Before commencing with my commentary, I would like to introduce to you 4 new members into our banking morgue. Two of the banks, Lydian Private Bank of Palm Beach Florida and Public Savings Bank of Huntingdon
Valley PA got a good headstart by failing Thursday night. Last night we lost another two banks:
1. First Choice , Geneva, Illinois
2. First Southern Nation Bank (Statesboro GA).
Therefore we lost 4 banks these past two days.
The price of gold hit another record close Friday at the comex coming in at a respectable close of $1848.90 for a gain of $30.00. Silver however was the standout as it rose $1.74 despite the shackles at its feet.
It closed the comex session at $42.43.
Here are the final prices of gold and silver in the access market:
Let us head straight to the comex and assess the trading for our precious metals.
The total gold OI rose by only 6633 contracts despite the huge rise in this ancient metal of king.
Actually this metal is now now regaining its title of king of all metals as gold surpassed both Platinum and Rhodium in price today. Two years ago I remember that Rhodium was trading over 10,000 dollars per oz.
Both Platinum and Rhodium finished the session at $1850.00. Gold in the access market finished at $1853.00. The bankers must have been scared to be the supplier of much of the non backed gold paper as they sensed the run-away gold train and they are following the old saying "never stand in the way of a moving freight train". The October OI remains almost identical at 27,404. The next big delivery month after October is December and here the OI continues to gain strength rising by over 5000 contracts to 368,836.
The estimated volume at the gold comex today was monstrous at 303,325. The confirmed volume yesterday was also superb at 271,845. It was quite a day for gold.
Lets see how silver fared. The total OI surprisingly fell by 1130 contracts despite silver's rise.
The bankers have been seen standing on window ledges ready to end their misery with their massive silver shortfall. The front options expiry month of August saw its Oi fall from 26 to 6 for a drop of 20 contracts.
We had exactly 20 deliveries on Thursday so the entire drop in OI was due to those deliveries and we lost zero ounces to cash settlements. The next big delivery month is September and here the OI fell by a tiny 1200 contracts to 37,707. We have less than 2 weeks before first day notice and the front month is not contracting at all. The bankers are very nervous on this and may be the reason they are exiting their shorts. The estimated volume on the silver comex yesterday was also a monster day coming in at 97,768 contracts.
The confirmed volume on Thursday was also good at 64,296. It looks like we have renewed spec interest in silver.
I nventory Movements and Delivery Notices for Gold: August 20.2011:
The gold vaults again saw no gold enter the dealer and no gold leaving the dealer.
The customer received the following:
1. Into HSBC 122,652 oz
2. Into Manfra; 1768
total deposit to the customer; 124,420 oz
There were no withdrawals by the customer.
Thus the total registered gold remains at 1.796 million oz.
The comex folk notified us that 111 notices were filed for 11100 oz of gold. The total number
of gold notices so far this month total 6443 for 644,300 oz . To obtain what is left to be served upon, I take the OI standing (641) and subtract out yesterday's deliveries (111) which leaves me with 530 notices or 53000 oz left to be served upon.
Thus the total number of gold oz standing in this delivery month is as follows;
644,300 oz (served) + 53000 oz (to be served) = 697,300 oz
On Thursday we had: 692,100 so we gained over 5000 oz standing.
And now for silver
Again no silver entered as a deposit to the dealer and no silver left as a withdrawal.
The customer had only a tiny deposit to the Delaware vault: 6030 oz
The customer had sizable withdrawals:
1. a huge 802,911 oz from Brinks
2. a smallish 12,050 from HSBC
total withdrawal by the customer; 814,916 oz
We had another huge adjustment from the customer to the dealer in an obvious lease arrangement:
913,334 oz leaving a customer and entering the dealer's vault (Scotia)
The total dealer inventory rises to 30.418 million oz and the total of all silver falls to 105.694 million oz
The comex folk notified us that only one notice was filed for Friday for 5000 oz.
The total number of notices thus rises to 667 or 3,335,000 oz. To obtain what is left to be served,
I take the OI standing for August (6) and subtract out Friday's deliveries (1) which leaves me with 5 notices or 25,000 oz left to be served upon.
Thus the total number of silver oz standing in this non delivery month is as follows:
3,335,000 (served oz) + 25,000 oz (to be served) = 3,360,000 oz (exactly the same as Thursday.
Total Gold in Trust
|Ounces of Silver in Trust||313,318,164.100|
|Tonnes of Silver in Trust||9,745|
|Ounces of Silver in Trust||313,318,164.100|
|Tonnes of Silver in Trust||9,745.28|
Silver COT Report - Futures
non reportable positions
Change from the previous reporting period
COT Silver Report - Positions as of
Tuesday, August 16, 2011
The large specs that have been long in silver added a tiny 596 longs to their already high long position. These guys are very determined and are considered to be in very strong hands.
The large specs that have been short in silver did not like the lay of the land and covered 2944 short contracts and are very thankful for their efforts.
Those commercials who have been long in silver and are close to the physical scene somehow missed the signals by covering 1839 long contracts and they are very sorry they did it.
Those commercials who have been short in silver like JPMorgan and friends, added a monstrous 3501 contracts to their shortfall and are crying the blues tonight with the huge run up in silver prices.
I smell a commercial failure here.
Goldman Cuts Q3 Growth Forecast In Half, Sees Q3, Q4 GDP At 1.0%, 1.5%, Presents Jackson Hole Event Walk Thru
From already quite low growth rates, it appears that the US economy is losing further momentum. According to our Current Activity Indicator (CAI), underlying growth was about 1.5% (annual rate) as of July, and several major indicators for last month— nonfarm payrolls, retail sales, industrial production— were surprisingly strong. However, timelier survey- based data have turned down sharply, and weakness in the hard statistics seems likely to follow with a lag.
It is true that data on August activity is still relatively limited at this point. But of the major indicators released so far, one was weak (the Empire State index) and two were exceptionally weak (Consumer Sentiment and the Philadelphia Fed index). The most positive signal has come from jobless claims, which are roughly unchanged from last month and down from the spring. The survey data could potentially have been biased downward by volatility in financial markets and the contentious debate over the debt limit. But we do not want to take that argument too far: these are important cyclical indicators, and they are pointing to even weaker growth ahead. Updating the model from last week's US Economics Analyst with the latest data on equity prices and housing starts and an estimated value for the August ISM gives a probability of about one-third that the economy is currently in recession.
In light of the downshift in the data this week, we are cutting our second-half growth forecasts further. We now expect GDP growth of 1.0% in Q3 and 1.5% in Q4, both down from 2.0% previously. These changes reduce our forecasts for full-year 2011 GDP growth to 1.5% from 1.7%. Exhibit 1 shows the details.
Will Bernanke Move Mountains?
Against this challenging backdrop, Chairman Bernanke will deliver his address to the Fed’s annual Jackson Hole Conference next week.2 Given rising recession risks, worsening financial market conditions, and the FOMC’s surprisingly aggressive moves at its last meeting, investors are probably right to be focusing intensely on the event. We expect his speech to contain three main elements:
1. Discussion of the dimmer growth outlook. The statement from the last FOMC meeting made clear that the committee made a significant change to its growth forecasts. The statement said that growth had been “considerably slower” than expected this year, that temporary factors “account for only some of the recent weakness”, and that “downside risks to the economic outlook have increased”.
The speech will be an opportunity for Bernanke to describe the Fed’s revised view in more detail. While he is likely to be downbeat about recent developments, we expect that he will still argue that the conditions for an acceleration later this year and in 2012 remain in place. The last post-meeting statement said the committee “anticipates that the unemployment rate will decline only gradually”, which hints at a slightly above-trend growth outlook.
Recent comments from other Fed officials have been moderately constructive on growth. For instance, Cleveland Fed President Pianalto said earlier today that she expects growth of about 2% this year and 3% in 2012. New York Fed President Dudley also said this week that recent data were “at worst mixed”, and that growth will be “significantly firmer” in the second half. With annualized GDP growth in the first half of 0.8%, this is not an especially optimistic view, but it suggests Bernanke could sound positive relative to the current market consensus.
2. Defense of earlier policy actions. Weakness in growth and renewed questions about Fed easing have naturally raised questions about the effectiveness of its tools. We expect that Bernanke will address this issue directly in his speech, as he did in Congressional testimony last month. At that time, Bernanke argued that quantitative easing (QE) was effective in reducing the risk of deflation, emphasizing the rise in market- based measures of inflation expectations. He also said QE was helpful in “shoring up economic activity”.
It may be difficult for Bernanke to lean on these arguments today. The weakness in activity—and especially the downward revisions to GDP in late July—casts doubt on the claim that asset purchases have stimulated growth, at least in the eyes of many observers. Inflation expectations remain around levels consistent with the Fed’s target, but if higher inflation expectations are the only impact from QE, it would make little sense to ease now.
We think Bernanke will stick to a few main points. First, he will probably reiterate that the Fed’s expectations for the impact of QE were low, and therefore that slow growth does not necessarily imply that QE failed. At last year’s Jackson Hole speech he said that “central bankers alone cannot solve the world’s economic problems”; a repeat of this type of language seems likely. Second, he could argue that securities purchases ward off the tail risk of deflation, and that if the economy slipped into recession, deflation risk would return. Third, we think he could again list the many studies about QE and their quantitative estimates of the impact on growth. Emphasizing the positive effects of past asset purchases would implicitly help justify further action.
3. Review of the easing options. The Fed has three main easing tools: 1) communication; 2) asset purchases; and 3) cutting the interest rate on excess reserves. At the August meeting, it exercised option #1 by making a conditional commitment to keep the funds rate low until mid-2013. Option #3 is often mentioned but in our view is unlikely for several reasons. That leaves only option #2, asset purchases.We believe Bernanke’s Jackson Hole speech will include a detailed discussion of the potential for more easing through large-scale asset purchases. A variety of indicators suggest many investors already expect more QE. For instance, a recent CNBC survey shows that more than $300bn of purchases may already be priced in. The sharp decline in forward real rates is also partly related to QE expectations, in our view (Exhibit 2).5 Based on our conversations with clients, we believe investors would be very surprised if the speech did not include a discussion of asset purchases.
We see two main reasons why Fed officials may prefer to change the composition of the balance sheet as a first step. First, as we showed in Monday’s US Daily, if used aggressively this could have a sizable impact. For example, if the Fed were to sell its Treasury securities that mature over the next two years and buy securities in the 10- to 30-year part of the curve—apportioning them based on amounts available in the market—it could take a similar amount of duration risk onto its balance sheet as in QE2 (around $350bn in 10-year equivalent terms, or 80-90% of QE2). The policy could be scaled up further by weighting purchases toward even longer maturities, or by changing the mix of the mortgage portfolio.
Second, policies that keep the size of the balance sheet (and excess reserves) unchanged may be less controversial among politicians and the broader public. A detailed discussion of possible changes in balance sheet composition seems a likely component of the Jackson Hole speech.
Bernanke may of course also discuss conventional QE. Arguments in favor of this approach include a less complicated exit strategy—if securities mature faster, the Fed may not need to sell actively—and potentially a larger impact on confidence and expectations. We do not think Bernanke will signal anything more unconventional, such as a higher inflation target, price level targeting, or a long-term interest rate target.6 However, these ideas may turn up in the FOMC minutes published on August 30.
While listing the easing options looks probable, Bernanke is very unlikely to pre-commit to taking action next week. This is a monetary policy decision, and any announcement would come at an FOMC meeting. In addition, core inflation continues to accelerate, and Fed officials seem to have a rosier outlook than our forecast or the consensus. While we expect additional QE and the odds are rising at the margin, it is not yet a done deal.
Of DOW JONES NEWSWIRES
The magnitude of the recession caused by the 2008 financial crisis is taking a bigger toll on the U.S. economy than most had expected, a U.S. central bank official said Friday, adding she was in favor of providing the nation's recovery with more support at the latest Federal Reserve meeting.
"The economy appeared to be strengthening, and yet once again, in the summer, storm clouds appeared," said Cleveland Federal Reserve Bank President Sandra Pianalto. "We learned that the magnitude of the recession was worse than we had thought."
In a speech to a community bankers association in Ohio, Pianalto said the U.S. has to grow by about 2.5% annually in order to keep the unemployment rate, currently at a towering 9.1%, from rising. She said it will take "quite a few years" to get that rate down to around 5.5%.
The central banker lowered her outlook on U.S. growth and sees inflation falling back to 2%. Given those projections, Pianalto said she was in favor of providing additional support to the recovery at a Federal Open Market Committee meeting earlier this month. She does not hold a voting slot on the monetary policy-setting FOMC.
With the targeted federal funds rate already near zero, Pianalto said the Fed explicitly announcing a mid-2013 time frame to stick to its loose monetary policy was a tool to help bring down interest rates along the yield curve.
"Under the circumstances, I think it made sense to take the unprecedented step of including that conditional guidance in our press statement," she said.
Pianalto now sees the economy growing at about 2% in 2011, and 3% in each of the next two years. In June, Pianalto said she expected the economy to grow at about 3% a year.
The Fed official points out that between June and August, several pieces of economic data showed a deteriorating labor market, tapering household spending and a still-depressed housing sector, suggesting that the U.S. was in store for a slower pace of recovery in the coming quarters than most expected.
With unemployment stubbornly high, consumer confidence falling and households expecting their income to decline in the next year, Pianalto said people are focused on rebuilding their wealth, not spending it.
"I put all of these facts together; I do not expect much of an economic boost from consumer spending any time soon," Pianalto said.
Turning to inflation, Pianalto sees inflation averaging around 2% in 2012 and 2013, expecting the pressures of rising food and energy costs to abate over time.
This will have serious impact on the economy as S andP is now on a roll as they may downgrade Muni bonds: (courtesy Standard and Poor):
The company, which said earlier this month that states and local governments could remain AAA even after the U.S. cut, said in a report today downgrades could come after reductions in federal funding or changed policy. Ratings changes would come based on "differing levels of reliance on federal funding, and varying management capabilities," and, after the Budget Control Act of 2011, will be felt "unevenly across the sector," S&P said.
"Experience tells me I would expect there to be some downgrades," said S&P credit analyst Gabriel Petek in a telephone interview. "These cuts are coming in addition to the losses of revenue that already came during the recession."
The initial budget cuts would be smaller than the revenue losses during the recession that ended June 2009, he said. States lost $67 billion in aggregate during the 18-month contraction, the report said. The federal government has planned $7 billion in cuts, most of which won’t be implemented until 2013, giving states some time to prepare, Petek said.
S&P will begin evaluating states and local governments starting Nov. 23, when a panel of 12 members of Congress, split evenly between Republicans and Democrats, is supposed to come up with recommendations, Petek said.
In 2009, when the U.S. introduced economic stimulus, federal spending on average was 24.6 percent of state gross domestic product, the report said. States that had federal funds representing more than 30 percent of GDP included Alabama, Alaska, Hawaii, Kentucky, Maryland, Montana, Mississippi, New Mexico and West Virginia. The state with the lowest percentage was Delaware.
"We do not have immediate concerns at the state and local levels," said Natalie Cohen, managing director and senior municipal-bond analyst for Wells Fargo Securities, in an Aug. 16 report.
The 11,500 municipal bonds already downgraded from AAA in lockstep with the U.S. were a "logical extension," and "not a symptom of a meltdown in the municipal-bond market," she wrote. The debt was directly dependent on federal funding.S&P mentioned possible changes to the municipal market if tax policy is altered. If tax cuts enacted during George W. Bush’s presidency are allowed to expire, federal taxes would increase and the tax exemption on municipal bonds would be more attractive to investors and drive yields on municipal bonds lower, S&P said.
Alternatively, Congress could limit some of the tax exemptions on municipal bonds to raise more government revenue, which would likely increase interest costs, S&P said.
The analyst, William J. Harrington, worked for Moody's for 11 years, from 1999 until his resignation last year.
From 2006 to 2010, Harrington was a Senior Vice President in the derivative products group, which was responsible for producing many of the disastrous ratings Moody's issued during the housing bubble.Harrington has made his story public in the form of a 78-page "comment" to the SEC's proposed rules about rating agency reform, which he submitted to the agency on August 8th. The comment is a scathing indictment of Moody's processes, conflicts of interests, and management, and it will likely make Harrington a star witness at any future litigation or hearings on this topic.
The primary conflict of interest at Moody's is well known: The company is paid by the same "issuers" (banks and companies) whose securities it is supposed to objectively rate. This conflict pervades every aspect of Moody's operations, Harrington says. It incentivizes everyone at the company, including analysts, to give Moody's clients the ratings they want, lest the clients fire Moody's and take their business to other ratings agencies.
Read more: http://www.businessinsider.com/moodys-analyst-conflicts-corruption-and-greed-2011-8?op=1#ixzz1VV8RAr3C
Interactive Brokers Warns Gold Margin Hike Imminent, CME Next?
Interactive Brokers bulletin board
To HKFE,HKMEX,NYMEX,NYSELIFFE traders:
Fri Aug 19 13:29:35 2011 EST
As a result of the volatile trading environment at the present
time, please be advised that Exchange margins and House margins are
likely to increase over the next couple of days. For exchange-
specific increases, please visit the respective websites. IB will
also be increasing the gold derivatives margin. Please monitor any
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