Putin unleashes fury at US ‘follies’

24-Oct (Financial Times) — Russian president Vladimir Putin on Friday accused the US of undermining the post-Cold War world order, warning that without efforts to establish a new system of global governance the world could collapse into anarchy and chaos.

In one of his most anti-US speeches in 15 years as Russia’s most powerful politician, Mr Putin insisted allegations that its annexation of Crimea showed that it was trying to rebuild the Soviet empire were “groundless”. Russia had no intention of encroaching on the sovereignty of its neighbours, he insisted.

Instead, the Russian leader blamed the US for triggering both Crimea’s breakaway from Ukraine and thousands of deaths in the war in the east of the country, by backing what Mr Putin called an armed coup against former president Viktor Yanukovich in February.

“We didn’t start this,” Mr Putin said. Citing a string of US-led military interventions from Kosovo to Libya, he insisted the US had declared itself victor when the Cold War ended and “decided to … reshape the world to suit their own needs and interests”.

[source]

PG View: Seems like tensions remain quite high. Is another cold war underway?

Posted in Geopolitical Risks |

French unemployment hits new record high

24-Oct (France24) — After a slight improvement in August, the number of jobless in France once again increased in September, reaching a new record high of 3.43 million unemployed, government figures revealed Friday.

Data from France’s labor ministry showed unemployment rose by 0.6 percent last month, after the modest 0.3 rise it experienced in August.

“Let’s be honest, we are failing,” French Labor Minister François Rebsamen told Le Parisien newspaper on Friday in an unusually candid acknowledgement of France’s massive unemployment problem.

[source]

Posted in Economy |

Putin Warns Of Risk Of Major Conflict, Says Dollar Losing Reserve Currency Status

24-Oct (ZeroHedge) — Having been relatively quiet for a while, Russia’s leader Vladimir, speaking in Sochi (following meetings with Middle East crown princes who confirmed Russia as a key partner – “isolated”?), has unleashed his most aggressive statements with regard the failing world order:

*PUTIN SAYS U.S. DOLLAR LOSING TRUST AS RESERVE CURRENCY
*PUTIN: WORLD WITHOUT RULES IS POSSIBILITY; ANARCHY GROWING

Adding that the risk of major conflicts involving major countries is growing, as well as the risk of arms control treaties being violated, Putin exclaimed that the US-led unipolar world is like a dictatorship over other countries and that “US leadership brings no good for others,” and calls for a new global consensus.

[source]

Posted in Geopolitical Risks |

The Daily Market Report: Gold Consolidates Ahead of Weekend, As Market Eyes Upcoming FOMC Meeting


24-Oct (USAGOLD) — Gold is trading in a consolidative manner heading into the weekend, as the market is already looking forward to next week’s FOMC meeting. The Fed bedins a two-day meeting on Tuesday.

The Fed is widely anticipated to retain the “considerable time” language in the policy statement. You may recall that there was much talk last month that this verbiage would be removed, right before the Fed went all dovish again.

Global growth concerns will continue to be a big concern for the market, likely resulting in further stock market volatility. A Washington Post article I posted this morning suggests that the sluggish growth experienced in the years following the Great Recession may in fact be a permanent state of affairs.

Certainly all the liquidity generated by the major central banks of the world in recent years have been largely unsuccessful in reestablishing “normal” and sustainable growth.

Bad recoveries, it seems, have a way of turning into bad economies that never get better. — Washington Post

And what is the cause of bad recoveries? I think it starts with bad policy:

Russell Napier asks a pretty important and relevant question over at the ZeroHedge blog today: ‘With inflation expectations back at 4Q 2009 levels, what evidence is there that QE works?’

Amidst the dearth of evidence that QE is an affective policy, it continues nonetheless, and is quite likely to be expanded. For monetary policymakers the “law of the instrument‘ holds true, perhaps more-so than anywhere else: “if all you have is a hammer, everything looks like a nail.”

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

Gold Rises From 1-Week Low as Investors Assess Economy

24-Oct (Bloomberg) — Gold rose from the lowest in a week as investors weighed signs the U.S. economy is improving against the outlook for a delay to raising borrowing costs.

Bullion rebounded from this year’s low set Oct. 6 after the Federal Reserve cited slowing overseas economies as a risk to U.S. expansion. Traders have pushed back estimates for when policy makers will raise U.S. interest rates. The metal slumped 28 percent last year on expectations of less American stimulus.

The four-week average of U.S. jobless claims fell to the lowest since May 2000, while the Bloomberg Consumer Comfort Index’s measure on the state of the economy rose last week, data showed yesterday. The dollar was little changed after reaching a two-week high yesterday, when global stocks rose 0.6 percent.

[source]

Posted in Gold News, Gold Views |

Twenty-five banks to fail ECB test – Bloomberg

24-Oct (Financial Times) — Twenty-five eurozone banks are set to fail the European Central Bank’s stress test, Bloomberg News has reported, citing preliminary results seen by the newswire.

Of the 130 banks being reviewed, 105 have passed, according to a draft document seen by Bloomberg. Citing a person familiar with the matter, negotiations with about 10 banks that have a capital shortfall are ongoing.

[source]

Posted in all posts |

Gold better at 1233.70 (+2.41). Silver 17.24 (+0.055). Dollar firm. Euro better. Stocks called lower. US 10yr 2.24% (-3 bps).

Posted in all posts |

The terrifying idea that the economy might stay stuck forever just got more terrifying

23-Oct (Washington Post) — The U.S. economy has fallen, and it can’t get up.

At least that’s the way it seems. That’s because our slump hasn’t really ended, even though the Great Recession officially did more than five years ago. Growth has been low, unemployment is still high, and it’d be even more so if the labor force hadn’t shrunk so much. And all this, remember, has happened despite interest rates being zero the whole time. It’s the opposite of what we would have expected: big crashes are usually followed by big comebacks. So why has this time been different?

Well, it hasn’t — not if you compare it to other recoveries from financial crises. These, as economists Carmen Reinhart and Ken Rogoff have shown, tend to be nasty, brutish, and long: it takes, on average, eight years just to make up lost ground. But even so, this doesn’t fully explain the kind of persistent economic weakness we’ve seen here and most everywhere else. Look at Japan. Its own bubble burst in the 1990s, and since then even zero interest rates haven’t been enough to save it from first one, and then two, lost decades. The same is happening to Europe today. Bad recoveries, it seems, have a way of turning into bad economies that never get better.

[source]

PG View: I would suggest that it is bad policy responses to financial crises that beget bad recoveries, which in turn beget perpetually bad economies.

Posted in Economy |

The Daily Market Report: Gold Retreats as Shares Rebound


23-Aug (USAGOLD) — Gold came under further selling pressure, weighed by renewed buoyancy in global stocks. The dollar index also hit new highs for the week, but remains confined to last week’s range.

Stocks surged, lead by Europe, where PMI data posted surprising gains. While the initial reaction was positive for shares, the uptick in business activity is largely a result of price cuts. However, the very thing that is keeping these businesses chugging-along, is also adding to the deflationary pressures that the ECB fears the most.

At some point, purchases slow as buyers delay those purchases in anticipation of lower prices tomorrow. This in turn prompts the central banks to push back ever-harder in an effort to generate the inflation they so desperately desire; by further debasing their currencies.

The upcoming Swiss gold referendum is starting to get more press, as at least some in Switzerland would like to see the debasement of the franc halted. As Egon von Greyerz pointed out in an article early in October, the SNB has expanded the monetary base from CHF100 bln to CHF500 bln since 2008 to try and keep the franc weak.

“Switzerland has printed around 400 Billion Swiss Francs in the last 6 years in order to hold its currency down against the Euro and other currencies.” — Egon von Greyerz

And here’s a fact from Mr. von Greyerz that you may not realize: “CHF 400 Billion is around 2/3 of GDP. This means that Switzerland has printed more money, relatively, than any major country in the world in the last 6 years.” The Fed would have to nearly triple its balance sheet from the present $4 trillion level to be as profligate!

The Swiss franc was long considered a sound currency, a true safe-haven, which benefited the Swiss economy (primarily banking) greatly. Some of the Swiss have apparently grown nostalgic for the ‘good-old-days’ when the wasn’t subject to constant debasement at the hands of central bankers.

If the measure passes on 30-Nov the SNB will have to repatriate its gold reserves held overseas and bring those gold holdings up to 20% of total reserves. The SNB’s gold reserves are presently less than 8% of total reserves, meaning the central bank would have to go on a buying spree to accumulate an additional 1,500 tonnes of gold over the next five-years.

According to Reuters, “a “Yes” vote – which is possible but not likely, polls suggest – would probably send gold prices rocketing.” A poll that I saw earlier this week showed proponents with a slight edge, but within the margin of error.

Not surprisingly, the Swiss government are adamantly opposed to the measure, claiming it will hinder their ability to affect monetary policy. Translated, that means it will hinder their ability to further debase the franc.

Certainly a ‘yes’ vote would render the 1.20 ceiling against the euro untenable. In fact, since most of the SNB’s current reserves are held in euros, they would likely be selling euros to buy gold.

If the ECB were devious, they would be surreptitiously funding pro-referendum efforts in Switzerland. With average voter turnout around two-million, they wouldn’t have to sway many voters to get the measure passed. Several million spent there, just might go far further toward weakening the euro than trillions in QE ever would.

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

US leading indicators +0.8% in Sep, above expectations of +0.7%, vs negative revised unch in Aug.

Posted in Economic Data |

US Markit Manufacturing PMI – Flash falls to 56.2 in Oct, below expectations of 57.0, vs 57.5 in Sep.

Posted in Economic Data |

US FHFA home price index +0.5% in Aug to 214.0, vs positive revised 213.1 in Jul; +4.8% y/y.

Posted in Economic Data |

Why India’s love affair with gold is set to deepen

23-Oct (BBCNews) —

…Analysts expect gold purchases to pick up. In the second half of 2013, demand for the precious metal fell due to high gold prices and import restrictions. But that trend has started to change over the last three months.

In September, imports surged to $3.7bn compared to just $682.5m last year.

“Demand for physical gold in India never really dies. There maybe a dip for a while but it always bounces back.

[source]

Posted in Gold News, Gold Views |

Gold Demand in India, China on the Rise


23-Oct (The Wall Street Journal) — Appetite for physical gold in India and China has returned, particularly as low prices lure buyers during India’s Diwali festival, the country’s biggest-gold buying occasion of the year.

Demand surrounding this year’s Diwali festival, which is being celebrated Thursday, rose by around a third from last year, said Rahul Gupta, managing director of Delhi-based P.P. Jewelers, a large jewelry retail chain.

“The gates seem to have come off for festival buyers in the last couple of days,” he said.

Asia accounts for about two-thirds of global gold demand—China and India are the world’s top two consumers—so stronger appetite should support gold prices, which hit their lowest level of the year earlier this month.

[source]

Posted in Gold News, Gold Views |

Gold eases as data lift European shares

23-Oct (BusinessDay) — Gold prices eased on Thursday as better than expected eurozone business activity data lifted stock markets from early lows, while the dollar index held near its highest in a week and demand for the physical metal softened.

Spot gold was down 0.1% at $1,239.50 an ounce at 9.36am GMT, while US gold futures for December delivery were down $5.60/oz at $1,239.90.

European stocks ticked higher after data showed eurozone businesses were performing much better than expected this month, albeit by slashing prices again. The dollar index held near the previous day’s one-week high, though the euro edged higher.

[source]

Posted in Gold News, Gold Views |

US initial jobless claims +17k to 283k for the week ended 18-Oct, above expectations of 280k, vs upward revised 266k in previous week.

Posted in Economic Data |

Gold lower at 1234.00 (-8.43). Silver 17.11 (-0.066). Dollar easier. Euro higher. Stocks called higher. US 10yr 2.24% (+2 bps).

Posted in all posts |

October Silver Eagle Sales Best Ever…. And With 10 Days Remaining

22-Oct (SRSrocco) — While the Fed and Western Central Banks continue to prop up the entire market, investors took advantage of the manipulated low silver price by purchasing a record amount of Silver Eagles in October. Silver Eagle sales were also extremely strong last month as total sales reached 4.1 million in September.

In the beginning of October as the price of silver was clobbered below $17, investors purchased more silver eagles in one week than in any other week throughout the year. This trend continues as sales in October are the strongest ever compared to previous years.

If we look at the chart below, we can see that investors only bought 550,000 Silver Eagles in October 2007. Then in the next few years, purchases of Silver Eagles increased dramatically to 1,425,000 in Oct 2008 and 2,939,000 in Oct 2009. However, since 2010…. October sales were relatively flat–between 3.0 to 3.1 million.

[source]

Posted in Silver News, Silver Views |

China Gold Association: 2013 Gold Demand 2199t

by Koos Jansen
22-Oct (BullionStar) — We now have official confirmation from the China Gold Association (CGA) that Chinese wholesale gold demand in 2013 reached 2,200 tonnes, in contrast to what all Western consultancy firms and news outlets have been reporting. On September 11 the China Gold Yearbook 2014 (that covers the financial year 2013) was released by the CGA on the China Gold Congress in Beijing.

As you can read below in the translation from a Chinese press release about the China Gold Yearbook 2014, the CGA states Chinese wholesale gold demand in 2013 was 2,199 tonnes; bullion import 1507 tonnes, doré import from overseas mines 17 tonnes and domestically mined gold accounted for 428 tonnes. (scrap supply must have been 247 tonnes)

[source]

Posted in Gold News, Gold Views |

Currency Wars Evolve With Goal of Avoiding Deflation

22-Oct (Bloomberg) — Currency wars are back, though this time the goal is to steal inflation, not growth.

Brazil Finance Minister Guido Mantega popularized the term “currency war” in 2010 to describe policies employed at the time by major central banks to boost the competitiveness of their economies through weaker currencies. Now, many see lower exchange rates as a way to avoid crippling deflation.

Weak price growth is stifling economies from the euro region to Israel and Japan. Eight of the 10 currencies with the biggest forecasted declines through 2015 are from nations that are either in deflation or pursuing policies that weaken their exchange rates, data compiled by Bloomberg show.

“This beggar-thy-neighbor policy is not about rebalancing, not about growth,” David Bloom, the global head of currency strategy at London-based HSBC Holdings Plc, which does business in 74 countries and territories, said in an Oct. 17 interview. “This is about deflation, exporting your deflationary problems to someone else.”

[source]

Posted in Currency Wars |

The Daily Market Report: Gold Modestly Lower As Dollar Firms


22-Oct (USAGOLD) — Gold is trading modestly lower today, but remains fairly close to the six-week highs established on Tuesday. Further upticks in the dollar may be limiting the upside today.

The dollar gains are largely attributable to euro weakness, amid reports that up to eleven eurozone banks have failed the ECB stress tests. Details of the stress tests are slated to be released this weekend, but European shares were under pressure today, weighing on the U.S. stock market as well.

Ongoing volatility in global shares, caused by escalating growth risks, has heightened demand for gold as safe-haven. China reported yesterday that growth in Q3 was the weakest seen in five-years.

Like with the other central banks, there is speculation that the PBoC may have to offer further accommodations to keep Chinese growth elevated. If the economy slows too much and unemployment rises, the risk increases for social unrest.

The Bank of Canada held rates steady today, but removed their neutral bias. While Canada is worried about asset bubbles, they are also worried that slowing growth in Asia and Europe may weigh on their natural resource driven economy as well. The last thing they need is a higher loonie to boot.

The currency wars are alive and well, with countries attempting to devalue their currencies in order to steal export market share. Or, as a Bloomberg article suggests, are they trying to steal inflation?

“This beggar-thy-neighbor policy is not about rebalancing, not about growth. This is about deflation, exporting your deflationary problems to someone else.” — David Bloom, global head of currency strategy, HSBC Holdings Plc,

The dollar set a four-year high against a basket of currencies earlier in the month, which I believe played a role in the more dovish tone at the Fed in recent weeks. They don’t want a strong currency either, so I wouldn’t be surprised to see them try to knock the greenback down even further over the near-term. That would have a buoying affect on gold.

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

The Fed is deliberately stealing from savers


By Chris Martenson
22-Oct (MarketWatch) — Recently Janet Yellen expressed both concern and puzzlement over the rising wealth inequality in America.

I found her speech to be disingenuous and disturbing. Why? Because it is the Fed’s very own policies that are driving the expansion of the wealth gap. Read Yellen’s speech.

Either Yellen thinks we cannot be trusted with the truth (worrisome), or the Fed is clueless as to how its own policies operate (scarier).
Chris Martenson

The academic name for the Fed’s current policy is financial repression. But a more apt name would be “Throw granny under the bus,” because the program boils down to taking from savers and fixed-income recipients and transferring that purchasing power to other entities.

The cornerstone element of financial repression is negative real interest rates, of which the Federal Reserve is the prime architect and owner.

[source]

Posted in all posts, Central Banks, Monetary Policy |

Is the Last Great Bubble bursting?

21-Oct (MarketWatch) — I believe that the Last Great Bubble is bursting — faith in central banks to solve all problems.

I have said this before and it is worth repeating. Twenty years ago, I’m fairly sure people said “don’t fight the Bank of Japan.” Two months ago, you could have said “don’t fight the European Central Bank.” Now, with the Federal Reserve ending quantitative easing as worldwide economic data falters, it appears the time to “fight the Fed” has come.

I have waited a long time personally for this environment, given that I have largely stood alone on the deflation-pulse thesis for the better part of a year and a half, and have been very public about failed reflation. The pushback was always that I was wrong, that markets were fine, and that equity gains proved it.

Narrative always follows price, and everyone loves buy-and-hold at the top. Markets desynched from reality, as our own ATAC Inflation Rotation Fund ATACX, -0.69% had difficulty gaining traction following the taper tantrum of May 2013. Conditions have changed, and the historical relationships we use for our risk trigger to rotate between Treasurys and equities are normalizing back to historical cause and effect. The small sample everyone seemingly looked at is now being proven to be the wrong anchor to evaluate strategies and asset-class behavior.

[source]

PG View: The recent rally in gold suggest this market may be returning to its more normal cause and effect as well. Like I said a couple weeks ago, ‘bad news is bad news’ once again.

Posted in Central Banks, Monetary Policy |

European shares fall as bank stress test worries offset ECB stimulus talk

22-Oct (Reuters) – European shares slipped and the euro hit a one-week low on Wednesday as reports that at least 11 banks could fail a region-wide financial health check this weekend offset hopes of corporate bond buying by the ECB.

Spanish news agency Efe cited several unidentified sources saying three banks in Greece, three Italian lenders, two Austrian banks, as well as one bank each from Cyprus, Belgium and Portugal will fail the stress tests. The results of the checks, designed to see how banks would cope under adverse economic scenarios, are due on Sunday.

Spanish Economy Minister Luis de Guindos said he was confident Spanish lenders would do well.

[source]

Posted in all posts |

US CPI +0.1% in Sep, in-line with expectations, vs -0.2% in Aug; +1.7% y/y. Core +0.1%, on expectations of +0.2%, vs unch in Aug; +1.7% y/y.

Posted in Economic Data |

Gold lower at 1245.36 (-3.12). Silver 17.27 (-0.229). Dollar higher. Euro lower. Stocks called mixed. US 10yr 2.21% (-1 bp).

Posted in all posts |

Will this save the Swiss financial system?

by Egon von Greyerz
21-Oct On 30 November 2014 the Swiss People has the opportunity to determine not just the fate of their own financial system but also to be the catalyst for the return to sound money in the Western World.

On November 30th the Swiss will vote on:

• Returning their national gold which is held abroad back to Switzerland
• Requiring the Swiss National Bank to hold 20% of their assets in physical gold
• Prohibiting further gold sales

Money printing SNBSo why is this referendum so important? Because Switzerland has, for hundreds of years, been a bastion of sound monetary policy and low inflation. But this has gradually changed in the last 100 years since the creation of the Fed in the US and especially during the past 15 years when the Swiss government quietly removed the 40% gold backing from the revised Federal Constitution which was adopted by popular vote in 1999.

No paper currency has ever survived throughout history in its original form. And the Swiss Franc from having been a strong currency is now in the process of being slowly destroyed by the recent policies of the Swiss National Bank (SNB).

[source]

Posted in Gold News, Gold Views |

The Daily Market Report: Gold Extends to Six-Week Highs


21-Oct (USAGOLD) — Gold extended to the upside on Tuesday, establishing new six week highs. The yellow metal remains underpinned by global growth risks and the expectations that the central banks of the world will maintain their über-accommodative policy stances in hopes of mitigating those risks.

The European Central Bank is in the forefront on that meme these days. The ECB began their new covered bond buying program yesterday. They are expected to expand to ABS purchases in the coming weeks and today their was talk of adding corporate bonds to the mix as well. This is pretty clearly quantitative easing, but the ECB remains under intense pressure to start adding sovereign bonds from periphery nations to their portfolio.

The euro came under renewed selling pressure today as the ECB continues to edge toward Fed/BoJ/BoE-style QE. Even though weakness in the single currency as buoyed the dollar, the yellow metal is holding gains.

In an effort to explain why the dollar is exhibiting strength, despite falling yields, the St. Louis Fed acknowledged that the recent drop in oil prices may prevent the FOMC from raising rates any time soon.

The decline in oil prices—though welcome to consumers of oil—will tend to temporarily reduce inflation in oil-consuming nations and may delay the long-anticipated removal of unusual monetary accommodation by their central banks. That is, central banks that are concerned about missing their inflation targets on the low side may worry about unwelcome disinflation. — Christopher Neely, Assistant Vice President and Economist, St. Louis Fed

As I’ve pointed out in recent DMRs, the Fed — and other central banks for that matter — must be absolutely flummoxed by their inability to generate inflation, despite the trillions and trillions of dollars, euros, yen, pounds, yuan etc. that have been dedicated to that effort. Admission of defeat at this point would crater what little credibility of the central banks have left, so they will most likely through trillions and trillions more at the problem. With rates at zero, printing money and buying assets is the only tool left in the box.

Eventually the central banks will get the inflation that they so desperately crave. Thinking that they can limit that inflation to around 2%, may prove to be very hubris, of the most dangerous sort.

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

QE: New York Fed purchases $1.536 billion in Treasury coupons.

Posted in Central Banks, Monetary Policy, QE |

ECB Said to Buy Italian Bonds in Second Day of Purchases

21-Oct (Bloomberg) — The European Central Bank bought Italian covered bonds as it returned to the market for a second day under its asset purchase program, according to two people familiar with the matter.

Debt issued by Intesa Sanpaolo SpA (ISP) was included in the purchases, according to one of the people, who asked not to be identified because the information is private. The ECB bought short-dated French notes from Societe Generale SA and BNP Paribas SA as well as Spanish securities from other lenders yesterday.

The ECB entered the 2.6 trillion-euro ($3.3 trillion) covered bond market after President Mario Draghi unveiled plans last month to bolster companies’ and households’ access to financing. Draghi, who also included asset-backed securities in the program, intends to expand the bank’s balance sheet by as much as 1 trillion euros to stave off deflation in the euro area.

“Covered bond purchases are a good means to apply quantitative easing in Europe and to increase the balance sheet of the ECB,” said Richard Schmidt, who helps oversee 220 billion euros of assets, including 55 billion euros of covered bonds, as a senior money manager at MEAG Munich Ergo Asset Management GmbH. “Politically, these purchases are much easier to accomplish than buying government bonds.”

[source]

Posted in Central Banks, Monetary Policy, QE |