Tinker, Trader, Holder. Why? Things that make you go hmmm….

Mauldin Economics (Aug 18) by Grant Williams —

The latest letter from Grant Williams is once again full of phenomenal analysis regarding all things gold – specifically, a full discussion on the somewhat unknown/underreported central bank behavior in the gold market over the last decade or so. In short, there is much more going on in the gold market than the price behavior would lead us to believe. A long read, but if its the only thing you read today, it will serve you well. – JK

Some highlights:

Yes, as anybody who follows the space knows only too well, Indians love their physical gold; and, unlike their counterparts in the West, when they have money to save, they have no hang-ups about swapping cash for hard yellow lumps of metal. Until February of this year, they were the largest buyers of gold in the world. By a long, long way. Now, however, the Chinese have overtaken them:

But — and I’ve talked about this before — it’s the metal they want to own. Period. Not futures. Metal.
Oh… and not ETFs, either.

Now, stop for a second and just imagine what would happen if the world-at-large didn’t wait to have numbers like Koos’ officially confirmed but instead made the kinds of thoroughly vetted assumptions that Koos does after sifting diligently through the data.
Back in the day, it used to be called research.

If the PBoC’s holding “6,000 to 8,000 tonnes would be a gamechanger,” what effect does would their holding nearly 15,000 tonnes have, I wonder?

I wonder.

Seems to me that, when 2008 came out of the clear blue sky and blindsided every central banker in the world (the situation was “contained,” I believe they said…), they panicked just like everybody else; and when they did, where did they run? Yup. To gold.
When QE1 ended and equity markets fell out of bed once again, guess what? Yup. Another sudden panicky-looking dash into the ultimate safe-haven asset — our old friend gold.

In fairness to this group of geniuses, they at least got the joke after that and bought steadily for almost three years, though, as we’ve seen, some of them bought harder than others.

Now we stand on the brink of another possible war between NATO and Russia as tensions over Ukraine ratchet ever higher.

We’ve already seen the effect the last threat had on gold, so how do things stack up this time around?

Well, funnily enough, for once this time really is different; and the New Cold War is, as you can see from the chart below, apparently not even remotely troubling. In fact, gold is trading below where it was when the Russians first dipped their toes in Ukraine to test the water.

Many investors who claim to “own” gold as an insurance policy do so through the ownership of ETFs such as GLD. That’s just not the same as owning metal, I’m afraid. Doing that, you’re simply one of the traders. You’re NOT a holder.

Individuals (and institutions) who buy physical gold and hold it, unencumbered, outside the banking system are true holders. They aren’t about to alter their position in any meaningful way just because the price moves a few percent against them (or, for that matter, for them). They own gold as an insurance policy, and until the reason for owning it is proven wrong, they hold onto it.

That just leaves the central banks.

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The British economy: Mr Dependable

19-Aug (The Economist) — RECOGNISING that fragile economies need strong leaders, Mark Carney, the governor of the Bank of England, aims for an air of unruffled competence. Recently, however, his mixed messages on the economy have bamboozled firms and financial markets. In February the bank suggested that interest rates would not rise until the second quarter of 2015. Just four months later the plan changed: in June Mr Carney hinted that rates could rise “sooner than markets currently expect.” Pat McFadden, a Labour MP, likened the bank’s behaviour to that of an unreliable boyfriend. That judgment proved unfair: Mr Carney is sticking to his original plan. The bank’s latest forecast, released on August 13th, revealed that ultra-low rates are likely to endure until 2015, as he previously promised.

Cheap money has become the norm in Britain: August marked the 65th successive month in which the monetary-policy committee (MPC) has kept interest rates at 0.5%. Hawks, hungry for signals that rates will rise this year, have plenty to point to. Unemployment has tumbled faster than expected, passing 7% at the beginning of 2014 (progress that the bank thought unfathomable a year ago). It now stands at 6.4% (see chart). In July, Britain’s GDP surpassed its pre-crisis peak. The bank sees good times ahead. It reckons that GDP growth in 2015 will be about 3%, higher than in predictions published in May. All this suggests the economy can cope with higher interest rates.

It might need them, too. Worries about housing market bubbles abound. According to the Council of Mortgage Lenders, a trade association, gross mortgage lending reached £17.5 billion ($29 billion) in June, up 17% over the year. Mr Carney intimated in July that he could use higher rates to manage the housing market.

Yet Mr Carney holds steady.


PG View: The mixed signals are by design: Keep the markets guessing so nobody makes any big bets one way or another.

Posted in Central Banks, Monetary Policy |

France Returns From Summer Holiday To A Stagnant Economy, Record Unemployment, And A Growing Deficit

19-Aug (BusinessInsider) — A stagnant economy, ballooning deficit, and sniping from within his own party ranks — President Francois Hollande faces a mountain of problems when French political life restarts after the long summer holidays.

The government on Wednesday will hold its first cabinet meeting of what is known as the political “rentree,” or return from holidays, just a week after the finance minister admitted the economy had “broken down,” with zero growth over the past six months.

Prime Minister Manuel Valls had already warned the autumn months would be “difficult,” with France’s unemployment at a record high and the European Union increasingly worried about the country’s budget deficit.

The government was forced to slash this year’s growth forecast in half to 0.5 percent after figures showed the economy failed to grow in the second quarter after stagnating in the first three months.


Posted in Economy |

The Daily Market Report: Gold Consolidates, Awaiting Policy Queues from Jackson Hole

19-Aug (USAGOLD) — Gold gave back earlier gains as better than expected U.S. housing data lifted stocks, yields and the dollar. Despite persistent geopolitical tensions underpinning the market, the yellow metal slipped back below $1300, keeping the overall tone consolidative.

U.S. housing starts surged 15.7% in July to an annual pace of 1.093 million, above expectations of 965k, versus an upward revised 945k in June. The print was just shy of the cycle high set in November 2013 at a 1.105 million pace. This may have dragged forward expectations of the first Fed rate hike, as evidenced by Treasuries retraced earlier gains and the dollar jumped to fresh eleven-month highs against a basket of currencies.

However, inflation slowed in July to +0.1% m/m, versus +0.3% in June. Core inflation came in below expectations. This leaves the annual pace of CPI at 2.0% and core at 1.9%.

The market will be watching the KC Fed’s Jackson Hole Summit for any new policy queues. Fed chair Yellen is scheduled to speak on Friday and is expected to reiterate why she still sees slack in the labor market, despite recent drops in the jobless rate.

It seems like it behooves the Fed to continue fomenting uncertainty about when ‘lift-off’ will come. After all, rates remain suppressed, stocks remain buoyant and volatility remains near historic lows. What’s not to love, from a central banking perspective? It can’t last indefinitely though; and I’m sure the Fed knows it.

A survey of economists conducted by The Wall Street Journal reveals that the vast majority of respondents fear that the Fed would be too slow in raising rates. History shows that the Fed is indeed more reactionary than proactive.

“The idea that the Fed might get behind the curve is a powerful one, and that’s certainly been the history of the institution. People are right to worry about that.” — St. Louis Fed’s James Bullard via WSJ

For example: It is the Fed’s stated goal to generate 2.0% PCE inflation. They’ve pushed hard to reach that goal, to the tune of a $4 trillion balance sheet, and yet the PCE price index was 1.6% y/y in June. That was the 26th consecutive month below the 2.0% target.

Even though there’s no sense that a move above the 2.0% target is imminent, Ms. Yellen has already indicated that she’d be willing to tolerate a period of above-target inflation. Despite the massive expansion of the money supply (and by extension, the Fed’s balance sheet) the velocity of money continues to hit record lows.

The velocity of M2 is a mere 1.531 as of Q2, compared to the pre-crisis peak of 2.000 and a 1997 cycle high of 2.200. So, despite a boat-load of new dollars in the system, those dollars are turning over at an ever-slower rate. If inflation expectations where to suddenly become ‘unanchored,’ the velocity of those trillions of dollar could accelerate rapidly and the Fed would find itself “behind the curve” once again.

I liken it to the Fed trying to break into a china shop: They push against the door harder and harder, and when it finally gives way, they don’t stop on the threshold (inflation target). But rather, they go crashing into the shop, wreaking all-sorts of havoc.

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QE: New York Fed purchases $0.285 billion in Treasury coupons.

Posted in Central Banks, Monetary Policy, QE |

Rockets from Gaza end ceasefire

19-Aug (Financial Times) — Rockets were fired from the Gaza Strip into southern Israel on Tuesday afternoon, breaking a ceasefire between the two sides that was due to end at midnight. Benjamin Netanyahu, the Israeli prime minister, ordered strikes in retaliation.

The attack came as Israeli and Palestinian negotiators in Cairo discussed details of a durable truce aimed at ending Israel’s war with Hamas, the militant group that governs Gaza. The one-day ceasefire was agreed late on Monday evening as a five-day pause in fighting was about to lapse, briefly raising hopes among Israelis and Palestinians that a peace deal might be announced soon, although Israel said no agreement had been reached yet.

The Israel Defence Forces said shortly before 4pm local time on Tuesday that three rockets fired from Gaza struck southern Israel in open areas near Beer Sheva, southern Israel’s largest city, causing no reported injuries or damage.

Mr Netanyahu and Moshe Ya’alon, defence minister, ordered the IDF to respond to the rocket fire.


Posted in Geopolitical Risks |

ETF gold buys slow metal’s decline – Phillips

19-Aug (GoldForecaster, via MineWeb) — There were purchases of 1.832 tonnes into the SPDR gold ETF but none into the Gold Trust on Monday. The holdings of the gold ETFs stand at 797.691 tonnes in the SPDR gold ETF and at 165.93 tonnes, in the Gold Trust. The purchase slowed attempts by traders to push prices down. Should we see a large purchase now into the SPDR gold ETF we are sure it will push prices back up against overhead resistance once more. But we need to see a swell in demand before the gold price can break overhead resistance and move much higher.

The market remains thin and easily pushed around, to a small degree, by traders. We expect this to remain the situation until September arrives, as we have said before. Many have expected the geo-political disturbances in Iraq and in the Ukraine to have had much more influence on the gold and silver prices. However, it is clear that for any news item to do that it needs to be related to investors who will go out and buy or sell gold and silver in markets directly affected by that news. But these two items will have an impact on longer term stability and uncertainty and this will influence gold and silver investors, but not immediately. Hence the quiet markets in gold and silver for the last few months. These news items could burst open into more serious gold-related items should they lead to a broad economic decline or to a direct impact on the oil price.


Posted in Gold News, Gold Views |

Here Are 10 Countries Hoarding Enormous Piles Of Gold

18-Aug (BusinessInsider) — Central banks purchased 118 tonnes in net gold in Q2 2014, representing a 28% year-over-year increase, according to The World Gold Council.

In May 2014, the European Central Bank and other European central banks signed the fourth Central Bank Gold Agreement (CBGA). The agreement says the central banks “currently do not have plans to sell significant amounts of gold,” and that it will last for five years starting in the end of September 2014.

Country-wise, Russia saw a major increase in official reserves since February 2014, moving its place up two spots in the ranking.

Global official gold holdings totaled 31,812 tonnes as of August 2014, according to the latest report from the World Gold Council.

Business Insider identified the 10 countries with the largest gold reserves.


Posted in Gold News, Gold Views |

US CPI +0.1% in Jul, in line with expectations, vs +0.3% in Jun; +2.0% y/y. Core +0.1%, below expectations of +0.2%; +1.9% y/y.

Posted in Economic Data |

US housing starts surged 15.7% in July to 1.093M, above expectations of 965k, vs upward revised 945k in Jun.

Posted in Economic Data |

China allows 3 more banks including StanChart to import gold -sources

19-Aug (Reuters) — China has allowed three more banks, including a foreign lender, to import gold, sources with direct knowledge of the matter said, as the world’s top gold buyer gears up for its strongest effort yet to gain pricing power of the metal.

The move, which brings the number of firms allowed to import gold into China to 15, comes ahead of the launch in September of a new international bullion exchange in Shanghai with which China hopes to become a price-discovery centre.

China and other Asian gold trading centres such as Singapore are calling for more localised pricing of the precious metal as they seek alternatives to the so-called London fix, the global benchmark for spot gold prices, which is being investigated by regulators on suspicion that it may have been manipulated.


Posted in Gold News, Gold Views |

Gold ticks up on fund inflows, safe-haven demand

19-Aug (Reuters) – Gold snapped a two-day losing streak on Tuesday as geopolitical tensions and fund inflows boosted the safe-haven metal, but gains were kept in check by strength in equities and the dollar.

Equity markets rose after Russian Foreign Minister Sergei Lavrov said all issues around a humanitarian convoy sent by Moscow to relieve needy areas of eastern Ukraine had been
resolved. Moscow said it would like a ceasefire to allow aid to get to people trapped by the fighting.

However, tensions remain high, with Ukraine saying that dozens of people, including women and children, were killed as they fled fighting in eastern Ukraine on Monday when their
convoy of buses was hit by rocket fire.


Posted in Gold News, Gold Views |

Gold better at 1300.80 (+2.72). Silver 19.69 (+0.071). Dollar higher. Euro weak. Stocks called higher. US 10-yr 2.36% (-3 bps).

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FLECKENSTEIN: There’s ‘No Chance’ That This Ends Well

18-Aug (BusinessInsider) — Bill Fleckenstein, President of Fleckenstein Capital, told King World News that he anticipated big problems for stocks and bonds down the road.

Fleckenstein said that easy monetary policy has led to a misallocation of capital and that no one has seen what happens when central banks print as much as they have since the financial crisis.

“Bonds are a joke, yes, and stocks are a joke, and which one is going to crack first and which one is going to lead to more trouble, I can’t tell you, other than both are going to be big problems somewhere down the road,” he said.

“There’s no chance that the outcome in the financial markets in America is a pleasant one because we’ve gotten here because of the printed money. And so either we have a boatload of inflation and at some point the bond market really gets wrecked and the Fed’s credibility is undermined and we do something about them …

This can’t possibly end well.” — Bill Fleckenstein



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The Daily Market Report: Gold Well Contained Near $1300

18-Aug (USAGOLD) — Gold slipped back below $1300, weighed by a supposed lessening of geopolitical tensions in Ukraine after weekend talks in Berlin. A firm dollar is also seen as limiting the upside within the recent range.

Perhaps more so than a lessening of tensions, it is heightened expectations that the Russia-back rebels are on the verge of defeat. The Ukrainian military now claims it controls the center of Luhansk, which was one of the last rebel strongholds.

Ukraine also said a refugee convoy was struck by rebel artillery, killing dozens. Also, despite the weekend talks, Russia still has a large number of troops on the Ukrainian border and is reportedly directly supporting the rebels under siege.

With a number of geopolitical hotspots stoking uncertainty, gold is likely to remain well contained on the downside. Protecting the upside is dollar strength and resilient equities.

The dollar index continues to trade comfortably above 81.00, near the eleven-month highs established two-weeks ago. The dollar has been helped by currency debasement in Japan and threats of further euro debasement as well. Pressure on the ECB to launch its own QE program has escalated in recent weeks as the eurozone economy has foundered.

Posted in Daily Market Report, Gold News, Gold Views |

QE: New York Fed purchases $1.094 billion in Treasury coupons.

Posted in Central Banks, Monetary Policy, QE |

US NAHB housing market index rose to 55 in Aug, above expectations of 53, vs 53 in Jul.

Posted in Economic Data |

Federal Reserve Bets Rate Rise Can Wait

By Jon Hilsenrath
18-Aug (The Wall Street Journal) — In a recent Wall Street Journal survey, 30 private economists said they feared the Federal Reserve would wait too long before raising short-term interest rates, while only three said they feared the Fed would move too early.

Will the Fed fall behind the curve and keep interest rates too low for too long as the economy strengthens? The question looms as officials travel this week to their annual gathering in Jackson Hole, Wyo., where they and the world’s leading central bankers discuss economic issues.

Fed Chairwoman Janet Yellen and academic papers presented at the meeting will focus on labor markets, which are improving rapidly even though U.S. economic growth has been sluggish and erratic. Ms. Yellen seems likely to acknowledge the improving job market, though she has argued for much of the year that slack and headwinds endure after the 2008-09 financial crisis.

Here is how the central banks in four major advanced economies have moved two key levers of monetary policy in recent years, and how two important economic indicators have responded. View the interactive.

A growing number of economists believe slack in labor markets is diminishing, making the economy prone to inflation and financial markets prone to overshooting with short-term interest rates near zero. The unemployment rate fell to 6.2% in July from 7.3% a year ago, a decline far faster than Fed officials expected.


Posted in Central Banks, Monetary Policy |

Gold lower on strong shares, dollar keeps it around $1,300/oz

18-Aug (Reuters) – Gold edged lower on Monday as European shares rebounded on easing tensions in Ukraine, but a flat dollar and depressed U.S. Treasury yields limited losses and kept the metal’s prices around the $1,300 mark.

Russia’s foreign ministry said on Monday “certain progress” was achieved during talks between Russia, Germany, France and Ukraine in Berlin on Sunday about ways to end the military conflict in eastern Ukraine.

Spot gold fell 0.3 percent to $1,300.00 by 1158 GMT, while U.S. gold futures for December delivery were down 0.4 percent at $1,301.30.

The dollar was flat against a basket of currencies after a sixth straight weekly loss, and the yield on the benchmark 10-year U.S. Treasury note was close to a 12-month low hit the previous week.


Posted in Gold News, Gold Views |

Palladium Advances to a 13-Year High as Gold Declines

18-Aug (Bloomberg) — Palladium climbed to a 13-year high in the longest run of gains in more than a month in New York on concern supply will lag demand and add to shortages. Gold fell.

Palladium, mostly used in catalytic converters in cars alongside platinum, advanced 25 percent this year as auto companies used more and as supply was cut by a mine strike that ended in June in South Africa, the second-biggest producer. Prices also rose as tension over Ukraine led to the U.S. and European Union slapping sanctions on Russia, the top supplier.

There have been no sanctions yet on palladium, which is heading for a third annual supply shortfall. Russia’s Foreign Minister Sergei Lavrov said talks on the conflict in Ukraine haven’t produced a resolution, with the only progress made being on the passage of humanitarian aid. He expects truckloads of Russian aid for the Luhansk region to be delivered soon.


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Gold lower at 1297.25 (-7.15). Silver 19.54 (unch). Dollar firm. Euro lower. Stocks called higher. US 10yr 2.37% (+3 bps).

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Reader question. . .

DP writes to ask:

“What about QE [quantitative easing] in this context?”


In my view, rejuvenated QE is not off the table – not the way things are going.  One of three occurrences could force a ramp-up of the program:

- if the federal government can’t finance its borrowing needs externally as a result of persistent low interest rates

- if systemic risk driven global demand for Treasuries begins pushing rates higher

- if another black swan event touches off a systemic crisis.  There are plenty of Lehmanesque candidates around the world that could set it off.  Both Europe and Japan are in disinflationary (even quasi-deflationary) economic environments that represent acute danger for the global financial system, and central bankers are keenly aware of it.

Neil Howe (Fourth Turning author) in an interview with Chris Mortenson, 6/23/2013:

“Our society has entered a fourth turning (consisting of the twenty-year periods leading up to and out of it immediately.) It is a season you have to move through before you are born again — so to speak — as a society, and regain institutional confidence. You have to go through a crucible to get there.

I think the fourth turning started — probably, if I were to date it now — in 2008: the realigning election in that year of Barack Obama against John McCain. And, obviously, simultaneously with that, as we all recall, an epic, historic crash of the global economy from which we still have not recovered.

We are sort of hobbling along in kind of a low-earth orbit, with continued high unemployment and excess capacity — not just in the United States, but around the world. And, of course, all the rules of economic policy seem broken and lie in fragments on the floor. People are wondering what the heck do we do in this new era?. . . . . .

There are patterns here which we recognize, and it is very important not to have historical amnesia. To look back and see where we have been, see where we are going, and more importantly, to understand the dynamics behind these social trends have familiar parallels. We just need to have the historical imagination to look far enough backwards and forward to see where else they have happened or to see where they possibly will happen again.

I am nervous. I am nervous about the future right now. I think we have a lot more deep issues, deep crises, to save in the economy. I am also very nervous about what I see geopolitically.

We cannot possibly afford the government we have promised ourselves. And, that will be a painful process of deleveraging, and it is not just deleveraging the explicit debt that we have already actually formally borrowed, it is all the implicit debt. And, I think we will deal with it, because we have no other choice.

But, my point is this: No one simply solves a terrible problem on a sunny day when they can afford, at least for the time being, to look the other way. Problems like that are faced when people have no other choice, and it is a really grim day. And, it is white-knuckle time, and horrible things are happening with markets around the world, or horrible things are happening, at least historically; we have seen that geopolitically around the world. And, that is when people are forced to act.”

Nothing has changed since Howe first uttered those words mid-2013 — except that both the geopolitical and economic risks have heightened considerably. - MK

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Stanley Fischer speaks out

Can central bankers succeed in getting global economy back on track?

Reuters/Anatole Kaletsky/8-15-2014

“Year after year, we have had to explain from mid-year onwards why the global growth rate has been lower than predicted as little as two quarters back. … This pattern of disappointment and downward revision sets up the first, and the basic, challenge on the list of issues policymakers face in moving ahead: restoring growth, if that is possible.” - Stanley Fischer, (8/11/14) in his first speech as vice chairman, Federal Reserve

MK comment:  Though the raging bull grips Wall Street, the rest of the economy languishes. The gold price — paper bound — reacts to non-existent economic strength which market players believe will force interest rates higher.  Economic reality, to make a long story short, tells a different story.  If you want to know why Janet Yellen and the Fed are unlikely to raise interest rates any time soon, take the following into account:

1.  The following graph first-posted here by our resident economist, Pete Grant, has a lost gem of an understanding hidden in full sight.  Can you see it?

20140731fredgraphGoldFedFunds 2.26.48 AM

Every time the Fed raises rates, it causes a recession (the gray bars).  In this disinflationary environment (the one that began in 2008) raising rates would be economic suicide — and the effects would be widespread, monumental, and too deep and numerous to list here.

All of which leads me to number two. . . . .

2.  The Federal Reserve Board is a hot bed of politics — especially for those who take every utterance from its members to be a form of economic gospel requiring a full market reaction. It is easy for Board members to talk like hawks when they know that the chair(wo)man is unlikely to succumb to their rhetorical positioning.  Put those same individuals in charge of the Fed and make them fully responsible for the economy and then let’s see whether or not their acts follow the rhetoric.  The indelible legacy of Alan Greenspan is that even the most conservative among central bankers can go suddenly dovish when the reality of full responsibility for economic policy hits home.  Better to be safe than sorry. . . .

Stanley Fischer’s comments, unambiguous as they are, might appear to be an act of courage at this juncture, but they might also constitute the dropping of a less than subtle hint. With respect to the gold market, it spells out a message that even the knee-jerk speculators in paper gold might be forced to take into account.  If Fischer represents the hawkish position at some level, one would have to assume that the Fed’s hawks might be ready to sound the retreat.

This quote from Kaletsky’s Reuters column speaks volumes:

“The central message of Fischer’s speech — that central bankers and governments should try even harder than they have in the past five years to support economic growth — was closely echoed by Mark Carney, the governor of the Bank of England, at his quarterly press conference two days later.

This consistency should not be surprising: Carney was Fischer’s student at the Massachusetts Institute of Technology in the 1970s — as, even more significant, was Mario Draghi, president of the European Central Bank. Because of Fischer’s influence on other central bankers, as well as his unparalleled combination of academic and official experience, he is probably now the world’s most influential economist.”

Is this a game changer?  Maybe so. Concerns about pushing on a string will resurface, but if Fischer is at the vanguard issuing a clarion call, it is bound to affect the flow of capital in the financial markets and blunt concerns about rising interest rates — and maybe  that is Fischer’s and the Fed’s intent . . . . . .Something to ponder during a restless weekend toward the end of summer doldrums.



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U.S. National Debt: $17,671,687,900,979.84

Posted in Debt |

Russia seeks safe haven in gold, away from dollar and euro

15-Aug (RT) — Russia is taking steps to ensure that it protects itself from any future dollar or euro sanctions. Moscow boasts the world’s 5th biggest foreign exchange reserves and the 6th largest gold reserves. In total, the assets amount to over $1.5 trillion.

While the West is continuing to try and punish Russia via economic sanctions, the response of the Russian Central Bank has been to diversify away from the euro and dollar – and to buy up more gold.

As the geopolitical situation in Ukraine deteriorates, Russia is moving to protect itself from currency risks associated with the euro and the greenback.


Posted in Geopolitical Risks, Gold News |

Did Russia and Ukraine just start a war? What we know and don’t know

15-Aug (Vox) — On Friday, as a Russian “aid convoy” of 280 trucks neared the Ukrainian border, NATO said that a separate “incursion” of Russian military forces had crossed into Ukraine. The Russian forces are reportedly in eastern Ukrainian territory held by Russia-backed separatist rebels, according to NATO and Ukrainian government officials. Some reports suggest that there may be open fighting between Ukrainian military forces and the Russian incursion, but it’s far from clear whether that’s true or what precisely is happening on the ground.

Did Russia really invade Ukraine outright? Is this now an open war? Here is a running account of what we know and what we don’t know.


Posted in Geopolitical Risks |

Bund yields make history books – more lows to come?

15-Aug (CNBC) — Benchmark German Bunds made the history books this week when yields twice fell below 1 percent—and some analysts say the rally has further to run.

Bunds, which are viewed as a low-risk asset akin to U.S. Treasurys, have been rising since the beginning of this year, with investors nervous about deteriorating Western relations with Russia, stagnation in Europe and tightening of monetary policy in the U.K. and the U.S.

Following disappointing growth data for the euro zone, 10-year yields finally broke through the 1 percent handle on Thursday—a first—dipping to an intraday low of 0.998 percent.

Yields then fell below 1 percent again on Friday, on reports that Ukrainian troops had attacked armed Russian military, which had crossed into the country near the border of Izvaryne. U.S. yields also declined, hitting a low of 2.333 percent, while the euro and European stocks turned negative.


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The Daily Market Report: Gold Rebounds From Earlier Losses on Mounting Ukraine Tensions

15-Aug (USAGOLD) — Gold has traded in a choppy manner thus far today. More heavy paper selling on the U.S. open sent the yellow metal back below $1300, but much of those losses were subsequently retraced amid escalating tensions in Ukraine.

The UK Telegraph reported that the observed a Russian military convoy cross the border into Ukraine. This was subsequently confirmed by NATO. Rasmussen said that NATO too observed a “Russian incursion.”

Ukraine claims they shelled the Russian convoy in their territory. Russia denied there even was a convoy; accusing Ukraine of trying to drag them into the conflict.

Stocks gave up earlier gains on risk aversion. German Bund yields plunged decisively below 1.0%, making new record lows. Treasuries also benefited from heightened geopolitical worries with the 10-year yield dropping to 2.34%.

Safe-haven flows often favor fixed income products initially: Out of stocks and into bonds. However, given the ridiculously low yields, particularly in Bunds, one has to wonder how long that capital will stick. After all, with Europe at risk of a another recession, is eurozone debt really where you want to be?

The risk-off environment is generally favorable to gold. Sometimes though, it is the secondary reaction.

Posted in Daily Market Report, Gold News, Gold Views |

Gold snaps back above $1300 after earlier losses. Now trading more than $15 off intraday low.

Posted in Gold News |

NATO Chief Accuses Russia Of Ukraine ‘Incursion’

15-Aug (NPR) — NATO Secretary General Anders Fogh Rasmussen says the alliance observed a “Russian incursion” into Ukraine overnight, confirming that Moscow was continuing to supply separatists with “a continuous flow of weapons and fighters.”

The remarks come as a Russian convoy purportedly carrying humanitarian aid to eastern Ukraine has been halted near the border as it awaits inspection by officials concerned that it could be a pretext for invasion.

“Last night we saw a Russian incursion, a crossing of the Ukrainian border,” Rasmussen told reporters after meeting the Danish defense minister, according to Reuters.

“It just confirms the fact that we see a continuous flow of weapons and fighters from Russia into eastern Ukraine and it is a clear demonstration of continued Russian involvement in the destabilization of eastern Ukraine,” he said.


Posted in Geopolitical Risks |