Latest SGE deliveries enormous: Physical gold may be nearing crunch point

SharpsPixley/Lawrie Williams/8-29-2015

“August is usually a weak time of year for such gold movements, yet the latest week’s figures are for withdrawals of 73 tonnes – the fourth highest demand week ever! And this follows on from deliveries during the month out of the Exchange of 65 tonnes the previous week and 56 tonnes for the first week of August, making a 3 week total of 194 tonnes of gold. If this kind of demand level continues for the final week of the month – figures should be released next Friday – August will be a remarkable month for SGE gold deliveries at 250 tonnes or more – around 90% of global newly mined gold output for the month. And remember this is physical gold, not paper gold! . . .

All this points to the potential for a real tightness in the supply of physical gold. In truth this has been building for some time now, but it could be getting near the crunch point. . .Sooner or later, physical gold supplies may thus become tight enough to start driving the markets – rather than the paper gold which has been doing so to date. This day may be fast approaching if current gold flows are maintained – or increase as they usually do in the latter part of the year.”

Posted in all posts |

End-of-week top gold stories

Friday, 28-Aug-2015

Ranjeetha Pakiam (Bloomberg) Gold Bucks Commodity Rout as Turmoil Sends Investors to Havens Gold was spared from the global market rout that’s sent commodities to the lowest level since 1999 as investors sought haven assets.

…Mounting concern that global growth is faltering pummeled shares, emerging-market currencies and commodities last week, and the selloff deepened on Monday.

Note: Gold displayed remarkable resilience during the latest “Black Monday” rout as safe-haven demand offset broad-based deleveraging pressures.

Anora Mahmudova (MarketWatch) U.S. stocks plummet at open; Dow drops 1,000 points U.S. stocks plunged to lowest levels since last October after a rout in Chinese stocks triggered a world-wide selloff of risky assets such as equities. The Dow Jones Industrial Average dropped 1000 points, or 6%, to 15,441. The S&P 500 opened 100 points, or 4.9%, lower at 1,874. The benchmark index is down more than 10% from its peak reached on May 21. The Nasdaq Composite began the day down 360 points, or 7.6%, to 4,349.

Note: Monday was an exciting day indeed for investors world wide . . . and generally not in a good way. While stocks recovered later in the week, many worry that the rout was a harbinger of things to come.

Koos Jansen (BullionStar) Theory On China’s Gold Strategy Koos Jansen’s latest study offers initial proof of a speculation we published here when China announced its change in the yuan price discovery mechanism. “China says it wants a say in the gold price and that’s why it established its own fix outside of London and New York’s purview. If the price of gold in yuan goes higher, it adds value to both Chinese gold reserves, which are likely much higher than recently announced, and to the asset structure of the Chinese people and banks that are hoarding it. In fact the low announcement may have been in anticipation of the devaluation strategy.

Note: The number of U.S. investors saving in gold remains disturbingly low. Take heed people! The dollar is part of the “rodeo” too and has dropped about 7% from the high set early this year.

Matt Egan (CNNMoney) Trading was halted 1,200 times Monday The selling on Wall Street was so dramatic Monday that it triggered unprecedented emergency freezes on stocks. Stocks and exchange-traded funds were automatically halted more than 1,200 times, according to Nasdaq.

The high level of trading pauses highlights just how extreme the selloff was in a short span of time. Fears about China’s economic slowdown caused the Dow to plummet over 1,000 points when the market opened. The Dow ended down 588 points, its worst decline since August 2011.

Note: Particularly interesting was the illiquidity of ETFs during the market rout. That should be an eye-opener for every investor, warranting a reexamination of your portfolio diversification. Do you have enough physical gold?

John Crudele (New York Post) Crudele says Washington attempting to rig the stock recovery, recommends “switching off” CNBC One of these mornings — or overnight — some mysterious buyer will suddenly start purchasing an abnormal amount of Standard & Poor’s 500 stock index futures. So we get down to direct intervention — just like China did. Only Washington, with Wall Street as its co-conspirator, won’t be as sloppy as Beijing was. That’ll get the stock market moving higher and everyone will pretend that the buyers are just ordinary people who suddenly think Wall Street is oversold.

MK Note: In this cogent piece written two days ago, the New York Post’s John Crudele accurately predicted events and provided a pretty good summary on the true forces at work. He is not happy about the cozy relationship between Wall Street and Washington nor the coverage at our favorite stock-hyping cable channel (which he says “tens of thousands” have already abandoned). This piece will confirm what a lot of you are already thinking. . . . .

(Bloomberg) China Sells U.S. Treasuries to Support Yuan China has cut its holdings of U.S. Treasuries this month to raise dollars needed to support the yuan in the wake of a shock devaluation two weeks ago, according to people familiar with the matter.

Note: Interesting turn of events. Devalue against the dollar and then sell Treasuries to prevent the yuan from falling further against the dollar.

Michael J. Kosares (USAGOLD) Key trade in gold market signals China’s intentions WSJ: “In recent years, China has come to shape the very way in which commodities are bought and sold, traditionally the preserve of financial centers such as London and New York. Late last month, the price of gold fell sharply, to a five-year low, within minutes of Asian markets opening. That came after almost five metric tons of gold—close to $200 million of the metal—was sold on the Shanghai Gold Exchange, according to ANZ Bank. The trade was seen by market participants as a key moment reflecting how China had moved Asian commodity markets away from just following the overnight pattern of U.S. and European trading.”

MK Note: The premise of this article is that China will continue to play a key role in shaping commodities’ markets in the years to come, despite the current slowdown, based on its sheer scale. If you follow this blog, you already know of the infrastructure China is putting in place to influence the gold trade and insert itself as a third gold trading center along with London and New York. We should note that the five tonne trade cited above came after the price had dropped. Keep in mind that Shanghai is a physical market exchange. In other words, someone in China took advantage of the price drop to force the market into a delivery of five metric tonnes of the metal.

Posted in Gold News, Gold Views |

The case for retiring another ‘barbarous relic’

23-Aug (Financial Times) — The fact that people treat cash as the go-to safe asset when banks are teetering is heavy with historical irony. Paper money was once the symbol of monetary irresponsibility. But even as individuals have taken recent crises as reasons to stock up on banknotes, authorities would do well to consider the arguments for phasing out their use as another “barbarous relic”, the moniker Keynes gave to gold.

Already, by far the largest amount of money exists and is transacted in electronic form — as bank deposits and central bank reserves. But even a little physical currency can cause a lot of distortion to the economic system.

…Fortunately some benefits of electronic money can be reaped without banning all cash outright. Cash could remain accessible but at a cost, so that its users pay for the privilege of anonymity — and remain affected by monetary policy. Dated banknotes could see their value as legal tender gradually fall over time; banks could be charged for swapping electronic reserves for physical cash and vice versa. The benefits of cash are significant — but they need not be offered for free.

[source]

PG View: Positively insidious. In this scenario, you become a hostage of a banking system that pays you next to nothing (or less than nothing) for the use of your money. If you opt to hold physical cash, it comes with an expiration date.

Take some of your wealth out of the banking system and store it in gold. The yellow metal is shelf-stable, with no expiration date!

Posted in Gold News, Gold Views |

The Daily Market Report: Gold Rebounds Amid Mixed FedSpeak


28-Aug (USAGOLD) — Gold rebounded within the range in early trading on Friday, underpinned by some dovish FedSpeak from Jackson Hole and a downward revision to August consumer sentiment. The yellow metal remains comfortably in the upper half of the recent range.

Fed-people have been out in force in advance of the Jackson Hole symposium. Not surprisingly perhaps, it’s been a mixed back of dovish and hawkish comments, perhaps slightly biased to the former. However, nobody seems terribly willing to ‘officially’ take September off the table.

Recent market volatility and the Fed’s complete and utter failure to generate inflation anywhere close to target have been the key precipitating factors. Earlier in the week, NY Fed President William Dudley said, “From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago.”

Fed Vice-Chair Stanley Fischer weighed in today on that volatility with this comment: “If you don’t understand the market volatility—and I’m sure we don’t fully understand it now, there are many many analyses of what’s going on—yes it does affect the timing of a decision you might want to make.”

Minneapolis Fed President Kocherlakota doesn’t see a September rate hike as appropriate; warning that any such move could risk the Fed’s credibility. It certainly would suggest that the Fed doesn’t take its price stability mandate very seriously. Kocherlakota actually thinks it will be “several years” before the Fed’s 2% inflation target will be achieved.

The obvious question being: Then why hike now? According to the FT, “The dominant argument for beginning the tightening cycle is to have enough “ammunition” for a new stimulus when the next downturn comes.”

Kocherlakota not only thinks the Fed should hold off on raising rates, but went so far as to say he would be in favor of further accommodations if that option were presented. A thinly veiled hint at QE4.

“The fact is, any one who doesn’t imbibe in the Keynesian Kool-Aid dispensed by the central banking cartel can see in an instant that 80 months of ZIRP has done exactly nothing for the main street economy,” quipped David Stockman in a post today. Even the Kansas City Fed has acknowledged the declining efficacy of easy policy, noting that increases in monetary policy accommodation do not raise the economy’s productive capacity.

Slow recoveries followed recessions in 1990-91, 2001, and 2007-09, a contrast to the much more rapid recoveries that followed pre-1990 recessions. These slow recoveries occurred despite sizeable monetary accommodation from the Federal Reserve, primarily through reductions in short-term interest rates. — Federal Reserve Bank of Kansas City, Economic Review

Perhaps therein lies the simple answer to the “why now” question: ZIRP and QE have simply not worked. The aforementioned Stockman piece provides rather compelling answers as to why that is so.

I have maintained that the Fed will not tighten this year because they aren’t achieving their stated goals. I agree with Kocherlakota, that such a move may well result in a serious credibility crisis for the Fed. How would it look if they tighten now and precipitate the very recession they are hoping to prevent — only to turn around and cut rates again? Arguably the massive volatility in stocks is already reflecting diminished central bank credibility.

The August jobs report comes out at the end of next week. The market is going to watching those data very closely, as it always does, hoping for some clarity one way or the other on lift-off.

Median expectations for nonfarm payrolls is +205k, down from +210k in July. The jobless rate is expected to tick lower to 5.2%.

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

The Central Bankers’ Malodorous War On Savers

28-Aug (ZeroHedge) — Well, that didn’t take long!

After just three days of market turmoil the monetary politburo swung into action. This time they sent out B-Dud to promise still another monetary sweetener. Said the head of the New York Fed,

“From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago.”

Needless to say, “B-Dud” is a moniker implying extreme disrespect, and Bill Dudley deserves every bit of it. He is a crony capitalist fool and one of the Fed ring-leaders prosecuting a relentless, savage war on savers. Its only purpose is to keep carry trade speculators gorged with free funding in the money markets and to bloat the profits of Wall Street strip-mining operations, like that of his former employer, Goldman Sachs.

The fact is, any one who doesn’t imbibe in the Keynesian Kool-Aid dispensed by the central banking cartel can see in an instant that 80 months of ZIRP has done exactly nothing for the main street economy. Notwithtanding the Fed’s gussied-up theories about monetary “accommodation” and closing the “output gap” the litmus test is real simple.

…What these unspeakably dangerous fools argued was that cash should be abolished so that the central banks could get on with their job of stimulating “depressed” economies by setting interest at negative nominal rates.

In other words, it is apparently not enough that someone who saved $150,000 over a lifetime of work and foregone consumption should earn just $1 per day of interest on liquid savings deposits or treasury bills. No, the central bankers’ posse now wants to actually expropriate these savings by extracting a monthly levy, and by throwing anyone in jail who attempts to hide their wealth outside the controlled banking system by keeping it in private script or unconfiscated greenbacks.

[source]

Posted in Debt, Economy |

Greece’s Syriza to win election but face setback, poll shows

Former Greek Prime Minister Alexis Tsipras’ leftist Syriza will emerge as the biggest party after next month’s election but without the sizeable margin it was hoping for, the first major opinion poll since he resigned last week showed.

The survey also found that almost two thirds of voters felt Tsipras should not have sought a fresh mandate and that his favored coalition ally would not make it into parliament.

That suggested his gamble to call early elections to consolidate his power base could backfire, though over quarter of voters remained undecided, making the final outcome far from clear.

[source]

Posted in European Debt Crisis |

Fed’s Kocherlakota: 2015 rate rise not appropriate

28-Aug (CNBC) — Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said Friday he does not believe the central bank should raise interest rates this year, and policymakers may have to consider further quantitative easing.

“Barring big changes in the data between now and September … I don’t see a near-term increase in interest rates as being appropriate, and by near term I mean really through the course of 2015,” he said in an interview on CNBC’s “Squawk Box.”

If the Fed raises interest rates given the current inflation outlook, market watchers will conclude the central bank doesn’t think it can hit 2 percent inflation, he said. As a result, the Fed’s credibility in terms of people’s beliefs about its long-term inflation goals would suffer, he added.

“You’re already seeing that in market data, so this is not some economic theory. This is actually reality,” he said.

It will take a few years to get back to the Fed’s inflation target, he said.

[source]

Posted in Central Banks, Monetary Policy, QE |

University of Michigan sentiment (final) revised down to 91.9, below expectations of 93.2, vs 92.9 preliminary read and 93.1 in Jul.

Posted in Economic Data |

Gold pops 1% on latest dovish FedSpeak, negative consumer sentiment revision; now up more than $11 on the day.

Posted in Gold News, Gold Views |

Gold Prices Higher But Fed Rate Hike Prospects Cap Gains

28-Aug (Wall Street Journal) — Gold prices were slightly higher on the London spot market Friday, but the prospects of a stronger dollar and further good economic news out of the U.S. will likely keep a cap on the price of the metal in the coming weeks.

Gold missed out on the big gains across commodities on Thursday, as the positive U.S. economic data that pushed oil and metals higher dulled traders interest in safe haven assets and increased the likelihood of a September interest rate rise.

On Friday gold traded slightly higher on a day when many commodities appeared to lack firm direction.

[source]

Posted in Gold News, Gold Views |

US personal income +0.4% in Jul, in line with expectations, vs +0.4% in Jun; PCE +0.3%, below expectations of +0.4%, vs upward revised +0.3% in Jun.

Posted in Economic Data |

Gold steady at 1127.27 (+0.54). Silver 14.49 (-0.048). Dollar easier. Euro higher. Stocks called lower. US 10yr 2.16% (-3 bps)

Posted in Markets |

China Central Bank Official: We Were Wronged

27-Aug (FoxBusiness) — China’s devaluation of its yuan currency should not be made a scapegoat for the recent global stock market rout, a senior Chinese central bank official told Reuters on Thursday.

Instead, Yao Yudong, head of the bank’s Research Institute of Finance and Banking, said concerns over a possible U.S. interest rate rise this year may have fueled capital flight out of emerging markets.

He said the U.S. Federal Reserve should delay any rate hike to give fragile emerging market economies time to prepare.

“China’s exchange rate reform had nothing to do with the global stock market volatility, it was mainly due to the upcoming U.S. Federal Reserve monetary policy move,” Yao said.

“We were wronged.”

…”So we hope the Federal Reserve could further delay its interest rate rise, giving emerging markets ample time to prepare. The Fed should not only consider the U.S. economy, but should also consider the global economy which is very fragile,” he said in an exclusive interview.

[source]

Posted in Central Banks, Currency Wars, Monetary Policy |

Key trade in gold market signals China’s intentions

by Michael J. Kosares

Wall Street Journal/Ese Dheriene and Biman Mukherji/8-25-2015

“In recent years, China has come to shape the very way in which commodities are bought and sold, traditionally the preserve of financial centers such as London and New York. Late last month, the price of gold fell sharply, to a five-year low, within minutes of Asian markets opening. That came after almost five metric tons of gold—close to $200 million of the metal—was sold on the Shanghai Gold Exchange, according to ANZ Bank. The trade was seen by market participants as a key moment reflecting how China had moved Asian commodity markets away from just following the overnight pattern of U.S. and European trading.”

MK note:  The premise of this article is that China will continue to play a key role in shaping commodities’ markets in the years to come, despite the current slowdown, based on its sheer scale.   If you follow this blog, you already know of the infrastructure China is putting in place to influence the gold trade and insert itself as a third gold trading center along with London and New York. We should note that the five tonne trade cited above came after the price had dropped.  Keep in mind that Shanghai is a physical market exchange. In other words, someone in China took advantage of the price drop to force the market into a delivery of five metric tonnes of the metal.  You might recall too that there have been reports in the background of Goldman Sachs and HSBC looking to purchase significant amounts of physical metal for delivery around the time of the five tonne trade.  Are the two events related?  They very well might be.  And this might be the very first signs of China flexing its muscle in the gold market in the way we outlined in this News & Views Special Report titled, The Shanghai stock crash and China gold demand.

Quoting that Special Report:

In addition, an institution wishing to bet against gold would be forced to do so by delivering the physical metal itself in kilo bar form (the standard trading unit) upon settlement – an expensive and cumbersome process likely to further discourage excessive speculation or attempts at price manipulation. Gold Forecaster’s Julian Phillips, who has analyzed activity in the gold market for a number of years, points out that the seminal changes taking place in the gold market centering around Shanghai “will allow Chinese banks to participate in the gold market on a global basis.” It will be a market, he says, “that is not distorted by the banks, their proprietary trading, or control of the gold distribution system globally. China will hold these reins.”

Gold as a wealth building asset – East and West

In short, the physical flow of metal – its purchase and sale in real terms – will govern pricing in Shanghai, not leveraged paper trades, as is the case in the West. This emphasis on physical pricing in Shanghai, particularly when the new Shanghai Fix comes into play later this year, could signal the birth of a whole new gold market unlike anything we have experienced since the United States detached the dollar from gold in 1971.

At the moment, there is a strong, steady flow of gold through the London-Zurich-Hong Kong-Shanghai pipeline. Should the supply slow, prices in yuan terms could receive a strong jolt. Don’t forget too that the newly structured London fix now includes one Chinese bank with perhaps two others soon to be accepted as members, the situation Julian Phillips touches upon above. These banks will be on the constant lookout for arbitrage opportunities that could be purchased and shipped to their home country. Competition, as they say, is good for the soul, and in this case, it could be curative.

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We invite you to sign-up for the service. It comes free of charge and you can opt out of the service at anytime. Last, we will not deluge you with e-mails.  

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The Daily Market Report: Gold Consolidates Near Midpoint of Recent Range Amid Mixed Queues


27-Aug (USAGOLD) — Gold is consolidating near the midpoint of the recent range. The safe-haven bid has softened somewhat in the last two sessions as stocks rebound from the massive rout earlier in the week. A stronger dollar is also conspiring to limit the yellow metal’s upside somewhat.

Despite its sizable rebound, the DJIA remains below the halfway-back point of its steep plunge from the record high set back in May. Considerable doubts remain as to whether the recent drop was a mere correction in the long-term uptrend, or a rotation into a bear market.

One thing most investors seem to agree on is that higher than normal equity market volatility is likely to persist for some time to come. In fact, uncertainty about the Fed’s next move is likely contributing greatly to this situation.

The Chinese certainly seem to think so. A PBoC official said today that the yuan devaluation should not be made a scapegoat for the global market rout.

“China’s exchange rate reform had nothing to do with the global stock market volatility, it was mainly due to the upcoming U.S. Federal Reserve monetary policy move.” — Yao Yudong, Head of PBoC’s Research Institute of Finance and Banking

“We were wronged,” Yao added. But then he politely asked the Fed to take the rest of the world into consideration and defer lift-off to some future date.

“So we hope the Federal Reserve could further delay its interest rate rise, giving emerging markets ample time to prepare. The Fed should not only consider the U.S. economy, but should also consider the global economy which is very fragile.” — Yao Yudong

KC Fed hawk Esther George acknowledged in an interview that recent market volatility “complicates” any decision to raise rates. She also agreed with the PBoC, that rate hike expectations may indeed be contributing to market volatility. “I think [Fed policy] has an influence on it,” said Ms. George.

George also thinks that volatility is likely to persist, along with disinflationary pressures, for sometime to come. That last part is salient, as a rate hike would in fact probably exacerbate those disinflationary pressures. That of course is counter to the price stability mandate and the expressed goal of generating 2% inflation.

In recent writings on this page, we have suggested that the stock market rout was more a function of mounting growth risks and the disinflationary pressures now echoed by Ms. George. While U.S. Q2 GDP was revised up by more than expected, risks of a global disinflationary depression remain.

China is still widely expected to miss its 2015 growth objective of 7%. Japan contracted in Q2. Europe is tenuously clinging to very modestly positive growth numbers, but even Germany — the shining-star of Europe — posted just 0.4% growth in Q2. While today’s U.S. revision was a beat, that’s coming off +0.6% in Q1 and looking ahead to a Atlanta Fed GDPNow forecast for Q3 of 1.4%.

The message here is that proper portfolio diversification is probably more important than ever at this particular juncture. Given the recent price action in gold, laying in some insurance in the form of physical metal, is still cheap.

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

US NAR pending home sales +0.5% to 110.9 in Jul, below expectations of +1.0%, vs 110.4 in Jun.

Posted in Economic Data |

China Intervened Today to Shore Up Stocks Ahead of Military Parade

China’s government resumed its intervention in the stock market on Thursday and has been cutting holdings of U.S. Treasuries this month to support the yuan, according to people familiar with the matter.

Authorities want to stabilize equities before a Sept. 3 military parade celebrating the 70th anniversary of the World War II victory over Japan, said two of the people, who asked not to be identified because the move wasn’t publicly announced. Treasury sales allow policy makers to raise dollars needed to bolster the yuan after a shock devaluation two weeks ago, according to different people familiar with the matter.

China revived its equity purchases after the government’s absence from the market earlier this week contributed to the biggest two-day selloff since 1996. Under a new exchange-rate regime announced Aug. 11, the central bank relies on intervention to manage the yuan instead of its daily fixing. China’s surprise policy shifts have jolted markets worldwide as investors struggle to gauge their impact on the world’s second-largest economy.

“The Chinese are not being very consistent in their communication to the markets,” said Andrew Sullivan, head of sales trading at Haitong International Securities Group Ltd. in Hong Kong. Investors are “frustrated by the flip flop.”

[source]

Posted in Markets |

China Sells U.S. Treasuries to Support Yuan

27-Aug (Bloomberg) — China has cut its holdings of U.S. Treasuries this month to raise dollars needed to support the yuan in the wake of a shock devaluation two weeks ago, according to people familiar with the matter.

Channels for such transactions include China selling directly, as well as through agents in Belgium and Switzerland, said one of the people, who declined to be identified as the information isn’t public. China has communicated with U.S. authorities about the sales, said another person. They didn’t reveal the size of the disposals.

The People’s Bank of China has been offloading dollars and buying yuan to support the exchange rate, a policy that’s contributed to a $315 billion drop in its foreign-exchange reserves over the last 12 months. The $3.65 trillion stockpile will fall by some $40 billion a month in the remainder of 2015 because of the intervention, according to the median estimate in a Bloomberg survey.

China selling Treasuries is “not a surprise, but possibly something which people haven’t fully priced in,” said Owen Callan, a Dublin-based fixed-income strategist at Cantor Fitzgerald LP. “It would change the outlook on Treasuries quite a bit if you started to price in a fairly large liquidation of their reserves over the next six months or so as they manage the yuan to whatever level they have in mind.”

…“By selling Treasuries to defend the renminbi, they’re preventing Treasury yields from going lower despite the fact that we’ve seen a sharp drop in the stock market,” David Woo, head of global rates and currencies research at Bank of America Corp., said on Bloomberg Television on Wednesday. “China has a direct impact on global markets through U.S. rates.”

[source]

Posted in Central Banks, Currency Wars, Debt, Markets, Monetary Policy |

KC Fed’s George repeats call for rate hikes but says market turmoil complicates decision

27-Aug (MarketWatch) — Kansas City Fed President Esther George says the market turmoil “complicates” any decision to raise rates, but she repeated her long-held call for normalization. George, who is considered a hawk, said the market swings may have been impacted by the central bank’s moves. “I think [Fed policy] has an influence on it,” said George in an interview with CNBC. She doesn’t have a vote this year.

[source]

PG View: George also said market volatility and disinflationary pressures are likely to persist for some time.

Posted in Central Banks, Markets, Monetary Policy |

US initial jobless claims -6k to 271k for the week ended 15-Aug, below expectations of 275k, vs 277k in previous week.

Posted in Economic Data |

US Q2 GDP revised up to 3.7%, above expectations of +3.2%, vs +2.3% previously.

Posted in Economic Data |

Gold steady at 1124.00 (-0.48). Silver 14.29 (+0.058). Dollar better. Euro lower. Stocks called higher. US 10yr 2.17% (-1 bp).

Posted in Markets |

Market turmoil makes September rate hike ‘less compelling': Fed’s Dudley

26-Aug (Reuters) — An interest rate hike next month seems less appropriate given the threat posed to the U.S. economy by recent global market turmoil, an influential Federal Reserve official said on Wednesday.

In the clearest indication yet that fears of a Chinese economic slowdown could influence U.S. monetary policy, New York Fed President William Dudley said the prospect of a September rate hike “seems less compelling” than it was only weeks ago.

Dudley, a dovish policymaker and close ally of Fed Chair Janet Yellen, however left the door open to raising rates for the first time in nearly a decade when the U.S. central bank holds a policy meeting Sept. 16-17.

The global selloff, brought on by weak Chinese economic data, threatens to crimp global growth and create financial conditions unsuitable for a initial policy tightening in the United States, he said.

“At this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago,” Dudley told reporters at the New York Fed, of the policy-making Federal Open Market Committee.

…Asked about the possibility of another round of stimulative bond-buying, Dudley said the U.S. central bank is “a long way from” that. He added that the market turmoil “is not a U.S. problem” and was sparked by “developments abroad.”

[source]

PG View: Rest easy everyone, it’s not our problem.

If you’re disinclined to believe such pablum, diversify your investments with some physical gold.

Posted in Central Banks, Markets, Monetary Policy, QE |

Legendary Richard Russell warns stay out of the stock market after yesterday’s carnage, stick with precious metals

King World News/8-25-2015

“After yesterday’s carnage in global stock markets, the Godfather of newsletter writers, 91-year-old legend Richard Russell, warned people to stay out of the stock market. He also discussed the Fed, gold, silver and the possibility of hyperinflation.”

MK note:  Those who have read my writings over the years know of my respect for Richard Russell.  I have always appreciated his direct commentary and down-to-earth analysis drawn from many years experience analyzing markets.  As for the final outcome, I find it interesting that his concerns about eventual hyperinflation echo those of another long-term analyst of note, James Sinclair – even as the economies of the world flirt with disinflationary disaster.  Though I am not in concert with him on the Great Reset and the gold price forecasted, I find this interview of Sinclair with former ABC News and CNN business reporter Greg Hunter at least interesting and worth watching with respect to the causes and effects of the present situation in the financial markets.  Sinclair doesn’t quote his sources but he passes along an interesting piece of advice he received with respect to gold:  “You probably will not want to sell gold’s next rally.”  Some of you might be aware of Sinclair’s long term ties to important, old-money Wall Street families.  As I say, worth watching. . . . .

Posted in all posts |

The troubling truth revealed by the stock market’s nosedive (Part 1)

Fiscal Times/Anthony Mirhaydari/8-24-2015

“A recent working paper by the vice president of the St. Louis Federal Reserve Bank finds that after six years of quantitative easing that swelled the Fed’s balance sheet to $4.5 trillion, ‘casual evidence suggests that QE has been ineffective in increasing inflation’ and only seems to have boosted stock prices.

Complaints once in the realm of conspiracy theorists wearing tin foil hats are now being embraced by the Wall Street establishment. In a note to clients, Deutsche Bank analysts warned that ‘the fragility of this artificially manipulated financial system was exposed’ and that ‘the only thing preventing another financial crisis has been extraordinary central bank liquidity and general interventions from the global authorities.'”

MK note: For those who like to look a bit deeper, here’s the link to the St. Louis Fed paper referenced above.  The point of all this is that QE post-2008 worked to save the financial institutions (at least some of them), but it didn’t work to save the economy.  Thus, if the economy couldn’t be saved by QE previously, why would anyone believe that it could work to save the economy now.  Thus, the “troubling truth” is that the Fed might be out of ammunition, an event causing a loss of faith on Wall Street and Main Street both. In some ways, that makes this breakdown closer to a 1929-style event (with the evident strong disinflationary bias in the economy) than 2008. Troubling indeed. . . . .

Posted in all posts |

The troubling truth revealed by the stock market’s nosedive (Part 2)

Fiscal Times/Anthony Mirhaydari/8-24-2015

“Policymakers responded to the financial crisis with easy monetary policy and low interest rates. The critics — including us — argued against ‘solving a debt crisis with more debt.’ Put differently, we said that QE was necessary, but not sufficient for a recovery. We are now coming to the moment of reckoning: central bankers look naked, and markets have nothing else to believe in.”  Alberto Gallo, head of credit research, Royal Bank of Scotland

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Crudele says Washington attempting to rig the stock recovery, recommends “switching off” CNBC

How Washington will try to rig the stock market/John Crudele/ New York Post/8-24-2015

“One of these mornings — or overnight — some mysterious buyer will suddenly start purchasing an abnormal amount of Standard & Poor’s 500 stock index futures. So we get down to direct intervention — just like China did. Only Washington, with Wall Street as its co-conspirator, won’t be as sloppy as Beijing was. That’ll get the stock market moving higher and everyone will pretend that the buyers are just ordinary people who suddenly think Wall Street is oversold.”

MK note:  In this cogent piece written two days ago, the New York Post’s John Crudele accurately predicted events and provided a pretty good summary on the true forces at work.  He is not happy about the cozy relationship between Wall Street and Washington nor the coverage at our favorite stock-hyping cable channel (which he says “tens of thousands” have already abandoned).  This piece will confirm what a lot of you are already thinking. . . . .

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Gold falls on dollar, investors monitor China, Fed policy

26-Aug (Reuters) – Gold slipped one percent on Wednesday as the dollar gained and European shares recouped some of their losses, while investors closely monitored China’s efforts to support its economy.

Sentiment in the more industrial precious metals also deteriorated on worries about global growth. Silver fell nearly 3 percent to $14.26, its lowest since August 2009 and palladium, mainly used in emissions control systems for cars, trucks and other vehicles, touched a five-year low.

Spot gold was down 0.9 percent to $1,129.91 an ounce by 1212 GMT, on track for a third day of losses. The decline added to a 1.2 percent fall on Tuesday, its steepest since July 20, made as global stock markets rebounded.

[source]

Posted in Gold News, Gold Views |

Today is options expiration day for the September gold contract

Link to options expiration calendar

MK note:  For those of you new to the gold scene, the gold price has been known in the past to take a dump on options expiration dates – in fact in some circles it is an anticipated event. Those who underwrite gold “calls” benefit from every $5 decline in the metals’ price. No one knows for certain if these recurring expiry takedowns are a coincidence, chance events or engineered anomalies, though a good many over the years have speculated that the latter is the case.  In the past, gold has often, but not always, recovered quickly from the onslaught. Given what else is on the table these days, one wonders how many of the big players will take advantage of this dump to stock up on physical.

By the way, today is also options expiration day for silver.

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ECB Ready to Expand QE If Needed on Inflation Risks, Praet Says

26-Aug (Bloomberg) — The European Central Bank is ready to expand or extend its bond-buying program if needed as a slump in commodity prices and risks to global economic growth threaten its inflation goal, said Executive Board member Peter Praet.

“Recent developments in the world economy and in commodity markets have increased the downside risk of achieving the sustainable inflation path toward 2 percent,” Praet told reporters in Mannheim, Germany. “There should be no ambiguity on the willingness and ability of the Governing Council to act if needed.”

The euro weakened after the comments, which echo remarks by ECB Vice President Vitor Constancio on Tuesday and come just a week before the Governing Council will hold its next policy meeting. Inflation in the euro area was just 0.2 percent in July, and the slowdown in China’s economy, renewed slump in oil prices and stock-market turmoil could add downward pressure.

[source]

PG View: These comments tanked the euro, buoying the dollar in the process. That in turn has weighed on gold.

Posted in Central Banks, Currency Wars, Deflation, inflation, Monetary Policy, QE |