100b mark at $120.26b; YTD $713.715b

DB’s Jim Reid concludes the overnight wrap

The mood of markets is pretty temperamental at the moment with sudden reversals in sentiment seemingly occurring every few days. The S&P 500 closed -0.94% last night, wiping out Monday’s gains. Fedspeak seemed to be a driver and it was interesting to see the US 2s10s curve hit its flattest level since 2007. Specifically it was the joint comments from Atlanta Fed President Lockhart and also San Francisco Fed President Williams that sparked interest after both suggested that they continue to see two to three rate hikes this year. Lockhart also added that markets are currently more pessimistic than he is, while Williams made mention of June being a live meeting and even went as far as to say that his view of gradual hikes also means 3-4 hikes in 2017. Balancing all this were comments from Dallas Fed President Kaplan shortly after who said that a hike may well be warranted in the ‘not-too-distant future’ but warned of the need to consider uncertainty including Brexit risk.

In any case it was the initial hawkish comments which helped to fuel a decent flattening across the Treasury curve. 2y yields ended 4.5bps higher at 0.833% with 10y yields ‘just’ 1.9bps higher at 1.773%. That means the current 2s10s spread of 94bps has marked a new tight for the year and you have to go back to December 2007 to find the last time the spread was this narrow. All of this has also resulted in a decent repricing in Fed Funds futures. The probability of a hike next month has now risen to 12% from 4% on Monday while a July hike has increased to 28% from 19%. The December meeting odds are now sitting at 65% from 56%.

Notwithstanding those moves, there’s still a clearly large gap between where the market is and the recent rhetoric from the Fed. In our view though this is just in keeping with the Fed holding on to full optionality. Importantly we’re still yet to hear from either the Fed President Yellen or Vice-Chair Fischer recently. That will change tomorrow though when the latter is scheduled to speak, while Yellen is pencilled in for a talk at Harvard University on the 27th of this month and then again on June 6th. As we’ve highlighted previously there are a number of big events in June so it looks set to be an interesting six weeks or so ahead.

Meanwhile all this chatter also comes before this evening’s FOMC minutes from the April meeting. They are likely to be a bit outdated now given what we’ve heard from Fed officials and it wouldn’t be a great surprise to see the text as relatively balanced versus the more dovish tone in prior statements.

Changing tact now and switching over to Asia this morning where the bulk of bourses are following the weak lead from the US last night. Indeed the Hang Seng (-1.27%), Shanghai Comp (-1.45%), Kospi (-0.59%) and ASX (-0.19%) are in the red, while Japanese equities initially advanced with the better than expected GDP print, but have now followed the moves elsewhere and are down as we type with the Nikkei and Topix currently -0.46% and -0.14% respectively. Japan’s Q1 GDP printed at +0.4% qoq after expectations were for just +0.1% growth and it means the annualized pace has been lifted to +1.7% qoq from -1.7% previously. That data should provide some relief to an under pressure BoJ although the Yen is starting to strengthen as we type and is perhaps contributing to some of the volatile moves.

There’s also been data out of China this morning too in the form of the latest house price data. April new house prices were reported as climbing in 65 of the 70 cities tracked, compared with 62 in March. It’s the most since December 2013.

Moving on. The latest “Credit Bites” was just out around an hour ago. In it we take a brief look at the basis between CDS and cash in HY by looking at the spread level of the iTraxx Crossover index vs. the asset swap spread of the iBoxx EUR HY Non-Fin index. We specifically highlight that while the two series have followed very similar paths, the CDS-cash basis has turned consistently negative since September 2013 and has generally been lower than -100bps over the past 8-9 months. Given slightly higher ratings for the cash index the stretched relationship poses the question as to whether this highlights relative value for the cash market over CDS or simply a reflection of deteriorating liquidity. All thoughts welcome.

Staying with credit, while price action yesterday in the market largely reflected what was a weaker session for risk assets in the US (CDX IG ending 1bp wider) and a benign session in Europe (Main unchanged), the big news was the pricing of the hotly anticipated bumper deal from Dell. With a reported $85bn of orders according to the FT, the all senior secured deal was eventually upsized to $20bn from $16bn and priced across 6 tranches. Bonds eventually priced at the tight end of guidance with secondary trading said to be supportive. The same FT article suggests that this was the fourth biggest corporate bond sale on record.

Meanwhile, it wasn’t just the Fedspeak that markets had to contend with yesterday, with it also being a relatively busy day for data. Specifically it was the inflation data in the US which the market was most focused on. Headline CPI printed at +0.4% mom in April and slightly ahead of expectations (+0.3% expected) after being boosted by rising fuel prices. That had the effect of lifting the YoY rate by two-tenths to +1.1%. Meanwhile the core print of +0.2% was bang on estimates, although it did cause the YoY rate to edge down one-tenth to +2.1%. Our US economists noted that the details of the latest CPI report provide preliminary evidence that core inflation may level out as rents and medical prices, which together make up 50% of the core CPI, are possibly in the midst of stabilising.

As well as the inflation data, industrial production was reported as increasing more than expected in April (+0.7% mom vs. +0.3% expected) with capacity utilization also edging up five-tenths to 75.4% (vs. 75.0% expected). The April housing starts data showed a +6.6% mom rebound in sales (vs. +3.3% expected) to an annualized rate of 1172k. Building permits rebounded a slightly less than expected +3.6% mom (vs. +5.5% expected).

Elsewhere in Europe it was another fairly uninspiring day of price action with the Stoxx 600 (0.00%) unchanged again (it was +0.01% on Monday) after giving up gains of as much as +1.2% early in the session. While there’s been some reasonable intraday volatility the index is still effectively unchanged since May 3rd now. In the commodity space the day was characterised by yet another advance for Oil. WTI rose another +1.24% to take it past $48/bbl, while Brent closed +0.63% and is creeping closer to testing that $50/bbl level (currently $49.39/bbl). The data in Europe yesterday was focused in the UK and specifically the April inflation data docket. CPI rose less than expected last month (+0.1% mom vs. +0.3% expected) meaning the YoY rate has edged down two-tenths to +0.3%. Meanwhile the core print of +1.2% yoy also missed (+1.4% expected) and is a decline of three-tenths from March.

ASIAN AFFAIRS

i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN  BY 36.10 PTS OR 1.27%  /  Hang Sang closed DOWN 292.39 OR 1.45%. The Nikkei closed DOWN 8.11 POINTS OR 0.06% . Australia’s all ordinaires  CLOSED DOWN 0.74% Chinese yuan (ONSHORE) closed DOWN at 6.5362 as China fired another shot across the bow telling the USA not to raise rates.  Oil ROSE to 47.76 dollars per barrel for WTI and 48.80 for Brent. Stocks in Europe  MOSTLY IN THE GREEN . Offshore yuan trades  6.5581 yuan to the dollar vs 6.5362 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

end

b) CHINA ISSUES

Just take a look at Tier 1 house prices in China, up a staggering 26-28% year over year.

This is a huge bubble and it will burst as there is not enough money earned to sustain the prices.

(courtesy zero hedge)

 

 

One of the stated reasons for the Shanghai Composite’s 1.3% drop (and it would have been worse had the PPT not launched its infamous last minute buying blitz) was also the most amusing one: the stock market bubble is in danger of popping even more as a result of a housing bubble that is now raging at a pace not seen since the last Chinese housing bubble, and thus threatens to soak up even more cash from China’s chronic gamblers-cum-speculators.

So just how high of a housing number did the NBS report that spooked stocks so much? Well, as Goldman summarizes, housing prices in the primary market increased 1.1% month-over-month after seasonal adjustment in April, higher than the growth rate in March. Out of 70 cities monitored by China’s National Bureau of Statistics (NBS), 63 saw housing prices increase from the previous month. On a year-over-year, population-weighted basis, housing prices in the 70 cities were up 6.9% (vs. 5.5% yoy in March).  According to an alterantive set of calculations by MarketNews, aggregate home prices rose 12.4% Y/Y in April after rising 10.4% in March. Since both numbers are ridiculously high, we’ll just leave them at that.

However, it was not the overall market bubble that is troubling, but that focused on the most desired, top – or Tier 1 – cities. Here, April price growth was 2.6% month-over-month after seasonal adjustment, vs. 3.0% in March.

But the real shocker was that on a year-over-year price growth in tier-1 cities continue to rise however, reaching 28.3% vs. 26.0% yoy in March. In fact it is so bad that Goldman, which tried to show the surge in the second chart below, clearly needs a bigger chart. Incidentally, total property sales in tier-1 cities accounted for around 5% of nationwide property sales in volume terms, and around 15% in value terms (2015 data).

It wasn’t just the top: average property prices also increased in lower tier cities: In tier-2 cities (our own definition; 11 cities), property price growth was 1.3% month-over-month after seasonal adjustment, up from 1.0% in March. Price growth in tier-3 cities was 0.7% month-over-month after seasonal adjustment in April, higher than 0.5% in March, and month-over-month price growth in tier-4 cities was +0.4% month-over-month after seasonal adjustment, vs. +0.3% in March.

Today’s data is consistent with the Soufun property price data for April released earlier. The continued acceleration in prices contributed to the strong growth in  investment and construction activities in the property sector.

This repeat housing bubble also explains why China is citing “authoritative figures” in People’s Daily front page stories to warn the population that China is about to crack down on said bubble… just not quite yet.

And the stunning charts:

Home price inflation month over month

And year over year: to show the Tier 1 housing bubble, Goldman will need a bigger chart.

end
A good illustration of the huge debt problem inside China.  Kyle Bass has done huge research on China and he comes up with a total debt of 31 trillion USA with non performing loans of 20%.
This is an atomic bomb waiting for ignition:
(courtesy zero hedge)

China’s Debt Bomb: No One Really Knows The Payload

No one knows if it’s a hand grenade or a nuclear warhead…

The ramp up in Chinese debt accumulation has been a leading concern of investors for years. The average total debt of emerging market economies is 175% of GDP, and skyrocketing corporate non-financial debt has launched China far beyond that number.

The real question is: by how far?

The answer is disconcerting, as VisualCapitalist’s Jeff Desjardins warns, because nobody really knows.

If the Chinese debt bomb is detonated, the impact on markets is anybody’s guess. Kyle Bass says the losses would be 5x that of the subprime mortgage crisis, while Moody’s says the bomb will be safely disarmed by authorities far before it goes off.

In today’s chart, we look at various estimates to the size of China’s debt bomb, its payload, and what might spark the fuse…

Courtesy of: Visual Capitalist

CHINA’S DEBT BOMB: THE PAYLOAD

Mckinsey came out with a widely-publicized estimate of China’s debt at the beginning of 2015. Using figures up to Q2 2014, they estimated that total Chinese debt was 282% of GDP, an increase from 158% in 2007.

Since then, various trusted organizations have come up with follow-up estimates.

On the low end, Goldman Sachs came out with an estimate in January 2016 of 216% total debt-to-GDP for 2015. (A few months later, they put out a separate report saying that total debt-to-GDP was estimated to be closer to 270% for 2016.)

On the high end, Macquarie analyst Viktor Shvets said that China’s debt was $35 trillion, or “nearly 350%” of GDP.

The truth is that it’s anybody’s guess. China’s official estimates are fairly useless, and the country has a massive and quickly evolving shadow banking sector that complicates these projections significantly.

EXPLOSIVE MATERIALS

Total debt is made up of various components, including government, corporate, banking, and household debts.

In the case of China, it is corporate debt that is particularly explosive. According to Mckinsey, the country’s corporate sector already has a higher debt-to-GDP than the United States, Canada, South Korea, or Germany, even while still being considered an “emerging market”.

S&P Global Ratings now figures that Chinese corporate debt is in the 160% range, up from 98% in 2008. The current number in the United States is a less ominous 70%.

China’s central bank is just as concerned as anyone else. Here’s what the Governor of the People’s Bank of China, Zhou Xiaochuan, had to say about a month ago:

Lending as a share of GDP, especially corporate lending as a share of GDP, is too high.

Xiaochuan also noted that a high leverage ratio is more prone to macroeconomic risk.

DEFUSING THE BOMB

If there’s something that can ignite the fuse of China’s debt bomb, it’s non-performing loans (NPLs).

An NPL is a sum of money borrowed upon which the debtor has not made scheduled payments. They are essentially loans that are either close to defaulting, or already in default territory.

China has an official estimate for this number, and it is a benign 1.7% of debt. Unfortunately, independent researchers peg it much higher.

Bullish analysts have the number pegged in the high single-digits, while bearish analysts put the range anywhere between 15% and 21%. Even the IMF says that loans “potentially at risk” would be equal to 15.5% of total commercial lending.

If there’s a place to start defusing the bomb, this is it.

end

EUROPEAN ISSUES

 

The Pound/USA dollar rises due to the latest Evening Standard newspaper poll indicating the stay crowd ahead of the leave sector!

(courtesy zero hedge)

Cable Spikes To 3-Week Highs On Latest BREXIT Poll

With still more than a month to go until the June 23 referendum on whether to keep Britain inside the European Union, the pound is strengthening amid evidence the “leave” campaign is losing ground in the Brexit debate. Cable has spiked this morning to near 3-week highs after an opinion poll by the Evening Standard newspaper and Ipsos Mori put the “remain” camp’s lead at 18 percentage points. What is most fascinating is that while phone polls show BREMAIN now in the lead, online polls signal BREXIT still leads – perhaps indicating age-related biases.

As AP reporets, Britain is set to vote overwhelmingly to remain in the European Union, according to a poll.

The Ipsos Mori survey for the Evening Standard put Remain on 55% against 37% for Leave.

 

The 18-point advantage for Remain is the largest since the referendum was called for June 23.

 

The pollsters said there were signs of moderately Eurosceptic Conservative voters swinging towards Remain, with 60% of Tories now saying they will opt to stay in the EU.

 

However, these voters were also the group most likely to say they could change their minds.

And the reaction – a buying panic in cable… Is vol about to explode as every poll is now a trading signal?

 

However, online polls still show BREXIT leading…

 

But phone polls still have BREMAIN leading…

 

Charts: Bloomberg

 

end

 

RUSSIAN AND MIDDLE EASTERN AFFAIRS

Saudi Arabia has a full blown liquidity crisis and they can only pay government contractors with IOU’s!

(courtesy zero hedge)

Saudi Arabia Admits To A Full-Blown Liquidity Crisis; Will Pay Government Contractors With IOUs, Debt

Previously we documented that as a result of the still low oil prices, largely a result of Saudi Arabian strategy to put high cost producers out of business and to remove excess supply, none other than Saudi Arabia has been substantially impacted, with the result being dramatic state budget cuts and mass layoffs. Just three weeks ago we reported that the biggest construction conglomerate in the middle east, the Saudi Binladin Group had announced it would layoff 50,000 workers ot a quarter of its workforce, slammed by the weak economy.

Now, Saudi economic (and liquidity) problems just spilled out into the open, because Bloomberg reported moments ago, Saudi Arabia has told banks it is considering paying some outstanding bills to contractors with government-issued bonds, citing people with knowledge of matter say.

Contractors would be able to hold bond-like instruments until maturity.

Bloomberg adds that issuing bonds is one of several options being considered.

Contractors so far received some payments of outstanding bills from government in cash.

Saudi Arabia’s finance ministry declines to comment, while central bank didn’t immediately return calls seeking comment

What this means is simple: as a result of the budget imbalance driven by low oil prices, largely a Saudi doing, the kingdom is forced to give workers an implicit pay cut. It also means that since the government has to “pay” through the issuance of debt, that the liquidity crisis in the kingdom is far worse than many had anticipated.

Which brings up the question of devaluation: how long until the SAR has to follow the Yuan and see a substantial haircut. According to the market, 12 month SAR forward are now trading at a price which implies a 12% devaluation in the coming months.

When that happens is, of course, up to the King Salman.

END

EMERGING MARKETS

Rubber bullets are fired into the crowd as police clash with protesters. Conditions inside Venezuela worsens:

 

(courtesy zero hedge)

 

Venezuelan Police Unleash Tear-Gas, Rubber Bullets Amid Violent Anti-Government Protests

The conflagration that is the collapse of a socilaist utopia continues to escalate in Venezuela today. With morgues overflowing, medicines running out, and apocalyptic scenes playing out across the nation, Venezuelans took to the streets of Caracas today – at the behest of the opposition – demanding a recall referendum to end Venezuelan President Nicolas Maduro’s socialist rule. The troubled nations leader was not happy and security forces fired tear gas and shut subway stations to block the thousands of protesters.

Over the last two weeks, several provinces have hosted scenes of looting in pharmacies, shopping malls, supermarkets, and food delivery trucks. In several markets, shouts of “we are hungry!” echoed. On April 27, the Venezuelan Chamber of Food (Cavidea) reported that the country’s food producers only had 15 days left of inventory.

PanamPost adds that lootings are becoming an increasingly common occurrence in Venezuela, as the country’s food shortage resulted in yet another reported incident of violence in a supermarket — this time in the Luvebras Automarket located in the La Florida Province of Caracas.

Venezuelans lost control this week when offered small portions

Videos posted to social media showed desperate people falling over each other trying to get bags of rice. One user claimed the looting occurred because it is difficult to get cereal, and so people “broke down the doors and damaged infrastructure.”

And now, as Reuters reports, in the third opposition rally in a week, several thousand protesters descended on downtown Caracas, witnesses said, planning to march to the national election board’s headquarters

But National Guard soldiers and police cordoned off the square where they planned to meet, so protesters milled instead in nearby streets waving flags and chanting anti-Maduro slogans.

Adultos mayores rompieron cordón policial en la Av.Libertador.

 

 

Security forces used tear gas to control about 100 protesters in one street, witnesses said.

 

 

“They’re scared. Venezuelans are tired, hungry,” said demonstrator Alfredo Gonzalez, 76, who wore a scarf over his mouth and said he had been sprayed with pepper gas.

 

An anti-Maduro demonstration Wednesday also turned violent, with troops using tear gas to quell stone-throwing protesters and an officer pepper-spraying opposition leader Henrique Capriles.

 

 

 

Beyond the opposition’s formal protest campaign, spontaneous street protests and looting are becoming more common around Venezuela amid worsening food shortages, frequent power and water cuts, and inflation that is the highest in the world.

 

 

During the weekend, Maduro declared a 60-day state of emergency, widening his powers to sidestep the legislature, intervene in the economy and control the streets, because of what he called U.S. and domestic plots against him.

 

Protester Jose Alirio, 48, said he had been a supporter of Chavez but was angry at Maduro. “The bread shops are empty,” said Alirio, a bus conductor. “I’m close to robbing. This man has to fix things or he should go.”

 

Haydee Teran, a 48-year-old housewife who had been lining up for hours at the supermarket hoping to buy some scarce essentials, said Guarenas officials ordered that half of the food deliveries heading to shops and markets be instead diverted for local distribution.

 

“This decree isn’t solving anything,” Teran told AFP, showing a video of the incident she posted on Twitter.

 

“What the people want is food. There hasn’t been looting, but we are closing the streets to protest,” she said.

 

Authorities also closed subway stations in Caracas on Wednesday in another measure to impede the protesters.

As AFP adds, the head of the Venezuelan Observatory for Social Conflict, Marco Ponce, told AFP that his non-governmental organization had counted 107 instances of looting and attempted looting in the first three months of the year. There have been hundreds of small street protests, he said.

Seventy percent of Venezuelans want a change of government, according to a poll by the firm Datanalisis.

 

Lopez is among them, but she doesn’t want to see current opposition figures take over, remembering some of them as greedy and arrogant when they held the reins before Chavez’s rule.

 

“It’s best that others step in to govern — but not those squalid bastards, not them either,” she said.

 

A man in line yells out sardonically that “the socialist bread is coming,”provoking a ripple of comments and grumbles from others in the long bread line.

 

“They are going to fall! They are going to fall!” residents chant from windows above the bakery.

The crowd is growing despite police action…

imágenes de la maecha esta si es una marcha Maduro el pueblo te dice FUERAAAAAAAAAAAAAAAAAAAAAAA AAAAAAAAAA#Caracas

Av Libertador Caracas 12:30 pm gases lacrimógenos contra manifestantes q arrojan piedras y botellas a PNB

 

As we concluded, previously, Social Collapse Is Inevitable

With the economy dead, the only thing remaining is to watch as society implodes. To that end, Oscar Meza, Director of the Documentation Center for Social Analysis (Cendas-FVM), said that measurements of scarcity and inflation in May are going to be the worst to date. “We are officially declaring May as the month that [widespread] hunger began in Venezuela,” he told Web Noticias Venezuela. … “As for March, there was an increase in yearly prices due to inflation — a 582.9 percent increase for food, while the level of scarcity of basic products remains at 41.37 percent.”


“We are officially declaring May as the month that hunger began
in Venezuela,” says an NGO that measures inflation and scarcity

Meza said the trigger for the crisis is the shortage of bread and other foods derived from wheat.

“Prices are so high that you can’t buy anything, so people don’t buy bread, they don’t buy flour. You get porridge, you see the price of chicken go up and families struggle … lunch is around 1,500 bolivars… People used to take food from home to work, but now you can’t anymore because you don’t have food at home.”

The is why, Español Ramón Muchacho, Mayor of Chacao in Caracas, said the streets of the capital of Venezuela are filled with people killing animals for food. “Muchacho reported that in Venezuela, it is a “painful reality” that people “hunt cats, dogs and pigeons” to ease their hunger.”

Subsquently, Muchacho warned that Caribbean islands and Colombia may suffer an influx of refugees from Venezuela if food shortages continue in the country.

“As hunger deepens, we could see more Venezuelans fleeing by land or sea to an island,” Muchacho said.

And that is how all socialist utopias always end.

* * *

Meanwhile, as civil war appears inevitable, as previously reported there are factions vying to oust Maduro, although we are confident the dictator will hang on for dear life (literally) and force his population to endure more of this socialist nightmare. One can only hope that these shocking scenes remain relegated to the streets of offshore socialist paradises, although Americans should always prepare for the worst in case they eventually manage to make their way into the country.

end

 

OIL ISSUES

DOE shows a huge 3.5 million build against expectations of a 3.5 million draw. Crude production fell again to the lowest level since 2014. Cushing inventories rose again but less than expected.  Oil initially dumped and then rose

(courtesy zero hedge)

Crude Dumps’n’Pumps After Unexpected Inventory Build Offset By Production Cut

Following API’s smaller than expected draw overnight, DOE data showed an unexpedted 1.31m barrel build (3.5m draw expectations). This was offset by considerably bigger than expected draws in Gasoline and Distillates and Cushing inventories rose less than expected. Crude production also fell once again, to its lowest since Sept 2014. The initial kneejerk was a mini-flash-crash in crude prices.. but that was rapidly bid back to unch…

 

API:

  • Crude -1.1m (-3.5mm exp, last week -3.4mm)
  • Cushing +508k (+1.1m exp)
  • Gasoline -1.9mm (-1m exp)
  • Distillates -2m (-1m exp)

DOE

  • Crude +1.31m (-3.5mm exp, last week -3.4mm)
  • Cushing +460k (+1.1m exp)
  • Gasoline -2.5mm (-1m exp)
  • Distillates -3.17m (-1m exp)

Production dropped for the 17th week in a row to its lowest since Sept 2014…

 

And the reaction was an immediate flash crash in crude…but BTFD’ers could not resist…

 

Charts: Bloomberg

 

end

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/WEDNESDAY morning 7:00 am

Euro/USA   1.1273 DOWN .0041 ( STILL REACTING TO USA FAILED POLICY)

USA/JAPAN YEN 109.42 UP .404 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER

GBP/USA 1.4484 UP .0030 (STILL THREAT OF BREXIT)

USA/CAN 1.2960 UP .0052

Early THIS WEDNESDAY morning in Europe, the Euro FELL by 41 basis points, trading now WELL above the important 1.08 level FALLING to 1.1367; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED DOWN BY 36.10 PTS OR 1.27% / Hang Sang CLOSED DOWN 292.39 OR  1.45%   / AUSTRALIA IS LOWER BY 0.74% / ALL EUROPEAN BOURSES ARE ALL IN THE RED   as they start their morning/

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 and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

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 WEDNESDAY morning: closed DOWN 8.11 OR 0.06% 

Trading from Europe and Asia:
1. Europe stocks ALL THE RED AS  THEY START THEIR DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 2392.39 PTS OR 1.45% . ,Shanghai CLOSED  DOWN 36.10 OR 1.27%/ Australia BOURSE IN THE RED: /Nikkei (Japan) CLOSED IN THE RED/India’s Sensex IN THE RED

Gold very early morning trading: $1273.00

silver:$17.04

Early WEDNESDAY morning USA 10 year bond yield: 1.784% !!! UP 3 in basis points from TUESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.605 UP 1 in basis points from TUESDAY night.

USA dollar index early WEDNESDAY morning: 94.83 UP 25 from TUESDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers WEDNESDAY MORNING

END

 

And now your closing WEDNESDAY NUMBERS

Portuguese 10 year bond yield:  3.09% UP 2 in basis points from TUESDAY

JAPANESE BOND YIELD: -.093% UP 2 in   basis points from TUESDAY

SPANISH 10 YR BOND YIELD:1.60%  UP 3 IN basis points from TUESDAY

ITALIAN 10 YR BOND YIELD: 1.49  UP 4 IN basis points from TUESDAY

the Italian 10 yr bond yield is trading 11 points lower than Spain.

GERMAN 10 YR BOND YIELD: .168% UP 2  IN BASIS POINTS ON THE DAY

 

END

IMPORTANT CURRENCY CLOSES FOR WEDNESDAY

Closing currency crosses for WEDNESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

 

Euro/USA 1.1229 down .0085 (Euro =DOWN 85 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 110.00 UP 1.004 (Yen DOWN 100 basis points )

Great Britain/USA 1.4596 UP .0143 Pound UP143 basis points/

USA/Canada 1.2983 UP 0.0075 (Canadian dollar DOWN 75 basis points with OIL FALLING a LOT(WTI AT $48.09).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 85 basis points to trade at 1.1229

The Yen FELL to 110.00 for a LOSS of 100 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was UP 143 basis points, trading at 1.4596

The Canadian dollar FELL by 75 basis points to 1.2983, WITH WTI OIL AT:  $48.11

The USA/Yuan closed at 6.5386

the 10 yr Japanese bond yield closed at -.093% UP 2 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: UP 11  IN basis points from TUESDAY at 1.866% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.6840 UP 8 in basis points on the day ( HUGE POLICY ERROR)

BANKS NEED THE LONGER BOND HIGHER IN YIELD: INSTEAD THE SPREAD LESSENS.

Your closing USA dollar index, 95.06 UP 46 IN CENTS ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for WEDNESDAY

London:  CLOSED DOWN 1.977 OR 0.03%
German Dax :CLOSED UP 53.04 OR .54%
Paris Cac  CLOSED UP 21.73  OR 0.51%
Spain IBEX CLOSED UP 76.40 OR 0.88%
Italian MIB: CLOSED UP 214.74 OR 1.23%

The Dow was DOWN 3.36  points or 0.02%

NASDAQ UP 23.39 points or 0.50%
WTI Oil price; 48.12 at 4:30 pm;

Brent Oil: 48.74

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  65.85 (ROUBLE DOWN 1 AMD 6/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT FELL AND WTI FELL

TODAY THE GERMAN YIELD ROSE TO .168  FOR THE 10 YR BOND

.

END

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5 PM:47.92

BRENT: 48.51

USA 10 YR BOND YIELD: 1.853%

USA DOLLAR INDEX: 95.22 UP 68 cents

END

And now your more important USA stories which will influence the price of gold/silver

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

Late-Day Buying Panic Keeps Stocks Green For 2016 After Fed Shock

Another roller-coaster day… “you’re a crook, and a cheat, and a swindler…”

 

Today’s melt-ups (pre-FOMC Minutes) were all thanks to broken markets

 

But after FOMC, things went south in everything (except the Dollar)…

 

Post-fed, bonds win (but they all lose)…

 

Obviously we were panic bid into the FOMC minutes but that all changed when The Fed hawks appeared…

 

The machines were in full rescue mode eying VWAP twice after the minutes smashed stocks lower...perfect VWAP close!

 

Chaos reigned in VIX… With desperation to keep the S&P green for 2016…

 

With some huge Open Interests in 205 and 210 SPYs…

h/t @DamonSharkey

 

Treasury yields all spiked on the Fed minutes (but note the short-end notably underperforming)…

 

with 2s30s collapsing to fresh lows since Dec 2008…

 

The USD Index spiked to its highest since March…

 

But Cable bucked the day’s trend, rallying after positive BREXIT (remain 55%) polls…

 

We suspect tonight will see a major China devaluation…to send a message, and increase turmoil – in order to scare The Fed off again…

 

The strong USD weighed heavy on commodities…

 

Charts: Bloomberg

end

 

Fun and games! After the government stated that retail sales jumped the most in years, Target, misses on top line and worst of all , they slash guidance!

(courtesy zero hedge)

Target Crashes To 2016 Lows After Missing Top Line, Slashing Guidance

How is this possible? The government just told us that retail sales jumped the most in years?

Target is out with its earnings despite beating bottom line, it missed top-line and took an ax to Q2 guidance…

  • *TARGET 1Q ADJ. EPS $1.29, EST. $1.19 (Good)
  • *TARGET 1Q REV. $16.2B, EST. $16.3B (Bad)
  • *TARGET SEES 2Q ADJ. EPS $1.00-$1.20, EST. $1.36 (Ugly)

 

In second quarter 2016, Target expects comparable sales of flat to down two percent, and Adjusted EPS of $1.00 to $1.20. Second quarter GAAP EPS from continuing operations will include approximately $0.17 of expense related to early debt retirement losses, and also may include the impact of certain additional discrete items which will be excluded in calculating Adjusted EPS. In the past, these items have included data breach expenses, restructuring costs and certain other items that are discretely managed. Beyond losses related to the early debt retirement, Target is not currently aware of any other material discrete items.

And the result – Target is down almost 10% in the pre-market…

 

Makes you wonder just what fiction the government is peddling?

The government data was so “good” in fact that even establishment economists such as Stephanie Pomboy of Macromavens did what we have repeatedly done in the past few months when she accused the government of fabricating the reported number by using a major seasonal adjustment gimmick

end

First:
FOMC states that the cornered Fed will “likely” hike rates in JUne and the masrket is underpricing risk of that hike:
(courtesy zero hedge)

FOMC Minutes Show Cornered Fed “Likely” To Hike Rates In June, Concerned Market Underpricing Risk Of Hike

The supposedly dovish April FOMC statement – as global fears fell and turned domestically – has left bonds and bullion the winners and stocks the losers as investors lose faith in The Fed’s forecast and economic promises. Today’s FOMC meeting minutes suggest an increasingly cornered Fed will pull the trigger in June with member disagreements brewing…

  • *MOST FED OFFICIALS SAW JUNE HIKE `LIKELY’ IF ECONOMY WARRANTED
  • *FED: RANGE OF VIEWS ON WHETHER DATA WOULD SUPPORT JUNE HIKE

Of course, no matter what narrative the market perceives from these minutes, tomorrow’s speeches by Dudley and Fischer (who has been conspicuously quiet recently) will likely give the biggest hint as to what happens next.

Further headlines:

  • *FED: MANY OFFICIALS NOTED GLOBAL RISKS NEED `CLOSE MONITORING’
  • *FED: OFFICIALS WANTED TO KEEP `OPTIONS OPEN’ FOR JUNE

Since The April FOMC Statement, stocks are the laggard, gold and bonds outperforming while Oil has spiked 9%!!??

 

And ED Futures have rallied (dovish) and sold off (hawkish) back to unchanged…

 

If The Fed doesn’t go after this statement, then all credibility will be lost.

Here are the key statement excerpts:

June rate hike may be warranted:

Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June.

The Fed remains worried about foreign developments:

Many participants noted that downside risks emanating from developments abroad, while reduced, still warranted close monitoring. For these reasons, participants generally saw maintaining the target range for the federal funds rate at ¼ to ½ percent at this meeting and continuing to assess developments carefully as consistent with setting policy in a data-dependent manner and as leaving open the possibility of an increase in the federal funds rate at the June FOMC meeting

* * *

Many participants noted that downside risks emanating from developments abroad, while reduced, still warranted close monitoring

So much so that “global” was used 15 times in the April minutes.

The Fed is also worried that the market is underestimating the Fed. In fact, the following statement may be the most important one.

Some members expressed concern that the likelihood implied by market pricing that the Committee would increase the target range for the federal funds rate at the June meeting might be unduly low

However, the market may be right again:

Regarding the possibility of adjustments in the stance of policy at the next meeting, members generally judged it appropriate to leave their policy options open and maintain the flexibility to make this decision based on how the incoming data and developments shaped their outlook for the labor market and inflation as well as their evolving assessments of the balance of risks around that outlook.

Worries about brexit just after the June meeting:

Some participants noted that global financial markets could be sensitive to the upcoming British referendum on membership in the European Union or to unanticipated developments associated with China’s management of its exchange rate

And the usual worries about an asset bubble.

Several noted the ongoing need to remain alert to vulnerabilities in the financial system. In that regard, a few cited concerns about rapidly rising prices of CRE, including multifamily properties, or about illiquidity of the assets of some mutual funds. It was also noted that the debt situation in Puerto Rico had deteriorated further over the intermeeting period and remained unresolved. To date, the situation had not led to strains in broader financial markets and was not expected to do so

But before everyone assumes the statement is unduly hawkish, note the following statement:

participants generally agreed that the Committee should not completely rule out the possibility of using monetary policy to address financial stability risks, particularly in circumstances in which such risks significantly threatened the achievement of its dual mandate and when macroprudential tools had been or were likely to be ineffective at mitigating those risks

And then this shocker:

participants stressed the need for further research and analysis to advance understanding of the relationship between monetary policy and financial stability and to help identify situations in which it might be desirable to incorporate financial stability considerations in the design of monetary policy.

Yes, that would be useful.

Of course, at the end of the day, it’s all about this:

Full FOMC Meeting Minutes…

 

end

 

And the initial reaction:

(courtesy zero hedge)

 

Dollar Jumps, Stocks Slump As June Rate Hike Odds Soar After Fed Minutes

Surprise! June rate hike odds have tripled – but remain at just 24% for now…

 

Pre-Election rate hike odds now at record highs…

 

With the USD Index surging, Gold, stocks, and the short-end of the bond curve are fading fast…

 

But the 30Y is outperforming dramatically (policy error?)

 

Financials are rallying hopefully but traders are missing the fact that it’s the spread not the level that matters and the curve is flattening…

 

S&P is back in negative territory for 2016 to March lows…

 

And The USD Index is at its highest since March…

 

Oil is the biggest loser for now…

end
With the rise in the USA dollar, we are now again seeing the China panic trade once again rear its ugly head.  China has continued to warn the USA that if they raise rates,  the POBC will devalue the yuan which will set off a massive deflation throughout the globe and totally kill Japan and South Korea as well as the emerging markets.

The China-Panic Trade Is Back

Once again the fears over China’s slowdown, global growth faltering, and the fallacy of US analyst hockey sticks are biting at the ankles of fiction-peddling talking heads. With copper plunging and the USD Index resurgent, as Bloomberg’s Mark Cudmore warns, the risk-aversion sparked by China in January is on course for an imminent replay

Deja vu all over again…

 

With the last few weeks really diverging…

 

As Bloomberg’s Mark Cudmore warns, we are on the verge of the ‘China Panic’ trade once again…

The risk-aversion sparked by China in January is on course for an imminent replay unless the trend of the weakening yuan amid a strengthening dollar is checked.

 

Chinese data this weekend missed expectations across the board. But that isn’t the real concern — retail sales expanding at 10.1% year-on-year is still an exceptional pace of growth even if it’s a slowdown relative to the rate of the last decade. The real problem is the creep higher in USD/CNY.

 

It’s an expectations game. The more the currency pair climbs, the more traders fear that unsustainable capital outflows will force a more sudden yuan devaluation and result in global turmoil. Panic started in January when the rate climbed above 6.56 yuan. Today’s fix was within 0.4% of that level.

 

On Friday, the offshore yuan traded at the weakest level relative to the onshore yuan in more than three months. That’s a good barometer of building speculation.

 

The critical issue now is that the U.S. dollar is appreciating again. The Bloomberg Dollar index is up 2.8% in the last two weeks and another 2% wouldn’t be an unreasonable consolidation in the context of it dropping more than 7% in the previous three months.

 

That previous dollar slide distracted from the fact that yuan depreciation never abated. Against the basket, it’s been weakening at an average rate of almost 1.2% per month for the last five months.

 

 

The market’s single-minded focus on USD/CNY is crucial and it’s also why disaster can still be averted. It will require the PBOC to temporarily suspend their yuan-weakening policy for as long as the dollar is climbing.

 

Otherwise, prepare to batten down the hatches for the coming storm.

Of course, the last time traders panicced about China, bad things happened to stocks…

 end
Let us close with this must see interview with Rob Kirby and Greg Hunter of USAWatchdog
(courtesy Greg Hunter/Rob Kirby)

Global Elite Making Preparations for Post-Dollar World-Rob Kirby

 

 

 

Macroeconomic analyst Rob Kirby says his rich clients around the planet are bracing for an inevitable economic calamity. Kirby explains, “The people I know, that I would say are at the higher level of the food chain in the global world of finance, are hunkered down and making very serious preparations.  What I see on a macro level is people acting like squirrels preparing for winter.  They are burying nuts and gathering as much physical precious metals as they can. They are making preparations for a post-dollar world in terms of world reserve currency.”

On news that there are more than 540 paper claims for every ounce of Gold at COMEX, Kirby contends, “There are 540 claims for every ounce of gold at the COMEX vault. My question to you is what happens if that gold is in fact leased metal?  Then, the 540 becomes 1,080, and what if it has been leased two times?  Then, it becomes 2,160.  So, the number of claims for every ounce of gold may be many factors higher than even 540.”

Kirby goes on to say, “I have been writing consistently for the past 12 years that if you are going to own gold, you need to own it physically. If you own precious metals, and you can’t physically go and touch it, then it’s highly dubious whether you have clear title on any physical metal at all.  This is the reason why I am such a strong advocate of owning your own stash.  My gut tells me, in the very near term, people are going to find out what they really hold.  The tide is going out, and we’re going to find out who is wearing bathing suits pretty darn soon. . . . This is building to some sort of climactic event that will blow.  It’s sort of like putting baking soda and vinegar together.  You know what’s going to happen, and if it take a few extra seconds to pop, then so be it.  In economic terms . . . the big question is not whether they can keep making things appear pseudonormal for next few days, weeks or months . . .  the outcome is absolutely cemented in stone.”  The real question you should be asking is . . . do you want to own fire insurance?  It’s a mathematical certainty your house is going to burn to the ground.”

Kirby also arranges gold sales between buyers and sellers by the ton. Kirby says the biggest concern for his customers is the U.S. dollar.  Kirby says, “The dollar is going to be kicked off its perch.  That is a guarantee.  It’s only a matter of time.

So, what are Kirby’s clients doing now? Kirby says, “The universal message is people are trying to get, for the most part, as much of their assets into physical precious metals as they can.  Precious metal is getting increasingly hard to buy.”

Has Kirby seen demand for precious metals higher than right now? Kirby says, “No, I haven’t.  I also have never seen this much interest to procure or own physical precious metal.  Up until 2010, central banks were net sellers of gold, and since 2010, they have been net buyers of physical precious metal, and they never bought more than last year, except this year will be bigger than last year.

Join Greg Hunter as he goes One-on-One with Rob Kirby of KirbyAnalytics.com.

(There is much more in the video interview.)

 

end
Well that is all for today
I will see you tomorrow night
h,.
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