Tag: news

In what is the most remarkable news of the day, which has so far passed very quietly under the radar, Fosun International, China’s largest private-owned conglomerate which invests in commodities, properties and pharmaceuticals also known as “Shanghai’s Hutchison Whampoa”, announced in a statement filed just as quietly with the Hong Kong stock exchange, that it had purchased JPM’s iconic former headquarters, the tower built by none other than David Rockefeller, at 1 Chase Manhattan Plaza for a measly $725 million.

Here is Bloomberg described the transaction:

Over the past year, other Chinese developers and wealthy investors have been buying real estate in the U.S.

 

China Vanke Co., the biggest homebuilder listed in mainland China, said in February it joined a residential real estate venture in San Francisco. The families of Zhang Xin, co-founder of Soho China Ltd. (410), the biggest developer in Beijing’s central business district, and Brazilian banking billionaire Moise Safra this year bought a 40 percent stake in New York’s General Motors Building.

 

The landmark 1 Chase Manhattan Plaza, designed by architect Gordon Bunshaft and built in the 1950s, was once the headquarters of Chase Manhattan Bank. Rockefeller, as head of the bank’s building committee, selected the site and oversaw its construction.

 

JPMorgan intends to relocate about 4,000 employees, most of the people who work in the 60-story skyscraper, to other New York locations, Brian Marchiony, a spokesman, said in August. JPMorgan occupies about half of its space.

None of this is particularly newsworthy What is, however, is what Zero Hedge exclusively reported back in March, namely that the very same former JPM HQ at 1 Chase Manhattan Plaza is also the building that houses the firm’s commercial gold vault: incidentally, the largest in the world.

Recall:

What do we know about 1 Chase Manhattan Plaza. Well, aside from the fact that the 60-story structure, built in the 1950s, was the headquarters of the once-legendary Chase Manhattan corporation, and which when it was built was the world’s sixth tallest building, not much.

So we set off to learn more.

To learn more, we first went to the motherlode: the Landmarks Preservation Commission, whose report on 1 CMP describes everyone one wants to know about this building and then much more, such as that:

One Chase Manhattan Plaza combines three main components: a 60-story tower, a 2½ acre plaza, and a 6-story base, of which 5 floors are beneath grade.

So the old Chase HQ, once the stomping grounds of one David Rockefeller, and soon to be the other half of JPMorgan Chase, has 5 sub-basements, just like the NY Fed…

Reading on:

Excavations, said to be the largest in New York City history, reached a depth of 90 feet

Or, about the same depth as the bottom-most sub-basement under the NY Fed…

But then we hit the jackpot:

Originally constructed with white marble terrazzo paving and enclosed by a solid parapet of white marble travertine that was personally selected by Bunshaft in Tivoli, Italy, the L-shaped plaza levels the sloping site and conceals six floors of operations that would have been difficult to fit into a single floor of the tower, including an auditorium seating 800 [and] the world’s largest bank vault.

And there you have it: the JPM vault, recommissioned to become a commercial vault, just happens to also be the “world’s largest bank vault.”

Digging some more into the curious nature of this biggest bank vault in the world, we learn the following, courtesy of a freely available book written by one of the architects:

On the lowest level was the vault, which rested directly on the rock – the “largest bank vault in the world, longer than a football field.” It was anchored to the bedrock with steel rods. This was to prevent the watertight, concrete structure from floating to the surface like a huge bubble in the event that an atomic bomb falling in the bay would blow away the building and flood the area.

In other words, the world’s biggest bank vault, that belonging to the private Chase Manhattan empire, and then, to JPMorgan, was so safe, the creators even had a plan of action should it sustain a near-direct hit from a nuclear bomb, and suffer epic flooding (such as that from Hurricane Sandy).

* * *

So, what the real news of today is not that JPM is selling its gold vault, we knew that two months ago, or that it is outright looking to exit the physical commodities business, that too was preannounced. What is extremely notable is that in one very quiet transaction, China just acquired the building that houses the world’s largest gold vault.

Why? We don’t know. We do know that China’s gross gold imports from Hong Kong alone have amounted to over 2000 tons in the past two years. This excludes imports from other sources, and certainly internal gold mining and production.

One guess: China has decided it has its fill of domestically held gold and is starting to acquire gold warehouses in the banking capitals of the world.

For now the reason why is unclear but we are confident the answer will present itself shortly.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/CONAFr4cDok/story01.htm Tyler Durden

In what is the most remarkable news of the day, which has so far passed very quietly under the radar, Fosun International, China’s largest private-owned conglomerate which invests in commodities, properties and pharmaceuticals also known as “Shanghai’s Hutchison Whampoa”, announced in a statement filed just as quietly with the Hong Kong stock exchange, that it had purchased JPM’s iconic former headquarters, the tower built by none other than David Rockefeller, at 1 Chase Manhattan Plaza for a measly $725 million.

Here is Bloomberg described the transaction:

Over the past year, other Chinese developers and wealthy investors have been buying real estate in the U.S.

 

China Vanke Co., the biggest homebuilder listed in mainland China, said in February it joined a residential real estate venture in San Francisco. The families of Zhang Xin, co-founder of Soho China Ltd. (410), the biggest developer in Beijing’s central business district, and Brazilian banking billionaire Moise Safra this year bought a 40 percent stake in New York’s General Motors Building.

 

The landmark 1 Chase Manhattan Plaza, designed by architect Gordon Bunshaft and built in the 1950s, was once the headquarters of Chase Manhattan Bank. Rockefeller, as head of the bank’s building committee, selected the site and oversaw its construction.

 

JPMorgan intends to relocate about 4,000 employees, most of the people who work in the 60-story skyscraper, to other New York locations, Brian Marchiony, a spokesman, said in August. JPMorgan occupies about half of its space.

None of this is particularly newsworthy What is, however, is what Zero Hedge exclusively reported back in March, namely that the very same former JPM HQ at 1 Chase Manhattan Plaza is also the building that houses the firm’s commercial gold vault: incidentally, the largest in the world.

Recall:

What do we know about 1 Chase Manhattan Plaza. Well, aside from the fact that the 60-story structure, built in the 1950s, was the headquarters of the once-legendary Chase Manhattan corporation, and which when it was built was the world’s sixth tallest building, not much.

So we set off to learn more.

To learn more, we first went to the motherlode: the Landmarks Preservation Commission, whose report on 1 CMP describes everyone one wants to know about this building and then much more, such as that:

One Chase Manhattan Plaza combines three main components: a 60-story tower, a 2½ acre plaza, and a 6-story base, of which 5 floors are beneath grade.

So the old Chase HQ, once the stomping grounds of one David Rockefeller, and soon to be the other half of JPMorgan Chase, has 5 sub-basements, just like the NY Fed…

Reading on:

Excavations, said to be the largest in New York City history, reached a depth of 90 feet

Or, about the same depth as the bottom-most sub-basement under the NY Fed…

But then we hit the jackpot:

Originally constructed with white marble terrazzo paving and enclosed by a solid parapet of white marble travertine that was personally selected by Bunshaft in Tivoli, Italy, the L-shaped plaza levels the sloping site and conceals six floors of operations that would have been difficult to fit into a single floor of the tower, including an auditorium seating 800 [and] the world’s largest bank vault.

And there you have it: the JPM vault, recommissioned to become a commercial vault, just happens to also be the “world’s largest bank vault.”

Digging some more into the curious nature of this biggest bank vault in the world, we learn the following, courtesy of a freely available book written by one of the architects:

On the lowest level was the vault, which rested directly on the rock – the “largest bank vault in the world, longer than a football field.” It was anchored to the bedrock with steel rods. This was to prevent the watertight, concrete structure from floating to the surface like a huge bubble in the event that an atomic bomb falling in the bay would blow away the building and flood the area.

In other words, the world’s biggest bank vault, that belonging to the private Chase Manhattan empire, and then, to JPMorgan, was so safe, the creators even had a plan of action should it sustain a near-direct hit from a nuclear bomb, and suffer epic flooding (such as that from Hurricane Sandy).

* * *

So, what the real news of today is not that JPM is selling its gold vault, we knew that two months ago, or that it is outright looking to exit the physical commodities business, that too was preannounced. What is extremely notable is that in one very quiet transaction, China just acquired the building that houses the world’s largest gold vault.

Why? We don’t know. We do know that China’s gross gold imports from Hong Kong alone have amounted to over 2000 tons in the past two years. This excludes imports from other sources, and certainly internal gold mining and production.

One guess: China has decided it has its fill of domestically held gold and is starting to acquire gold warehouses in the banking capitals of the world.

For now the reason why is unclear but we are confident the answer will present itself shortly.

 

The investment media regularly proclaims that Gold is a terrible investment and that investors should shun it in favor of stocks.

 

However, the fact of the matter is that Gold has dramatically outperformed the stock market for the better part of 40 years.

 

I say 40 years because there is no point comparing Gold to stocks during periods in which Gold was pegged to world currencies. Most of the analysis I see comparing the benefits of owning Gold to stocks goes back to the early 20^th century.

 

However Gold was pegged to global currencies up until 1967. Stocks weren’t. Comparing the two during this time period is just bad analysis.

 

However, once the Gold peg officially ended with France dropping it in 1967, the precious metal has outperformed both the Dow and the S&P 500 by a massive margin.

 

 

See for yourself… the above chart is in normalized terms courtesy of Bill King’s The King Report.

 

According to King, Gold has risen 37.43 fold since 1967. That is more than twice the performance of the Dow over the same time period (18.45 fold). So much for the claim that stocks are a better investment than Gold long-term.

 

Indeed, once Gold was no longer pegged to world currencies there was only a single period in which stocks outperformed the precious metal. That period was from 1997-2000 during the height of the Tech Bubble (the single biggest stock market bubble in over 100 years).

 

That’s Gold as a long-term investment. But what about as a short-term investment?

 

Since the Crash hit in 2008, the price of Gold has been very closely correlated to the Fed’s balance sheet expansion. Put another way, the more money the Fed printed, the higher the price of Gold went.

 

Gold did become overextended relative to the Fed’s balance sheet in 2011 when it entered a bubble with Silver.  However, with the Fed now printing some $85 billion per month, the precious metal is now significantly undervalued relative to the Fed’s balance sheet.

 

Indeed, for Gold to even realign based on the Fed’s actions, it would need to be north of $1,800. That’s a full 30% higher than where it trades today.

 

 

Thus we have an asset class that historically has outperformed stocks, trading at a discount to the primary driver of its prices in the last five years. Seems like a set up worth considering….

 

For more market insights as well as several FREE investment reports, swing by:

http://gainspainscapital.com

 

Best Regards

Phoenix Capital Research

 

 

 

 

 

 

 

 

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/5_uWoRu0DiQ/story01.htm Phoenix Capital Research

 

The investment media regularly proclaims that Gold is a terrible investment and that investors should shun it in favor of stocks.

 

However, the fact of the matter is that Gold has dramatically outperformed the stock market for the better part of 40 years.

 

I say 40 years because there is no point comparing Gold to stocks during periods in which Gold was pegged to world currencies. Most of the analysis I see comparing the benefits of owning Gold to stocks goes back to the early 20^th century.

 

However Gold was pegged to global currencies up until 1967. Stocks weren’t. Comparing the two during this time period is just bad analysis.

 

However, once the Gold peg officially ended with France dropping it in 1967, the precious metal has outperformed both the Dow and the S&P 500 by a massive margin.

 

 

See for yourself… the above chart is in normalized terms courtesy of Bill King’s The King Report.

 

According to King, Gold has risen 37.43 fold since 1967. That is more than twice the performance of the Dow over the same time period (18.45 fold). So much for the claim that stocks are a better investment than Gold long-term.

 

Indeed, once Gold was no longer pegged to world currencies there was only a single period in which stocks outperformed the precious metal. That period was from 1997-2000 during the height of the Tech Bubble (the single biggest stock market bubble in over 100 years).

 

That’s Gold as a long-term investment. But what about as a short-term investment?

 

Since the Crash hit in 2008, the price of Gold has been very closely correlated to the Fed’s balance sheet expansion. Put another way, the more money the Fed printed, the higher the price of Gold went.

 

Gold did become overextended relative to the Fed’s balance sheet in 2011 when it entered a bubble with Silver.  However, with the Fed now printing some $85 billion per month, the precious metal is now significantly undervalued relative to the Fed’s balance sheet.

 

Indeed, for Gold to even realign based on the Fed’s actions, it would need to be north of $1,800. That’s a full 30% higher than where it trades today.

 

 

Thus we have an asset class that historically has outperformed stocks, trading at a discount to the primary driver of its prices in the last five years. Seems like a set up worth considering….

 

For more market insights as well as several FREE investment reports, swing by:

http://gainspainscapital.com

 

Best Regards

Phoenix Capital Research

 

 

 

 

 

 

 

 

 

 

 

BANZAI7 NEWS–A Japanese company, Acme Fukuppy Enterprises, has launched anti-radiation swimwear and underwear as Fukushima nuclear crisis spirals towards the Tokyo Radiation Olympics.

The products are clearly targeting high-risk dare devil workers in and around the waste water sopped Fukushima nuclear power plant as well as Olympic swimmers.

However, the clothing, which is designed as an additional form of protection alongside conventional anti-radiation jock straps worn by workers at the plant, is not cheap: the swimwear will sell for Y105,000 (£663) and the underwear for Y80,850 (£511).

Workers will be able to acquire the safety garments in lieu of the payment of salary and a free seasonal parking pass at Fukushima Beach.

 

 

.

 

.

 

A Plumbing We Will Go…

.

 

 

 

 

[No we did not make this up: Link]

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/14ytH0OVAwQ/story01.htm williambanzai7

 

BANZAI7 NEWS–A Japanese company, Acme Fukuppy Enterprises, has launched anti-radiation swimwear and underwear as Fukushima nuclear crisis spirals towards the Tokyo Radiation Olympics.

The products are clearly targeting high-risk dare devil workers in and around the waste water sopped Fukushima nuclear power plant as well as Olympic swimmers.

However, the clothing, which is designed as an additional form of protection alongside conventional anti-radiation jock straps worn by workers at the plant, is not cheap: the swimwear will sell for Y105,000 (£663) and the underwear for Y80,850 (£511).

Workers will be able to acquire the safety garments in lieu of the payment of salary and a free seasonal parking pass at Fukushima Beach.

 

 

.

 

.

 

A Plumbing We Will Go…

.

 

 

 

 

[No we did not make this up: Link]

Today’s AM fix was USD 1,317.00, EUR 962.09 and GBP 813.16 per ounce.
Yesterday’s AM fix was USD 1,308.50, EUR 959.87 and GBP 813.09 per ounce.

Gold climbed $40.20 or 3.14% yesterday, closing at $1,319.70/oz. Silver rose $0.53 or 2.49% closing at $21.80. Platinum jumped $44.84 or 3.2% to $1,432.74/oz, while palladium soared $23.50 or 3.3% to $737.50 /oz.

 

COMEX Gold In U.S. Dollars and Volumes – October 17

Gold is 3.5% higher for the week and headed for its best weekly gain in two months due to concerns about the latest episode of fiscal “can kicking” in Washington after U.S. politicians reached another temporary budget deal.

Besides the extension in the U.S. debt ceiling, gold also got traction after the increasingly influential Chinese credit rating agency, Dagong, downgraded the U.S.

The move higher was encouraging as it was on high volume with broad based buying seen.
During the gold surge COMEX gold saw volumes at 80% above the 100 day average for this time.

Physical buyers were evident too as the uncertainty of recent weeks came to a close … for now.
U.S. politicians have set the stage for another standoff as soon as January as the deal reached earlier this week only lasts until early next year. This will support gold and lead to continued safe haven buying.

Gold in USD and Debt Ceiling – Quarterly, 1933-2013 (Bloomberg)

Premiums in China and India remained robust overnight. Shanghai premiums are at $18 over spot and in Mumbai premiums remain extremely high near record highs at $100 per ounce.

Bullion premiums in western markets have not seen any movement due to the recent slowdown. Gold bullion bars (1 oz) are trading at $1,377.52/oz (up from $1,335.25 last week) or premiums of between 3.75% and 4.5%, and gold  bars (1 kilo) are trading at $43,864/oz (up from $42,602 last week) or premiums of between 3% and 3.5%.

Gold and Silver in USD and Debt Ceiling – Quarterly, 2000-2013 (Bloomberg)

The fact that gold forward offered rates have gone negative this week and remain so today suggests there remains difficulty in sourcing large London Good Delivery bars in volume which will be supportive of gold.

Reuters Precious Metals Poll (Q4, 2013)
1. Reuters: Where do you expect gold prices to end this year?
GoldCore: We expect gold prices to end 2013 around the $1,450-1,550/oz. This would be a gain of between 10% and 17%.

2. Reuters: What will bring gold prices out of the overall downtrend we’ve seen so far this year?

GoldCore: Significant physical demand from Asia, especially from China and official sector foreign exchange diversification.

Also, the risk of a continuing debt crisis in the U.S. and a re-emergence of the Eurozone debt crisis should lead to safe haven diversification in western markets.

3. Reuters: Do you see further systemic risk to the euro-zone having an impact?

GoldCore: Yes. Much of the Eurozone remains a basket case with Portugal, Spain, Italy and of course Greece very susceptible to a new sovereign debt crisis and bail-ins which will lead to renewed contagion risk.
Japan and the UK have their severe fiscal challenges.

4. Reuters: How will demand for silver, platinum and palladium be affected by the wider macroeconomic picture?

GoldCore: All precious metals now have favourable supply demand characteristics and we believe that diversification and even small allocations to silver, platinum and palladium should propel prices higher. In the event of a severe deflationary event or a global Depression, the PGM metals would be vulnerable as would silver to a degree but gold would benefit due to safe haven demand for an asset that cannot default, be “bailed-in” or go bankrupt.

Gold Is A”Reserve Of Safety” – Draghi of ECB
Dr. Mario Draghi, former Governor of the Bank of Italy and the current President of the European Central Bank (ECB), during an open forum at Harvard’s Kennedy School of Government, answered a question about gold and why central banks want gold and what value it offers.

Larry Summers, also in attendance, introduced Draghi and expressed his belief in Draghi’s having “saved the European continent in 2012.”

Tekoa Da Silva, Bull Market Thinking Question: 
Dr. Draghi what are your thoughts on gold as a reserve asset, you have the central banks like China and  Russia increasing their reserves especially in the last 10 years, Germany for example asking for its holdings back from New York, it doesn’t offer any income unless its leased,  why do you think they would want that and what value do you think it will offers in your opinion?

Mario Draghi, ECB. Answer:
“Well you’re also asking this to the former Governor of the Bank of Italy, and the Bank of Italy is the fourth largest owner of gold reserves in the world, which is out of all proportion to the size of the country. But I never thought it wise to sell it, because for central banks this is a reserve of safety, it’s viewed by the country as such. In the case of non-dollar countries it gives you a value-protection against fluctuations against the dollar, so there are several reasons, risk diversification and so on. So that’s why central banks which have started a program for selling gold a few years ago, substantially I think stopped…most of the experiences of central banks that have leased or sold the stock of gold about ten years ago, were not considered to be terribly successful from a purely money viewpoint.”

Tekoa Da Silver of Bull Market Thinking (see commentary) summed up the view of Draghi and the ECB on gold quite well:

“A key takeaway from Draghi’s commentary should be the point that while many still debate the value of gold as an asset class, and whether or not it remains in a bull market—central banks are quietly accumulating the metal in ton-sized increments, and as Draghi implied, with plans of never selling it.

When the president of a banking organization which arguably controls trillions of dollars (or euros in this case), indicates it to be “unwise” to sell core gold holdings—what more needs to be said for the individual? Can we not all, “Be our own central bank”, as economist Marc Faber is known for having stated?

Gold in USD and Debt Ceiling – 2011 (Bloomberg)

U.K. Gold Exports to Switzerland Fell in August From Record Levels
U.K. gold exports to Switzerland fell in August. Exports were 98.5t, down from 120.1t in July and the lowest since record levels seen in February, Macquarie says.

Exports to Hong Kong and UAE, next largest destinations, also fell from record levels.
‘Reduced level of exports is in line with lower outflows from gold ETFs in July, supporting our theo
ry that the U.K.’s exports in 2013 have been of sold ETF gold, which is being sent to Switzerland for transformation into bars and other products conducive to Asian consumers or possibly to be vaulted there instead’.’

Russian Launches Physically Backed Gold ETF On Irish Stock Exchange and Moscow Exchange
Russia’s first gold-backed exchange-traded fund has been launched as part of a bid to turn Moscow into an international financial centre.

The FinEx Physically Held Gold ETF fund has been listed on the Irish Stock Exchange and cross listed on the Moscow Exchange, tracks the gold price as calculated using the London Gold Fixing Price, FinEx said. Shares will be available in U.S. dollars but also traded in Russian roubles.

Moscow Exchange, Russia’s stock exchange, plans to launch spot trading in gold and silver this month. Russia’s over-the-counter market in gold is currently dominated by large banks such as Sberbank and VTB .

U.S. Mint October Gold-Coin Sales Exceed September Total
The U.S. Mint’s sales of American Eagle gold coins have reached 22,000 ounces so far this month, according to figures from the Mint’s website. Sales totaled 13,000 ounces in September.

The American Eagle 1 ounce Silver bullion coin is the official U.S. national silver bullion coin, and is the world’s most widely sold 1 oz silver coin. Everything you need to know about the world’s most popular silver bullion coin – download your comprehensive guide to the American Silver Eagle here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/w7RiK-aza90/story01.htm GoldCore

Today’s AM fix was USD 1,317.00, EUR 962.09 and GBP 813.16 per ounce.
Yesterday’s AM fix was USD 1,308.50, EUR 959.87 and GBP 813.09 per ounce.

Gold climbed $40.20 or 3.14% yesterday, closing at $1,319.70/oz. Silver rose $0.53 or 2.49% closing at $21.80. Platinum jumped $44.84 or 3.2% to $1,432.74/oz, while palladium soared $23.50 or 3.3% to $737.50 /oz.

 

COMEX Gold In U.S. Dollars and Volumes – October 17

Gold is 3.5% higher for the week and headed for its best weekly gain in two months due to concerns about the latest episode of fiscal “can kicking” in Washington after U.S. politicians reached another temporary budget deal.

Besides the extension in the U.S. debt ceiling, gold also got traction after the increasingly influential Chinese credit rating agency, Dagong, downgraded the U.S.

The move higher was encouraging as it was on high volume with broad based buying seen.
During the gold surge COMEX gold saw volumes at 80% above the 100 day average for this time.

Physical buyers were evident too as the uncertainty of recent weeks came to a close … for now.
U.S. politicians have set the stage for another standoff as soon as January as the deal reached earlier this week only lasts until early next year. This will support gold and lead to continued safe haven buying.

Gold in USD and Debt Ceiling – Quarterly, 1933-2013 (Bloomberg)

Premiums in China and India remained robust overnight. Shanghai premiums are at $18 over spot and in Mumbai premiums remain extremely high near record highs at $100 per ounce.

Bullion premiums in western markets have not seen any movement due to the recent slowdown. Gold bullion bars (1 oz) are trading at $1,377.52/oz (up from $1,335.25 last week) or premiums of between 3.75% and 4.5%, and gold  bars (1 kilo) are trading at $43,864/oz (up from $42,602 last week) or premiums of between 3% and 3.5%.

Gold and Silver in USD and Debt Ceiling – Quarterly, 2000-2013 (Bloomberg)

The fact that gold forward offered rates have gone negative this week and remain so today suggests there remains difficulty in sourcing large London Good Delivery bars in volume which will be supportive of gold.

Reuters Precious Metals Poll (Q4, 2013)
1. Reuters: Where do you expect gold prices to end this year?
GoldCore: We expect gold prices to end 2013 around the $1,450-1,550/oz. This would be a gain of between 10% and 17%.

2. Reuters: What will bring gold prices out of the overall downtrend we’ve seen so far this year?

GoldCore: Significant physical demand from Asia, especially from China and official sector foreign exchange diversification.

Also, the risk of a continuing debt crisis in the U.S. and a re-emergence of the Eurozone debt crisis should lead to safe haven diversification in western markets.

3. Reuters: Do you see further systemic risk to the euro-zone having an impact?

GoldCore: Yes. Much of the Eurozone remains a basket case with Portugal, Spain, Italy and of course Greece very susceptible to a new sovereign debt crisis and bail-ins which will lead to renewed contagion risk.
Japan and the UK have their severe fiscal challenges.

4. Reuters: How will demand for silver, platinum and palladium be affected by the wider macroeconomic picture?

GoldCore: All precious metals now have favourable supply demand characteristics and we believe that diversification and even small allocations to silver, platinum and palladium should propel prices higher. In the event of a severe deflationary event or a global Depression, the PGM metals would be vulnerable as would silver to a degree but gold would benefit due to safe haven demand for an asset that cannot default, be “bailed-in” or go bankrupt.

Gold Is A”Reserve Of Safety” – Draghi of ECB
Dr. Mario Draghi, former Governor of the Bank of Italy and the current President of the European Central Bank (ECB), during an open forum at Harvard’s Kennedy School of Government, answered a question about gold and why central banks want gold and what value it offers.

Larry Summers, also in attendance, introduced Draghi and expressed his belief in Draghi’s having “saved the European continent in 2012.”

Tekoa Da Silva, Bull Market Thinking Question: 
Dr. Draghi what are your thoughts on gold as a reserve asset, you have the central banks like China and  Russia increasing their reserves especially in the last 10 years, Germany for example asking for its holdings back from New York, it doesn’t offer any income unless its leased,  why do you think they would want that and what value do you think it will offers in your opinion?

Mario Draghi, ECB. Answer:
“Well you’re also asking this to the former Governor of the Bank of Italy, and the Bank of Italy is the fourth largest owner of gold reserves in the world, which is out of all proportion to the size of the country. But I never thought it wise to sell it, because for central banks this is a reserve of safety, it’s viewed by the country as such. In the case of non-dollar countries it gives you a value-protection against fluctuations against the dollar, so there are several reasons, risk diversification and so on. So that’s why central banks which have started a program for selling gold a few years ago, substantially I think stopped…most of the experiences of central banks that have leased or sold the stock of gold about ten years ago, were not considered to be terribly successful from a purely money viewpoint.”

Tekoa Da Silver of Bull Market Thinking (see commentary) summed up the view of Draghi and the ECB on gold quite well:

“A key takeaway from Draghi’s commentary should be the point that while many still debate the value of gold as an asset class, and whether or not it remains in a bull market—central banks are quietly accumulating the metal in ton-sized increments, and as Draghi implied, with plans of never selling it.

When the president of a banking organization which arguably controls trillions of dollars (or euros in this case), indicates it to be “unwise” to sell core gold holdings—what more needs to be said for the individual? Can we not all, “Be our own central bank”, as economist Marc Faber is known for having stated?

Gold in USD and Debt Ceiling – 2011 (Bloomberg)

U.K. Gold Exports to Switzerland Fell in August From Record Levels
U.K. gold exports to Switzerland fell in August. Exports were 98.5t, down from 120.1t in July and the lowest since record levels seen in February, Macquarie says.

Exports to Hong Kong and UAE, next largest destinations, also fell from record levels.
‘Reduced level of exports is in
line with lower outflows from gold ETFs in July, supporting our theory that the U.K.’s exports in 2013 have been of sold ETF gold, which is being sent to Switzerland for transformation into bars and other products conducive to Asian consumers or possibly to be vaulted there instead’.’

Russian Launches Physically Backed Gold ETF On Irish Stock Exchange and Moscow Exchange
Russia’s first gold-backed exchange-traded fund has been launched as part of a bid to turn Moscow into an international financial centre.

The FinEx Physically Held Gold ETF fund has been listed on the Irish Stock Exchange and cross listed on the Moscow Exchange, tracks the gold price as calculated using the London Gold Fixing Price, FinEx said. Shares will be available in U.S. dollars but also traded in Russian roubles.

Moscow Exchange, Russia’s stock exchange, plans to launch spot trading in gold and silver this month. Russia’s over-the-counter market in gold is currently dominated by large banks such as Sberbank and VTB .

U.S. Mint October Gold-Coin Sales Exceed September Total
The U.S. Mint’s sales of American Eagle gold coins have reached 22,000 ounces so far this month, according to figures from the Mint’s website. Sales totaled 13,000 ounces in September.

The American Eagle 1 ounce Silver bullion coin is the official U.S. national silver bullion coin, and is the world’s most widely sold 1 oz silver coin. Everything you need to know about the world’s most popular silver bullion coin – download your comprehensive guide to the American Silver Eagle here.

Submitted by James E. Miller of The Ludwig von Mises Institute of Canada,

I am not very good at self-identifying. When asked of my political affiliation, I waffle between libertarian, Rothbardian, or just straight out anarchist. Perhaps the best answer is “none.” Explaining the immoral nature of the state is too big of a feat for casual conversation. Regardless of my anti-state views, there is a soft spot for conservatism somewhere in my inner political makeup. And when I reference conservatism, I mean real conservatism; not its bastard third cousin known as neoconservatism that was birthed by Trotsky.

Hayek’s critique notwithstanding, libertarianism and conservatism overlap slightly when it comes to public policy. Both recognize the tendency of the state to become excessive with authority. The fundamentality of law is paramount in both viewpoints. The virtue of temperance is held in high regard for followers of both Rand and Burke. At times, there is conflict on the boundary of rights whether the greater good is worth violating the individual liberty of some. But fiscal issues are where the conservative and libertarian find the most common ground.

As the United States government remains partially shut down, Washington is hurtling toward its statutory debt limit of $16.7 trillion. Come sometime this week, Congress will either have to pass an extension of the cap or no more money can be borrowed. Some writers of the conservative bent have expressed worry there will be a default on the national debt if a couple of ideological Congressmen keep getting their way. Rod Dreher claims a small band of Tea Party Republicans are using the “prospect of a sovereign default as political leverage.” Commentary editor John Podhoretz calls the strategy (if there were really a tactic of shorting bondholders) “suicide of the right.” Ross Douthat, the estimable token conservative of the New York Times, labels the whole gambit “blackmail” and “much dumber and more dangerous” than the debt limit acquiescence during Reagan’s second presidential term.

These critics, for all their esteemed insights, are mistaken in their belief of the infallibility of Uncle Sam’s credit. That the thieves in Washington collect enough in tax ransom to make interest payments is not considered. Neither is the inconvenient truth that buyers of government securities are not engaging in a riskless activity – they too made an investment and thereby accept the possible consequences involved. The state’s inherent ability to fleece money for operation is limited by decree and the impending furor of a plucked populace. Placing undeniable confidence in the full faith and credit of a government is nothing but ignorant reverence to force.

That aside, Washington will still not default on owners of its bonds. Talk of such an event is downright scaremongering. President Obama and the media are leading the chorus of fearfulness in this regard, and some otherwise sharp fellows are falling under the siren song. It’s unfortunate yet understandable. The failure to pay creditors in full would be a painful blow to America’s prestige. It would also hold ramifications for the global economy if investors began a fire sale of U.S. Treasuries. Nevertheless, that hypothetical is far from realistic in the immediate future.

That doesn’t make defaulting an impossibility however. For the superior economic productivity within its borders, the U.S. government is gifted with a sizeable tax base. Still, the politicians in charge can’t help but borrow close to .40 cents of every dollar spent – and that’s just on-the-books accounting. In reality, Washington is in possession of $222 trillion in unfunded liabilities largely due to entitlement programs. Such a number is so astronomical that default is already in the cards. The question is when it will occur. Like most things in life, the medicine can be swallowed now or later down the road.

The conservative case against another raise in the debt ceiling is not grounded in politics. It is made by the prudential character of anyone who firmly understands that well-being cannot flourish by using a disease as a cure. As Russell Kirk wrote,

A conservative is not, by definition, a selfish or a stupid person; instead, he is a person who believes there is something in our life worth saving.

Debt on debt is no way to run a country, a household, or an individual bank account. By borrowing in seeming perpetuity, you preserve the good times. But it only lasts as long as your credit rating remains intact. There is always the appearance of stability in a drunk who maintains his level of intoxication. As long as the bottles of bottom-shelf whiskey keep coming, the inebriated will not have to go through the painful correction of sobering up. Not many would disagree that the comedown after a party is a necessary part of existence. But when it comes to debt, the circumstances apparently change.

The virus of progressivism, at its essence, is the belief that paradise can be created on Earth. In practice, it’s presented in a variety of efforts that attempt to hurdle the natural barriers of life that keep us from being gods. The minimum wage, hate crime prohibition, public housing, income redistribution, and tax funding for welfare are all byproducts of an ideology that thinks it can it simply wipe away the laws that govern the world. What is not realized, or is willfully ignored, is the unseen, pernicious results of all government policy. Public debt brings the pretense of prosperity while avoiding the true cost. There are several economists who assert that government liabilities don’t really matter because, in the end, we owe it to ourselves. As Rothbard wrote back in the heyday of supply-side economics,

…at least, conservatives were astute enough to realize that it made an enormous amount of difference whether — slicing through the obfuscatory collective nouns — one is a member of the “we” (the burdened taxpayer) or of the “ourselves” (those living off the proceeds of taxation).

Since taxation is always and everywhere theft, the only justified approach to government debt is total repudiation. The money that passes through the state’s hand to the creditor is tainted with the mark of crime. The correction would be tough, but the world would not end in flames. Another, less radical path is simply for the U.S. Treasury to cancel its debt held at the Federal Reserve. Since the Fed cannot go bankrupt due to the recent adoption of a questionable accounting scheme, both entities would pretty much keep to their respective gimmicks to outrun an inherent insolvency.

The whole fulcrum of the bloated American state is beyond ready for a radical deconstruction. The same goes for most nation-states in the West. The continual borrowing, serviced indiscreetly by an accommodating central bank, has made an entirety of the populace fat and happy off of debt. Large pools of capital continue to be depleted with little refreshment. In 2008, there was a massive correction in this wholly destructive process, but it was averted through government intervention. The same easy credit policy that fueled the asset bubble-and-burst is being replicated at an unprecedented rated.

This is no realistic method for operating any institution. Something has to give eventually. The conservative will often pride himself on taking a realistic view on affairs. Refusing to see the train wreck that is Washington finances means putting one’s head in the sand and hoping for sunshine and lollipops. It’s the polar opposite of a sustainable yet measured outlook toward good living.

Any conservative who places high value on civil society over the intrusion of government should balk at the prospect of a higher debt load. It makes certain that the ruling political class will not cease in their effort to infiltrate private life. Unfortunately it appears as if some otherwise sharp minds have fallen prey to the liberal device of alarmism. Keeping the status quo is a nice goal if the present state of affairs is bucolic enough. But with an increasingly militarized domestic police presence combined with a massive surveillance apparatus that has made privacy into an anachronism, the times are far from serene. Taking a hardline on the national debt would go far in reducing both of these highly viable threats to peace.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/aTuDNKdpht8/story01.htm Tyler Durden

Submitted by James E. Miller of The Ludwig von Mises Institute of Canada,

I am not very good at self-identifying. When asked of my political affiliation, I waffle between libertarian, Rothbardian, or just straight out anarchist. Perhaps the best answer is “none.” Explaining the immoral nature of the state is too big of a feat for casual conversation. Regardless of my anti-state views, there is a soft spot for conservatism somewhere in my inner political makeup. And when I reference conservatism, I mean real conservatism; not its bastard third cousin known as neoconservatism that was birthed by Trotsky.

Hayek’s critique notwithstanding, libertarianism and conservatism overlap slightly when it comes to public policy. Both recognize the tendency of the state to become excessive with authority. The fundamentality of law is paramount in both viewpoints. The virtue of temperance is held in high regard for followers of both Rand and Burke. At times, there is conflict on the boundary of rights whether the greater good is worth violating the individual liberty of some. But fiscal issues are where the conservative and libertarian find the most common ground.

As the United States government remains partially shut down, Washington is hurtling toward its statutory debt limit of $16.7 trillion. Come sometime this week, Congress will either have to pass an extension of the cap or no more money can be borrowed. Some writers of the conservative bent have expressed worry there will be a default on the national debt if a couple of ideological Congressmen keep getting their way. Rod Dreher claims a small band of Tea Party Republicans are using the “prospect of a sovereign default as political leverage.” Commentary editor John Podhoretz calls the strategy (if there were really a tactic of shorting bondholders) “suicide of the right.” Ross Douthat, the estimable token conservative of the New York Times, labels the whole gambit “blackmail” and “much dumber and more dangerous” than the debt limit acquiescence during Reagan’s second presidential term.

These critics, for all their esteemed insights, are mistaken in their belief of the infallibility of Uncle Sam’s credit. That the thieves in Washington collect enough in tax ransom to make interest payments is not considered. Neither is the inconvenient truth that buyers of government securities are not engaging in a riskless activity – they too made an investment and thereby accept the possible consequences involved. The state’s inherent ability to fleece money for operation is limited by decree and the impending furor of a plucked populace. Placing undeniable confidence in the full faith and credit of a government is nothing but ignorant reverence to force.

That aside, Washington will still not default on owners of its bonds. Talk of such an event is downright scaremongering. President Obama and the media are leading the chorus of fearfulness in this regard, and some otherwise sharp fellows are falling under the siren song. It’s unfortunate yet understandable. The failure to pay creditors in full would be a painful blow to America’s prestige. It would also hold ramifications for the global economy if investors began a fire sale of U.S. Treasuries. Nevertheless, that hypothetical is far from realistic in the immediate future.

That doesn’t make defaulting an impossibility however. For the superior economic productivity within its borders, the U.S. government is gifted with a sizeable tax base. Still, the politicians in charge can’t help but borrow close to .40 cents of every dollar spent – and that’s just on-the-books accounting. In reality, Washington is in possession of $222 trillion in unfunded liabilities largely due to entitlement programs. Such a number is so astronomical that default is already in the cards. The question is when it will occur. Like most things in life, the medicine can be swallowed now or later down the road.

The conservative case against another raise in the debt ceiling is not grounded in politics. It is made by the prudential character of anyone who firmly understands that well-being cannot flourish by using a disease as a cure. As Russell Kirk wrote,

A conservative is not, by definition, a selfish or a stupid person; instead, he is a person who believes there is something in our life worth saving.

Debt on debt is no way to run a country, a household, or an individual bank account. By borrowing in seeming perpetuity, you preserve the good times. But it only lasts as long as your credit rating remains intact. There is always the appearance of stability in a drunk who maintains his level of intoxication. As long as the bottles of bottom-shelf whiskey keep coming, the inebriated will not have to go through the painful correction of sobering up. Not many would disagree that the comedown after a party is a necessary part of existence. But when it comes to debt, the circumstances apparently change.

The virus of progressivism, at its essence, is the belief that paradise can be created on Earth. In practice, it’s presented in a variety of efforts that attempt to hurdle the natural barriers of life that keep us from being gods. The minimum wage, hate crime prohibition, public housing, income redistribution, and tax funding for welfare are all byproducts of an ideology that thinks it can it simply wipe away the laws that govern the world. What is not realized, or is willfully ignored, is the unseen, pernicious results of all government policy. Public debt brings the pretense of prosperity while avoiding the true cost. There are several economists who assert that government liabilities don’t really matter because, in the end, we owe it to ourselves. As Rothbard wrote back in the heyday of supply-side economics,

…at least, conservatives were astute enough to realize that it made an enormous amount of difference whether — slicing through the obfuscatory collective nouns — one is a member of the “we” (the burdened taxpayer) or of the “ourselves” (those living off the proceeds of taxation).

Since taxation is always and everywhere theft, the only justified approach to government debt is total repudiation. The money that passes through the state’s hand to the creditor is tainted with the mark of crime. The correction would be tough, bu
t the world would not end in flames. Another, less radical path is simply for the U.S. Treasury to cancel its debt held at the Federal Reserve. Since the Fed cannot go bankrupt due to the recent adoption of a questionable accounting scheme, both entities would pretty much keep to their respective gimmicks to outrun an inherent insolvency.

The whole fulcrum of the bloated American state is beyond ready for a radical deconstruction. The same goes for most nation-states in the West. The continual borrowing, serviced indiscreetly by an accommodating central bank, has made an entirety of the populace fat and happy off of debt. Large pools of capital continue to be depleted with little refreshment. In 2008, there was a massive correction in this wholly destructive process, but it was averted through government intervention. The same easy credit policy that fueled the asset bubble-and-burst is being replicated at an unprecedented rated.

This is no realistic method for operating any institution. Something has to give eventually. The conservative will often pride himself on taking a realistic view on affairs. Refusing to see the train wreck that is Washington finances means putting one’s head in the sand and hoping for sunshine and lollipops. It’s the polar opposite of a sustainable yet measured outlook toward good living.

Any conservative who places high value on civil society over the intrusion of government should balk at the prospect of a higher debt load. It makes certain that the ruling political class will not cease in their effort to infiltrate private life. Unfortunately it appears as if some otherwise sharp minds have fallen prey to the liberal device of alarmism. Keeping the status quo is a nice goal if the present state of affairs is bucolic enough. But with an increasingly militarized domestic police presence combined with a massive surveillance apparatus that has made privacy into an anachronism, the times are far from serene. Taking a hardline on the national debt would go far in reducing both of these highly viable threats to peace.

The corks are popping, new valuation metrics are confirming the buy signals, and everyone’s a stock-picking genius… that is the image projected by CNBC USA (and Europe) as the Russell 2000 is now up 30.6% year-to-date. However, we can only imagine the elation, exuberance, and ecstasy that would be seen day in and day out in at CNBC Venezuela as the Caracas Stock Index rises its most in a month to a new all-time record high and is now up 312.5% year-to-date…

 

 

Coming to another ‘banana republic’ soon…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zK4gtCAPO6I/story01.htm Tyler Durden

The corks are popping, new valuation metrics are confirming the buy signals, and everyone’s a stock-picking genius… that is the image projected by CNBC USA (and Europe) as the Russell 2000 is now up 30.6% year-to-date. However, we can only imagine the elation, exuberance, and ecstasy that would be seen day in and day out in at CNBC Venezuela as the Caracas Stock Index rises its most in a month to a new all-time record high and is now up 312.5% year-to-date…

 

 

Coming to another ‘banana republic’ soon…

The corks are popping, new valuation metrics are confirming the buy signals, and everyone’s a stock-picking genius… that is the image projected by CNBC USA (and Europe) as the Russell 2000 is now up 30.6% year-to-date. However, we can only imagine the elation, exuberance, and ecstasy that would be seen day in and day out in at CNBC Venezuela as the Caracas Stock Index rises its most in a month to a new all-time record high and is now up 312.5% year-to-date…

 

 

Coming to another ‘banana republic’ soon…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zK4gtCAPO6I/story01.htm Tyler Durden

The corks are popping, new valuation metrics are confirming the buy signals, and everyone’s a stock-picking genius… that is the image projected by CNBC USA (and Europe) as the Russell 2000 is now up 30.6% year-to-date. However, we can only imagine the elation, exuberance, and ecstasy that would be seen day in and day out in at CNBC Venezuela as the Caracas Stock Index rises its most in a month to a new all-time record high and is now up 312.5% year-to-date…

 

 

Coming to another ‘banana republic’ soon…

We already highlighted the return of gold lease rates to subzero yesterday, during the dramatic spike in gold following Gartman’s latest sell recommendation. Now, it is time for the banks to also begin admitting that, as SocGen has just pointed out, the gold “physical squeeze returns.”

Why is this relevant? First, we present SocGen’s explanation of how in a world of ever greater quality asset scarcity, gold remains at the pinnacle (or bottom of Exter’s pyramid), central banks have had to forge agreements among themselves to constant lease and re-lease the gold in circulation to each other, to have backstops for when demand is so high that the actual underlying physical is simply not enough:

Western central banks have more than a decade-long history of gold Agreements with each other and with the private sector. The Central Bank Gold Agreement (also known as the Washington Agreement on Gold) was announced on September 26, 1999. It followed a period of increasing concern that uncoordinated central bank gold sales were destabilising the market, driving the gold price sharply down. The third Central Bank Gold Agreement (CBGA3) currently in force covers the gold sales of the Eurosystem central banks, Sweden and Switzerland. Like the previous two Agreements, CBGA3  covers a five-year period, in this case from 27 September 2009 (immediately after the second Agreement expired) to 26 September 2014. The third Central Bank Gold Agreement reaffirmed that “gold remains an important element of global monetary reserves”, as was stated in the two previous Agreements.

 

In both the previous Agreements, signatories undertook not to increase their activities in the derivatives and lending markets above the levels of September 1999, when the first CBGA was signed. The new Agreement includes no similar commitment, although central bank activity in these fields has been very limited in recent years.

In other wodrs, despite all the posturing, gold is not only money, but the most important money central banks have access to for one simple reason: they can’t create it out of thin air. More importantly though, as part of a possible new Central Bank Gold Agreement, as SocGen notes, it appears gold derivative and lending activity is about to take off courtesy of the elimination of the Washington Agreement limitations.

So what may be included in the new agreement once the CBGA3 expires in September 2014? SocGen explains:

The CBGA is likely to be a topic of increasingly intense debate over the coming twelve months; we suspect that a renewal is on the cards, if only for the sake of best practice. The CBGA covers not only sales, but lending arrangements. With the gold hedge book now below 200 tonnes, there is clearly scope for the banks to start lending again should there be any requirements from the mining sector. There is increasing debate about the possible re-emergence of hedging in the next few years, but thus far there is little evidence of any great intent. As the gold price trends lower, gold producers become more likely to hedge in order to protect their declining margins.

But that’s some time in the future. As for the present, well – listening to 5 minutes of financial TV is enough to convince anyone that everyone hates gold: after all it’s lost its momentum. So what do to?

If anything is guaranteed to send the gold price higher it is likely to be the fact that the majority of delegates at the recent annual conference held by the London Bullion Market Association and the London Platinum & Palladium Market were bearish for gold in the short term. The general consensus was that the flurries of very strong private purchasing in April and again in June-September was now on the wane and that a degree of increasing confidence in the global economy pointed to reduced interest among professional investors.

As for central banks:

The official sector remains a buyer. The panel of central bankers that addressed the conference included The Banque de France, the Deutsche Bundesbank and the Central Bank of Argentina. What was particularly interesting was that, when questioned, the representatives of both the Banque de France and the Bundesbank were uncommunicative about the prospects for a further Central Bank Gold Agreement (the third – known as CBGA-3 – expires on 26th September next year; see blue box below for further details). The Deputy Head of the Market Operations Division at the Bundesbank refrained from any comment on “this very sensitive issue”, while the Director of the Market Operations department at the Banque de France said that there were “many many issues” to be considered. Delegates, on the whole, were of the view that the Agreement should be rolled over, otherwise the markets could easily become unsettled, given the heavy holdings in the hands of a number of European banks in particular, notably those with legacy holdings from the days of the Gold Standard.

And of course, there is always China.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/WY9xiVdKs0Q/story01.htm Tyler Durden

We already highlighted the return of gold lease rates to subzero yesterday, during the dramatic spike in gold following Gartman’s latest sell recommendation. Now, it is time for the banks to also begin admitting that, as SocGen has just pointed out, the gold “physical squeeze returns.”

Why is this relevant? First, we present SocGen’s explanation of how in a world of ever greater quality asset scarcity, gold remains at the pinnacle (or bottom of Exter’s pyramid), central banks have had to forge agreements among themselves to constant lease and re-lease the gold in circulation to each other, to have backstops for when demand is so high that the actual underlying physical is simply not enough:

Western central banks have more than a decade-long history of gold Agreements with each other and with the private sector. The Central Bank Gold Agreement (also known as the Washington Agreement on Gold) was announced on September 26, 1999. It followed a period of increasing concern that uncoordinated central bank gold sales were destabilising the market, driving the gold price sharply down. The third Central Bank Gold Agreement (CBGA3) currently in force covers the gold sales of the Eurosystem central banks, Sweden and Switzerland. Like the previous two Agreements, CBGA3  covers a five-year period, in this case from 27 September 2009 (immediately after the second Agreement expired) to 26 September 2014. The third Central Bank Gold Agreement reaffirmed that “gold remains an important element of global monetary reserves”, as was stated in the two previous Agreements.

 

In both the previous Agreements, signatories undertook not to increase their activities in the derivatives and lending markets above the levels of September 1999, when the first CBGA was signed. The new Agreement includes no similar commitment, although central bank activity in these fields has been very limited in recent years.

In other wodrs, despite all the posturing, gold is not only money, but the most important money central banks have access to for one simple reason: they can’t create it out of thin air. More importantly though, as part of a possible new Central Bank Gold Agreement, as SocGen notes, it appears gold derivative and lending activity is about to take off courtesy of the elimination of the Washington Agreement limitations.

So what may be included in the new agreement once the CBGA3 expires in September 2014? SocGen explains:

The CBGA is likely to be a topic of increasingly intense debate over the coming twelve months; we suspect that a renewal is on the cards, if only for the sake of best practice. The CBGA covers not only sales, but lending arrangements. With the gold hedge book now below 200 tonnes, there is clearly scope for the banks to start lending again should there be any requirements from the mining sector. There is increasing debate about the possible re-emergence of hedging in the next few years, but thus far there is little evidence of any great intent. As the gold price trends lower, gold producers become more likely to hedge in order to protect their declining margins.

But that’s some time in the future. As for the present, well – listening to 5 minutes of financial TV is enough to convince anyone that everyone hates gold: after all it’s lost its momentum. So what do to?

If anything is guaranteed to send the gold price higher it is likely to be the fact that the majority of delegates at the recent annual conference held by the London Bullion Market Association and the London Platinum & Palladium Market were bearish for gold in the short term. The general consensus was that the flurries of very strong private purchasing in April and again in June-September was now on the wane and that a degree of increasing confidence in the global economy pointed to reduced interest among professional investors.

As for central banks:

The official sector remains a buyer. The panel of central bankers that addressed the conference included The Banque de France, the Deutsche Bundesbank and the Central Bank of Argentina. What was particularly interesting was that, when questioned, the representatives of both the Banque de France and the Bundesbank were uncommunicative about the prospects for a further Central Bank Gold Agreement (the third – known as CBGA-3 – expires on 26th September next year; see blue box below for further details). The Deputy Head of the Market Operations Division at the Bundesbank refrained from any comment on “this very sensitive issue”, while the Director of the Market Operations department at the Banque de France said that there were “many many issues” to be considered. Delegates, on the whole, were of the view that the Agreement should be rolled over, otherwise the markets could easily become unsettled, given the heavy holdings in the hands of a number of European banks in particular, notably those with legacy holdings from the days of the Gold Standard.

And of course, there is always China.

We already highlighted the return of gold lease rates to subzero yesterday, during the dramatic spike in gold following Gartman’s latest sell recommendation. Now, it is time for the banks to also begin admitting that, as SocGen has just pointed out, the gold “physical squeeze returns.”

Why is this relevant? First, we present SocGen’s explanation of how in a world of ever greater quality asset scarcity, gold remains at the pinnacle (or bottom of Exter’s pyramid), central banks have had to forge agreements among themselves to constant lease and re-lease the gold in circulation to each other, to have backstops for when demand is so high that the actual underlying physical is simply not enough:

Western central banks have more than a decade-long history of gold Agreements with each other and with the private sector. The Central Bank Gold Agreement (also known as the Washington Agreement on Gold) was announced on September 26, 1999. It followed a period of increasing concern that uncoordinated central bank gold sales were destabilising the market, driving the gold price sharply down. The third Central Bank Gold Agreement (CBGA3) currently in force covers the gold sales of the Eurosystem central banks, Sweden and Switzerland. Like the previous two Agreements, CBGA3  covers a five-year period, in this case from 27 September 2009 (immediately after the second Agreement expired) to 26 September 2014. The third Central Bank Gold Agreement reaffirmed that “gold remains an important element of global monetary reserves”, as was stated in the two previous Agreements.

 

In both the previous Agreements, signatories undertook not to increase their activities in the derivatives and lending markets above the levels of September 1999, when the first CBGA was signed. The new Agreement includes no similar commitment, although central bank activity in these fields has been very limited in recent years.

In other wodrs, despite all the posturing, gold is not only money, but the most important money central banks have access to for one simple reason: they can’t create it out of thin air. More importantly though, as part of a possible new Central Bank Gold Agreement, as SocGen notes, it appears gold derivative and lending activity is about to take off courtesy of the elimination of the Washington Agreement limitations.

So what may be included in the new agreement once the CBGA3 expires in September 2014? SocGen explains:

The CBGA is likely to be a topic of increasingly intense debate over the coming twelve months; we suspect that a renewal is on the cards, if only for the sake of best practice. The CBGA covers not only sales, but lending arrangements. With the gold hedge book now below 200 tonnes, there is clearly scope for the banks to start lending again should there be any requirements from the mining sector. There is increasing debate about the possible re-emergence of hedging in the next few years, but thus far there is little evidence of any great intent. As the gold price trends lower, gold producers become more likely to hedge in order to protect their declining margins.

But that’s some time in the future. As for the present, well – listening to 5 minutes of financial TV is enough to convince anyone that everyone hates gold: after all it’s lost its momentum. So what do to?

If anything is guaranteed to send the gold price higher it is likely to be the fact that the majority of delegates at the recent annual conference held by the London Bullion Market Association and the London Platinum & Palladium Market were bearish for gold in the short term. The general consensus was that the flurries of very strong private purchasing in April and again in June-September was now on the wane and that a degree of increasing confidence in the global economy pointed to reduced interest among professional investors.

As for central banks:

The official sector remains a buyer. The panel of central bankers that addressed the conference included The Banque de France, the Deutsche Bundesbank and the Central Bank of Argentina. What was particularly interesting was that, when questioned, the representatives of both the Banque de France and the Bundesbank were uncommunicative about the prospects for a further Central Bank Gold Agreement (the third – known as CBGA-3 – expires on 26th September next year; see blue box below for further details). The Deputy Head of the Market Operations Division at the Bundesbank refrained from any comment on “this very sensitive issue”, while the Director of the Market Operations department at the Banque de France said that there were “many many issues” to be considered. Delegates, on the whole, were of the view that the Agreement should be rolled over, otherwise the markets could easily become unsettled, given the heavy holdings in the hands of a number of European banks in particular, notably those with legacy holdings from the days of the Gold Standard.

And of course, there is always China.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/WY9xiVdKs0Q/story01.htm Tyler Durden

We already highlighted the return of gold lease rates to subzero yesterday, during the dramatic spike in gold following Gartman’s latest sell recommendation. Now, it is time for the banks to also begin admitting that, as SocGen has just pointed out, the gold “physical squeeze returns.”

Why is this relevant? First, we present SocGen’s explanation of how in a world of ever greater quality asset scarcity, gold remains at the pinnacle (or bottom of Exter’s pyramid), central banks have had to forge agreements among themselves to constant lease and re-lease the gold in circulation to each other, to have backstops for when demand is so high that the actual underlying physical is simply not enough:

Western central banks have more than a decade-long history of gold Agreements with each other and with the private sector. The Central Bank Gold Agreement (also known as the Washington Agreement on Gold) was announced on September 26, 1999. It followed a period of increasing concern that uncoordinated central bank gold sales were destabilising the market, driving the gold price sharply down. The third Central Bank Gold Agreement (CBGA3) currently in force covers the gold sales of the Eurosystem central banks, Sweden and Switzerland. Like the previous two Agreements, CBGA3  covers a five-year period, in this case from 27 September 2009 (immediately after the second Agreement expired) to 26 September 2014. The third Central Bank Gold Agreement reaffirmed that “gold remains an important element of global monetary reserves”, as was stated in the two previous Agreements.

 

In both the previous Agreements, signatories undertook not to increase their activities in the derivatives and lending markets above the levels of September 1999, when the first CBGA was signed. The new Agreement includes no similar commitment, although central bank activity in these fields has been very limited in recent years.

In other wodrs, despite all the posturing, gold is not only money, but the most important money central banks have access to for one simple reason: they can’t create it out of thin air. More importantly though, as part of a possible new Central Bank Gold Agreement, as SocGen notes, it appears gold derivative and lending activity is about to take off courtesy of the elimination of the Washington Agreement limitations.

So what may be included in the new agreement once the CBGA3 expires in September 2014? SocGen explains:

The CBGA is likely to be a topic of increasingly intense debate over the coming twelve months; we suspect that a renewal is on the cards, if only for the sake of best practice. The CBGA covers not only sales, but lending arrangements. With the gold hedge book now below 200 tonnes, there is clearly scope for the banks to start lending again should there be any requirements from the mining sector. There is increasing debate about the possible re-emergence of hedging in the next few years, but thus far there is little evidence of any great intent. As the gold price trends lower, gold producers become more likely to hedge in order to protect their declining margins.

But that’s some time in the future. As for the present, well – listening to 5 minutes of financial TV is enough to convince anyone that everyone hates gold: after all it’s lost its momentum. So what do to?

If anything is guaranteed to send the gold price higher it is likely to be the fact that the majority of delegates at the recent annual conference held by the London Bullion Market Association and the London Platinum & Palladium Market were bearish for gold in the short term. The general consensus was that the flurries of very strong private purchasing in April and again in June-September was now on the wane and that a degree of increasing confidence in the global economy pointed to reduced interest among professional investors.

As for central banks:

The official sector remains a buyer. The panel of central bankers that addressed the conference included The Banque de France, the Deutsche Bundesbank and the Central Bank of Argentina. What was particularly interesting was that, when questioned, the representatives of both the Banque de France and the Bundesbank were uncommunicative about the prospects for a further Central Bank Gold Agreement (the third – known as CBGA-3 – expires on 26th September next year; see blue box below for further details). The Deputy Head of the Market Operations Division at the Bundesbank refrained from any comment on “this very sensitive issue”, while the Director of the Market Operations department at the Banque de France said that there were “many many issues” to be considered. Delegates, on the whole, were of the view that the Agreement should be rolled over, otherwise the markets could easily become unsettled, given the heavy holdings in the hands of a number of European banks in particular, notably those with legacy holdings from the days of the Gold Standard.

And of course, there is always China.