Wednesday, January 20, 2010

Jan 20.10 commentary

Good evening Ladies and Gentlemen:
 
I guess I was 24 hrs late in predicting market chaos.  It occurred today.
 
Gold closed down by $27.70 to 1112.20  Silver fell by a huge 83 cents to 17.95.
 
The volume on the gold comex on Tuesday was officially recorded at 240497 with minor switches.
 
The open interest rose by a sharp 7230 contracts to 528934. 
 
The GLD also announced a further inventory sale of .9 tonnes of gold:
 
MarketVane’s Bullish Consensus for gold added 1% to 82%, but the HGNSI was unchanged at 60.9%. The GLD ETF lost another 0.91419 tonnes (29,400 ozs).
 
 
 
end.
 
 
The silver comex OI also rose by a huge 1722 contracts to 131355.
 
The selling of gold at the GLD plus the high OI on both gold and silver certainly precipitated another doozy of a raid today.  The volume was estimated at over 265,000 with small switches.
 
This orchestrated raid had the footprints of JPMorgan.
 
The news of the day was generally quite bullish for gold.  For one last night the republicans won Senator Kennedy's Mass. seat.  This is the first time a republican held the seat in 47 years.
 
The credit default swaps on Greece rose sharply this morning.  The swaps are trading as if the country will default any day. This is the reason why the Euro collapsed today.
 
Greece represents only 3.3% of the entire Euroland.  By comparison California is 12% of usa GDP.
 
Here is Dave Kranzler's version of the day's events:
 
 
re: the dollar. Here's what I'm still grappling with: the credit default spreads on US/UK/German Govt debt are starting to spike higher again, apparently the CDS spreads on Greek Govt debt are indicating a default any day, Dubai has taken a turn for the worse. and, seriously, the housing market is about to take another cliff-dive in this country. I think it's possible we might be headed for another market collapse like after Lehman/Bear. if that's the case, the dollar will be the knee-jerk flight to safety trade and gold will get hit - at least initially - with stocks. of course, gold will snap back quickly.
 
 
 
 
 
end.
 
 
Many commented on China scaling back their credit:
 
 

China to Shift Policies as Stocks Slow, HSBC Says

Jan. 20 (Bloomberg) -- China may step up efforts to curb credit growth and inflation that have already started to weigh on the stock market, according to HSBC Private Bank.

A surge in bank lending last month prompted the central bank to ask lenders to set aside more money as reserves. The government will probably continue "tweaking the system" this year, saidArjuna Mahendran, the chief investment strategist for Asia at HSBC Private Bank…

-END-

 
 
 
 
 
Here are some results for today:
 
Commodities were trashed across the board. Copper is down around 10 cents, oil is off $2 per barrel. The CRB is down about.
 
Too early to give closes, but the yield on the Ten year T note was down to 3.63%.

The dollar was last up .86 to 78.35.

The Dow was down 122 points.

 

end.

 

 

Here are some major commentaries from John Williams who does analysis on government data and puts everything in proper order.

His figures are impeccable.

 

His latest findings are showing a negative M3 growth which is startling.  His CPI is running around 9% and his rea; unemployment rate is still at 22%.

 

Here is his official releases:  (click on www.shadowstats.com)

 

John Williams' Shadow Government Statistics

Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting.

http://www.shadowstats.com/

 

 

Although the following is not startling it is nontheless important for all to read:

 

ZERO HEDGE

Insider Selling Outpaces Buying By 24 Times In Last Week

Submitted by Tyler Durden on 01/19/2010 19:24 -0500

What is there to say about the endless barrage of insider sales that hasn't been said for 9 straight months before. Insiders are selling into the neverending rally, as domestic mutual funds have no equity inflows, yet stocks somehow miraculously keep rising, providing yet more attractive exit price points for directors and insiders. In the past week insiders bought $18 million worth of stock and sold $419 million. There is no way to spin this data. There were no notable buyers, while Nelson Peltz was vacating HNZ shares with a vengeance, selling $30 million worth of the canned food maker. Ralph Lauren also apparently wasn't too hot on Polo's Spring/Summer collection.

-END-

 

 

The PPI showed a .2% month over month gain as inflation seems to be seeping into the usa economy:

 

U.S. producer prices driven higher in Dec by foods

WASHINGTON (Reuters) - U.S. producer prices rose for the third month in a row in December, increasing by 0.2 percent on a surge in food prices and recording their largest year-on-year gain since October 2008, according to a government report on Wednesday.

The annual gain of 4.4 percent, though, was slightly below analyst expectations of a 4.5 percent increase. On a month-on-month basis, analysts polled by Reuters had anticipated monthly prices paid at the farm and factory gate to remain unchanged in December.

The Labor Department said core prices, which exclude food and energy, were steady in December. Analysts had expected a 0.1 percent gain.

-END-

 

 

Inflation is certainly rising in these 3 countries, China,  Canada and the UK:

 

Inflation…

REUTERS China gov't economist sees inflation, rates rising

BEIJING, Jan 20 (Reuters) - Chinese consumer price inflation accelerated "significantly" in December and is likely to average 3.0 percent this year, Zhu Baoliang, a senior government economist, said on Wednesday.

REUTERS UPDATE 3-UK inflation surges at record pace in December

LONDON, Jan 19 (Reuters) - Britain's inflation accelerated in December at a record pace, prompting worries that interest rates might rise sooner than expected, though the surge was largely due to an unflattering comparison with a year earlier.

REUTERS UPDATE 1-Canada inflation hits 10-month high on gasoline

OTTAWA, Jan 20 (Reuters) - Higher gasoline prices pushed Canada's annual inflation rate to a 10-month high in December, but the news is unlikely to knock the Bank of Canada off track in its pledge to hold interest rates steady for some time.

-END-

 

 

I rarely talk about what is going on inside the silver and gold warehouses of the comex.  I do not trust the data.  We know of deliveries of metal but they are not recorded.

 

We are aware of cash settling some of the contracts.

 

With that cautionary note, there have been unbelievable movements in silver at the comex recorded yesterday and today:

 

On Friday I reported that after weeks of zero movement in the dealer silver inventory SUDDENLY out of the blue 2.4 Million ozs of silver were withdrawn! That is 75 tons in a single day. What is even more intriguing is that 4.1 Mozs were apparently deposited in the customer inventory making the total silver inventory movements 204 tonnes for the day. Now today there is another gobsmacking volume of silver inventory movement. 4.45 Mozs of silver were withdrawn from the dealers’ inventory and 4.56 Mozs were deposited in the customer inventory. This is most unusual considering the total delivery notices for January are only 0.94 Mozs. What is shocking is the massive drain in just two days on the dealer inventory has plunged their holdings to a mere 47.5 Mozs. This is only sufficient silver to deliver on 9500 contracts. There is certainly something serious going on with silver. For the inventory level not to change during weeks and then in just two days drop by 7 Mozs, or 13%, is nothing short of incredible, especially in a low delivery month.

 

 

end.

 

 

I would like to point out that january and Feb are  non delivery months in silver.  Movement out of dealer inventory cannot be explained. The shear number of oz of 4.45 million oz in one day is just not belieable.  You would need over 60 Brinks armed trucks.

 

The inventory of the dealers is now down to 47.5 million oz.  Normally the inventory is greater than 110 million oz of silver.

 

I have no answer for you but something is up!!

 

In gold there was a huge withdrawal from the dealer inventory to the customer inventory.  However we are entering a delivery month (Feb) and this is normal:

 

Interestingly gold also saw a large withdrawal from the dealer inventory and a similar deposit in the customer inventory. However, unlike with silver, this is totally consistent with the level of delivery notices issued against the JAN contract.

 

 

 

end.

 

 

We have witnessed two new ETF's trade.  The commodity is Palladium and Platinum and with the introduction of these two metals, we have seen a dramatic rise in the price of the metals;

 

ETFs Drive Up Platinum, Palladium

Demand for Physical Supply Fuels a Six-Month High; 'Everyone Is Watching'

Wall Street Journal – January 20, 2010

By MATT WHITTAKER And CAROLYN CUI

Platinum and palladium futures rose sharply, settling at their highest levels since July, boosted by demand from new exchange-traded funds that are luring investors but could prove to be a headache for consumers of the physical metals.

Benchmark April platinum on the New York Mercantile Exchange advanced 2.7% to settle at $1,639.40 an ounce while most-active March palladium on the exchange gained 3.2% to $461.95. The front-month platinum contract for January delivery gained $43.70, or 2.8%, to $1.635.10, while palladium rose $14.20, or 3.2%, to $461.70.

Since the Securities and Exchange Commission approved the launch of the new ETFs in late December, platinum futures have gained 15%, while palladium futures have risen 30%.

ETFS Physical Platinum Shares (symbol PPLT) and ETFS Physical Palladium Shares (PALL) began trading Jan. 8 on the New York Stock Exchange Arca platform and were the first ETFs for the platinum group metals in the U.S. These funds create additional investment demand since physical metal is put into storage to back shares that trade like a stock but track the price of the commodity.

The platinum ETF gained 3% to finish Tuesday's session at $165.12, while the palladium ETF rose 2.6% to $46.94.

The two funds have already each accumulated more than 100,000 ounces each of platinum and palladium, which are used primarily by the auto industry for the production of catalytic converters. The platinum market was about 6 million ounces, and showed a small surplus last year. A 100,000-ounce swing is big enough to turn the market to a deficit.

"Everybody is watching what is unfolding with these U.S. ETFs," said Timothy Murray, U.S. general manager of Johnson Matthey, a precious-metal refiner.

On top of higher prices, the volatility of platinum and palladium is hurting consumers such as car makers, liquid-crystal-display glass makers and medical-device makers. Amid sharp daily price movements, some customers have waited and missed opportunities to buy, while others have been forced to buy. "The ETFs are certainly making their lives difficult," Mr. Murray said.

Frank McAllister, chief executive of Stillwater Mining Co., the biggest palladium producer in the U.S., said that customers recently have been placing their orders for next year because they are worried about prices going even higher. "The ETFs are part of it," he said. Stillwater plans to increase its palladium mine production by 29% to 515,000 ounces this year.

Analysts expect further metal-price gains as buying of the physically backed ETFs effectively removes metal from the market. Commerzbank analyst Eugen Weinberg estimates the amount of platinum purchased for the New York-based ETF since its launch was more than double the amount produced by mines during the period.

 

 

 

end.

 

Russia has announced a huge 800,000 oz of gold gain to official reserves or about 27 tonnes of gold.  I am sure this is from their agency sovereign entity, Gokhram.

 

This was announced earlier in the month.  Here is the official release from Moscow:

 

On a day like today, I decided to look for some good news. The Russian Central Bank just reported their gold holdings for December 2009.

http://www.cbr.ru/eng/statistics/credit_statistics/print.asp?file=liquidity_e.htm

The Russian central bank increased their gold holdings by 800,000 ounces in 1 month. That is the biggest one month increase since I started keeping records on October 2006. The 2nd biggest monthly increase was 600,000 ounces in July 2009. In July 2009, the price of gold was around $950/oz.

The Russian central bank may have purchased this gold from the Russian agency, Gokhram. The bottom line is that the Russian central bank is publicly adding gold to their reserves and that this is the largest 1 month purchase since at least Oct. 2006.

I wonder if GFMS would consider the 800,000 ounce gold purchase by the Russian central bank a "lumpy purchase" ? Does a lumpy purchase have to exceed 1,000,000 ounces in a single transaction? Maybe I should send an email to GFMS inquiring how many of these lumpy purchases have taken place over the last 3 to 6 months.

Looking forward to more lumpy purchases. 

 

end.

 

 

Here is a Jim Sinclair article on the total breakdown of credit in the usa marketplace:

 

 

Breakdown of U.S. Commercial Bank Credit 
CIGA Eric

Brown: Mass. victory sends ‘very powerful message’

"There are messages here. We hear those messages," said Axelrod. "There is a general sense of discontent about the economy. And there is a general sense of discontent about this town"

Clearly messages are being sent, but is anyone listening? One thing remains clear, the message of no more reckless spending will ignored completely as long as bank credit, updated through December 2009, continues to deteriorate under Keynsian decision-making.

Where’s the picture of that gnarly roster?

Breakdown of Total Bank Credit Growth: Year-over-Year Growth for Total Loans, Business Loans, Real Estate Loans, Home Equity Loans, Consumer Loans, and Cash Assets for Commercial Banks in the US:

clip_image001

Raise Taxes – No 
Cut Spending – No 
DEVALUE! – Yes

Source: news.yahoo.com

More…

 

Here is Dan Norcini on the tightening of credit in China and its meaning:

 

Filed under: Trader Dan Norcini

Dear Friends,

As you know by now, China announced last evening that they intended to tighten credit availability in an attempt to stave off “overheating” in their economy. The markets today interpreted this event as evidence that inflation fears are unwarranted. Thus the bids beneath the gold market evaporated, allowing the bears to push prices low enough to take out some of the downside sell stops.

While today’s markets have become the domain of the 3 minute bar chart traders with short term factors creating excessive volatility as the norm, as investors it still behoves one to try to understand the longer term macroeconomic picture.

The Chinese are more than concerned about the long term viability of the US Dollar due to the recklessness of its stewards here in the US. The recent TIC reports reveal Chinese net selling of US Treasuries. Having surpassed Japan as the largest holder of US Treasury debt, this is not insignificant as those actions speak to their suspicions about the Dollar’s fate and the effect on their reserves.

If you recall not that long ago, India surprised the entire gold market by scooping up some 200 tons or so of gold. That drove the gold price up through the $1,000 level – a level which it has not seen again. I believe that India’s actions caught China flatfooted as it is no secret that they are actively looking to acquire a larger percentage of gold in their reserves as they slowly move out of their lopsided holdings of US Dollar based debt.

Having been unable to secure gold at the price that India did, and having a desire to acquire more of the metal at a better price, it is my opinion that the Chinese authorities completely understood in advance the effect that their announcement would have on the commodity markets and on gold. China is still looking to secure stockpiles of strategic commodities as their long term growth strategy requires sufficient quantities of such to make them well supplied. The Chinese do not chase market prices higher – they buy stuff when no one wants it or when the hedge fund managers in the West are throwing it away.

Gold may well move lower from current levels but the Chinese will be there to greet its potential descent as will India, which also wants to own more of the metal. The amount that they are looking to acquire is not miniscule. Remember that when you hear chatter about the demise of gold.

Remember also that a growing number of US states are for all practical purposes, fiscally bankrupt, with rising pressure mounting in those states to receive some sort of Federal bailout. Unemployment levels that remain stubbornly high guarantee lower tax revenues for the Federal Government, and state governments in those cases which rely upon a state income tax as a primary means of revenue. Tighter credit restrictions here in the US, as lenders seek to cover their own rear ends, means that consumers will have more difficulty increasing purchases of larger ticket items. When you see stock analysts upgrade and then issue buy recommendations for McDonalds based on cash strapped consumers looking for food bargains who are bypassing more expensive, higher end restaurants, rest assured that disposable income is not exactly proliferating.

All of this translates to an economy that is moving along in that “L” shaped “recovery” that I have mentioned before. A plunge, followed by a long period of mediocre or subpar growth marked by high levels of unemployment and huge amounts of government deficit spending and massive QE by the Fed. How this quantifies a bull market in the Dollar eludes me.

ShareThis

end.
 
 
And finally, Jim Sinclair on the Republican victory in Mass. USA:
 
 

Due to the Republican victory in Massachusetts yesterday, the general commentary on F-TV is that the USA looks really good. The MOPE on Greece is going wild.

The dollar is no safe haven and will not guarantee the maintenance of buying power.

The large purchases by non US entities of US Treasuries in the TIC report smells like Limburger cheese. The US dollar economic recovery is nothing more than pixie dust.

To sustain a US economic recovery, there first needs to be an economic recovery to sustain.

Unemployment now becomes an increasing concern for both parties.

The Fed is locked into QE and in all probability is supporting the US Treasury market via the Caymans and other countries internationally.

Buy the dollar and sell gold? You have to be kidding. That is the madness of the crowd and the actions of the Crimex in paper gold

FHA gets tougher to stay solvent. 
The Federal Housing Administration announced stricter lending requirements and higher borrowing fees today, a move meant to shore up the agency’s tanking finances and preclude the need for a taxpayer bailout. The FHA’s reserves to cover losses have fallen to $3.6B, or 0.5% of the $685B in loans outstanding. A year ago, its reserves stood at 3%, and Congress requires the FHA to maintain a 2% capital-reserve ratio.

Unemployment likely to persist. 
A new report from a group of U.S. mayors suggests that while unemployment will likely peak in most U.S. cities this year, it will take many years before the jobless rate returns to the lows experienced last decade. In some areas, unemployment will stay at or above 10% through 2013, but "what is just as alarming as the double-digit unemployment in many of the nation’s major metro areas is the lethargic rate at which it will recede once the job market turns around."

Housing market still weak. 
NAHB’s Housing Market Index dropped 1 point to 15, still the lowest point since June. Current sales conditions fell 1 point to 15, and buyer traffic fell 1 point to 12. Sales expectations for the next six months remained steady at 26. “We stand poised and ready to deliver new homes as soon as our customers are ready" to take advantage of tax credits and conditions, said NAHB Chairman Joe Robson.

Consumer confidence dips. 
ABC’s Consumer Comfort Index slipped 2 points to -49, entering "full retreat" mode this month after posting gains in December. Ratings of the national economy held steady at 9% positive, but those who think it’s a good time to buy things slipped a point to 23%, and those rating their personal finances positively slipped a point to 45%.

 

end.
 
 
 
All markets are now manipulated. There is no such an animal as a free market in the usa.  It seems that the usa Orwellians believe that markets must be manipulated in order to have a semblance of a market.
 
The Republican victory guarantees continued quantitative easing as usa authorities continue their purchase of debt. We are seeing the dollars that purchased these bonds enter the marketplace There is now no chance that Bernanke will withdraw any liquidity. 
 
We are seeing inflation register in various jurisdictions around the world despite the lousy economic conditions throughout the globe.
 
Speak to you tomorrow
 
Harvey.

1 comment:

Anonymous said...

Sir,
First, great work on your blog!
Second, are you familiar with fofoa.blogspot.com?
He basicly believes that when the COMEX defaults the Gold price will be set free from manipulation. And that the dollar will crash when gold is set free.

And also that the Euro currency was strategically designed to float next to gold once the COMEX goes bust. The 15 percent gold reserves the Euro has, is not some kind of trick to make people think that it is backed by a little bit of Gold.

Gold is structured into the architecture of the Euro so that when the price of Gold is set free, the Euro will be able to trade side by side with Gold freely. The Euro wont have to be backed by Gold it just has to be able to buy Gold at the price the free market is asking. Gold will be for saving wealth and the Euro will be for spending as a currency. This has always been the Elites plan. Keep the price of Gold low with the dollar system, so Gold can be widely redistributed into the hands of many across the globe. Then crash the dollar setting Gold free and have a couple regional currencies float freely next to Gold. China, Vietnam, and even Iran are encouraging their citizens to accumulate Gold! Germanys got Gold vending machines. Its easy to travel with Gold through most countries no VAT, very little customs problems. Never in history has Gold been distributed to so many little people world wide! For Gold to float freely and not be monopolized it has to be spread out among the masses of the world. Its what the elite bankers have always wanted. Gold demonetized forever! Watch what happens with Greece in the next few weeks. You will see that the Euro is the Elites baby. The Euro is going to limp along until the COMEX goes bust then we shall truly see some amazing things!

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