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The media voices that have plagued the markets for the last few days will have to take their seats as the FOMC delivers its rate decision and then a half hour later Chairman Bernanke will read a prepared statement which the algos will have two seconds earlier and a Q&A will ensue. My first question is why will Hilsenrath and Harding be called on by Bernanke to ask their questions when they purportedly already know the full extent of FED policy. I look for Ben Bernanke to be very measured in his words for he has seen the damage a misplaced adjective or verb can have on the market. Will the FED “taper”? I don’t know but look for the chairman to entertain a few questions about removing part of the present QEproject.
Today the man who oversees more than $150 billion warned King World News about the high likelihood of a coming great inflation, or worse yet the possibility of a hyperinflationary collapse. Rob Arnott, who has won an unprecedented six Graham & Dodd Awards and is also Chairman of Research Affiliates, also warned KWN about the dangers of what the Fed and other central planners are engaging in as they lead us into a reckless and potentially game-ending and destructive “Hyper-Keynes” policy.
Arnott: “The Fed has painted itself awfully far into a corner and there is no graceful way out. When you reach a point where talk of ‘tapering’ causes markets to tremble with fear, that’s not a good place to be because it means that you’ve really got the markets addicted to the newly printed money.
And the only way to get the markets attention is to give it more (freshly printed money). It’s just like a crack addiction. This is not healthy and doesn’t play out nicely, and you do have asset bubbles fueled by central bank profligacy all over the world. That also sows seeds of risk because as the Fed backs off from the quantitative easing you wind up creating risks of pretty sharp and adverse market reactions....
The official gold holdings (rounded numbers) of the US Treasury Department are as follows:
Fort Knox147,000,000 ouncesWest Point54,000,000 ouncesDenver44,000,000 ouncesFederal Reserve of NY13,000,000 ouncesOther3,000,000 ouncesTotal261,000,000 ounces
Does anyone really think that gold is unencumbered, unleased, and actually physically there? Yes, I know...
They would not lie to us, right?The official numbers must be true, right?They seem like trustworthy people, right?Why wouldn't it be there?
Glad you asked that question. Why wouldn't it be there? Gold is a bit like an "anti-dollar." The Federal Reserve creates new dollars by the trillions - dollars are their product. Wal-Mart sells snow shovels and a few other things, Wall Street sells stocks and everything paper, Hollywood sells dreams and entertainment, but the Fed sells dollars, and they don't like competition. Gold has been real money for 5,000 years world-wide. Federal Reserve notes have been passed off as money for a few decades, and in that time they have lost most of their value as measured against commodities such as wheat, gasoline, and cigarettes.
It could have been worse! Western central banks (officially) and governments sold a considerable sum of gold during the 1990s to help repress the price of gold and to slow the apparent decline in the value of paper money. They also "leased" an unknown amount of gold to bullion banks who also sold that gold into the market. The leases are still "on the books," so the central banks officially still own the gold, even though it is probably long gone - likely to China, Russia, India, and the Middle East.
Yes, central banks and governments have motive, means and\ opportunity to suppress the price of gold. They want to support their product (dollars, euros, etc.) and to defeat the competition - gold. If you were a central banker or treasury official who was inflating his currency and consequently reducing its purchasing power, wouldn't you want to suppress the price of gold to delay recognition of your involvement in the devaluation process?
The last weekly COT report to show money managers betting on aggregate against the silver price were published in April -– prior to that no managed money net short silver position had been published since September 2007.
Despite this, the GLD's biggest holder, hedge fund Paulson & Co., says it has no intention of closing its Gold Fund, news agency Bloomberg reports, citing a letter to investors it has obtained.
"While gold continues to pivot between negative investment appetite, which has slowed, and softer physical demand, this week the market focus will shift to the FOMC meeting and press conference," a note from Barclays says.
"The markets are a little bit fatigued at the moment," agrees Victor Thianpiriya, commodities analyst at ANZ.
"They are still looking for direction from the Fed meeting. That's clearly the big driver this week."
Over in China meantime, Huaan Asset management, one of two physically-backed gold ETF providers to be approved by the China Securities Regulatory Commission, has said it aims to attract $400 million of initial funding – equivalent to around 9 tonnes at current prices – though no launch date has yet been announced.
"Gold hasn't lost its appeal as a store of value in China," says fund manager Xu Yiyi, who will run the Huaan ETF.
"Investors here usually like to buy on dips, so a decline in the bullion prices this year should work in our favor." ...
“It’s gone up 12 years in a row. I don’t know of any asset that goes up 12 years in a row. So just from a technical point of view, maybe it needs to go down some more. But from a fundamental point of view it will be a buy. There are some short-term factors hurting gold. The Indians are trying to restrict the purchase of gold, as it’s the source (along with oil) of their trade deficit. I have not sold my gold and plan to buy more if it keeps dropping. And yes, I did call for a correction a while back, and sometimes I do get it right!” – in Business Insider
Banks in California’s Central Valley are on high alert, and they should be. There is a young man, around 20-years old I’m guessing from his picture, who has robbed at least six banks over the last few months. He doesn’t use a gun, doesn’t wear a mask, or does he make threats to the bank tellers. Most customers or bank employees never know the bank was robbed even though the man committing these crimes flaunts his face in front of high-tech surveillance cameras time and time again. The young robber simply walks into a bank, hands over a note, and then walks out with stacks of other people’s cash. Local banks are warning employees and urging people to be aware.
My motive for sharing this story of brazenness is less about warning than observation. Today’s banking industry shows concern over such theft but the truth is they’re more concerned with endangering employees than losing dollars. The mother-ship bank, better known as the Federal Reserve Bank, can….. and will, replace stolen fiat with a keyboard stroke, no worries.
After all, 99.4% of the perceived money safely stored in your local bank doesn’t exist. It’s nothing more than a digit assigned to an account number.
Oddly enough, the same 99% percent of folks staggering your neighborhood streets, and still believing their dollars are stored in a bank somewhere, fail to understand the difference between money and fiat currency. This monetary ignorance separates these folks from sound money like physical silver or gold, respectively.
The Wells Fargo bank building in my local community is hands down the nicest and most expensive building on Main Street. I’m not a commercial appraiser but guessing this building has a value worth several million dollars, I’m willing to bet your community is no different. Just down the street, but on the same side, sits my humble-looking local coin shop (I would estimate this building’s value around $250k, but no more).
One building, the Wells Fargo one, reflects a perception of wealth and security even though it houses no intrinsic source of sound money. The other building, our local coin shop, needs some updating but houses many times the building’s worth in physical silver and gold, or, real money. Unfortunately, less than 1% of the folks passing by recognize the difference.
Folks living in the US are at a real crossroads. Monetary confusion influences them to ...
For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realise that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance. - George Orwell, "1984"
The ability to perceive and understand the truth about Government/Federal Reserve/Industry economic reports is getting more difficult for those who only look at the headlines or take a cursory glance at the story, without delving into the details. I'm sure eventually, if Orwell's vision plays out accurately even further than it has already, the details behind the headlines will be conveniently obfuscated - “Yes, sometimes two plus two is four. But sometimes it’s five or even three. Sometimes it’s all of those at the same time.” (from "1984").
So today the NY Fed released its monthly Empire State Manufacturing report, which showed that the general index increased from April's decline. But the new orders index was -6.7, shipments index was -11.8%, unfilled orders -14.5%, labor index -10. I believe the source of the increase was derived from prices paid, +21, and prices received, +11.3. There was an increase in the "outlook," a touch-feely sentiment poll, but the 6-month future outlook was negative.
In fact, beneath the headline number the report was down-right ugly. You can check my ability to read and copy numbers here: Empire State Manufacturing Survey. ...
This is a must read. Click through for the full piece.
With continued volatility in key global markets, today 40-year veteran, Robert Fitzwilson, wrote another absolutely extraordinary piece. Fitzwilson, who is founder of The Portola Group, put together the following masterpiece exclusively for King World News
Fitzwilson: “Alexander the Great is the source of a phrase used in modern times to describe resolving an apparently unsolvable problem by ‘thinking out of the box’. While traveling in modern day Turkey near a region called Phrygia, Alexander deviated from his march to visit a city called Gordium.
He was keenly aware of a prophecy that surrounded a cart and a yoke held together by a knot of cornel bark. The prophecy foretold that the person who could untie the knot would rule all of Asia. Many had tried, but none had succeeded. It was apparently so for the impetuous Alexander....
This is an interesting read. I enjoy the inclusion of history lessons. After all, gold has been around since the time of Alexander the Great.
Gold continues to suffer under a cloud of bearish expectations. Its price has been trending lower for some 20 months now - and, at recent lows, it is off some 30 percent from the September 2011 all-time high of $1924.
A growing number of investors, analysts, and journalists are already writing obituaries for the decade-long bull market and foresee only a grim future for the yellow metal. These naysayers, most prominently economist Nouriel Roubini who gained some renown for predicting the financial-market debacle of 2008, point to a number factors to support their bearish predictions.
They say inflation will remain subdued, the U.S. dollar will continue to appreciate, interest rates will rise, Europe will pull through without sovereign defaults, and the central banks of some deeply indebted countries with substantial gold reserves (like Italy or Spain) may sell some of their official gold reserves. Moreover, they say gold has been over-hyped and don’t see why investors would want to own an asset that earns no income.
It seems to me that the bears have a fairly provincial view and a limited understanding of gold’s increasingly bullish long-term fundamentals. By “provincial” I mean they are ignoring more than half the world - the half that loves gold and will accumulate more. They seem to think not much is important to the future of gold outside the United States and Europe. ...
“At some point, and there may make hints of that, they may cut back a little bit, but the reality is the Fed has to continue to pour money into this economy. If you look at median incomes, they have plunged for the average family since the beginning of the century.
When you look at oil prices bordering on $100 a barrel, that $100 level is a much, much harder hit than it was 5 or 6 years ago because median incomes are so much lower. The only strong point we have in this economy is housing. Is the Fed going to pull the rug out and watch everything collapse again? No. So I think the Fed eliminating QE is a false worry. ...
Click through for what he has to say on gold and silver.
Eric King interviewed Rick Rule on his recent tour of Europe. Here's a snippet I found interesting. Click over for the full piece:
In London the people there are creatures of markets, and the markets are in total disarray. When I lectured in London about the differences between liquidity and solvency, that is the market seems to be fairly quiescent as a consequence of all of the liquidity, but with the overhanging issue of solvency, the institutional investors absolutely got it.
I would describe them (institutional investors in London) as absolutely terrified. I was in the offices of a broker in London, a broker that did extraordinarily well last decade, and they have to be concerned because they have high quality people doing absolutely nothing right now. So I would describe the mood of the institutional investors as quietly terrified.
If anyone is still not convinced that surging stock bourses in Europe are indicative of anything more than central bank liquidity, carry trade allocation and localized asset bubbles, we present a snapshot of what is actually happening on the ground...
(BullionStreet): Hassan Rouhani's victory in ultra orthodox Iran raised hopes not only for Iranians but for the western world that imposed sanctions against them.
What Rouhani do to move away immediately from Ahmedinejad's policies to make an impression on Iranians and the rest of the world is yet to be revealed but his victory has already created a positive impact on country's gold and share markets.
Analysts said victory of the only reformist candidate in the elections could signify more tempered policies toward bringing balance in the country's beleaguered economic and political scene.
According to earlier reports, price of gold and the dollar drops after the election results. The price of gold in Iran had risen sharply due to western sanctions as people began brisk buying to safeguard from climbing inflation.
Analysts said gold prices would remain on the lower side at least till Rouhani sworn in as president in August. ...
With the Fed kicking off its two-day meeting, today James Turk warned King World News that investors need to be prepared for global markets and the banking system to “literally collapse.” Turk also spoke about what Western central planners face going forward and the accompanying market risks and dangers.
...“The Fed has this silly notion that if people believe inflation is not a problem, then it won't be a problem. So we hear from Mr Bernanke time and again that “inflation expectations” are “well anchored,” regardless of what might actually be happening to the price of food or gasoline.
Listening to some of these pronouncements one would never guess that crude oil is trading over $98 a barrel today which is the highest price this year - until of course you go to the gas station and face reality at the pump. Are people really so foolish to believe a Fed announcement, or the US government's doctored CPI number, that inflation is not a problem when the rising cost of living continues to erode the living standards of America's middle class? I don't think so, and this highlights the point that is about to be put to a test tomorrow. ...
When the Cypriot government forced account holders to cover bank losses earlier this year most of the world assumed this was a one-off event, limited only to the people of Cyprus.
Though warnings urging depositors to get their money out of banks spread across the world, few have taken them seriously.
Perhaps now they’ll reconsider. We’re all familiar with bail-outs, as in the government rescuing failed institutions, namely banks, by injecting them with tens of billions of dollars to prevent collapse.
But have you ever heard of a bail-in?
Japan’s Financial Services Agency will enact new rules that will forced failed bank losses on investors, if needed, via a mechanism known as a “bail-in,” according to The Nikkei. Mitsubishi UFJ (MTU), Mizuho Financial (MFG) and Sumitomo Mitsui (SMFG) are among those proposing amendments to allow them to issue the types of preferred shares or subordinated bonds that would be used in such cases, the report noted.
I had the great opportunity last week to connect with legendary 'mine-finder', Bob Quartermain, President and CEO of Pretium Resources...
In moving on to the subject of physical gold; Bob is known for traveling around the world regularly, updating shareholders of Pretium on operational progress of the company. During his free time on those trips—he visits gold shops.
“I recently came back from a trip to the Middle East,” Bob explained,“When the gold price (on paper), was falling to recent lows of $1350. And when I [went] to the gold souks in the evening either in Doha or in Dubai, it was just full of people in there, trying to buy gold jewelry and bars. So there was this real disconnect, between the physical attraction for gold, and what was going on in the paper markets.”
Further reflecting on the fundamentals of gold, Bob added that, “I’ve been a precious metals bull all my life…[and a] component of my portfolio is in physical gold…it always has a bid, it’s transportable, you can carry it, and you can turn it into cash fairly quickly. You can sell a gold equity and you may need a few days of settlement on that, [but] if you take a gold bar into a bank, you get immediate cash for it.”
The purveyors of this piece of media re-direct/distraction forgot to tell us that QE isn't intended to help the economy. It's intended to keep the too big to fail banks - both domestic and foreign - solvent and to keep the Government outfitted with low-cost Treasury bond financing.
Stock and bond prices both here and abroad have been going up and down like a yoyo lately. Some of you must be wondering what the heck is going on here?
Well, here is my opinion. Investors globally have become addicted to newly created free money ever since 2009. Therefore, when Federal Reserve Chairman Bernanke intimated on May 22 that the free money will “Taper”, the markets have been acting similar to how heroin addicts would respond if they knew their drug would not be available anymore.
Specifically stocks and bonds have both been rising and falling depending upon the most recent rumor about when the Fed will Taper. US stocks have gone down 1%+ when it seems as if Tapering is imminent and then rebound 1% when it doesn’t. As to bonds, the 10 year Treasury was yielding well under 2% before the “Taper” comment and now is trading around 2.2%. As a result of the threat of higher interest rates and lower bond prices; bond funds ...
Gold, which attracted white settlers from the west and paved the way for modern Australia remained a key income generator for the country even today.
CANBERRA(BullionStreet): Gold production in Australia, one of the world's largest gold produces, would continued to maintain current levels despite a 5 percent drop in first quarter this year, according to Surbiton and Associates.
Inclement weather disrupted productions in Western Australia, where roughly 80 percent of Australia's gold is mined, it added.
In it's latest Gold Quarterly Review, Surbiton said just 63.5 tonnes of the shiny metal were pulled from the ground in the three months to March this year, but that amount is set to rise.
It said the recent decrease in gold price will see miners target higher grade ore in the coming months. ...
After sharp increase in gold import in April-May gold imports are likely to come down significantly in June. RBI blocked consignment import route for domestic market and the central government imposing 2% additional import duty is expected to result in fall in gold import in June.
I am very confused by the constant bombardment of the news headlines that tend to contradict each other. One begins to wonder if the “ARMS” race media outlets are running is to craft headlines that have the greatest market impact. In a world of keyword algo readers, the market impact can be immense in a mereTWO SECONDS.
Last week it was the economic lightweight Jon Hilsenrath writing that traders and investors were misinterpreting the Bernanke hints at tapering and the FED’s QE program would remain in place longer than the markets were anticipating. It was thought, as usual, that the Hilsenrath piece was a planted piece by the Bernanke-led communications team. ...
Glad to see someone else speak this. I've pretty much come to that conclusion the media and the markets.
I am privileged to present a comprehensive yet succinct two-part account of the banking/debt crisis in Cyprus, prepared by a knowledgeable resident of that nation.Why do the debt crisis in Cyprus and the subsequent "bail-in" confiscation of bank depositors' money matter? They matter for two reasons:
1. The banking/debt crisis in Cyprus shares many characteristics with other banking/debt crises.
2. The official Eurozone resolution of the crisis--the "bail-in" confiscation of 60% of bank depositors' cash in an involuntary exchange for shares in the bank (which are unlikely to have any future value)--may provide a template for future official resolutions of other banking/debt crises.
In other words, since the banking/debt crisis in Cyprus is hardly unique, we can anticipate the resolution (confiscation of deposits) may be applied elsewhere.
Readers may recall that the initial resolution in Cyprus called for all depositors to accept a "haircut" (the harmless-sounding vernacular for confiscation). This triggered widespread outrage, and was soon amended to exempt the first 100,000 euros on deposit. 60% of the remaining "uninsured" deposits would be confiscated and involuntarily exchanged for bank shares, in two tranches of 37.5% and 22.5%: Bank of Cyprus starts process of turning uninsured deposits into stocks (April 29, 2013)
In sum, it's extremely important to understand the real story of the Cyprus Debt Crisis to be able to sort out which features of the situation may be considered unique and which ones are shared by other banking/debt crises. ...