US leading indicators +0.8% in Mar, above expectations of +0.7%, vs +0.5% in Feb.

Posted in Economic Data |

Russia steps up rhetoric on potential east Ukraine intervention

21-Apr (Financial Times) — Russia stepped up its angry rhetoric against the Ukraine government on Monday with its toughest warning yet about a possible intervention in the conflict in the east of the country.

“There are more and more calls to Russia for rescue from this lawlessness. That puts us in an extremely complicated situation,” Sergei Lavrov, foreign minister, told reporters. “Those who are deliberately trying to trigger a civil war, obviously hoping to provoke a big, serious, bloody conflict, are engaging in a criminal policy. And we will not only condemn but also stop it.”

[source]

Posted in Geopolitical Risks |

Japan posts largest-ever trade deficit

21-Apr (Financial Times) — Japan suffered its largest-ever trade deficit last fiscal year, underlining a wrenching structural shift for an economy long renowned as an export powerhouse.

The now chronic deficit has widened even during a more than year-long , limiting the impact of Shinzo Abe’s “Abenomics” stimulus policies.

Those policies have helped to weaken the yen – a once reliable way to kick-start the Japanese economy, but one whose effect today is less clear as Japan manufactures less than it once did and buys more energy and other items from abroad.

The gap between the value of Japan’s exports and that of its imports grew by more than two-thirds in the 12 months through March, to Y13.7tn ($134bn), according to government data released on Monday. It was the third consecutive fiscal year of deficits, the longest streak since comparable records began in the 1970s.

[source]

Posted in Debt |

BOJ Recovery Picture at Odds With Cabinet Data

21-Apr (Bloomberg) — Central bank Governor Haruhiko Kuroda says one sign of Japan’s recovery under Abenomics is that a gap between the nation’s actual and potential growth rates has come close to “zero.” A government gauge gives a less optimistic picture.

…“Kuroda appears to be too optimistic,” said Naoki Iizuka, an economist at Citigroup Inc. in Tokyo. “It’s extremely questionable if this output-gap data is pointing to solid inflation and wage growth,” said Iizuka, adding that the central bank is likely to add to its already unprecedented easing in June or July.

[source]

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

US Chicago Fed National Activity index fell to 0.20 in Mar, vs upward revised 0.53 in Feb.

Posted in Economic Data |

Gold falls to 2-1/2 week low in thin trade

21-Apr (Reuters) — Gold fell to a two-and-a-half-week low in choppy and thin holiday trade on Monday, hurt by sharp outflows from the world’s biggest bullion-backed exchange-traded fund (ETF) and a stronger dollar.

The metal was also hurt by a spurt of technical selling after it was unable to hold on to the $1,300-an-ounce level hit early in the trading session.

…”One aspect is that the market is pretty thin today and liquidity is going to be constrained,” said Victor Thianpiriya, an analyst at ANZ.

Australia, Hong Kong and London are closed on Monday for the Easter holiday.

[source]

Posted in Gold News, Gold Views |

Gold lower at 1286.06 (-8.02). Silver 19.39 (-0.24). Dollar better. Euro better. Stocks called higher. US 10yr 2.72% (unch).

Posted in all posts |

Press’ anti-gold scare tactics largely ineffective

Gallup poll ranks gold second best long term investment after real estate

by Michael J. Kosares

bumpyrideUnder normal circumstances, I might let a rutty headline about gold in the Financial Times pass without much notice. I say “rutty” because the Financial Times has long been stuck in a rut as one of the principle apologists for Keynesian economics — big banks, big deficits, big governments and powerful central banks. It doesn’t think much of gold enthusiasts and gold enthusiasts do not think much of it. (Although I still read it every morning.)

When I took-in the headline — Bumpy ride in store for gold with price forecast to fall 15% — with my morning coffee, my first reaction was to disregard it, as I do most of the day-to-day, routinely negative Financial Times’ reports on gold. Scanning the article (with the hope some nugget of important information might be gleaned), something tugged at the back of my mind with respect to the entities referenced — Gold Fields Mineral Services (GFMS), Goldman Sachs and Credit Suisse. All three obviously were predicting 2014 would be a bad year for gold. What was nagging was their near-term record in the art of gold forecasting.

So I went to the trouble of backtracking some of their most recent predictions on the gold market:

* GFMS, for example, predicted last April that gold would once again visit the $1800 per ounce level before year end. At the time, the metal was trading in the $1600 per ounce range. It promptly revisited the $1200 level instead.

* Goldman Sachs, at the end of 2013, predicted gold would fall to $1050 an ounce in what it called the “slam dunk sell for 2014.” Gold at the time was trading in the $1200 per ounce range. Gold promptly jumped to nearly $1400 per ounce in the first quarter of 2014 and is trading in the $1300 range as this is written — roughly 25% higher than Goldman’s prediction.

* Similarly, Credit Suisse predicted in May of last year that gold would get “crushed” and drop to $1100 per ounce by the end of 2013. Gold did hit $1200 per ounce shortly thereafter, but turned around to trade back at the $1300 level by year end. In that same forecast, the bank’s Ric Deverall observed: “When gold is going up, it looks like a great idea to buy more gold. And when it’s going down, do you really think risk-averse central bankers are going to try and catch the knife? No.” The jury is still out on whether or not China’s secretive central bank endeavored to catch the falling knife in 2013, but central banks in general did purchase 368 tonnes — down from 2012′s record year (545 tonnes). Contrary to Deverall’s assertion, central banks do buy gold when the price is falling.

The first lesson to file for future reference is that major banks with huge balance sheets and big-name consultants do not necessarily have a better crystal ball on the gold price than anyone else. The second is that, when it comes to gold reporting, one should not accept as gospel everything one sees or reads in the mainstream media. Its traditional anti-gold bias bleeds from its pages, so to speak, and should be taken with a grain of salt.

The mainstream media, for whatever reason, continues to believe that it can scare potential gold owners away with its consistently negative coverage, but as a recent Gallup Poll suggests, such tactics no longer work all that well. That poll ranks gold the second best option among long-term investments behind real estate and tied with stocks.

What makes gold’s poll performance interesting is that it reflects public opinion on gold after a more than two year decline that began in 2011 and at a time when real estate and stocks have enjoyed strong performances. In 2011, after ten straight years of annual gains, the public ranked gold the number one investment. Prior to 2011 gold was not included in the Gallup survey.

Polls notoriously reflect the ebb and flow of public opinion and for gold to still rank second after a two year drought indicates a swing in the public’s long-term attitude toward gold. The very fact that Gallup chooses to include gold in its annual survey speaks to a gain in stature since the secular bull market began in 2003.

Of the sample, 24% named gold the top investment and 24% chose stocks. Real Estate topped this year’s poll at 30% and bonds, perennially the least popular long-term investment, again finished last at 6%. When broken down across the political spectrum, gold was named the top investment by 26% of Republicans, 25% of Independents and 10% of Democrats. By contrast, stocks were named first by 26% of Republicans, 19% of Independents and 30% of Democrats.

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If you are looking for a gold-based analysis of the financial markets and economy, we invite you to subscribe to our FREE newsletterUSAGOLD’s Review & Outlook, edited by Michael J. Kosares, the author of the preceding post, the founder of USAGOLD and the author of “The ABCs of Gold Investing: How To Protect And Build Your Wealth With Gold.” You can opt out any time and we won’t deluge you with junk e-mails.  An all-new issue you won’t want to miss will be released shortly.

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The Daily Market Report: Gold Eases Within Range on 4-Party Talks to Deescalate Ukraine Crisis


17-Apr (USAGOLD) — Gold is a little easier below $1300 today following reports of a possible deescalation of tensions between Ukraine and Russia. The four-party talks in Geneva reportedly garnered an agreement that all sides of the conflict would work toward deescalation and refrain from violence.

According to a CNN article, the agreement “calls for all illegal armed groups to be disarmed, all illegally seized buildings to be returned to legitimate owners, and for all occupied public spaces to be vacated.”

Such an agreement is certainly a step in the right direction, but U.S. Secretary of State John Kerry was quick to caution that the agreement was just words at this point. He then immediately threatened Russia with “further costs,” if they don’t take the steps laid out in the agreement.

Perhaps most significantly, there is apparently no call for Russia to pull its troops back from the Ukrainian border. Additionally, Russian President Putin admitted in a radio interview today that Russian troops did indeed secretly invade Crimea to assist pro-Russian forces with the overthrow of the province. It seems tensions will remain high as long as Russian troops remain on the border.

With a long holiday weekend approaching, the yellow metal is likely to remain range bound. U.S., Canadian, UK, most European and the Japanese markets are all closed tomorrow in observance of Good Friday. The UK and some European markets are also closed on Easter Monday.

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

US Philly Fed index rose to 16.6 in Apr, well above expectations of 10.0, vs 9.0 in Mar.

Posted in Economic Data |

Gold Trades Near $1,300 as U.S. Economy, Ukraine Weighed

17-Apr (Bloomberg) — Gold, set for a weekly drop, traded near $1,300 an ounce as investors weighed signs of U.S. economic recovery against tensions in Ukraine.

Prices have rebounded 8.3 percent this year amid haven demand linked to the unrest in Ukraine. Diplomats from the Eastern European country, Russia, the U.S. and the European Union met for talks on the crisis in Geneva today. Jobless claims increased less than forecast in the U.S. last week, a Labor Department report showed today, after industrial production beat economists’ estimates yesterday. Assets in the largest gold-backed exchange-traded product dropped the most this year.

“Markets are on one hand expecting the U.S. economy to do better and are looking for higher Treasury yields down the road which are a negative” for gold, Bart Melek, an analyst at TD Securities in Toronto, said by e-mail. “On the other hand, nobody wants to go into the weekend short with the Ukraine issue still very active.”

[source]

Posted in Gold News, Gold Views |

US initial jobless claims +2k to 304k in week ended 12-Apr, below expectations of 315k, vs upward revised 302k in previous week.

Posted in Economic Data |

Gold steady at 1301.87 (-1.70). Silver 19.64 (-0.001). Dollar lower. Euro higher. Stocks called mixed. US 10yr 2.65% (+2 bps).

Posted in all posts |

Out of Ammo? The Eroding Power of Central Banks

16-Apr (Der Spiegel) — Since the financial crisis, central banks have slashed interest rates, purchased vast quantities of sovereign bonds and bailed out banks. Now, though, their influence appears to be on the wane with measures producing paltry results. Do they still have control?

…But ever since many central banks lowered their interest rates to almost zero, bought up sovereign debt and rescued banks, a new, critical undertone has crept into the dinner conversations. Monetary experts from emerging economies complain that the measures taken by Europeans and Americans are pushing unwanted speculative money their way. Western central bankers say they have come under growing political pressure. And recently, when the host of the meetings — head of the Basel-based Bank for International Settlements Jaime Caruana — speaks in one of his rare public appearances, he talks about “chronic post-crisis weakness” and “risk.” Monetary institutions, says Caruana, are at “serious risk of exhausting the policy room for manoeuver over time.”

…Growth is limping along in the world’s major economies; banks, households and governments are deeply in debt; and the bankers’ so-called unconventional monetary policy is running up against its limits everywhere.

[source]

PG View: That’s a pretty startling comment from the head of the BIS, considered to be the central bank for central banks.

Posted in Central Banks, Monetary Policy |

SGE Withdrawals Equal Chinese Gold Demand, Part 3

15-Apr (InGoldWeTrust) — On April 4, 2014 Alasdair Macleod published an extensive analysis on the Chinese gold market. I felt obligated to respond to it by sharing my point of view and explain where I disagree with his analysis. I think his estimates are largely overstated because he double counts certain demand categories. He states Chinese gold demand in 2013 was 4843 metric tonnes, according to me it was 2197 metric tonnes (my estimate excludes some hidden demand and PBOC purchases on which I have no hard numbers). Setting out our differences was incidentally a good occasion for me to write another in-depth analysis on the Chinese gold market.

I highly respect Macleod, who was probably working in finance when I was in diapers, and I’m very grateful he has been using my findings about SGE withdrawals and the structure of the Chinese gold market. I see very little commentators stepping into this realm, though it’s truly the most important economic event happening in our time.

…it’s safe to say there is now more than 14000 metric tonnes of gold in China mainland. Divided by 1.3 billion people that’s 10.7 grams of gold per capita.

[source]

PG View: Mr. Jansen’s post is a nice addendum to today’s DMR: Chinese demand for gold is alive and well.

Posted in Gold News, Gold Views |

The Daily Market Report: Gold Stabilizes Around $1300


16-Apr (USAGOLD) — Gold has stabilized around the $1300 level following Tuesday’s retreat. Intensified rhetoric between the Ukrainian government and pro-Russian protesters in eastern-Ukraine are keeping geopolitical tensions elevated, which should limit downside potential in gold.

Yesterday’s sell-off in gold was attributed to a World Gold Council (WGC) report entitled China’s gold market: progress and prospects that suggested the Middle Kingdom may have up to 1,000 tonnes of gold tied to financial deals. I made the point in yesterday’s DMR, that this WGC report was in actuality very bullish for the yellow metal.

Tim Iacono, of Iacono Research, had a similar reaction. He notes in a SeekingAlpha post that a Reuters report on the WGC paper “misrepresented gold being used for financing deals in China’s shadow banking system…” Iacono makes the case that, “Traders were quick to sell, but sentiment may change after looking more closely at these reports.”

I agree, but one doesn’t really need to look more closely at all. Everything you need to know about Chinese gold demand can be found in the report’s ‘key facts’, which I reproduced in yesterday’s comment.

And while it may indeed be difficult for Chinese gold demand in 2014 to match the record demand seen last year, the overall trend will remain unquestionably positive.

Iacono says:

“The Shanghai Gold Exchange delivered over 2,000 tonnes of gold last year, yet both the WGC and the China Gold Association put the nation’s gold demand at a little over half that amount.

Other gold market analysts put 2013 China gold demand at well over 2,000 tonnes, meaning that even if the 1,000 tonnes of gold for financing deals over the last few years is accurate, it would have been just a fraction of total gold demand.”

My primary take-away from the WGC report was that they expect Chinese gold demand to increase nearly 20%, from 1132 tonnes in 2013 to 1350 tonnes in 2017. That should continue to provide support to the market, but even if some of those collateralized financial deals are unwound, I think the PBoC is a ready and willing buyer.

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

QE: New York Fed purchases $1.018 billion in Treasury coupons.

Posted in Central Banks, Monetary Policy, QE |

Bank of Canada held overnight rate steady at 1%, in line with expectations. Ongoing concerns about “downside risks to inflation.”

Posted in Central Banks, Monetary Policy |

US industrial production +0.7% in Mar, above expectations of +0.5%, vs upward revised 1.2% in Feb; cap use rises to 79.2%.

Posted in Economic Data |

Gold steadies above $1,300, supported by Ukraine crisis


16-Apr (Reuters) — Gold prices steadied on Wednesday after falling nearly 2 percent in the previous session, underpinned by escalating tensions in Ukraine but still under pressure from a weak chart picture and concerns over a slowdown in Chinese demand.

Ukrainian government forces and separatist pro-Russian militia staged rival shows of force in eastern Ukraine amid escalating rhetoric on the eve of crucial four-power talks in Geneva on the former Soviet country’s future.

That helped gold steady after the metal broke through a 200-day moving average at $1,300 an ounce on Tuesday, unleashing stop-loss selling that took spot prices to a low of $1,290.34.

[source]

Posted in Gold News, Gold Views |

US housing starts rebound 2.8% to 946k in Mar, below expectations of 970k, vs positive revised 920k in Feb.

Posted in Economic Data |

Gold steady at 1301.96 (-0.77). Silver 19.62 (+0.088). Dollar easier. Euro higher. Stocks called higher. US 10yr 2.65% (+3 bps).

Posted in all posts |

Here’s proof the housing bubble is about to burst

15-Apr (HousingWire) — Many housing industry experts and economists (especially “celebrity economists”) have been touting their belief that the housing recovery has been very real over the past year to 18 months, and see things only getting better.

We, on the other hand, have seemingly been a rare contrarian.

For many months we have privately and publicly stated that the current housing “recovery” is an illusion – a false recovery built upon a sandy foundation above a slippery slope.

But the truth is, things are even worse.

[source]

Posted in all posts |

The Daily Market Report: Gold Weighed by Demand Concerns, Firmer Dollar


15-Apr (USAGOLD) — Gold dropped sharply on Tuesday, trading briefly back below the $1300 level on worries that Chinese physical demand might be waning. The rebound in the dollar this week was also cited as a factor weighing on gold, although the rise in the greenback has been very limited this far.

A World Gold Council report on China’s gold market came out today. Here are the “key facts” from China’s gold market: progress and prospects:

• China’s continuing urbanisation means that it now has 170 cities with more than one million inhabitants – within these cities, the middle classes currently number 300million and are set to grow to 500million by 2020. Demand for gold amongst those with a greater disposable income and limited investment opportunities will continue to grow.

• Chinese savings levels remain high – there is an estimated US$7.5 trillion in Chinese bank accounts and household allocations to gold remain small, around $300bn. Gold is seen as a stable, accessible investment by consumers, particularly in the light of rising house prices and a lack of alternative savings options. Chinese investors have a preference for physical gold over paper, with investment focused on small bars, gift bars or Gold Accumulation Plans (GAPs). New gold investment products mean that medium term demand for bars and coins could reach close to 500t by 2017 – a rise of nearly 25% above its record level last year.

• China has become the world’s number one jewellery market, nearly trebling in size over the past decade – at 669t in 2013, it accounts for 30% of global jewellery demand. Estimates suggest that demand will continue to grow and reach 780t by 2017. There are now over 100,000 retail outlets selling 24k gold and thousands of manufacturers nationwide.

Consumer sentiment toward gold is unwavering – although 40% of jewellery consumption relates to weddings, the appetite for gold in China goes beyond occasions and gift giving. 80% of consumers surveyed for this report planned to maintain or increase their spending on 24-carat gold jewellery over the next 12 months believing that gold will hold its long-term value and because they expect to have a higher level of disposable income.

• Chinese electronics demand for gold will see small gains in the next four years – industrial demand has grown with electronics being the key driver (climbing from 16t in 2003 to 66t in 2013. China is also the leading market for gold related patents such as the use of nanogold in healthcare.

• Official gold holdings in China totalled 1,054t at the end of 2013making the country the world’s sixth largest holder of bullion- based on this declared stock, gold represents 1% of China’s total official reserves (down from a peak of almost 2% in 2012) due to the rapid growth of the country’s foreign exchange holdings which reached around US$3.8 trillion at the end of 2013. Speculation continues as to whether the Chinese government has increased its gold holdings.

• China has gone from being a minor producer to the world’s largest source of mined gold – in the past ten years production has doubled from 217t to 437t.

Pretty darn bullish, right? However, the market was worried by the WGC’s opinion that Chinese demand in 2014 might fall short of the “exceptional” demand seen in 2013. The WGC expects 2014 to be “a year of consolidation”.

While speculators might view a protracted period of consolidation as a reason to look for yield elsewhere, most buyers of physical gold are not speculators. They buy gold for the purpose of long-term wealth preservation. In that frame of reference, steady or even lower prices are a gift, allowing one to accumulate gold weight without chasing ever-rising prices.

An additionally point of concern was the revelation that Chinese companies may have accumulated 1,000 tonnes of gold for use as collateral in financing “business investment and speculation.” You may recall that copper sold off sharply several weeks ago when it became apparent that the industrial metal was being used as collateral: The concern being that if the Chinese economy slowed, these deals might have to be unwound.

Even if some of this collateralized gold were to be sold, I suspect the corporations might find a willing and able buyer in their own government. In fact, China saw their forex reserves jump by 3.4% to $3.95 trillion in Q1 and their quest for reserve diversification in the form of gold is a pretty well established trend at this point.

Bottom line: The WGC expects nearly 20% growth in Chinese gold demand from 1132 tonnes in 2013 to 1350 tonnes in 2017. All-in-all, a pretty favorable outlook.

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

QE: New York Fed purchases $2.204 billion in Treasury coupons.

Posted in Central Banks, Monetary Policy, QE |

China companies hoard gold for collateral

15-Apr (Financial Times) — Chinese companies may have accumulated up to 1,000 tonnes of gold for use as collateral in financing deals rather than to meet consumer demand in recent years, a new study says.

The report by the World Gold Council said imported bullion was being used “to raise low-cost funds for business investment and speculation”, and was part of the wider growth in shadow banking in China.

Other metals, including copper, have been used extensively as collateral by Chinese traders affected by tight credit conditions, raising concerns of a sudden fall in prices should the financing deals unwind.

…However, the traditional appeal of gold to Chinese consumers and their optimistic outlook for prices should result in private sector demand from all sources climbing to at least 1,350 tonnes by 2017.

[source]

Posted in Gold News, Gold Views |

US CPI +0.2% in Mar, above expectations of +0.1%, vs +0.1% in Feb; +1.5% y/y. Core +0.2%, on expectations of +0.1%; +1.7% y/y.

Posted in Economic Data |

US NY Fed Empire State index tumbled to 1.3 in Apr, well below expectations of 8.0, vs 5.6 in Mar.

Posted in Economic Data |

Gold Tumbles Most In 4 Months On China Demand Slowdown Fears

15-Apr (ZeroHedge) — Gold prices are down almost 2% this morning (over $25) as last night’s slowdown in Chinese money-supply growth and fears that China’s insatiable gold demand has become less insatiable send the barbarous relic back towards $1300. Slowing GDP expectations, increasing restrictions on shadow-banking commodity-backed financing, and a need for liquidity are all factors weighing on the precious metal this morning.

[source]

PG View: Worth noting, however, that China’s foreign exchange reserves rose by 3.4% in Q1 to $3.95 trillion from $3.82 trillion in Q4-13. This is likely to keep China’s ‘official’ reserve diversification gold buying campaign on track. Additionally, a World Gold Council report released today called Chinese consumer sentiment toward gold “unwavering”.

Posted in Gold News, Gold Views |

Gold lower 1293.74 (-31.88). Silver 19.34 (-0.605). Dollar better. Euro lower. Stocks called higher. US 10yr 2.65% (+1 bp).

Posted in all posts |