Beiträge von Schwabenpfeil

Here is an unconventional outlook:

Dollar on an oily slope
By Jephraim P Gundzik

The unabated rise of international oil prices and depreciation of the dollar will push economic growth in the US down to about 2.5% in 2005, but will have little impact on economic growth in the European Union, where growth is expected to accelerate modestly. Stronger economic fundamentals in the EU will support the continued impressive economic growth in non-Japan Asia.

Full story
http://www.atimes.com/atimes/Global_Economy/GA13Dj01.html

***

Therein lies the problem for the US. For the US saving rate to go up, spending must go down, which sets short-term recession forces in motion. It’s bad for Wall Street and bad for incumbent politicos. Yet, for the US not to address the growing deficit problems sets up a tsunami situation when, out of nowhere, markets collapse due to unforeseen events and trigger financial panic.

As is, the US is in a pickle. Foreign creditors have made it clear they expect the US to get its financial house in order. This should mean decreasing government spending and/or raising taxes. This need to be done to reduce our budget deficit. Either step will set some brakes on economic expansion. Pile decreased consumer spending on top of that and you have a subdued economy, reduced corporate profits and lower stock prices.

The alternative for the US is to stay the course. However, this means the dollar could really tank as foreigners not only stop buying our debt, they begin to pull out altogether. This would send interest rates through the roof and set off who knows what in the economy and financial markets.

"It can work to undermine the reserve status of the dollar and that has big implications globally," he said, adding the euro was being considered as a reserve currency of the future.

The HSBC officials spoke at a press briefing.

The bank predicts the euro will strengthen to $1.40 by the end of 2005 from around $1.32 on Thursday. HSBC expects the dollar to weaken to 98 yen by the end of the year from 102.70 now.

U.S. policymakers have pressed China to relax its controls on the yuan, arguing it is under valued and gives China's exporters an unfair advantage in world markets.

The view was repeated earlier on Thursday by U.S. Commerce Secretary Don Evans, in an interview with Reuters.

But King said China comprised less than a tenth of the dollar's trade weighted basket.

"So let's say that the renminbi will revalue by 20 percent, that would mean a fall in the dollar's trade-weighted exchange rate of only 2 percent," he said, noting the trade deficit had widened in the past two years despite a 20 percent fall in the dollar on a trade weighted basis.

"The current account deficit exists primarily because of the lack of U.S. savings and that needs to be addressed," he said.

The U.S. personal savings rate -- or proportion of money U.S. workers save from disposable incomes -- has been falling for the past two decades. The slide has been particularly severe since 1995, with it falling from about 6 percent to near zero now.

Some analysts say the demand from Asian central banks to park their dollar surpluses in U.S. Treasuries has allowed Americans to spend despite the collapse in savings.

Foreign holdings of Treasuries rose about $216 billion in 2004. Asian central banks increased foreign currency reserves last year by around $500 billion and parked much of it in U.S. debt.

-END-

This Reuters story on the yuan/US current account deficit is worth reading in toto:

HONG KONG, Jan 13 (Reuters) - Solving the massive U.S. current account deficit does not hinge on a revaluation of China's yuan currency but on the ability of Americans to boost savings, HSBC's chief economist said on Thursday.

Stephen King said he did not expect Beijing to change the value of the yuan , which is managed between 8.276 and 8.280 per dollar, anytime soon, suggesting there was no need for a revaluation.

"The reason for the misalignment, particularly in terms of the current account balance, has very little to do with the value of the reminbi at all," he said, referring to the deficit which is close to 6 percent of the U.S. gross domestic product.

Worries over the current account deficit intensified on Wednesday with data that showed the U.S. trade gap widened in November to a record $60.3 billion, bringing the dollar's New Year rally to an abrupt halt and undermining confidence in the currency.

"We will be seeing some rallies in the dollar this year but I think it's a trend decline of falling highs and lows," said David Bloom, HSBC's director of currency strategy.

The 30-year T bond is firm as can be with yields at the lows for the last six months:

March T-bond, up 22/32 to 113 22/32
http://futures.tradingcharts.com/chart/TR/35

As oft-queried in this column, if all is so great with the US economy, why are the yields going down with the dollar so weak and commodity prices so firm. Is something REALLY wrong out there behind the scenes? My guess has been, and remains, YES!

The CRB is trucking right back up. It rose 2.63 to 285.13 and is within striking distance of new highs. Feb crude oil shot up $1.67 per barrel to $48.04. So much for cheap oil.

U.S. Dec Phila. Fed index revised down to 25.4

NEW YORK, Jan 13 (Reuters) - The Federal Reserve Bank of Philadelphia said on Thursday it had revised its business conditions index for December to 25.4 from 29.6.

The adjustment is part of the Philadelphia Fed's annual historical data revisions for its business outlook survey after adjusting for new seasonal adjustment factors.

-END-

US Treasuries firm despite mediocre debt auction

NEW YORK, Jan 13 (Reuters) - Treasuries prices were broadly firmer on Thursday but came off their highs after an auction of new U.S. government debt attracted only mediocre demand.

The sale of $10 billion in 10-year Treasury inflation protected notes, known as TIPS, went at a high yield of 1.725 percent. It drew bids for 1.88 times the amount on offer, down on the 2.0 average for last year's auctions…

-END-

U.S. Dec Phila. Fed index revised down to 25.4

NEW YORK, Jan 13 (Reuters) - The Federal Reserve Bank of Philadelphia said on Thursday it had revised its business conditions index for December to 25.4 from 29.6.

The adjustment is part of the Philadelphia Fed's annual historical data revisions for its business outlook survey after adjusting for new seasonal adjustment factors.

-END-

US Treasuries firm despite mediocre debt auction

NEW YORK, Jan 13 (Reuters) - Treasuries prices were broadly firmer on Thursday but came off their highs after an auction of new U.S. government debt attracted only mediocre demand.

The sale of $10 billion in 10-year Treasury inflation protected notes, known as TIPS, went at a high yield of 1.725 percent. It drew bids for 1.88 times the amount on offer, down on the 2.0 average for last year's auctions…

-END-

The 30-year T bond is firm as can be with yields at the lows for the last six months:

March T-bond, up 22/32 to 113 22/32
http://futures.tradingcharts.com/chart/TR/35

CARTEL CAPITULATION WATCH

The big financial market news of the day was the drubbing the US stock market took. The DOW fell 112 to 10,506 and the DOG sank 22 to 2070. What seems too obvious to MIDAS, and others on our planet about what lies ahead for the US economy and stock market, seems to be finally taking hold among the investing public.

The S&P chart is a nasty one and reveals the market breaking down after forming a massive top:

March S&P
http://futures.tradingcharts.com/chart/SP/35

The action is particularly bad considering the time of the year. This is bull market time. The move down during the first two weeks is one of the worst on record and portends much worse times ahead.

No surprise to Jesse:

The US Equity 'Recovery' is a Fake
http://jessel.100megsfree3.com/SPEuro.png

Key US economic news, which is not good:

08:30 Dec. Retail Sales reported 1.2% vs. consensus 1.1%; ex-Autos 0.3% vs. consensus 0.4%
Prior total sales unrevised at 0.1%; prior ex-Autos revised to 0.4% from 0.5%.
* * * * *

08:30 Jobless claims for w/e 1/8 reported 367K vs. consensus 340K
Prior week revised to 357K from 364K.
* * * * *

10:30 EIA reports natural gas inventories (88)bcf vs. consensus (90)bcf
For reference, year-ago data was (153)bcf. Prior week's data was(151)bcf. Feb. nat'l gas futures move lower in initial reaction.

The John Brimelow Report

India supports gold AND silver. Refineries optimistic. No Yuan revaluation

Thursday, January 13, 2005

Indian ex-duty premiums: AM $7.78, PM $8.56, with world gold at $426.40 and $424.40. High; lavish for legal imports. India is continuing to lend powerful support to world gold at these levels.

Also apparently to silver. Correspondence with an India bullion dealer contact confirms that on last week’s break below $6.50 quantities of silver were flown to India "to meet a sudden shortage". Flying this comparatively bulky metal is extremely costly and happens very rarely indeed – less than once a decade. Any chance to buy silver below $6.50 is likely to be very fleeting and deserves attention.

Shanghai continues to show substantial -$2.10 to $2.48 - premiums with gold at $426.40 this morning. This contrasts with the mid August – late November phase of appreciable discounts as gold ranged between $400 and $450. This despite the renewed rumors of Chinese revaluation (which would slash the local currency gold price). Clearly, either local traders do not believe in revaluation, or, (in my view more plausible) the Chinese authorities are using a very closely supervised gold market to signal to their business community their refusal to bend on this issue.

Mitsui put their monthly refinery survey up on their website this morning:

"December saw a pick up in gold demand as the prices eased from their mid 450 highs down to just under 440, bringing in pent up demand in the Middle East in particular…In fact, across the board, the figures in general were better than YOY…Expectations of demand in fact show the 2nd highest figure in our records." (JB emphasis – the survey started in September ‘03).

TOCOM, finding a notably higher world gold price, was cautious: volume dropped 26% to equal only 15,918 Comex lots, the active contract closed down 3 yen, and world gold went out 30c below NY. However, Mitsubishi’s data implies the public added another 7.2 tonnes to their long – 2,315 Comex lot equivalent. Rather surprising, given the robust behavior of the yen. (NY yesterday traded 69,810 contacts; open interest rose 3,117 lots.)

Some Bears like the Gartman letter complain that yesterday’s rally was weak, given the shock of the trade statistics, and the behavior of the dollar. Actually, the key buying zones were not much affected: much of the Middle East is fixed to the dollar, and the rupee was soggy for Indian reasons. But the frequently outspoken Mitsui-Sydney commentator gave food for thought:

"Price support was muted later in the session as light fund profit taking and central bank selling capped the initial positive price moves." (JB emphasis)

Given the physical market data, any seller will have to be very active to prevent gold going back up.

JB

Yesterday’s sell-off action in the gold shares, followed by today’s gold hit and further share sell-off, gives further vindication to those in our camp who feel the shares are used to manipulate gold sentiment. This has now occurred way too many times over the years (one day related to the next) to be normal unorchestrated market action.

Morgan Stanley continues to bid for silver. They appear to be on a mission here and remain very bullish. As vet Café members know, Morgan Stanley has been the featured player in silver for some time.

The silver open interest fell 282 contracts to 97,909.

The dollar rose .39 to 82.57, while the euro lost .61 to 132.14.

January 13 – Gold $424.20 down $1.30 – Silver $6.70 unchanged

US Stock Market Breaking Down / Aflease

Nothing great will ever be achieved without great men, and men are great only if they are determined to be so...Charles De Galle

GO GATA!!!

The Gold Cartel has become so blatant in their price rigging, it ought to be making it harder and harder for almost anyone not to "get it" re what is going on here.

Once again when I retired last evening the yen and euro were both higher and so was gold, about $1. When I awoke this morning, the currencies were the same, yet as we came into the Comex opening, gold was due down $1.60. More significantly, the entire move gold made following the sharp dollar drop after the horrendous US trade deficit was announced was quickly being erased.

Gold fell to $422.60, then firmed up to due stellar cash buying. As happens so often these days, gold failed to surpass its AM Fix price of $424.65.

Ich denke in dieser Diskussion gibt es kein richtig oder falsch. Der Panda wendet sich an Numismatiker; eben an Münzliebhaber. Die haben durchaus die Chance, dass der Liebhaberpreis in ein paar Jahren weitaus höher liegt. Versucht einfach mal heute den 1 kg Panda bspw. von 2002 zu bekommen und sagt mir dann, was der günstigste Einkaufspreis war, denn Ihr gefunden habt

Wer ausschließlich in Silber als Material interessiert ist, fährt natürlich mit einem Barren besser ...

Gruß
Schwabenpfeil

So what explains Ms. Cross's flatly wrong assertions about the concept of notional value? Why did no one at the WGC catch her egregious errors prior to publication? "Worrying" and "alarming" are the words Ms. Cross uses to describe the import of the notional value figures if they are what they are rather than what she says they are. And in this case, worried and alarmed is just what the big bullion banks with their huge short gold positions are. In a similar state of concern are heavily hedged mining companies like Barrick, which as one of the largest producers carries considerable influence at the WGC since it is funded by assessments on ounces produced. But most worried and alarmed of all are the politicians. They know that soaring gold prices mean collapsing political careers.

To be continued in my next commentary: WGC and Jessica Double-Cross: Part 2 [title subject to change].

A mining company sells 10 tonnes forward through a bullion bank. Assuming that the bank covers the full amount of its long exposure in this transaction, she points to a total turnover counting both the long and short legs of 20 tonnes, which presumably in her view also represents 20 tonnes of notional value. Then the mining company "elects to buy back 5 tonnes of its forward sale," and the "bank will unwind the exposure in both legs of the original transaction." As a result of these two transactions of 5 tonnes, "the turnover against the whole strategy in that quarter is now 30 tonnes." The reader is left to believe that the total notional value at this point is 30 tonnes.

But in fact, the notional value is not more than 10 tonnes. As reported by the BIS, it would be even less if some parts of the surviving position are with other reporting institutions. But the surviving position is at most a long and a short of 5 tonnes each, or a total of 10 tonnes. In Ms. Cross's fictional world, this position would count as 30 tonnes and require the same bank capital as a new forward sale transaction by another mining company of 15 tonnes, which including both the long and short sides would equate to 30 tonnes of notional value. Quite obviously, no rational person would argue that the same amount of bank capital should be required to carry these two positions, one a forward sale of 5 tonnes and the other a forward sale of 15.

Finally, Ms. Cross suggests that the publicly reported notional value figures "...are very similar to the enormous trading volumes reported by Comex/Nymex where we know one ounce of gold gets traded over and over again but delivered or settled for only once." The proper analogy, however, is not to volume but to open interest. On an exchange with standardized contracts, counting the number of open or outstanding contracts gives a good measure of market size and individual exposures at any given point in time. For custom-tailored OTC derivatives contracts, summing notional values is an effort to do substantially the same thing.

Ms. Cross's most complete discussion of the notional value figures appears at pages 95-96 of her study. She makes no effort whatever to describe the design or purposes of the reporting system that produces these figures or to describe the relationship of the BIS figures to those of the OCC. Nor does she mention that some bullion banks, particularly the largest Swiss and German banks, themselves report reasonably detailed figures on their gold derivatives, including total notional values by maturity category and, in the case of the Swiss banks, separating forwards and options. None of these banks, incidentally, describes notional value in terms of turnover. They all use definitions of notional value which track quite closely that used by the BIS.

According to the BIS (Yoshikuni Report, A2.2): "[T]he collection of turnover data is not envisaged as part of the regular reporting framework." Nevertheless, Ms. Cross asserts that notional value figures are "grossed-up total turnover." According to the BIS, it decided to require data on notional values because (Yoshikuni Report, B3.1): "A sum of notional amounts outstanding thus provides a rough approximation to the scale of gross exposures to price risk transferred between the contracting parties, just as adding the principal amounts of a group of cash market assets offers a picture of the price risk embedded in those assets." Ms. Cross disagrees.

Speaking about the US$243 billion total notional value of gold derivatives reported by the BIS for the major banks and dealers in the G-10 at year-end 1999, Ms. Cross asserts: "[W]e believe that this outstanding position should not be described as 'exposure' as it certainly could have negative if not alarmist connotations. A more objective reference would be a commercial banking presence in gold-based derivatives." She is entitled to her (wrong) opinion, but it does not change what the BIS and relevant national banking authorities require. Then, trying to clarify her position with an example, Ms. Cross proves her error.

Under the 1995 amendment to Basle Capital Accord, the determination of capital adequacy requirements for OTC derivatives involves the application of percentage factors to notional values. These factors vary for different types of derivatives, according to maturity, and depending upon whether the current exposure method or original exposure method is used. But in general, for gold and foreign exchange contracts, the applicable percentage factors run from 1% to over 7% for the longest maturities. Under certain circumstances capital requirements can be reduced by netting, and in all circumstances there is every incentive to avoid any unnecessary overstatement of notional values since to do so would weigh on capital.

Some national authorities, such as the OCC and the Swiss National Bank, also publish regular reports summarizing the derivatives data for the banks based in their countries. Through annual survey reports (e.g., Trading and Derivatives Disclosures of Banks and Securities Firms), the BIS encourages individual firms to provide in their annual and periodic reports information about their OTC derivatives at an appropriate level of detail for their particular operations.

The WGC has consistently opposed the idea that changes in the notional value of gold derivatives, either collectively or for individual banks, provide any meaningful information about the gold market. Ms. Cross's study picks up where "Looking for a scapegoat," the lead article in the July edition of the WGC's Gold in the Official Sector, left off. But her study does more. It demonstrates beyond doubt that neither Ms. Cross, nor anyone at the WGC who read her study before publication, grasps the most elementary fact about notional value figures: They are position data at a point in time, not transaction data measuring sales or turnover over a period of time.

9/9 Reginald H. Howe - Jessica Double-Cross Study Puts Q(uisling).E.D. on the World Gold Council

Reginald H. Howe
http://www.GoldenSextant.com
row@ix.netcom.com
September 10, 2000

Jessica Double-Cross Study Puts Q(uisling).E.D. on the World Gold Council

Where do the World Gold Council's first loyalties lie? Are they with the gold mining industry that supports it and needs higher gold prices just to survive? Or is the WGC, like Gold Fields Minerals Services, now little more than a shill for the big bullion banks and their friends in the Clinton administration and the Blair government? Gold Derivatives: The market view, a study by Jessica Cross sponsored and published last week by the WGC, puts Q.E.D., Quisling Erat Demonstrandum, to these questions. In a stunning double-cross of the gold mining industry, the study puts the WGC squarely on the side of the bullion bankers and the political elite. Even so, the study might still be defensible were it intellectually honest. Sadly, it is not. Rather, it is brazen disinformation aimed at neutralizing the impact of publicly reported figures on notional values of bullion banks' gold derivatives.

These figures and the reporting system under which they are produced have been addressed in several prior commentaries, including House of Morgan: From Gold Bugs to Paper Hangers, Deutsche Bank: Sabotaging the Washington Agreement? and Gold: Can't Bank with It; Can't Bank without It!, all of which are also included in the updated version of GATA's Gold Derivative Banking Crisis. Another prior commentary ("Ah! tenez, vous êtes de la merde dans un bas de soie."), addresses at considerable length some of the problems associated with aggregating notional values and using them as measures of exposure or risk. I have been asked by several people whether Ms. Cross or the WGC contacted me in connection with her study. The answer is no, although I was informed by a top official of the WGC that he at least is quite familiar with all these commentaries.

In connection with implementing the Basle Capital Accord and to provide greater transparency to regulators, market participants and public shareholders, the Bank for International Settlements administers a regular reporting system for OTC derivatives of the major banks and other financial institutions in the G-10 countries. Established pursuant to recommendations contained in the Yoshikuni Report, issued by the BIS in June 1996 and available online under the title Proposals for Improving Global Derivatives Market Statistics, the system involves three steps: (1) collecting at the head office of each reporting firm all required derivatives data for its operations worldwide; (2) transmitting the individual firm data to the central bank or other relevant national authority (e.g., the Comptroller of the Currency (OCC) in the United States) in the country where the home office is located; and (3) transmitting assembled derivatives data for each country to the BIS.

The BIS issues regular semi-annual reports summarizing this information. Available at its website (http://www.bis.org, click on Regular Publications, then on Regular OTC Derivatives Market Statistics), they include figures for the total notional value of all derivatives in each of several categories. As described by the BIS in these reports (footnote 1): "The notional amount, which is generally used as a reference to calculate cash flows under individual contracts, provides a comparison of market size between related cash and derivatives markets." In preparing these summary statistics, the BIS halves the notional values of contracts between reporting institutions in order to avoid double-counting.

Back at the ranch the gold shares couldn’t get out of their own way. The Gold Cartel must have been the buyers the past week, loading up so they could dump them on a day when the shares should have roared. The XAU was basically unchanged at 95.02, while the HUI fell .96 to 205.77.

Most everyone I spoke to today, or received emails from, was outraged, disgusted, or despondent about the capping of the price and the mugging of the gold shares. Not so in this case; a good way to end the MIDAS:

Hi Bill:
Today was a great day for Goldbugs although few seem to appreciate it. I realize that Gold was again capped and the Gold shares are down as I write but this is to be expected. The record US Trade Deficit clearly was a shocker and the Dollar and Gold reacted as they should. At least at first. But the bad guys have trained Gold traders well (like Pavlov's dogs) for when Gold was up $6 the traders took their profits. Given the news, Gold should have risen much more and in a free market it would have. But traders have learned the hard way when not to risk their own wealth. The market as a whole can overpower the bad guys but the market is made up of individuals and no single trader wants to be a martyr.

During the first couple of years of this bull market in Gold, the Gold shares reacted as they should to Gold moves. There were days when Gold shares were up 5% or even 10%. But no longer. Gold share traders, like Gold bullion traders, are now completely conditioned by "training". This "training" has been well thought out. It takes advantage of the bias of Gold share traders who repeat mantras like "shares lead bullion" over and over again.

Let's go back to basics here. Gold is in a bull market for many reasons but the primary reason is that it is Money and is therefore a deadly threat to the imposters we call fiat currencies. To preserve their power, those who control the fiat currencies must not allow confidence in their paper to wane. The reasons for holding Gold now are so overwhelming the last thing the cartel wants is price action to confirm this.

So they now not only "control" the Gold Bullion price but they also manipulate the Gold shares. This is easy to do given a printing press. Since this practise was introduced Gold shares, on key days, have behaved very strangely. Today was an excellent example. On all the Gold chatboards, there's a wringing of hands and pulling of hair. Gold shares are underperforming again! And then we see the argument that since shares lead Gold this must mean Bullion is about to fall. Which of course, may lead some Gold bugs to not only sell their shares but their Bullion too. Two birds with one stone. Even better, Gold share traders are now so conditioned by their "trainers" that they are reluctant to buy at all and are holding their wealth in the very instrument, the US Dollar, they know deep down has only one way to go and that is down.

Given all this, the question is how long they can keep this game going. I do not know. Many Goldbugs are sitting on the sidelines waiting for a signal. A signal to buy. But they are, I believe, wrong. We are clearly dealing with desperate men and women clinging on to power. They will stop a nothing. But the trend is clear. They are weaker today than they were last year and today's Trade Deficit shot a big hole in their argument that things are improving.

Yes, we may get a signal to buy but how will we know this signal is different from the signal we got today that it's dangerous to hold US Dollar. Different in the sense that Gold will rise more than $6 and Gold shares will rise freely as they should. I'll tell you how. There will be a jump in price, a discontinuity in market values. And when that REAL signal occurs, either you're in or you're going to have to pay a lot more to get in.

And for that sort of signal you won't get a warning.
Cheers from Auckland, Ed

GATA BE IN IT TO WIN IT!

MIDAS

What the heck is going on with GLD? One thing for sure, James Turk was right to raise all the questions he did about its validity and raison d’etre.

*First they dump 15 tonnes the day before gold crashes $20, selling along with the likes of gold nemesis Goldman Sachs.

*Now they are buying gold like crazy during a time the specs have been selling like crazy. We know this has been the case the past couple of weeks because of the Comex OI changes.

A few ponderings:

*I thought this was a vehicle to track the gold price, not lead it.
*They recorded 15 tonnes of buying yesterday and a total of 44 tonnes this year. Who are they buying for? The large specs have been selling on the Comex.
*Are they really buying all this gold, or is it just paper?
*Seems to me this is just another Gold Cartel vehicle. They buy gold down here and when The Gold Cartel says, ‘SELL" to cap a price rise, the crooks have an ally to put pressure on the market.

Oh what a mess this industry is.

Just received a call from someone who attended a World Gold Council GLD presentation in Washington yesterday. By the way, he says Washington is like an armed camp ahead of the Inaugural. James Turk and Chris Powell prepared some questions for him to ask the WGC rep.

The bottom line is the WGC wouldn’t directly answer the questions and was very vague. The only concrete bit of feedback was that HSBC is the main custodian for the gold. Once they are full up, they can sub the gold out. JP Morgan Chase, Gold Cartel honcho, was specifically mentioned. The WGC rep said once Morgan gets its hands on the gold they don’t know what they do with it. Not audited.

The WGC rep also remarked that the central banks are only short 2600 tonnes of gold, meaning gold which is lent out. Our man there couldn’t believe he could make a statement like that.

Need some hoots on a day like this. Dennis Gartman:

[Blockierte Grafik: http://www.lemetropolecafe.com/img2005/DecisionL.jpg]