Greece3

Mohammed A. El-Erian/Bloomberg

“By heeding their government’s advice and voting ‘No’ in the referendum on Sunday, Greek citizens sent an unambiguous message. Much like the fictional Americans portrayed in the movie “Network” who threw open their windows and shouted out, ‘I’m as mad as hell and I’m not going to take this anymore,’ the Greeks are demanding that the rest of Europe acknowledge their distress.

At this stage, however, only a handful of European leaders seem willing to listen; and even fewer appear willing to deliver the sort of relief that Greece desperately needs. The implications will be felt primarily in Greece, but also in Europe and beyond.”

 

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Greece2

EARLY REACTION

“JPMorgan Chase & Co. economists said a Greek departure from European monetary union is now probable after the country’s electorate rejected the austerity needed to secure international assistance.” Barclay’s agrees. (Bloomberg)

Euro down 1.3¢ vs $ / 3:17 MDT (Link USAGOLD Live page)

Deputy finance minister says Greece wants to keep euro (Reuters)

MK note:  Beginning to come into focus how Greece is going to play this.  The ball is in the EU’s court from Greek government’s perspective. Emergency EU summit scheduled for Tuesday.  Merkel, Hollande, Tusk attending.  Draghi, ECB to step aside for now, let politicians take lead.

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Greece 1

Greeks reject demands for more austerity/ Associated Press / 7-5-2015

MK Note: With 70% of the vote counted, 60%+ had voted “No”.  The Interior Ministry projects that the margin would hold, according to the AP report linked above. Varoufakis immediately projected the vote onto the whole of the EU.  “‘No’ is a big `yes’ to democratic Europe,” he said, “It’s a no to the vision of Europe an infinite cage for its people. It is a loud yes to the vision of the Eurozone as a common area of prosperity and social justice.”  The gamesman’s strategy is revealed. The psychological war begins. Finance ministries, treasuries and central banks the world over will be pulling all-nighters.  The markets will begin voting shortly.

TsiprasTw

tsipras2

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Shanghai stock crash shot of adrenaline for Chinese gold demand

shanghaistocks

Shanghai stocks have fallen nearly 30% since mid-June. The equivalent in U.S. terms would be for the DJIA to fall 6000 points to the 11,000 level – a crash by any definition. Most of the commentary on this important subject has centered around the potential contagion effect for stock markets in the rest of Asia and beyond. There is another aspect to the crash worth considering though, and that has to do with the effect it will have on Chinese gold demand. The Chinese people, it is well known, already have a cultural affinity to gold. That attachment just received a shot of adrenaline.

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News & Views Reprint Series – Important in-depth study now available

Open Access / Full Version

In Gold We Trust 2015

by Ronald-Peter Stoferle and Mark J. Valek, Incrementum AG, Lichtenstein

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Editor’s note:
Annually Incrementum, the Lichtenstein investment house, publishes the most comprehensive gold study available. In Gold We Trust 2015 comprises 140-pages of top-drawer analysis for those wondering whether or not gold should continue (or begin) to play a significant role in their financial plans. That study is published in the clear at the link to the left. We highly recommend at least paging through this important work, if not fully digesting it.

The following is an important excerpt from the study’s conclusions:

“We are strongly convinced that we are now close to a fork in the road. Over the coming three years, a paradigm change is likely to become evident in the markets, quite possibly including rising inflationary trends. We believe the following scenarios to have the highest probability:

Scenario I: The current economic cycle nears its end and the fairy tale of a self-sustaining recovery is increasingly questioned by market participants. This leads to a significant devaluation of the US dollar relative to commodities, since the Fed – as it has stressed time and again – will once again employ quantitative easing or similar interventions if occasion demands it. In this case gold would benefit significantly from wide-ranging repricing in financial markets. A stagflation-type environment would become a realistic alternative in this scenario, something that is currently on almost no-one’s radar screen.

Scenario II: Rising yields lead to an increase in credit creation and an increase in money velocity (= decline in the demand for money). Economic activity picks up, is however accompanied by accelerating price inflation. In this scenario, both financial assets (with the exception of bonds) and real assets (such as gold) would benefit in nominal terms.

Scenario III: The system hasn’t become any healthier since 2008, but has in fact become more fragile in many respects. Due to further concentration in the banking sector, the balance sheets of the largest banks have grown enormously. The volume of outstanding derivatives has continued to grow, with many off-balance sheet positions. In addition, the geopolitical situation hasn’t been this tense since the end of the cold war. The probability of a “black swan” event striking is therefore in our opinion higher than it has been in a long time. In this type of scenario, gold would likely emerge as a beneficiary as well.

Conclusion: All in all we are convinced that gold remains in a secular bull market, which is likely close to a renaissance. Should this assessment be correct, we would expect to see a trend acceleration in the coming phase. As discussed above, a variety of scenarios is possible which would mostly have positive effects on the gold price. We believe that this is a good time to provide a concrete time horizon for our long ago formulated price target. In light of the perspective discussed above, we have decided to set a time horizon of three years for our long term gold price target of USD 2,300.

Emphasis added. Reprinted with permission

• • • Also added to USAGOLD’s Gilded Opinion Library – a repository of timeless classics on matters of importance to gold owners.

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The creative destruction of the Fourth Turning – the latest from Neil Howe (The Fourth Turning)

From Erico Taveres’ just published interview of Neil Howe  (Sinclair & Co, 7-2-2015)

“Well, look at it this way! If the S&P500 were to come down by 50% – and, my God, if we have a reversion to the mean in corporate earnings as well as a decline in some of these lofty PE valuations this might actually happen – look at the bright side. The Millennial generation can finally buy into America’s future at a good price. Look at what they are facing right now: very little return on their savings and very lofty prices that they have to pay to invest in their future.

So we often forget that these wrenching dislocating financial events, particularly for older generations, can create opportunities for the young, and often create space for something more durable for the times to be built.

I think we are going to see a lot of creative destruction both politically and socially. In fact we are seeing it this week with Grexit becoming widely recognized as more probable than not. I think this will lead to an unravelling of Southern Europe from the Euro and I think that the heightened tensions – from the Middle East to Putin’s Russia to the Far East – and again the fact that nobody is in charge, not even pretends to be in charge, will create problems.

For those of us remembering earlier times, this is disquieting, disorienting… I think better things will grow out of it, in fact they have to. Right now the youth of the world in the midst of these tensions are not happy. Their needs are not being met from the systems that are in place.”

So I’ll just summarize it with Schumpeter’s phrase: creating destruction. That’s how I prefer to see what happens in a Fourth Turning.

MK note: Neil Howe is the author with William Strauss of “The Fourth Turning” (1997).  Those of you who have followed my writings over the years know that I consider that book one of the most important  published over the past two decades. “The next Fourth Turning,” predicted Strauss and Howe, “is due to begin shortly after the new millennium, midway through the Oh-Oh decade. Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation, and empire.” That prediction, eleven years before the event, turned out to be on the money. Howe now proclaims that the Fourth Turning indeed began with the financial meltdown in 2008 and is not likely to end until 2028.

FROM AN INTERVIEW WITH CHRIS MARTENSON (6/23/2013) –

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

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

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

________

Neil Howe’s website: Saeculum Research

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Why do we celebrate the Fourth of July?

Something to help you start your holiday weekend on the right foot . . . . . . . . . . .

Video link

The interviewer says it best:  “We are in trouble.”

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First signs: Public back in gold market

According to a new report from the U.S. Mint, the American public is back in the gold market after a slow May.  Sales of the U.S. gold Eagle in June were up 3.5 times over May and the best since January, traditionally a big month for gold. Gold Eagle sales went from 21,500 troy ounces in May to 76,000 troy ounces in June.  Silver Eagle sales were up 2.4 times over May from 2,023,500 troy ounces to 4,840,000 troy ounces.

At USAGOLD we experienced a strong surge of interest in June as well, particularly toward the end of the month.  Lower prices in June drove buying as well mounting concerns about Europe and what many believe to be an overvalued stock market.

The charts below not only show the surge in gold and silver Eagle buying since the 2007-2008 financial crisis, they show growth and permanence over the period with sales consistently registering at higher levels than before the crisis.  The silver Eagle chart, in addition, demonstrates growing interest in silver as a safe-haven asset.

Additional note:  If you like to monitor gold and silver bullion coin sales as a bellwether for public interest in the precious metals (and many people do), you will appreciate these pages built and maintained by Jen Hyde, our all-around website administrator.  Under each annual bar chart, you will find commensurate monthly charts for the same item.

Silver bullion coins

Gold bullion coins

Also, those pages are part of our Charts & Stats pages – a popular section of USAGOLD that we refer to as “a website within a website.”

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Polls show Greek vote a toss-up

GPO poll has it

47% leaning yes

43% leaning no

Basically within the margin of error making the referendum a toss-up.

Gold trading is erratic this morning partially on polling information on the Greek referendum, but also on the interpretation of today’s jobs report.  Finance Minister Varoufakis says he will resign if Greece votes “yes”.  European Union officials are generally taking a hard line.  Prior to the jobs report release this morning, gold was tracking lower anticipating a stronger outlook on the employment scene. After the release, which Bloomberg headlined as a “disappointment”, gold rebounded.  The metal got as low as $1158 and is trading at $1167 as this is written.  It will be interesting to see what happens in the markets today as we move into the long holiday weekend. Greece votes Sunday.

Happy Fourth everyone.

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Nobel laureate Robert Shiller’s latest

CNBC video link

Says things the CNBC crew does not want to hear.

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Leon Black’s sell everything call has been heard by his rivals

Bloomberg/Leslie Picker and Ruth David/Bloomberg, 6/30/2015

MK note: Private equity firms are selling out of stocks “at a record clip,” according to this Bloomberg article. Leading the charge are hedge funds like Leon Black’s Apollo Global Management which started its liquidation program two years ago (!).  What’s more these funds are using highly-publicized corporate buybacks as a means to that liquidation.  “Private equity is selling everything that’s not bolted down. With the robust valuations in today’s market, they are accelerating monetizations of companies they own,” says Frank Maturo, Vice chairman of equity markets at UBS AG.  Another analyst, Lise Buyer (Class V Group) says, “It’s clear that we are currently in an environment of frothy valuations. The insiders — those with the most knowledge — are finding this a very good time to take some money off the table.”  Simultaneously, gold is traversing lows and looking like a good place to park some of those stock market gains.

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Gold ownership as a lifestyle decision

‘It shone with the placid certainty of received tradition’

by Michael J. Kosares

“It is related of the illustrious Sandy McHoots that when, on the occasion of winning the British Open Championship, he was interviewed by reporters from the leading daily papers as to his views on Tariff Reform, Bimetallism, the Trial by Jury System, and the Modern Crave for Dancing, all they could extract from him was the word ‘Mphm!” Having uttered which he shouldered his bag and went home to tea. A great man. I wish there were more like him.” – P.G. Wodehouse

McHootsRegulars to this newsletter will recognize the quote from Mr. Wodehouse gracing this issue’s masthead. It’s been there before — almost always at summer’s start — and almost always with a reflection that perhaps we can learn something from Mr. McHoots. After all how much of what any one of us has to say about the current state of affairs matters much in the scheme of things? Even the Open champion has limited sway on the course of world events. So McHoots had solid justification for turning up his nose at the prospect of answering the media’s inquiries.

Then there’s the issue of summertime and whether or not the world can be put on hold while thoughts turn to the configuration of one’s golf swing, landing the fly in precisely the right location on the stream, or simply counting waves at the seaside. To a large degree we side with the McHoots school on the issue of summertime, but we also know that summertime can produce its unpleasant market surprises – dark thunderstorms that travel across the investment landscape wreaking havoc far and wide.

Bank of America Merrill Lynch was thinking just that when it warned its clients of a “grim summer” ahead and that they should consider moving money out of stocks and bonds and into gold and cash. A good many others have issued similar warnings. “Open your computer or smartphone these days,” says MarketWatch’s Mitch Tuchman, “and the stock market warnings fly by in giant type — ‘Summer Crash Imminent’ and ‘Sharp Correction Ahead'” blink at the top of nearly every investing website.

Though the temptation might be great to retreat unphased into the comforts of summertime, this might not be the year to do it. Of course, the best course of action is to diversify one’s holdings in such a way that summer’s pursuits need not suffer fully the consequences of that late afternoon window rattler. Stock market practitioners generally agree with that apporach, but almost universally fail to mention the one item that truly gets the job done for its owners – a tidy cache of gold and silver coins.

A telephone call from an old client and friend

Along these lines, I had the happy occasion recently of receiving a telephone call from an old client and friend – a physician safely retired near the sea and alongside one of the South’s oldest golf clubs. It was good to hear from this student of the markets – one of life’s steady and thoughtful practitioners. McHoots probably would have counted Doc, as I will call him, a friend, since he thinks much like the character so skillfully described by Mr. Wodehouse. Back at the turn of the century, Doc foresaw much of what would happen economically in the United States and purchased what he considered enough gold to see him through it.

Vanity Fair’s Matthew Hart offers this masterfully written overview of those early years of the 21st century:

“An ounce of gold cost $271 in 2001. Ten years later it reached $1,896 – an increase of almost 700 percent. On the way, it passed through some of the stormiest periods of recent history, when banks collapsed and currencies shivered. The gold price fed on these calamities. In a way, it came to stand for them: it was the re-discovered idol at a time when other gods were falling in a heap of subprime mortgages and credit default swaps and derivative products too complicated to even understand. Against these, gold shone with the placid certainty of received tradition. Honored through the ages, the standard of wealth, the original money, the safe haven. The value of gold was axiomatic. This view depends on a concept of gold as unchanging and unchanged—nature’s hard asset.”

lemmingsIt was in that time frame, when gold was stuck in the $300 to $400 per ounce price range (a time not unlike our own) that Doc transferred roughly $500,000 of his net worth into gold coins. His goal, like most of our clientele, was not to become wealthy through gold ownership, but to protect the hard-earned wealth he had already attained. After we had exchanged the usual pleasantries, the conversation turned once again to the subject of gold and the reason for his call.

“I still have all the gold I purchased from you,” he said simply. “Every ounce of it. It’s now worth well-over $2,000,000. I want to thank you again for your book and your advice. It made a great difference to me as you may have gathered.”

(Ed note: At the interim top – the $1896 Matthew Hart mentions above – Doc’s holdings reached a value well over $3,000,000!)

“That,” I said, “is the kind of story we enjoy hearing around here, Doc. I’m happy for you. Happy gold could help you like it did.”

“We had some very interesting conversations back in the day,” he said with a chuckle, “and gold did for me what we thought it would, what you said it would.”

I mentioned to him that the book to which he referred, “The ABCs of Gold Investing – How to Protect and Build Your Wealth with Gold,” was now in its third edition and still introducing people to the advantages of owning the metal and advising readers how to go about it. The conversation then drifted to other of life’s pursuits for both of us and ultimately to the purpose of his telephone call – a fresh gold transaction. We completed our business and I left the conversation with a strong sense of satisfaction. We get a steady stream of phone calls like Doc’s, but it is always good to hear real-life tales about gold’s role in preserving our clients’ assets.

The fact of the matter, though rarely discussed, is that gold ownership has as much to do with personal philosophy as it does finance and economics — though by that I do not mean to diminish the importance of financial markets, or politics for that matter, in our everyday lives. Things, though, do need to be kept in perspective and gold helps toward that goal — once one understands its true nature. In many ways, gold ownership, as Doc would likely attest, is a rational portfolio decision that suits the times, but it is also a life-style decision. As Richard Russell, the venerable purveyor of  Dow Theory Letters puts it, “I still sleep better at night knowing that I hold some gold. If or when everything else falls apart, gold will still be unquestioned wealth.” And one that helps you spend a quiet summer enjoying family and friends no matter what happens on Wall Street or in Washington D.C.

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If you appreciate the kind of gold-based analysis you just read, you would probably enjoy and gain from our e-mail newsletter service which sends you the link whenever a new issue is published. It comes free of charge and you can opt out of the service at anytime. Last, we will not deluge you with emails.

The rest of the July issue offers much to ponder . . . .

–– To receive it and register for future editions, go here. ––

A little USAGOLD history. . . . Pictured are News & Views hard copies from 1999 just before gold began its secular bull market. News & Views first made its appearance at a time when gold-based publications were few and far between. The “Big Breakout” headlined in the November, 1999 issue refers to a price jump from $260 to $330 per ounce. Your editor sees a good many similarities between that period and now.

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Quiet crisis in Puerto Rico

Puerto Rico poses a ‘substantial threat’: Strategist/CNBC/6-30-2015

MK note: With the world’s attention on Greece, what is going on in little Puerto Rico has gone unnoticed.  That is until yesterday’s announcement of Puerto Rico’s intention to declare a “moratorium” on its debt payments.  Two bond insurers, Assured Guarantee and MBIA, had their stock prices hammered yesterday due to their exposure in Puerto Rico.  Assured Guarantee shares were down 13% and MBIA shares down 23%.

“It’s a substantial threat,” bond expert Larry McDonald said Monday on CNBC’s Power Lunch. “The problem we’re seeing around the world is that political officials that are borrowing money in the capital markets have not been completely forthcoming about their financials.”

We recall the AIG collapse in 2008 – a centerpiece of the financial crisis.  AIG was a major seller of credit-default swaps, a form of  insurance against default on assets tied to corporate debt and mortgage securities.  In the end, the federal government bailed out AIG to the tune of $85 billion.  Yesterday’s reports had exposure at Assured Guarantee and MBIA at a mere $10.3 billion, but we are talking about their exposure in Puerto Rico only.  If McDonald is right, this “quiet” and developing problem could go much deeper.

Puerto Rico’s total sovereign debt is $72 billion and, as declared by its governor, “unpayable.”

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Gold as a mathematical construct

For those who take the technical approach to market problems, here’s a mathematical construct on using gold as a portfolio hedge:

“We look at [gold] purely from a risk management perspective and not just a return generating investment instrument. An analysis of the correlation between returns generated by gold and those generated by equities and bonds over various time periods brings out the lack of correlation between gold returns and those generated by both debt and equity. And even though this negative correlation increases with time, our research shows that it reaches a maximum of -0.27 over a 5 year period which is an extremely low level. Therefore, gold becomes the ideal diversification tool which based on empirical analysis reduces volatility without hampering returns. This results in a sharply higher risk adjusted return, which can only be good news for long term investors.”

– Amit Nigam of Peerless Fund Management

MK note:  Funny.  Using empirical analysis he comes to the same place I do via an attempted understanding of economic history.  Something for all the engineers out there who read these pages. . . . . . . It still comes down to viewing gold as a long-term savings alternative detached from the currency (whatever currency you happen to use in your financial accounts).

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BubbleTalk

For Robert Shiller, the prominent Yale University behavorial economist and Nobel Prize laureate, mathematics and historical example play a key role in predicting market bubbles.

“I think that compared with history,” he says, “US stocks are overvalued. One way to assess this is by looking at the CAPE (cyclically adjusted P/E) ratio that I created with John Campbell, now at Harvard, 25 years ago. The ratio is defined as the real stock price (using the S&P Composite Stock Price Index deflated by the CPI) divided by the ten-year average of real earnings per share. We have found this ratio to be a good predictor of subsequent stock market returns, especially over the long run. The CAPE ratio has recently been around 27, which is quite high by US historical standards. The only other times it has been that high or higher were in 1929, 2000, and 2007—all moments before market crashes. . . This time around, bonds and, increasingly, real estate also look overvalued. This is different from other over-valuation periods such as 1929, when the stock market was very overvalued, but the bond and housing markets for the most part weren’t. It’s an interesting phenomenon.”

Stop.  Look.  Listen.

MK

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Closer to home. . .

Puerto Rico is broke.  Seeks moratorium on debt payments. Governor says “$72 billion public debt is unpayable.”

Link

MK note:  Caribbean’s Greece looking to Prexit? Issue its own currency.  Repudiate debts.  Maybe Varoufakis can head up the negotiating team in his spare time.

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Donald Trump tells it like it is. . .

“We’re at $18 trillion now. We’re soon going to be at $20 trillion. At $24 trillion, that’s the point of no return. We will be there soon. That’s when we become Greece! That’s when we become a country that’s unsalvageable.”

MK note:  Of course he’s talking about the U.S. national debt.  Politicians talk about the political deficit.  Businessmen talk about the reality of the uncontrollable national debt and the potential interest payments that stand in the way of raising interest rates to historic norms.

totalnationaldebt

 

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Talk about bad timing. . . .

Report issued today of all days. . .

Bank for International Settlements blasts world’s central banks on “persistent exceptionally low rates reflect the central banks’ and market participants’ response to the unusually weak post-crisis recovery as they fumble in the dark in search of new certainties.”

London’s Telegraph says, “The world will be unable to fight the next global financial crash as central banks have used up their ammunition trying to tackle the last crises, the Bank of International Settlements has warned.”

Telegraph article

MK note:  On second thought, maybe their timing could not have been better. Many inquiries and purchases past few days at USAGOLD offices.  Pent-up demand unleashed. . . .

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Global stocks take a hit on Greece bank, bourse holiday

DJIA – 350.33 (-1.95%)
NASDAQ -122.04 (-2.4%)
Germany DAX -409.23 (-3.56%!!)
France CAC -189.35 (-3.74%)
UK FTSE -133.22 (-1.97%)

Best analysis we see is that no one knows for certain the fallout from Greece in the rest of Europe.  General perception is that others on EU’s periphery with weak sovereign finances, i.e. Italy, Spain, Portugal might see fit to follow suit if Greece opts for exit/monetary sovereignty – or to use it as a cudgel with respect to their own dismal financial picture.  Such concerns send ripples through financial markets everywhere, hence the big drops per above particularly in Germany and France.

 

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Bank holiday in Greece Monday

Where there’s smoke. . . . .there’s (ahem) smoke. (We haven’t gotten to the fire stage yet.)

“Greek leaders planned to shutter their banks on Monday amid last-ditch discussions about their nation’s economic future, as panicked citizens tried to pull their money from their accounts while they still were able.”

Gold up $10.50 . . . .at $1186 late Sunday.

LINK

P.S. They are also closing the stock exchange Monday.

 

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Shanghai Gold Exchange in talks to list products on CME

26-Jun (Reuters) — The Shanghai Gold Exchange (SGE) is in talks to list its bullion products on CME Group’s trading platform and launch yuan-denominated bullion contracts in Dubai, an exchange official said.

China, the top producer and a leading consumer of gold, is seeking to boost its global presence in the bullion market and increase the use of its currency, while also opening up its own markets to foreign players.

State-run SGE, the world’s biggest physical bullion exchange, will initially list its products and prices on CME, whose members and clients will be allowed to trade the Chinese exchange’s products, SGE Vice-President Shen Gang told an industry conference on Thursday.

In the next phase, SGE members will be able to trade CME products via SGE, Shen said, according to presentation slides, adding the bourse was also in talks to list yuan-denominated gold contracts on the Dubai Gold and Commodities Exchange.

[source]

Posted in Gold News, Gold Views |

The Daily Market Report: Gold Consolidates Amid Hope for Last-Minute Greek Deal


26-Jun (USAGOLD) — Gold eked out a new low for the week in early New York trading, but quickly rebounded intraday. The yellow metal remains well contained within the recent range as the market awaits an outcome on the Greek crisis.

Greece was offered a €15 bln deal earlier today that would have kicked the can until November. However, the offer was quickly rejected by Greek PM Tsipras, who categorized it as “blackmail”.

Earlier in the week German chancellor Merkel declared that she would not allow Greece to blackmail Germany. She went on to warn that if a deal is not struck before markets open on Monday, capital controls would be likely in Greece and default would be increasingly likely.

The rhetoric is certainly not reflective of negotiations that are achieving any kind of success. Nonetheless, markets seem to be holding out hope for a last-minute deal, as we’ve seen numerous times in the past.

After all, the policymakers and technocrats of Europe have summer holidays to plan. A Greek default will ruin the rest of summer! So, they have to kick the can beyond August at a minimum.

The Chinese stock market tanked on Friday, dropping 7.4%. It was the biggest one-day point drop in 7-years. That puts the Shanghai composite index down 19% from its mid-June peak. The swing from raging bull market, to the cusp of a bear market, has taken just 2-weeks.

As noted on this page in recent months, we’ve seen a lot of clients buying gold with funds they’ve taken out of the stock market. They have expressed concerns that shares are overvalued and they are taking money off that table and bolstering their hedge positions. They typically view gold as being undervalued at these levels.

Apparently the same thing is happening in China. Chinese imports of the yellow metal via Hong Kong surged 36% in May.

“We think investors are becoming increasingly worried about a more pronounced correction in China’s stock market and will return to gold to diversify their portfolios.” — Simona Gambarini, commodities economist at Capital Economics via CNBC

The heightened volatility in Chinese stocks seen in June is likely to help underpin gold, driving safe-haven demand. Continued uncertainty about Greece, even if some sort of agreement is reached, should also be supportive.

The time to own your safe-haven is before you actually need it. The May surge in Chinese gold imports suggest some Chinese investors were ahead of the curve. Certainly some of our clients have been ahead of the curve as well.

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

China Stocks Plunge to the Brink of a Bear Market

26-Jun (Wall Street Journal) — A Chinese stock market slump that began two weeks ago deepened, with the main index tumbling on concerns the government is seeking to cool a yearlong debt-fueled rally.

The Shanghai Composite Index fell 7.4% Friday to 4192.87. The index is off 19% since a June 12 high, a decline that has wiped off $1.25 trillion in market capitalization, an amount roughly equal to the size of Mexico’s economy.

…“There’s widespread panic today and some of my friends got margin calls and were forced to sell their stocks at deep losses. There was too much leverage in this market and it’s crazy,” said Yunfeng Wu, an investor in Shanghai.

[source]

Posted in Markets |

China’s Gold Demand Seen Getting a Boost If Stock Rally Fades

24-Jun (Bloomberg) — China’s gold demand may rise if the country’s stock market reverses its rally, according to the World Gold Council.

Demand in the world’s largest user may rise as high as 1,000 metric tons, a nearly 3 percent increase from last year, Roland Wang, China director of the London-based group, told reporters in Shanghai on Wednesday. Consumption sank in the first quarter as investors flocked to the Shanghai Composite Index’s 16 percent gain while bullion prices stalled.

“We will be more confident to say China’s demand in 2015 will beat 2014 if we see an end of the stock market rally and a start of a gold price surge,” Wang said. “Chinese investors usually seek asset tools to prevent risks in stock markets and chase rallies in gold.”

[source]

PG View: The surge in June imports, amid recent stock market volatility, suggests the shift from shares to gold may already be underway. The Shanghai Composite Index fell 7.4% today, it’s biggest drop in 7-years. The index is now down 19% and on the verge of a bear market in just 2-weeks.

Posted in Gold News, Gold Views, Markets |

Jittery Chinese investors park their cash here


26-Jun (CNBC) — A rise in Chinese gold imports suggests that investors seeking a safe haven from the turbulence in stock markets may be parking their cash in the precious metal.

China’s gold imports via Hong Kong rose 36 percent month-on-month and 35 percent year-on-year to the highest level since January, Capital Economics said in a note on Friday, citing data from the Hong Kong Census and Statistics Department. Net gold imports from gold dipped to 52.204 tonnes in April from 66.363 tonnes in March.

“We think investors are becoming increasingly worried about a more pronounced correction in China’s stock market and will return to gold to diversify their portfolios,” Simona Gambarini, commodities economist at Capital Economics said in a note.

…”The sharp rise in the local equity market in China is likely to have weighed on gold demand in the past few months. However, investors might be seeking once again the safety of gold, as recent gains in the stock market are deemed unsustainable” Gambarini said.

[source]

Posted in Gold News, Gold Views |

Greece’s Tsipras Rejects EU Debt Deal `Blackmail’

26-Jun (Bloomberg) — Greek Prime Minister Alexis Tsipras used strong language in rejecting offers from the nation’s creditors to unlock as much as $17.3 billion in aid for the country, saying they won’t accept blackmail.

[source]

Posted in Economic Data |

Greece offered six-month extension and €15bn; Tsipras calls it ‘blackmail’

26-Jun (Irish Examiner) — It is reported Greece has been offered a six-month bailout extension in return for agreeing to more austerity measures.

The package is said to be worth €15bn and would prevent a so-called Grexit.

Greece needs to make a €1.6m repayment to the IMF by Tuesday, or risk a default.

The Irish Examiner’s European Correspondent Anne Cahill believes a deal is very close.

“They have told the Greeks they will give them €15bn over the next five months if they accept the deal now,” she said.

“Everybody expects that (between now and the end of that six-month period) they will talk about a third bailout, because of course (the Greeks) are not at the end of their woes yet.”

However, the plan seems to have been rejected by the Greek prime minister Alexis Tsipras, who says his counterparts are ignoring the very principles of a European Union.

Leaving the summit, Tsipras accused others of trying to “blackmail” him.

[source]

Posted in European Debt Crisis |

Greek Bank Deposits Fall to Eleven-Year Low

26-Jun (Bloomberg) — Greece’s bank deposits hit an 11-year low in May.

Official data from the Bank of Greece today showed deposits fell €3.8 billion to €129.9 billion at the end of last month, marking a 21 percent plunge since November. That was just before then-Prime Minister Antonis Samaras brought forward a vote for a new president that led to his government’s downfall.

With Greece’s continued presence in the euro hanging in the balance, and the threat of capital controls looming if Prime Minister Alexis Tsipras fails to reach a bailout deal with creditors, the outflow has continued in June.

[source]

Posted in European Debt Crisis |

Greece’s Creditors Propose $17.3 Billion Package to End Standoff

26-Jun (Bloomberg) — Greece’s creditors are proposing a five-month program extension and 15.5 billion euros ($17.3 billion) of funding to resolve a standoff with Prime Minister Alexis Tsipras’s government, said a European official.

The proposal by Greece’s three creditor institutions — the International Monetary Fund, the European Central Bank and the European Commission — would extend Greece’s bailout program through November, the official told reporters in Brussels, asking not to named because negotiations are ongoing.

[source]

PG View: A third bailout? This solves nothing unless there are significant fiscal reforms required; something Greece has been loathe to implement.

Posted in European Debt Crisis |

Gold easier at 1172.96 (-1.45). Silver 15.81 (-0.075). Dollar & euro consolidate. Stocks called higher. US 10yr 2.42% (+1 bp).

Posted in Markets |