Monday, December 24, 2012

Arbitrage now surfaces between Shanghai gold/silver exchange and comex/new uses of gold/Indians switching to gold coins instead of jewelry/

Good evening Ladies and Gentlemen:

Gold closed down 60 cents to $1658.60 in a lacklustre day at the comex.  Silver fell by 30 cents down to $29.84.  Tonight's commentary will be brief as you have other more important things to attend to re your children. Today I am going to delve more into the physical stories than the paper news as generally there was a scarcity of paper stuff and a plethora of real physical stories.
I want to emphasize the big story introduced on Saturday through Andrew Maguire re the differential in pricing of gold and silver re Shanghai and the Comex.  ( I urge you to listen to Andrew Maguire on Kingworld news and then read Jim Willie.)  I have no doubt that the Chinese wish to back their yuan currency with gold.  They have surplus USA dollars on their shelf.  What better way to obtain gold from the comex and LBMA is through arbitrage where  an investors buys gold at the comex, seeks delivery and then jets over the gold via a rented plane to Shanghai where the investor had simultaneously sold short the higher priced gold in Shanghai.  It would not take long to bankrupt the comex.

In gold it looks like 9.62 tonnes of gold will eventually stand in December and in silver a whopping 19.5 million oz.

I would encourage you to read the entire Lars Schall interview with Alasdair Macleod.
Both of these gentlemen certainly understand the gold and silver market and the manipulation we face.
The Indians, after a much love affair with gold jewelry are now switching to gold coins.  And also today, we learn of a new use of gold in fighting cancer.

 We will go over these and other stories but first.............................................................................

Let us now head over to the comex and assess trading today.
The total comex gold open interest fell by 5192 contracts from 430,442 down to 425,250.  We had a good day on Friday as gold rose by 10 dollars so maybe we have some jittery bankers wishing to exit.  The active December contract saw it's OI fall from 303 down to 191 for a loss of 112 contracts. We had 134 notices served on Friday so in essence we gained 22 contracts or an additional 2200 oz of gold will stand in December.  The next non active contract month is January and here the OI fell by 160 contracts down to 1142. The next big active contract is February and here the OI fell by 6748 contracts from 263,632 down to 256,884. The estimated volume today was non existent, reading only 30,457.  The confirmed volume on Friday was much better at 146,357.

Thew total silver comex OI continues to hover around the 140,000 mark.  Today the reading came in at 140,617 a loss of 2280 contracts from Friday.  As in gold we may be losing a few bankers who are quite nervous about the fiscal cliff and other big developments coming down the pipe.  The active December contract saw it's OI fall from 967 down to 568 for a loss of 399 contracts.  We had 382 delivery notices filed on Friday so we finally lost a few oz in silver standing in December to the tune of 17 contracts or 85,000 oz.
The non active January contract saw it's OI fall by 37 contracts down to 584. The next big active contract month is March and here the OI lost 1993 contracts despite silver's rise in price on Friday.  The estimated volume today was a minuscule 7,311 contracts. The confirmed volume on Friday was very good at 47,114.

Comex gold figures 

Dec 24.2012    The  December contract month


Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
40,421.74 (HSBC,Scotia)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
114,875.294 (,Brinks,HSBC, Scotia)
No of oz served (contracts) today
 54 (5,400 oz)
No of oz to be served (notices)
137  (13,700 oz)
Total monthly oz gold served (contracts) so far this month
2956 (295,600  oz)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

581456.42  (18.08 tonnes)
Today, we  had huge activity  inside the gold vaults 

The dealer had no deposits  and no   withdrawals.

We had 3  customer deposits:

 i)  Into HSBC:  682.45 oz
ii   Into Brinks:  1899.91 oz
iii) Into Scotia: a monstrous 112,292.934 oz

total deposit:  114,875.294 oz

we had 2   customer withdrawals:

i) Out of HSBC 39,739.27 oz
ii) Out of Scotia:  682.47 oz

total customer withdrawal  40,421.74 oz

Adjustments: 1  transaction

2198.90 oz was adjusted out of Brinks customer account 
2790.85 oz was added to the Brinks dealer account
591.95 oz leaves Brinks altogether.

Thus the dealer inventory rests tonight at 2.621 million oz (81.33) tonnes of gold.

The CME reported that we had 54 notices  filed  for 5,400 oz of gold. The total number of notices filed so far this month  thus rises to 2956 notices or 295,600 oz of gold. To obtain what will stand for December, we take the open interest standing for December (191) and subtract out today's notices (54) which leaves us with 137 contracts or 13,700 oz of gold left to be served upon our longs.

Thus the total number of gold ounces standing for delivery in December  is as follows:

295,600 oz (served)  + 13,700 oz (to be served upon)  =  309,300 oz  (9.62 tonnes of gold).

we gained 2,200 oz of gold standing in the December delivery month.


Dec 24.2012:   The December silver contract month

Withdrawals from Dealers Inventory1,011,533.25 (Brinks)
Withdrawals from Customer Inventory  750,653.53 oz(Brinks, CNT, Delaware)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory1,737,708.908  oz  (Brinks, CNT, Delaware, HSBC)
No of oz served (contracts)96   (480,000 oz)
No of oz to be served (notices)472 (2,360,000 oz)
Total monthly oz silver served (contracts)3429  (17,145,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month4,430,570.9
Total accumulative withdrawal of silver from the Customer inventory this month11,229,085.00

Today, we again had good activity  inside the silver vaults.

 we had no dealer deposits but did have 1   dealer withdrawals:

i) Dealer withdrawal at Brinks:

1,011,533.25 oz

We had 4 customer deposits of silver:

i) Into Brinks:  516,289.30  oz
ii) Into CNT:  605,061.000  oz  (another perfectly round number of a withdrawal)
iii) Into Delaware:  15,827.778 oz
iv) Into HSBC  600,530.83 oz

we had 3 customer withdrawals:

I )Out of brinks:  590,545.73 oz  
ii) out of Delaware:  1935.8 oz
iii) Out of CNT:  158,176.000 oz  (another round number withdrawal)

total customer withdrawal:  750,653.53  oz

if we add the entire deposits it comes to 1,737,708.908 oz
and the withdrawals:  1,762,190.78 oz

which is pretty close and probably this will settle upon our longs.

we had 1  adjustments:

Today, we had 478,506.0000 oz of silver leave the customer and enter the dealer account at CNT. 

I have still not received any answer from the CFTC  regarding the round numbered deposits/withdrawals in gold and silver we have been witnessing lately, especially from the CNT vault.  

Registered silver remains today at :  42.123 million oz
total of all silver:  146.879  million oz.

The CME reported that we had 96 notices filed for 480,000 oz. 

To determine the number of silver ounces standing for December, I take the OI standing for December  (568) and subtract out today's notices (96) which leaves us with 472 notices left to be filed or 2,360,000 ounces left to be served upon our longs.
Thus the total number of silver ounces standing in this  active month of December is as follows:

17,145,000 oz (served) + 2,360,000 (oz to be served upon)  =  19,505,000 oz

we finally lost another 85,000 oz of addition silver  standing for December.


The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

Total Gold in Trust   Dec 24.2012  ( at 5 pm)



Value US$72.180 Billion

Dec 21.2012:



Value US$71.704 Billion.

Dec 20.2012:



Value US$71.645 Billion

Dec 19.2012:



Value US$72.276Billion.

we neither gained nor lost any gold ounces into/out of the GLD vaults.

and now for silver:

Dec 24.2012:  (at 6 pm est)

Ounces of Silver in Trust322,981,444.700
Tonnes of Silver in Trust Tonnes of Silver in Trust10,045.85

Dec 21.2012:

Ounces of Silver in Trust318,143,414.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,895.37

Dec 20.2012:

Ounces of Silver in Trust317,369,318.700
Tonnes of Silver in TrustTonnes of Silver in Trust9,871.29

Dec 19.2012:

Ounces of Silver in Trust317,369,318.700
Tonnes of Silver in TrustTonnes of Silver in Trust9,871.29

Late Friday night, the SLV was updated and revealed a gain of 4.84 million  oz of silver was added to the SLV vaults.  

And now for our premiums to NAV for the funds I follow:  

Sprott and Central Fund of Canada. 

(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded to a positive 3.3 percent to NAV in usa funds and a positive 3.4%  to NAV for Cdn funds. ( Dec24 2012)   

2. Sprott silver fund (PSLV): Premium to NAV fell to 0.71% NAV  Dec 24./2012
3. Sprott gold fund (PHYS): premium to NAV  rose to 1.54% positive to NAV Dec 24.2012. 

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 3.3% in usa and 3.4% in Canadian.This fund is back in premiums to it's former self with respect to premiums per NAV. 

The silver Sprott fund announced a big silver purchase and this reduces the premium to NAV temporarily.  It seems that the bankers are picking on Sprott to short their funds trying to cause an avalanche in selling in the precious metals.  They are foolhardy in their attempt.

It looks like England may have trouble in finding gold and silver for its clients.
It is worth watching the premium for gold at the Sprott funds which is a good indicator of shortage as investors bid up the premiums.



Here are your major physical stories:

Gold trading from Asia and Europe early this morning:

(courtesy Bullionvault)

Gold Regains Some Ground, "Good Demand" for Gold from India

By: Ben Traynor, BullionVault

-- Posted Monday, 24 December 2012 | Share this article | Source:

London Gold Market Report

ON THE FINAL day before Christmas, gold prices edged higher Monday morning, climbing to $1665 per ounce and recovering some of the ground lost last week.

Friday afternoon's London gold fix was $1651.50 an ounce, a 2.6% weekly fall and the biggest weekly drop since June.

"[Gold's fall] opens up a move to the next major support, which are the lows in the $1520s," says Friday's technical analysis note from Scotiabank.

On the physical bullion market, gold demand from traditional world number one India picked up Monday, dealers reported.

"Demand is good," one dealer at a state-run bank in Mumbai told newswire Reuters earlier today.

"Buyers are placing orders for limited stocks with banks. They know the supply situation will remain tight for the next few days. Overseas suppliers are going on leave."

Silver meantime rallied to $30.39 an ounce before easing slightly, like gold regaining a little of the

Stocks and commodities were broadly flat Monday morning, while the Euro gained against the Dollar but remained below last week's seven-month high.

In New York, the so-called speculative net long position of gold futures and options traders – the difference between bullish and bearish contracts held – fell to its lowest level since August in the week ended last Tuesday, weekly data published by the Commodity Futures Trading Commission show.

Elsewhere in the US, politicians negotiating over how to deal with the government's deficit have left Washington for Christmas without any deal being agreed. The US economy is due to hit the so-called fiscal cliff of around $600 billion of spending cuts and tax cut expiries, starting next Monday, if Congress does not agree new legislation.

Here in Europe, current Italian prime minister Mario Monti said Saturday that he will not run in February's parliamentary elections. He added however that he would consider being prime minister if nominated to the post by an elected coalition that would back what he called "the Monti agenda" of economic reforms.

"While he may not have thrown his hat into the ring," says Nicholas Spiro, managing director at consultancy Spiro Sovereign Strategy, "Il Professore has become Il Politico whether he likes it or not...[Monti] has made it crystal clear where his political allegiances lie and that he's ready to head
Italy's next government."

Ben Traynor

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault's weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012


I think it best that you read the following Alasdair MacLeod offering courtesy of Lars Schall. 

Both Schall and Macleod believe that we will most likely have a failure in silver at the comex:

(courtesy Lars Schall/Macleod)

THE MATTERHORN INTERVIEW – Review 2012: Alasdair Macleod

“We are quite likely to have a failure on COMEX in the silver market”

Matterhorn Asset Management is very pleased that the Christmas 2012 Matterhorn Interview is with Alasdair Macleod. We know Alasdair as a man with a lot of common sense based on a long time hands on experience in the largest financial center of the world. So here it is; straight from the horse’s mouth. Enjoy the interview.
The renowned economist and financial analyst Alasdair Macleod looks back through the rear window of twenty-twelve and comments important events and developments such as “QE to infinity.” Moreover, he gives his expectations for 2013 in general and the gold and silver markets in particular.
alasdairmacleodAlasdair Macleod started his career as a stockbroker in 1970 on the London Stock Exchange, and learned through experience about things as diverse as mining shares and general economics. Within nine years Macleod had risen to become a senior partner at his firm. He subsequently held positions at director level in investment management, fund management and banking. For most of his 40 years in the finance industry, Macleod has been de-mystifying macro-economic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policies are the most destructive weapons that governments can use against the people. Accordingly, his mission is to educate and inform the public, in layman’s terms, what governments do with money and how to protect themselves from the consequences.
By Lars Schall
Lars Schall:  Shall we do a review of 2012 by season?
Alasdair Macleod: Yes.
L.S.:  Let’s look for the big stories last winter, spring, summer and fall. So, what in your experience was the big story last winter at the start of 2012?
A.M.: The short answer is the Federal Reserve Board extending zero interest rates until 2014, which was unheard of before. We have now got used to zero rates. And also the ECB started to abandon all sound money in order to support the Eurozone banking system and the weaker members. And that to me sets the tone for an eventual complete paper money collapse.
L.S.: Maybe you tell us a little bit about zero interest rates and what usually happens?
A.M.: Well, usually what happens is that the Central Bank manages interest rates at a level which it thinks is appropriate for the economy. In the case of the Federal Reserve Board, it is meant to balance the level of unemployment and the prospects for inflation by managing the interest rates. Now, in practice, that probably means that it sets it below what the market would normally be comfortable with or what the market would decide on its own.
But here we have a situation where the Federal Reserve Board has turned around and said, “We are going to keep interest rates frozen at zero until late 2014 at least. So, that basically means that the cost of borrowing is tied to that zero bound and there is no way that interest rates can go any lower. It is the end point of lowering interest points. Obviously, if you’re going to keep interest rates at that very low level, you’ve got to do two things: Firstly you’ve got to pump money into the system to keep rates at zero and secondly the Central Bank must satisfy any demand for money at that zero bound. And of course, the FED has been doing this, by buying government treasuries and injecting the money in payment for them into the banking system. The banks, where they have drawn down on their lending capacity, have not lent it into the economy but they have used it for financial speculation. So that’s why huge amounts of derivatives have been piling up. And the US banking system, believe it or not, is also exposed quite significantly to the Eurozone area.
L.S.: How did this exposure to the Eurozone arise?
A.M.: Well, it goes back to the beginning of this year when it was only people like you and I perhaps who worried about the possibility that Greece and Italy and Spain might be bankrupt. The average banker just looked at guarantees from the ECB, allowing them to turn 3 per cent or more on a Eurozone sovereign loan. So you end up with bank exposure to the Eurozone and the Eurozone banking system. At mid-year, according to the Bank for International Settlements, the BIS, the total was about $1.5 trillion. This was a very, very important development from the beginning of this year. The ECB at that time was insisting they were not going to print money, and they were going to be conservative in their lending policy. But under Draghi they’ve responded to a systemic banking problem and to politicians unable to deal with government finances in individual countries. And so it became obvious the ECB is the only institution in the Eurozone which can keep this show on the road. So the ECB has started to abandon all pretence at sound money. The hard-money Germans have either resigned or been basically over-ruled in the ECB. The euro, like the US dollar, is now a story of print, print, print. And then of course we had the Greek bail-out in January. The first of two bail-outs this year at least as far as I can recall.
L.S.: Yes.
A.M.: So that’s the first quarter. In the spring what caught my eye was the Target 2 settlement system. Suddenly Germany was on the wrong end of something like Euro 500 billion, reflecting capital flight into Germany from countries such as Greece, and also increasingly out of Spain, Italy and Portugal. Ordinary citizens in those countries began to worry about the safety of leaving money on deposit in their banks. The imbalances from capital flight today are reflected in the Bundesbank with 715 billion Euros, or one trillion dollars owed to it by other Eurozone national Central Banks. Total imbalances from capital flight within the Eurozone are now one trillion euros. So that to me was the second quarter’s feature. I think the third quarter was notable for the LIBOR manipulation story.
L.S.: Yes, we had.
A.M.: And that started with Barclays Bank and it was clear at the time, it wasn’t just Barclays but all the other major banks could well be implicated in this, from UBS to Royal Bank of Scotland. All sorts of big banks had an interest in supporting the value of their derivatives at artificial levels, otherwise their solvency margins looked bad. This is actually a major, major scandal, but it’s nothing compared with the economic damage from manipulation of interest rates by the Central Banks,  with zero interest rate policies. We now have LIBOR manipulation on top. The thing that upsets people is the banks pursuing what is obviously a vested interest in keeping their asset values, the price of the bonds and other things that they have on their balance sheets, high by manipulating LIBOR interest rates down. And that I think is a very, very big scandal. It is a global scandal that implicates central banks, which I am sure knew it was happening and knew how important a low LIBOR was to commercial bank balance sheets.
L.S.: Okay. So we enter again the fall and winter season.
A.M.: Yes. There are so many systemic dangers now but I think the story I’m going to alight on is one I wrote about recently about gold and silver on the COMEX. The bank participation report came out on the 4th of December, and I was able to complete the figures for this year. Bank shorts are at or near record levels. And what is interesting is that with the prices of gold and silver well below the all-time highs there are no profit-takers in the market to sell contracts to close their shorts. And in silver it is very, very alarming. This leads me to think that we are quite likely to have a failure on COMEX and in the silver market in particular.
If you have a failure in silver on COMEX then that is going to affect the gold futures market as well. The West’s central and commercial banks have suppressed the price of both gold and silver by supplying central-bank gold and increased short positions, making prices far too cheap. The result has been a massive transfer of gold and silver to Asia. This is the relevance of the point that you have been raising about Central Banks gold holdings, and it is also going to bring into question the solvency of the bullion banks who are short.
So, I think that while it may not be obvious to many people at the moment, when we look back at the fourth quarter we will see that the conditions were in place for a huge bear squeeze, for silver in particular. I would assume that the short position in gold is more controllable so long as Western Central Banks continue to make bullion available to the bullion banks that are short either on COMEX or with LBMA. But silver is different, nobody has it for sale. There is no silver around.
L.S.: Yes, there is no stock.
A.M.: No, exactly.
L.S.: And that’s the big difference?
A.M.: Yes, and this silver position could actually destabilize other derivatives in financial markets. I blame complacency on this matter on Keynesian economists and monetarists saying, “Oh well, gold is just a commodity”. It’s absolute nonsense, we are talking about the most important money to all mankind. If you go into Asia and you ask what is money you will be told, ”Gold and silver”, not rupees, not any paper currencies issued by governments. Gold and silver, that’s what they regard as money, that is where they put their savings. And that is why we are short of it.
L.S.: Can I interrupt you because I would like to bring it both together. The Yuan in China, there’s now a lot of talk about the Yuan being the next reserve currency and we see the Chinese buying gold like crazy. Do you think they have something in mind with backing up their currency with gold?
A.M.: Yes, I do. I think they do have a plan and we don’t know what it is, but we can guess. My starting point in this is that all the Chinese and Russian Marxian economists were taught that capitalism destroys itself. Now, whether you believe that or not isn’t the point, but the Chinese economists actually have this in mind. And they can see the dangers of the way the US dollar is going. We must also understand that the dollar is for security reasons not something they want to use for their international trade settlements. Remember that every dollar transaction done in the world is reflected in a bank account in New York. So, the Chinese want to get away from the potential control and the intelligence information that it gives America. They want to use a different settlement medium.
Now, they agreed about 10 years ago with the Russians to set up the Shanghai Cooperation Organisation (SCO), and the last unsatisfied objective of the SCO is to have a common trade settlement system between the members of the SCO, which at the moment are Russia, China, and the various “stans” in middle-Asia. But interestingly, the next wave of members who will join are India, Iran, Pakistan, Mongolia and Afghanistan (as soon as NATO has left). So you’ve really got the bulk of Asia’s four billion people and they’re going to be settling cross-border trade not with the dollar but with something else. They need to be gold-rich to give confidence to their currencies. I suspect that the Chinese Yuan will play a big role in Asia. What they’re doing with Iran is interesting. They’re settling net balances in gold and gold is being re-monetized in that sense. And I think that China has accumulated a lot more gold than they officially tell us. So they have the potential to use gold as money. I can see gold being re-monetized in the loosest sense for the largest internal market the world has ever seen. Believe me, it’s happening now.
L.S.: Okay, let me then connect another thing with this question. Do you think the Chinese will get paid in gold for perhaps helping out in the euro crisis. So they’re helping to prop up the euro and they get in turn some of the European gold?
A.M.: I don’t think China is going to get sucked into supporting the Euro, no, I don’t see that at all. What I think is possible is they would very much like to cash in Euro’s for gold. I am sure they would consider taking physical gold as collateral for Eurozone loans. But for now every time a Eurozone country goes to China and says “we’ll be very grateful for some of your money, the Chinese listen very politely and then just show them the door. China is not in that role as they’ve got enough of their own problems.
L.S.: Yes.
A.M.: And look at it also this way, the average European has a standard of living, perhaps ten times better than the average Chinese. China is not interested.
L.S.: Let us then talk about the three big stories in gold this year, and I think the one thing out of the different campaigns for repatriation of gold reserves into the respective countries.
A.M.: Yes. That was going to be my overall story for 2012, and that owes much to the work that you have done. Teasing out of the German authorities, exactly how much gold they think they have got and where, was a great achievement, a journalistic scoop. And what I particularly liked was not only did you manage to do that but you have encouraged others to do the same thing elsewhere. The journalist in Mexico who has got the Mexican Central Bank to talk. We now discover from Austria that the bulk of their gold is in England and not only that, but they earned 300 million Euro in leasing fees. What a mistake to tell us that!
L.S.: Yes, but can you elaborate on this. Why was it a mistake?
A.M.: Well, I think it was a mistake because the sensible thing for a Central Banker to do when asked questions about this, given that a lot of the gold has probably disappeared through leasing, is actually to say as little as possible. The real reason for having gold as part of your foreign reserves is to have the ultimate protection of it for your country and currency. Are you telling us, central bankers, that you have compromised that role by leasing it with the risk that it won’t come back? You know that must be the next question you journalists will ask.
L.S.: Yes.
A.M.: And of course, to that they all clam up. So I think it was a mistake for the Austrian Central Bank to admit it. And the most recent story has been the Netherlands where it has just been revealed by the Central Bank after lots and lots of pressure that they have got 50 per cent of their gold in New York, they’ve got 20 per cent in Canada, 20 per cent in London and 10 per cent — only 10 per cent — in Amsterdam.
L.S.: So we come to the question what is a gold reserve. I would say a gold reserve is gold that you have in your possession and at your disposal at any time?
A.M.: Yes, a central banker has actually got to be able to go down into the basement, into the strong room, and count it.
L.S.: Yes.
M: It’s as simple as that.
L.S.: In Germany for example this is not the case. So what do they have. They have no gold reserve, what do they have, what kind of hybrid?
A.M.: There was a time when it made sense, with the Russian bear on the doorstep, for Germany to store her gold in New York or London or Paris. But things have changed, that’s no longer the case and they really should move it back. And I just can’t see the circumstances that have occurred or should occur for Germany whereby she needs to dispose of any of the gold, nor to keep any of it near the markets. It looks like the Bundesbank instead of physical gold has counterparty promises from the Fed, Bank of England and the Banque de France. This should be clarified.
Now, if you ask me about France I would say that France is theoretically bust, I can certainly see them selling gold in order to pay some of their debts or for emergency funding or something. Perhaps using it as collateral for loans. But for Germany it doesn’t make any sense at all, let alone have gold in any form in Paris. And I suspect that the Central Bankers in Germany have also had quite a tough time keeping gold out of the hands of various German chancellors, but that is another story.
L.S.: The argument now is, for example, that you have the gold in New York to trade with it. When you are trading with your gold reserve, what does this say?
A.M.: Well, it tells me that you’re not actually looking after it or keeping it for what it’s meant for. And if you are leasing it, then you’re being a party to a scheme which keeps the gold price, and therefore the value of your gold reserves low. Central Banks that go into leasing have lost sight of the whole point of having gold reserves.
L.S.: Why is it interesting for some parties to have a low gold price and what is the connection between the gold price and the bond market and the setting of interest rates.
A.M.: Okay, there’s quite a long story to that aspect.
L.S.: Can I challenge you?
A.M.: Yes, if we go back to the Nixon shock in 1971, the Americans decided that the Bretton Woods system of gold convertibility only for Central Banks (and the IMF and the World Bank) had to come to an end because they did not have enough gold to stem the losses resulting from dollar repatriation by the Banque de France and various other Central Banks. So, from that moment the US Treasury and the Federal Reserve Board tried to demonetize gold completely and they ran a campaign of saying that gold was old-fashioned; it was not money anymore. The dollar is king, the dollar is money and you can ignore gold.
And initially, they tried to hit the gold price to persuade speculators that gold is yesterday’s money. That failed spectacularly when the Bull Market in gold easily absorbed all the bullion the Americans sold. After that in the 1980s and 1990s, leasing developed. Gold leasing was the basis of the carry trade. A bullion bank gets a Central Bank to lease it some gold for an annual rate about a half, maybe three-quarters of a per cent. The Bullion Bank sells it into the market and with the proceeds goes and buys government short-dated bonds which at that time yielded say 5 or 6 per cent, so they got a very nice turn on that money. And they were meant to cover themselves through the London market from a producer who wanted to sell the gold forward so that he could fix the cash flow for his operations.
But what we don’t know other than by indirect analysis is to what extent these leasing operations were actually closed out by mine deliveries. Most of the gold that they sold in the 1980s and 1990s from this leasing ended up being fabricated into jewellery. And I think it was estimated that up to 90 per cent of the gold sold into the bullion market was actually going into jewellery in one form or another. That was the “raison d’être” if you like for the Central Banks trying to remove gold entirely from the financial system. I guess that the gold carry trade is now considerably reduced, because the interest rate spread is no longer there.
The other aspect of the relationship with bond yields is that physical gold doesn’t yield any interest. So, if bond yields are high, then there is a penalty for holding gold. If on the other hand interest rates are low there is no penalty and gold becomes more attractive. And that basically I think would sum up the relationship of gold with bonds.
L.S.: But now we see a move to declare gold a non-risk asset.
A.M.: Yes.
L.S.: Is this maybe also one of the big stories this year?
A.M.: Yes, it’s a very interesting one, because I think they’re trying to stop regulatory arbitrage, bearing in mind that derivatives markets have already accepted gold as collateral for margin purposes. And this was after some lobbying by the London bullion market. If they did nothing to stop regulatory arbitrage from bank balance sheets, it would encourage growth in shadow banking, which for regulators is not desirable. And now that the banks in America have been asked the question as to whether they think it will be a good idea to have gold as a collateral with zero or minimum haircut then of course they are bound to say yes. So I think it’s a done deal.
L.S.: It’s very important for the price, right?
A.M.: Well, I think in time it will be, because I would expect a number of bankers to begin to worry about the value of fiat currencies and it therefore makes sense to have a certain amount of asset allocation on their balance sheets in gold, just to give them protection. Gold will be on every banker’s radar screen.
L.S.: So gold will then also become a big story in 2013?
A.M.: I think it will be a story of 2013. But how important; I don’t know Lars. At this stage what I see is a potential failure in the precious metals markets. I think it’s far more important to worry about that. You know, they’re not going to get their gold and silver if this happens.
L.S.: Yes, sure. And then let us switch to the third big story in gold for 2012, and this has everything to do with Iran. They were kicked out of the SWIFT system and what did they do then?
A.M.: Well, I found this interesting because it first started with America banning the use of dollars for Iran’s payments. And that meant that no Iranian Bank and no other bank trading with Iranian counter parties could operate a dollar account because under the Nostro/Vostro correspondent system, all those dollar accounts are actually in New York, and they can be vetted and banned from that point. So the Americans turning around and saying, “No dollar settlements for Iran” is a done deal. But then you have the SWIFT system based in Brussels, which does all international currency transfers, and that was stopped.
So you have a situation where Iran, a future member of the Shanghai Cooperation Organisation and major exporter of oil to China India and Turkey, cannot be paid for its oil in dollars or any other currency. So, Iran has had to resort to external settlements in gold. This is bound to spur China on to increase her own desire for gold over dollars. She’s probably producing more gold than the World Gold Council figures actually reflect. Anyway, I am sure that not only has she been accumulating all her own production but we know China and her citizens have been buying gold whenever it is offered from elsewhere. We also know that they have invested in gold mining capacity outside China, both in Australia and also Africa. Here we have a country which is quite evidently preparing itself for the time when gold comes back as money and paper money, at least in the West, becomes useless. And all China’s suspicions that this is going to happen have not been diminished by American’s treatment of Iran.
L.S.: Yes, exactly. And so India is now paying for Iranian oil with gold.
A.M.: Yes. As I understand it India’s trade with Iran works on a net settlement basis in gold. But having said that, the collapse of the Iranian rial must have dampened Iran’s imports substantially, so Iran is probably earning a lot of gold from its oil, some of which it’s not having to give up against foreign imports.
L.S.: Now we come to your expectations for 2013, and let us begin with silver. Would you agree with me that this is the most explosive market there is, not just compared to gold but compared to all other markets?
A.M.: Absolutely. You’ve got the banks’ short position on COMEX which cannot be covered. According to the most recent bank participation reports, the banks are short of nearly 300 million ounces of silver. When you bear in mind this is an industrial metal, the vast bulk of silver consumption from mining and recycling supply goes into biocides, solar panels, electronics, et cetera. You have only 100 million ounces annually left over for investors. The short position for the banks on COMEX is three times that 100 million ounces.
There’s no way this can be covered without a price rise sufficient to kill off significant industrial demand, because there are no strategic reserves to draw on. The only country which might have strategic reserves is China but otherwise there are no reserves. And I think that the only way in which the banks’ shorts could be closed out is after a price hike which would lead to billions of dollars of losses for these banks. There will be a market crisis, and I think that they will have to suspend trading in silver and agree a settlement procedure for long and short contracts. And if that happens, it will be well over $50 an ounce. But remember, other exchanges will continue to price silver if Comex suspends, which will not help Comex resolve the problem if the price continues to rise elsewhere.
L.S.: It’s also a very difficult situation for the European banking system, right?
A.M.: Yes, it is. Last year the election of President Hollande added to this crisis because he has taken France away from the path of austerity and reverted to old-fashioned central planning and socialism. The result is that very quickly the French economy is beginning to collapse. And France in my view is at least as bust as Greece, Italy or Spain and it’s only a matter of time before that is realised in the markets. I think that is certainly an important development for 2013. At some stage in 2013, I expect Eurozone residents to turn away from the euro in favour of gold.
More generally, I would say that the systemic risks for next year are the Euro-zone, Japan (which might surprise you but note that in Japan the dissaving from elderly savers is now getting to the point where it’s reflected in a trade deficit which will lead either to higher interest rates or a lower yen). So, those are two problems for the banks – you’ve also got the precious metals market which we have already mentioned and I think is going to be the big surprise for everyone. And I know that the response to the Eurozone and Japanese problems is central banks around the world will print whatever it takes to stop this affecting their banks and bringing the banking system down. The US economy, with higher taxes, seems certain to disappoint as well. Going into 2013 I do not see progress, only problems, and a global banking system that is constantly on the verge of collapse. And if the banking system goes down, you bring down the currencies as well.
L.S.: That’s likely for sure. Okay, and with this background, what do you expect for the gold market in 2013?
A.M.: I expect it to be considerably higher because I would expect it to reflect the increased systemic risks and the quickening pace at which the systemic risks are likely to develop. I think it is going to be truly frightening or could be truly frightening. That is the outlook; but in the short run we also have a systemic shortage of bullion in the West which can only be resolved with higher prices, far higher prices in the case of silver.
L.S.: One last question; one gold story of 2012 was of course that we saw much more discussion about the gold standard in comparison to the past. Do you think this will increase and how do you view this debate?
A.M.: I think the people who are pushing for a gold standard are just indulging in wishful thinking. I really do not see a gold standard working at all, because the fact of the matter is the central banks want the flexibility to continue to issue currency without any restrictions whatsoever. As soon as you bring in a gold standard, if it’s going to mean anything at all, you impinge on that flexibility. It won’t happen, I think you can forget it.
L.S.: Do you think in 2013 we’ll go further down the road of decline?
A.M.: I’m very, very pessimistic about where we’re going, Lars. I think eventually we’re going to have a complete breakdown in value for paper currencies. I think they will become valueless and it will give me no pleasure at all to be sitting on my savings in gold and silver at a time when everyone else is impoverished. That appears to be the prospect as we go through 2013 and beyond.
L.S.: That’s the sad truth. Nevertheless, I thank you very much for this interview!
A.M.: No, not at all, it’s my pleasure!

Alasdair Macleod runs, a website dedicated to sound money and demystifying finance and economics. Moreover, he is a Senior Fellow at the GoldMoney Foundation


I brought the following to your attention on Saturday.  When the Shanghai gold and silver futures market started up I thought that we would finally get some honesty in the markets.
It now seems that we have a huge arbitrage differential between the Comex gold/silver and the Shanghai gold silver. On Saturday, Andrew Maguire first noticed the big delta and this was followed by Jim Willie.  Now we bring you Jim Willie who comments on the above:

(courtesy Jim Willie)

The Shanghai Gold Contract Arbitrage Potential
Jim Willie CB

Thanks to the London Siren for reporting on the price differentials between the COMEX and Shanghai Gold price, which are not minor. A price arbitrage of $20 to $25 is plenty to capture and to exploit. Consider a snapshot taken on December 7th. The Shanghai Gold contract closed at 1728. At no point did the Gold price on the COMEX/Globex trade at that level overnight, no touch. Alert parties with a global footprint will start arbitraging this differential, since they can. They could sell gold in Shanghai, but buy gold on COMEX. Anyone doing that would essentially be going against the cartel with threat to bust the COMEX. The roadmap is there, which can be implemented for quick exploit. Some logistics could interrupt the process. If supply is taken in New York, the gold bars must be shipped to Shanghai for sale and delivery. That might cost must be managed in arbitrage, if indeed delivery is permitted and taken. The New York side might refuse to deliver if they see what is being done. They also might attempt to engineer a more targeted account theft if they could isolate the party conducting sales in Shanghai. It will be interesting to observe if the price differential expands.
Update with another snapshot taken on December 13th. The COMEX Gold futures contract was trading at 1691 at one point when the London Siren checked the price. The Shanghai Gold price closed at 1715. At no point did gold trade anywhere close to 1715 on COMEX overnight, no touch. The differential was $24 at that snapshot, equal to a tiny 1.4% spread. Note also, the COMEX Silver futures contract was priced on December 13th at 32.65, while at the India MCX it was 35.46, a very wide differential of 2.81 per ounce, equal to a ripe 8.6% spread. The COMEX Platinum also offers arbitrage potential, since the COMEX Platinum futures price was 1616, but in Shanghai at 1690. The dislocation between COMEX prices and Shanghai/India prices continues to grow, equal to a 4.6% spread. Execution of the arb trade is possible, just must be managed with certain challenges.
The London Siren made some conclusions. He wrote, "Some points are important to understand in sequence. 1) The Gold arbitrage is a tool that China can now use against JPM, GSax, USFed, USGovt, USTBonds anytime they want to cause a systemic failure. 2) They do not have to sell USTBonds as most people believe, since they now have an alternative weapon of mass financial destruction in the arbitrage. 3) China is now the price setter for gold. They would not start trading gold in Shanghai unless very confident about its success. 4) This is another step in making the Chinese Yuan a reserve currency, toward enabling its free convertiblity into Gold in size."
Thorny issues must be addressed eventually, which strike at the heart of the corruption behind the COMEX. Compliance and Risk Departments must determine which is the true market price, and at what price client positions are marked to market for equity determination and margin calls decisions. The logistics would not be any formidable challenge to a wealthy well-equipped merchant player in execution of arbitrage trades to exploit the price spread. A $25/oz spread translates to a $80.4k arbitrage potential gain per kilogram. A private jet could be secured to manage the transported bullion bars, loaded with several hundred kilograms. The key is actual delivery taken in the devil's den of New York. Sophisticated traders with big accounts and big vault space and assistant mules in both locations could conduct the arbitrage trades. However, unless physical bars move, the trades remain trapped within the paper world on the two sides, separated by a wall (two distinct markets) and ocean. Contracts are not interchangeable. Other risks would be from robbery by employed JPMorgan thugs or hired Blackrock thugs or dedicated FBI thugs working under the USGovt badges. If believed far-fetched, then naive to the core. The level of financial crime and protection by USGovt law enforcement and security agencies is astonishing, backed up by the US courts. The FBI protected Goldman Sachs when their UNIX box for snagging order flow data was stolen by the Russian employee. They painted the Russian as a theif and protected the venerable GSax putrid house.


And now Andrew Maguire's piece with Kingworld news.  

The big news on Friday was the big premium for physical silver in Shanghai.
While silver traded at $29.61 in USA, over in Shanghai, silver was trading at $32.50 a premium of $2.89 per oz.  The Chinese are willing to pay more to get the real stuff.  Expect arbitrage to intensify between these two markets:

(courtesy Kingworldnews/Andrew Maguire)

Paper raid on metals causes 'unprecedented' silver premiums, Maguire tells King World News

Submitted by cpowell on Sat, 2012-12-22 01:00. Section: 
7:56p ET Friday, December 21, 2012
Dear Friend of GATA and Gold (and Silver):
London metals trader and silver market whistleblower Andrew Maguire reports via King World News tonight that premiums for delivery of physical silver in Shanghai today reached "unprecedented" and "ludicrous" levels, so distortive was the Western central bank intervention against the monetary metals in London and New York. Maguire says the bullion bank agents of the central banks "are fully aware of the physical drain" caused by their paper raid, "and I guarantee you that they are going long on this final stage of the selloff."
An excerpt from Maguire's interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Commmittee Inc.


James Turk gives his outlook for the price of gold from 2013 through to 2015:

(courtesy Goldmoney/James Turk)

GoldMoney's Turk gives outlook for gold from 2013-15

5p ET Saturday, December 22, 2012
Dear Friend of GATA and Gold:
In a video posted this week at GoldMoney's Internet site, GoldMoney founder and GATA consultant James Turk reviews and elaborates on the forecast for gold he made in Forbes magazine in 2003, explaining why he still thinks the gold price will reach $8,000 by 2015. Currency debasement, Turk notes, is both policy and compelling politics in the West, and the long-term charts he presents prove it. Turk's presentation is titled "James Turk's Outlook for Gold for 2013 to 2015" and it's posted at the GoldMoney Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


On Saturday I outlined that Iraq of all countries have added to their gold reserves to the tune of   
25 tonnes.
I have now provided the London financial times article which I forgot to include in Saturday's commentary:

(courtesy GATA/London Financial times/Javier Blas)

Iraq boosts gold reserves by 25 tonnes

By Javier Blas
Financial Times, London
Friday, December 21, 2012
Iraq has joined the growing list of countries buying gold for their official reserves, purchasing more than 25 tonnes of the precious metal in the market to beef up the gold reserves of its central bank for the first time in years.
The purchases by Baghdad come as Iran is using gold as a currency to settle import-export transactions with neighbouring countries, including Turkey. But Iraq has so far not disclosed any gold transaction with Tehran.
Analysts said it was unclear whether the purchases showed dealings with Iran or were simply a sign that the Iraqi central bank is diversifying its foreign exchange reserves, as others in emerging countries have done recently.

Iraq joins countries from Russia to Brazil in buying gold to diversify its official reserves this year. According to data released late on Thursday by the International Monetary Fund, Iraq bought gold during August-September, lifting its official precious metals reserves from 5.8 tonnes to 31.07 tonnes.
The so-called official sector -- a group that includes central banks, sovereign wealth funds, and other quasi-government entities -- has been a significant buyer of gold since 2010, having been a strong seller in the previous 15 years.
The Iraqi additions are among the biggest officially reported so far this year, behind only Russia, Turkey, and Kazakhstan. Some countries have bought gold secretly in the past, including China, disclosing their purchases years later.
The purchases have lifted Iraq in the global ranking of gold holders from 78th to 54th position, according to data from the World Gold Council, the lobby group of the gold industry. Iraq is the first buyer of gold in the Middle East region that has acknowledged its purchases, although the market suspects Saudi Arabia and several regional sovereign wealth funds have also bought gold in the past.
"Having a new buyer in the central bank space, and especially from a new region, is an important development," said Joni Teves at UBS in London.
Gold has been trading in a relatively narrow band of between $1,500 and $1,800 per troy ounce for the past year. Over the past week, spot gold prices in London fell 2.5 per cent to $1,651 per ounce. On Thursday, gold prices briefly hit their lowest since August, trading at $1,635 per ounce on the spot market.
Weak physical demand, particularly from India and China, has weighed on the gold market for most of the year, analysts said. The weakness from the jewellery sector is so far offsetting bullish financial factors, including ultra-low interests rates in major economies and the worries about the so-called fiscal cliff of automatic tax increases and spending cuts in the US.


Central banks are manipulating metals to which we already know.   Gerald Celente believes that bonds are going to collapse anyway despite their massive support from central authorities:

(courtesy Gerald Celente/GATA)

Central banks manipulate metals but bonds will fall anyway, Celente tells King

11:20a ET Sunday, December 23, 2012
Dear Friend of GATA and Gold:
Central banks are manipulating gold and silver prices but bonds are going to collapse anyway, Trends Journal editor Gerald Celente tells King World News in an interview excerpted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

We have a new 50 gm "credit card" of gold divided into fifty slots.  This will make payment easy as 1 gm of gold is almost equivalent to 2 oz of silver:

(courtesy zero hedge)

Demand For Gold "CombiBars" Soaring

Tyler Durden's picture

One of the biggest complaints about gold - always a parallelcurrency to paper, and soon to be serial, once the world shifts to a post-paper currency reality in which faith in infinitely creatable electronic paper money is finally destroyed - is that it would be an impractical medium of exchange, as the traditional denominations are so large one would be unable to trade one ounce (and certainly one bar) for every day needs. This is also one of the main reasons various retail investors prefer silver over gold. All this may be changing courtesy of Swiss refiner Valcambi which has created a CombiBar, a credit-card sized, 50 gram block of 99.9 gold, which is precut, and which can easily be broken into one gram pieces which can then be used as forms of payment in an emergency. And since one gram of gold has roughly the value of two ounces of silver, it is a far more practical lowest common denominator unit of exchange than the traditional one ounce minimums in broad circulation.
More on this novel, and practical, use of gold from Reuters:
Swiss refinery Valcambi, a unit of U.S. mining giant Newmont Mining Corp., wants to bring its “CombiBar” to market in the United States and build up its sales presence India – the world’s largest consumer of gold where the precious metal has long served as a parallel currency.

"The rich are buying standard bars or have deposits of phsyical gold. People that have less money are buying up to 100 grams," said Michael Mesaric, CEO of Valcambi "But for many people a pure investment product is no longer enough. They want to be able to do something with the precious metal."

Mesaric said the advantage of the "CombiBar" - which has been dubbed a "chocolate bar" because pieces can be easily broken off by hand into one gram squares - is that it can be easily transported and costs less than buying 50 one gram bars.

"The produce can also be used as an alternative method of payment," he said.

Valcambi is building a sales network in India and plans to launch the CombiBar on the U.S. market next year. In Japan, it wants to focus on CombiBars made of platinum and palladium.
Will the golden chocolate bar soon replace the one ounce gold coin as the most favored denomination?
The CombiBar is particularly popular among grandparents who want to give their grandchildren a strip of gold rather than a coin, said Andreas Habluetzel head of the Swiss business of Degussa, a gold trading company.

Other customers buy gold for security reasons.
Whatever the final outcome, demand is soaring:
Elsewhere, demand is particularly strong among Germans, still scarred by post-World War One hyperinflation, when money became all but worthless and it took a wheelbarrow full of notes to buy a loaf of bread.

"Above all, it's people aged between 40 and 70 that are investing in gold bars and coins," said Mesaric. "They've heard tales from their parents about wars and crises devaluing money."

“Demand is rising every week,” Mr. Habluetzel said. “Particularly in Germany, people buying gold fear that the euro will break apart or that banks will run into problems.”
Naturally, there are those who are desperate to infuse skepticism toward the new product. After all, one can't print gold, and any form of money that takes away wealth dilution power from the central banks (i.e. printing money), is implicitly disastrous for the status quo.
Stephan Mueller, who manages bank Julius Baer’s $6-billion gold fund, said one problem with using gold as a method of payment is that people have to take its value on blind trust.

“Gold is a useful store of value,” Mr. Mueller said. “However I doubt whether it will succeed as a method of payment.”
True- is is much better to have value in a EUR paper bill, collateralized by such non-blind trust items as Greek geta and Kalamata olives.
One thing is certain: after a record November, December sales of gold in the US Mint have already surpassed the total from 2011, and are set to be third most active gold purchasing month in 2012, recent violent paper smackdown of gold notwithstanding. Perhaps the US population has finally learned that all increasingly more frequent smackdowns of paper gold by central banks and other authorities do, is to make gold more affordable for more people, for longer. And increasingly more are taking advantage of precisely this, not of hopes of striking it rich overnight and then converting hard money once more into worthless paper equivalents.


Indians now investing in gold coins over jewellery

Dec 22, 2012

"Indians are buying more gold coins due to a shift in demand from jewellery to investment," says Madhavi Mehta, an analyst at Kotak Commodities.
The coin-shaped pieces of gold, sold at banks and jewellers and often embossed with designs such as the Hindu goddess of wealth, Lakshmi, have become increasingly popular as Indians look for a haven for their cash. At the same time, many shops report that this year they have seen demand weaken for gold jewellery, a less pure form of the precious metal that carries a high markup for its design and manufacturing.
Gold prices have hit record highs in India in recent months because the rupee has weakened against the US dollar, which pushes prices up in local currency terms. Consumer sentiment has also weakened amid slowing economic growth and high inflation.
India was the world's largest consumer of gold last year, but it is expected to be overtaken by China this year.
Still, data from the World Gold Council show that demand for gold coins surged by 59 per cent in the third quarter compared to the same period last year.
"As per World Gold Council data, Indian jewellery demand stood at 136.1 tonnes, while bar and coin demand stood at 87 tonnes," says Ms Mehta. "This indicates a ratio of 61:39 for gold demand. As against the third quarter of 2009, the ratio was 81:19 as jewellery demand stood at 111.6 tonnes while net retail investment was at 26 tonnes."
Gold coins, though, are not always bought for investment purposes.
"If you want to buy gold, the minimum amount in jewellery is more than what you would end up buying in coins," says Bhargava Vaidya at BN Vaidya & Associates. "If you just want to buy something you can go in and buy a gold coin."
Coins are often bought with the aim of eventually converting them into jewellery, which is an attractive hedging option if the buyer believes that prices will continue to rise, Mr Vaidya says. "Sometimes a person may be collecting a coin for him or her to change into jewellery when their son or daughter gets married."
Dimpesh Jain, the manager of Motaba & Sons, a jewellery store in Mumbai, says that demand for gold coins has increased by 30 per cent this year, while jewellery sales have fallen by the same amount.
"People have become more aware of the coins," he explains. "They prefer investing in gold coins now rather than jewellery.
But this is not necessarily good for business.
"We get a much higher profit on jewellery because of the profits on the labour. The amount of markup on coins in a very small percentage."
Across the road, Rajendra Gurjar, the owner of Gurjar Gold and Diamond jewellers, says that gold coins are "easier to sell" and represent "better value as an investment" than jewellery.
"People think that prices are going to continue to rise, and with jewellery they don't get the full value of the gold," says Rohit Jain, the co-owner of Surana Gold, another jewellery shop. "It's cheaper for the customer - you don't have to pay the making charge."
Gold plays an important role in Indian culture and gift-giving, particularly during religious festivals and weddings.
"Indians think of gold not only as an investment," says Mr Jain at Motaba & Sons. "It's a passion, a tradition."
But there are divided views on whether that love of gold is actually good for the economy. The nation's central bank has been trying to curb speculation and control imports of the precious metal.
"The Indian government has taken a number of steps this year to reduce gold purchases. The hike in import duty, tightening of norms for gold loan companies and discouraging investment in gold is part of government efforts to curb demand for the metal," says Ms Mehta. "While [the central bank] and government pressure will dent sentiments, a sharp drop in investment demand is unlikely due to the lack of other viable investments."
Sujan Hajra, the chief economist at Anand Rathi, a financial services company based in Mumbai, says: "Some think that gold is an unproductive asset and gold is something which is stopping India from improving the investment because there is a shift from financial assets. Also some people think that gold is one reason why India is having such a big current account deficit."
But Indians place great value on the precious metal in their finances.
"Gold is a very simple asset," Mr Hajra says. "For the poor, if they want to borrow, gold is the easiest collateral for them to borrow."
Meanwhile, the custom of giving gold during weddings in India is more than just a social tradition.
"In India you don't have a formal social security, so if there is some eventuality for the woman and Indian law clearly provides protection so that gold belongs to the woman," Mr Hajra says. "Gold is a social security system also in India. There are clear divides over whether gold is good or bad for India."
video link

 A new use for gold in cancer therapy:

(Karen Weintraub/Globe correspondent)
Gold particles could deliver cancer drugs

By Karen Weintraub

| Globe Correspondent
December 24, 2012
A longtime challenge has been delivering medicine in high enough doses to kill cancer cells while not harming the patient.
A longtime challenge has been delivering medicine in high enough doses to kill cancer cells while not harming the patient.
The pharmaceutical giant AstraZeneca­ is expected to announce this week that its oncology unit in Waltham is collaborating with a Maryland company to develop an innovative cancer therapy. The proposed treatment involves delivering powerful cancer drugs on the backs of gold nanoparticles made by CytImmune, of Rockville, Md., that are so tiny 5,000 of them can fit in the width of a human hair.
At that size, the gold flecks make a particularly good vehicle because they can easily carry other molecules, like cancer drugs. They are also believed safe to use in the body.
The gold nanoparticles may solve a longtime challenge facing cancer drug developers: delivering medicine in high enough doses to kill the cancer cells but not the patient, said Dr. Steven K. Libutti, director­ of the Montefiore Einstein Center for Cancer Care in New York.
That often means finding the right vehicle to deliver the drug directly to the cancer cells, a promise offered by nanomedicine because the particles are so small they bypass healthy tissue but get trapped in tumors.
"We are in kind of a revolution now," said Dan Peer, head of the laboratory of nanomedicine at Tel Aviv University. "We’re going to witness more and more nanoparticles as vehicles for chemotherapy."
CytImmune has been developing a gold nanoparticle that will be particularly effective at seeking out and killing tumor cells, without causing devastating side effects.
"If we can reduce the tumors where they are, we can significantly reduce or completely eliminate the need for surgeries, which would reduce time in hospitals. I would posit that this would reduce health care costs," said CytImmune’s chief executive, Lawrence ­Tamarkin.
Although gold as an investment commodity has been steadily posting record prices, there is so little used in the making of the medicine that "the bottle costs more than the nanoparticles in the bottle," he added.
Each CytImmune gold particle is designed to carry three elements: a drug called TNF that is too toxic to be delivered in more conventional ways; a second cancer drug from AstraZeneca­ that the two companies hope will combine with TNF to kill more cancer cells; and a molecule of ethylene glycol designed to disguise the treatment from the body’s immune system.
The treatment is called 6091, and the TNF gives it an edge over other nanoparticles, Tamarkin said, by making the drug better at finding and killing tumor cells. The TNF drug, or tumor necrosis factor, seems to improve the nanoparticle’s homing mechanism for tumor cells. Early research suggests that gold molecules with TNF accumulate better in tumor cells than those without the drug, Libutti said.
TNF was considered extremely promising as a cancer drug back in the 1980s, based largely on animal data. But when it was tried on its own in people, the outcome was bad: "The dose at which half the patients died was lower than effective dose" needed to treat the cancer, said Libutti, who has led clinical trials that use CytImmune’s compounds.
Tamarkin said the TNF works by binding to and killing cells that make up the tumor’s blood vessels. This deprives the tumor of needed blood supply and creates openings for chemotherapy drugs to get into the tumor, he said.
The "eureka observation," Libutti said, was that attaching TNF to gold particles actually made the drug less toxic. It could be given at higher doses, making it more effective at killing cancer cells, but less dangerous to healthy ones, he said.
Many drug companies have cancer drugs on their shelves that are too toxic to deliver to the whole body, but might be less dangerous if paired with gold and targeted directly at the tumor, Libutti said.
AstraZeneca has spent a year investigating different targeted cancer therapies and chose CytImmune’s approach as one of several investments in the area.
"CytImmune is one of the most exciting ones," said Detlev­ Biniszkiewicz, vice president for strategy in AstraZeneca’s oncology innovative medicines unit.
The Maryland company has expertise that AstraZeneca can benefit from, he said, while the bigger company can help speed up the drug development process.
"Together we might do something nice," Biniszkiewicz said. "Pharma needs to be more innovative. We’re trying."
Libutti said he is about to launch a new phase of research, giving patients the 6091 nanoparticle drug along with a regimen of Taxol, a chemotherapy commonly used against breast, ovarian and lung cancers, to see if the combination improves Taxol’s effectiveness­.
He is submitting a grant proposal for early clinical research to put Taxol directly onto the 6091 molecule to see if that works even better.


And now your major paper stories which will have an influence on the physical price of gold and silver.

   Your early morning overnight sentiment from Europe/Asia:

1.  The fiscal cliff is still on trader's minds.  It is now believed that Obama will introduce his version of plan B a shortened version whereby tax breaks of those earning less than 25,000 dollars will still be in force.  Dividend tax rates on capital gains will rise from 15 to 20%. They will extend unemployment benefits for those who lost their jobs.  However the big cuts in spending will be postponed until later in the year.  The Republicans will not go for that.

2.  Greece gives an 11 month budget forecast revealing a deficit of 12.9 billion euros instead
of the 21. 5 billion from last year, a supposed big improvement.
However Greece forgot to include outlays by the state owned entities which is in the mega billions.
3,  Abe, the new prime minister of Japan is threatening to rewrite laws governing the Bank of
Japan if this entity does not spend its way to a 2% inflation rate.

4.  The European Commission is now ready to give Spain more time to get it's deficits under control.
5.  Jim Reid of Deutsche Bank give a thorough analysis of today's early morning trading from
Europe and Asia:

(courtesy zero hedge/Jim Reid)

Sentiment: Listless Traders Looking Forward To Abbreviated Rumor Day

Tyler Durden's picture

As DB's Jim Reid summarizes, "it is fair to say that newsflow over the next 72 hours will be fairly thin before we head into a tense final few business days of the year." It is also fair to say, that the usual tricks of the new normal trade, such as the EUR and risk ramp as Europe walks in around 3 am, precisely what happened once again overnight to lift futures "off the lows", will continue working until it doesn't. In the meantime, the market is still convinced that some compromise will appear miraculously in the 2 trading sessions remaining until the end of the year, and a recession will be avoided even as talks now appear set to continue as far down as late March when the debt ceiling expiration, not cliff, will become the primary driving power for a resolution. That said, expect to start hearing rumors of a US downgrade by a major rating agency as soon as today: because the agenda is known all too well.
In other news, there was no other news, with some notable but hardly market moving developments such as Greece reporting an 11 month state budget deficit of €12.9 billion, better than expected and below the €21.5 billion seen last year. The small print is that this excludes outlays by state-controlled enterprises, however many billions of those are. Elsewhere, in China, the Shanghai exchange is reported to raise margin requirements by 1%, news which came after the SHCOMP's closing up 0.27% to 2159.
And while volumes already are absolutely abysmal during during the regular session, at least today there will be an excuse dur to early exchange closures as per the following breakdown:
  • NYSE (or is that N-ICE?): 1:00 pm Eastern
  • CME/CBOT: IR, FX, Commodities: 12:00 pm Eastern; Equities: 1:15 pm Eastern
  • NYMEX/COMEX: 1:30 pm Eastern
Look for some muted kneejerk reactions to Cliff resolution rumors, followed by just as muted selloffs.
More from DB's Jim Reid
Following the abandonment of Boehner’s bill on Thursday night it appears that President Obama will be calling on Congress to approve his own version of “Plan B” this week which the New York Times describes as a “stripped down” fiscal cliff deal similar to legislation already passed by the Senate previously. The fallback plan would include extending current tax rates for incomes up to $250,000, increasing taxes on capital gains and dividends from 15% to 20%, extending unemployment insurance and delays spending sequesters until 2013. The NYT also added that the President may be willing to extend tax rates for incomes as high as $500,000 if it would seal a deal with Republicans. In a statement on Friday, Obama described his plan as an “achievable goal that can get done in 10 days” and conceded that a “grand bargain” for deficit reduction with the GOP is unlikely before year-end. With the House and the Senate only reconvening on Thursday 27th and the President on vacation in Hawaii at the start of the week, it is  fair to say that newsflow over the next 72 hours will be fairly thin before we head into a tense final few business days of the year.
Asian markets are faring relatively well overnight despite the worst performance for the S&P 500 (-0.94%) in more than a month last Friday. The Hang Seng, Shanghai Composite and the KOSPI are around a tenth to a quarter of a percent higher as we type. In Asian specific headlines, the Chinese government has pledged to increase agricultural subsidies and offer better protection to farmers’ land rights according to local Xinhua news.
The Nikkei is closed overnight but there have been some interesting headlines out of Japan. Incoming PM Abe over the weekend threatened to revise the law of the Bank of Japan if the central bank refuses to introduce a 2% inflation target at the coming January policy meeting. PM Abe has made clear that BoJ Governor Shirakawa’s term will end in April as the government wants to have someone who is more willing to push more aggressive easing. This aggressiveness also echoed another comment he made on Sunday as Abe called on the BoJ to resist moves by other central banks to devalue their currencies after having cited the Fed’s money printing as an example. The USDJPY is trading 0.18% higher at 84.41 overnight.
Recapping Friday’s markets, the S&P 500 weakness was led by declines in all ten major sectors. Interestingly, S&P 500 volumes on Friday were 2.8x the average daily volume of the previous 3 months and the highest since 15th Sept 2011 in what was the last full trading day before Christmas which coincided with the expiration of index and single stock futures and options. Discouraging fiscal cliff progress weighed on the trading session although data was generally positive.
Personal Income (+0.6% vs +0.3% expected) surprised on the upside and we also saw an in-line but improving Personal Spending (+0.4% vs -0.1% previous). Headline durable goods orders (+0.7% vs +0.3% expected) came in better, although the final UofMichigan confidence index disappointed and fell to a five-month low of 72.9 (vs 82.7 previous).
The other notable political development over the weekend was in Italy. As was largely expected, PM Monti resigned on Friday following parliamentary approval of the government’s 2013 budget laws.
Monti announced on Sunday that he would consider seeking a second term as PM, but rather than committing himself to running with a particular party he said that "If a credible political force asked me to be candidate as prime minister for them, I would consider it". Monti added that he would publish a detailed pro-Europe manifesto of recommendations for a future government and would potentially be willing to lead a party that adopted it as its own.
Moving to Spain, the European Commission will propose giving Spain more time to cut their public deficits below the target limit of 3% of GDP. According to Reuters who cite Spanish newspaper El Pais, the Commission has agreed on new deficit targets of 7% of GDP in 2012 and 6% in 2013, from current targets of 6.3% and 4.5% respectively. Indeed, DB’s Gilles Moec believes that hitting a target of 6.3% in 2012 is very unlikely given slippages in regional deficits and social security.
Turning to the week ahead, it will be a holiday-shortened week for with little in the way of economic data to drive markets. Progress on fiscal cliff negotiations will remain the key focus for investors when lawmakers return to DC in the latter half of the week. Major exchanges will be closing early today. US markets will re-open on the 26th and major European markets the following day.
As far as data is concerned main US releases this week are Wednesday’s Richmond fed Manufacturing and Case-Shiller Home prices; Thursday’s new home sales, consumer confidence and jobless claims; followed by the Chicago PMI and pending home sales on Friday. In Europe, French employment numbers and consumer confidence (Thursday) as well as its Q3 GDP (Friday) and consumer spending (Friday) are the main reports. We will also get the Italian business confidence reading on Thursday.
Moving to Asia, the focus in Japan will on the Nov CPI release on Friday. The report comes after five consecutive months of deflation. Japan also reports November IP/PMI on the same day. Incoming PM Shinzo Abe will officially take office on Wednesday. It will be a quiet week elsewhere with China’s industrial profits the main data release of note.


Notable developments over the weekend

1. The fiscal cliff
2. Mario Monti
3. The EC will give more time for France and Spain to get it's deficits in order.

(courtesy of Marc to Market)

Notable Weekend Developments

Marc To Market's picture

Yes, it is the holiday season.  Yes, you are unlikely to be taking action with your investments.  Yes, the morphing of what is into what will be continues uninterrupted.  
There were several developments over the weekend that will influence the direction of the markets in the days ahead, with the usual caution about the impact of the thinness of conditions.  
First, the major focus remains the US fiscal cliff.  One of the most important ways in which the US fiscal crisis differs from those seen in Iceland, Greece, Portugal, Ireland is that it has not been triggered by a capital strike. Investors have not fled the US.  Interest rates have not trended higher.   It is not a fiscal crisis.  It is a political crisis. 
And that political crisis has prevented the untying of the Gordian Knot that Obama and Congress created to paper over the political crisis earlier.  With the holiday at hand, the politicians will not return until mid-week.  A interim deal that would allow for some modest modification of the "cliff" while buying some time to reach a "grand bargain" does not appear to have sufficient support.  Nor would it lift the pall of uncertainty that appears to be one of headwinds to the still fragile US economy.  
Second, political uncertainty has not been lifted in Italy either.  Technocrat Prime Minister Monti resigned following the approval of the 2013 budget and the approval of the fiscal compact.  He remains the caretaker until the elections are held in late February (24-25).   With much anticipation, Monti held a press conference, but rather than declare his intentions, he largely reiterated his willingness to serve if a coalition emerged that was committed to his reform agenda.  
The coalition Monti has in mind appears to between the center, including the UDC, and the center-left-PD.  Polls suggest such a coalition, with Monti's support, could provide the basis for a stable government.   However, besides the gravitas in Brussels and Berlin, it is not clear what Monti brings to the table.  With the Italian recession deepening under his austerity and reform agenda, Monti is not particularly popular at home.  Moreover, the PD's Bersani, a former communist, has his own ambitions for the premiership and will have to form a coalition to govern.  
Meanwhile, Monti's coyness seems to work in Berlusconi's favor.  Many of Monti's reforms lack full democratic legitimacy owing to the nature of his technocrat government and his penchant for 
governing by decree.   Berlusconi offers a populist rearguard attempt to dismantle Monti's reforms.  In lieu of a more compelling vision from the center-left, Berlusconi can fill the vacuum.  Monti seems to think he is above politics, and therefore of the Italian people.  Say what you will of Berlusconi he revels in politics and the people's appetites.  
Third,  in November 2011, I suggested that Europe could learn something from the lowly NY Mets baseball team.  In order to encourage more home runs, the Mets did not reform through acquiring new talent  or devise a way to boost productivity.  They simply brought the fences in.    The European Commission is going to do the same thing.  Reports suggest the EC will give Spain and France more time to reduce their budget deficits to 3% of GDP.  
France would get another year which means 2014.  It is not clear what Hollande did to "earn" this forbearance.  The press reports are light on details.  There seems to be some debate over how much more time to grant Spain. The reports suggest the IMF is seeking two years, while the ECB is pushing for one.  The formal decision is unlikely ahead of the EC review of Spain in mid-February.  However, it would seem to be both cause and effect of Spain not requesting assistance from the ECB's Outright Market Transaction scheme.  
Fourth, Japan's Abe, who will be sworn in as prime minister for the second time, was clearly not satisfied with the BOJ's move last week to expand its asset purchase scheme for the third time in four months.  The BOJ bought some time, indicating that it will review its inflation target at its meeting on January 21-22.   Abe threatens two things.  He will appoint people to the top posts at the BOJ that share his sense of urgency and vision.  He also threatens to change the BOJ's mandate.
Many participants have high conviction that Abe will succeed not only arresting the yen's strength but reversing it.  Into the run-up to election on December 6, market participants were paying a record premium to acquire the right to sell yen (referring to the benchmark 3-month risk-reversals).   
The key behind the yen's strength never seemed that it was because the BOJ's inflation target was too low or that it did not have open-ended QE (doesn't expanding it 3 times in 4 months seem open-ended?).  The heart of the problem seemed to lie Japan's ability to recycle first its trade surplus, and now its current account and capital surplus.  Will the weaker yen and stronger equity market discourage Japanese households and businesses from exporting their savings, in sufficient scale to offset the  earnings stream from past foreign investments and from foreign investors buy Japanese assets, including the Nikkei,  in which they tend to run under-weight positions?  Therein lies the fate of the yen.  


(the Reuters article where the EU gives Spain and France more time to cut its 

(courtesy Reuters)

EU to give Spain, France more time to cut deficit: press

MADRID | Sat Dec 22, 2012 12:57pm EST

(Reuters) - The European Commission will propose giving Spain, France and several other euro zonestates more time to cut their public deficits below the target limit of 3 percent of GDP, newspaper El Pais said on Saturday.

Citing senior Spanish and European Union sources, the Madrid-based daily said France could get an extra year, allowing it to narrow its fiscal gap by 2014, while Spain would be given one or two more years beyond that date.

France said on Saturday that it would maintain its deficit-reduction goal for 2013 regardless of any softer line from Brussels. A Commission spokeswoman declined to comment on the report.

Spain's fiscal targets are to be reassessed in February, EU Economic and Monetary Affairs Commissioner Olli Rehn said last month. No additional austerity efforts are needed until 2014, he added, when more structural reforms are likely to be required.

France does not appear to need additional belt-tightening and may have room for a "softer adjustment", the commissioner also said in an interview with France's Le Monde newspaper on Friday.

But France said on Saturday it planned to stick to its 3 percent goal for next year. "Our public finance path remains unchanged as it was fixed in the autumn," an aide to Prime Minister Jean-Marc Ayrault said.

The French government's 2013 budget is based on a 0.8 percent growth forecast for the year - more optimistic than the flat economic output predicted by Brussels and the International Monetary Fund.

European and Spanish sources had said earlier this month that Spain's fiscal path was likely be loosened to offset the country's second recessionin three years.

Such decisions need a formal discussion between the 27 European commissioners as well as a political green light from euro zone financeministers.

Spain sought support from its European partners this year for its ailing banks, hit by a burst property bubble.

Recession is also undermining government efforts to keep the public debt burden in check, and financial markets expect Madrid to seek sovereign aid sometime next year.

Madrid is to unveil new curbs on index-linked pension payouts and accelerate increases to the retirement age. Both EU demands must be met for Spain to tap international aid, lower its debt costs and fix its stricken economy.

According to El Pais, the Commission has agreed on a new Spanish deficit path of 7 percent of economic output in 2012 and 6 percent in 2013. That compares to current targets of 6.3 percent for 2012 and 4.5 percent for 2013.

Senior Spanish officials told Reuters this month the deficit would probably come in at around 7 percent at year end.

Spain's 17 highly devolved autonomous regions are broadly on course to meet their deficit target of 1.5 percent of GDP, while the central government is heading for a deficit close to 5.5 percent, including social security spending.

(Reporting By Jesús Aguado and Julien Toyer, additional reporting by Julien Ponthus in Paris and Barbara Lewis in Brussels, edited by Richard Meares)


Our resident expert on French affairs, Wolf Richter, comments:

(courtesy Wolf Richter/

“Trench Warfare” And “Civil War” Over Confiscatory Taxes In France

testosteronepit's picture

“We’re engaging in trench warfare,” proclaimed Alain Afflelou, head honcho and founder of an eyewear company with 1,200 stores in France and other countries. One of the wealthiest men in France. He was talking about the tax fiasco that split France in two. He was done with his country. He’s moving to London. One of France’s so-called fiscal exiles.
He’d set up his international headquarters in Switzerland, rather than France, 15 years ago to minimize his company’s tax burden, but now he’d personally bail out.
The clamor had started in September when it leaked out that Bernard Arnault, richest man in France and CEO of luxury-goods empires LVMH and Groupe Arnault, was applying for Belgian citizenship. In response, Economy Minister Pierre Moscovici threatened to renegotiate the tax treaties with Belgium, Luxembourg, and Switzerland. A few days ago, reports surfaced in the Belgian media that mailbox companies—a dozen at the Brussels apartment of a Groupe Arnault director alone—have allowed Arnault’s empire to escape several hundred million euros in taxes.
Belgium got cold feet. On Saturday before Christmas when nothing was supposed to happen, Anti-Fraud Secretary of State John Crombez requested that Finance Minister Steven Vanackere transfer Arnault’s tax file to the tax authorities in France, an idea the minister did not immediately reject.
Now Arnault got cold feet. LVMH and Groupe Arnault defended themselves the best they could, claiming that these mailbox companies had “economically perfectly real activities in Belgium where some of them have been implanted for decades.” Indeed, they were “surprised” by the allegations.
But no one stirred up the heat in France like iconic actor Gérard Depardieu who, turns out, set up his domicile in Néchin, a village just across the border in Belgium—as the mayor confirmed, “to escape French taxation.”
Final straw for President Hollande. Now he too threatened to renegotiate the tax treaty “to deal with cases of those who settle in some Belgian village.” He lashed out against the “fiscal dumping” that some countries in the EU were practicing. Prime Minister Jean-Marc Ayrault chimed in; Depardieu’s exile was “pretty pathetic.”
Depardieu was not amused. In an open letter, he renounced his French citizenship, broadsided the Prime Minister and the President, and shocked the nation: all taxes combined ate up 85% of his income.
Not true, explained eyewear mega-retailer Alain Afflelou during the interview. “Those who are in the 75% income-tax bracket may go well beyond 90% taxation.” He listed layers of additional taxes, small percentages here and there that added up. “We therefore have in France a confiscatory taxation that can deprive us of all of our income from work.”
Then he uttered “trench warfare” to describe the battle between the two sides. “We have to stop saying that CEOs are thieves, thugs, and dishonest people. We need people who work, who make a living, who create jobs.”
He was echoing Laurence Parisot, President of the MEDEF, France’s largest employer union. “Doubt is taking over the life force of the country,” she complained; Hollande in his confrontation with Depardieu was doing “the opposite of what he promised,” namely to pacify the country and reduce antagonism. “We are in the process of creating a climate of civil war, similar to 1789,” she said.
Hollande jumped on the airwaves and tried to impose some sort of armistice. The 75% tax bracket would be temporary, he said. And concerning Depardieu: “No citizen must be stigmatized by the President.” But by using that word, he stigmatized him—and all the others who’re trying to escape.
There are a lot of them. Le Figaro cited tax lawyers who spoke of “unprecedented waves” of fiscal exiles who were leaving France, some of them in the middle of the school year, which “had never happened before.” Moving companies confirmed it. Outflows “remain two to three times higher than normal,” said the boss of one of them. “Our trucks leave constantly in direction of Switzerland, Belgium, and Great Britain.”
And the profile of the fiscal exiles has changed. They’re no longer rich heirs or fifty-year-olds who’d sold their companies, but “young childless entrepreneurs” who wanted “to settle in another country to start up their companies,” according to one of the tax lawyers. And top executives between 40 and 55 were moving with their kids to Brussels or London “to escape” the new taxes.
Entire skill sets were leaving. International companies were “progressively relocating part of their teams abroad,” said le Figaro’s source within the MEDEF. Among them more and more secondary functions, such as human resources or finance—”much less visible and symbolic than relocating headquarters.”
With heavy consequences for the economy. When talent, entrepreneurial energy, capital, and profits leave the country all at the same time, it’s hard to imagine how economic growth and job creation could miraculously reappear.
Also on Friday before Christmas when nobody was supposed to pay attention, the European Commission issued a mind-boggling report on bank bailouts in the EU: Member States had committed over $2 trillion at the expense of current and future taxpayers to bail out stockholders, bondholders, and speculators. Read.... The EU Bailout Oligarchy Issues A Report About Itself.

Your early morning currency crosses: showing a little  USA weakness against major currencies like the Euro .  However the pound  fell against the dollar along with the Canadian dollar . The yen also fell a touch against the dollar. 

Your early morning currency crosses;

Euro/USA    1.3218 up  .0032
Japan/USA  8444  up .23
GBP/USA     1.6165 down .0003
USA/Can      .9933  up .0003


your closing 10 year bond yield from Spain:



5.257000.00600 0.11%

As of 07:40:57 ET on 12/24/2012.


Your closing Italian 10 year bond yield:  (now safely below 5%)

Italy Govt Bonds 10 Year Gross Yield


4.464000.00800 0.18%


Your 2:00 pm currency crosses: (  showing minuscule  USA strength against major currencies
like the Euro on closing. The pound also fell against the dollar , with the Canadian dollar regained a bit from what is lost early in the session against the dollar. The yen fell against all currencies on today as investors are becoming quite worried about the antics of their new prime minister Abe.
Euro/USA    1.3185 down  .0001
Japan/USA  84.76  up .548
GBP/USA     1.6119 down .0048
USA/Can      .9909  down .0021


Your closing figures from Europe and the USA:

  ( England and Spain  in the green, France and the uSA in the red)

i) England/FTSE up 14.19 points or  0.24%

ii) Paris/CAC  down 8.79 or .24%.

iii) German DAX: down 35.87 points or 0.47%  (did not of Friday)

iv) Spanish ibex: up 8.50  (.10%)

and the Dow: down 51.76 points  (.39%)


And now for major USA stories:

No question about it, the fiscal cliff is on everybody's minds:

(courtesy Bloomberg)

U.S. Stocks Retreat on Federal Budget Deadline Concern

U.S. stocks fell, after the biggest tumble in five weeks for the Standard & Poor’s 500 Index, amid concern that President Barack Obama and Congress will fail to agree on a budget by the end of the year.
The S&P 500 retreated 0.3 percent to 1,426.45 at 1 p.m. in New York, as New York Stock Exchange trading closed early ahead of the Christmas holiday. Trading in S&P 500 companies was 35 percent below the 30-day average at this time of day.
“The action last week in Washington flipped the switch for short-term market movement from up to down,” Frederic Dickson, who helps manage $32 billion as chief investment strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, said in a telephone interview. “The action picks up later in the week, when politicians return to Washington but it’s going to take them a couple days to figure out what to do. Today’s a wait-and-see day.”
The S&P 500 is heading for a 0.7 percent gain this month as Obama and Republican leaders discussed how to avoid more than $600 billion in tax increases and spending cuts -- known as the fiscal cliff -- that will automatically take effect at the start of 2013. The Congressional Budget Office has said that the changes will probably push the U.S. economy into a recession. The equity benchmark has increased 13 percent this year, heading toward its biggest annual gain since 2009.

Budget Stalemate

Senator Joseph Lieberman, a retiring Connecticut independent, said yesterday that Senate leaders must take charge of resolving the budget stalemate.
The S&P 500 slid 0.9 percent on Dec. 21 after House Speaker John Boehner failed to obtain support from congressional Republicans for his plan to allow tax rates to increase on incomes above $1 million. Speaking on CNN’s “State of the Union” program, Lieberman said, “For the first time, I feel it’s more likely that we will go off the cliff.”
Lawmakers plan to return to Washington on Dec. 27 to resume their negotiations. Before leaving to spend the Christmas holiday with his family in Hawaii, Obama on Dec. 21 urged leaders of both parties to put together an interim bill to keep taxes from rising on middle-income Americans.
The Chicago Board Options Exchange Volatility Index (VIX), the gauge of S&P 500 option prices, rose 3.6 percent to 18.48. The measure has increased 19 percent in the past four days.
“The continued uncertainty over the fiscal cliff issue is weighing on the market,” Dan Heckman, senior fixed-income strategist at Minneapolis-based U.S. Bank Wealth Management, which oversees $111 billion, said in a telephone interview. “There’s concern corporate earnings will be a little bit weaker in the fourth quarter than the market had anticipated. As much as we’d like to have a holiday season rally here, I think the market is going to pause.”
Americans have missed out on almost $200 billion of stock gains as they withdrew money from the market over the past four years because of the financial crisis.
Assets in equity mutual, exchange-traded and closed-end funds have increased about 85 percent to $5.6 trillion since the bull market began in March 2009, trailing the S&P 500’s 94 percent advance, according to data compiled by Bloomberg and Morningstar Inc. (MORN) The proportion of retirement funds in stocks fell about 0.5 percentage points, compared with an average increase of 8.2 percentage points in rallies since 1990.
To contact the reporter on this story: Inyoung Hwang in New York at

William D Cohan believes that UBS must be removed from USA soil with reasons why:

(courtesy zero hedge)

Does Libor Manipulation Deserve The Death Penalty?

Tyler Durden's picture

Bloomberg's William Cohan released a provocative piece last night, headlined by the even more provocative "UBS Libor Manipulation Deserves the Death Penalty." We can only assume that Cohan is being metaphorical - after all, despite the rare occasional recent criminal charge no one has still gone to prison for the biggest coordinated manipulation of a benchmark fixed income market for years: something previously relegated to the fringes of crackpot conspiracy theories - after all, so many people were in on it, how can they possibly all keep their mouths shut - you know, the usual excuse against massive conspiracy theories, at least until they become conspiracy fact. Yet one wonders: will current and future ongoing market manipulations ever cease when there is no real deterrent: after all spending a few years in jail is certainly worth a few million in ill-gotten proceeds, even assuming the termination of a career in finance. Is Cohan being rhetorical? Or has the time for some true vigilante justice finally come? Because in a world increasingly best portrayed by the 2009 movie "The International" where one has to "go outside" a captured legal system to get real justice, is vigilantism eventually coming to every town near you, once the money illusion ends? And a bigger question - is this the main preemptive reason for the gun control push seen so vividly in recent days and months?
Via Bloomberg:
There is no point in mincing words: UBS AG (UBSN), the Swiss global bank, has beendisgracing the banking profession for years and needs to be shut down.

... On Dec. 19, the bank paid $1.5 billion to global regulators -- including $700 million paid to the CFTC, the largest fine in the agency’s history -- to settle claims that for six years, the company’s traders and managers, specifically at its Japanese securities subsidiary, manipulated the London interbank offered rate and other borrowing standards.


The same day of UBS’s global settlement, which included the Japanese subsidiary pleading guilty to fraud, two former UBS traders, Tom Hayes and Roger Darin, were sued by the Justice Department and charged with “conspiring to manipulate” Libor.

Benchmark Manipulation

... “They defrauded the company’s counterparties of millions of dollars. And they did so primarily to reap increased profits, and secure bigger bonuses, for themselves.”

To see the level to which UBS employees descended, one need look no further than their written communications, as per U.S. prosecutors’ document dump. “Mate yur getting bloody good at this libor game,” one broker told a UBS derivatives trader. “Think of me when yur on yur yacht in monaco wont yu.”

But, then again, UBS and bad behavior have become nearly synonymous. During the financial crisis, UBS took writedowns totaling some $50 billion, prompting the company to produce a 76-page, single-spaced, Orwellian transparency report. ...

In February 2009, UBS entered into a deferred-prosecution agreement with the Justice Department and admitted to helping American taxpayers defraud the Internal Revenue Service. UBS agreed to provide the names of some clients whom it had helped to avoid U.S. taxes and to pay a fine of $780 million.

Then, last month, came the conviction of former UBS “rogue” trader, Kweku Adoboli, on charges that he hid trading losses totaling more than $2.3 billion. The U.K.’s Financial Services Authority fined UBS some $47 million and charged that its oversight of London traders was too trusting. The bank seems more than a little out of control.


‘Wash Trades’

It found that unidentified UBS traders entered into “wash trades” -- described as “risk-free trades that canceled each other out” and had no commercial rationale -- in order to “facilitate corrupt brokerage payments” to three individual brokers at two other firms.

In a Sept. 18, 2008, telephone conversation, Hayes promised that if one broker kept the six-month Japanese yen Libor unchanged for the day, he would in exchange “pay you, you know, 50,000 dollars, 100,000 dollars ... whatever you want ... I’m a man of my word.” Lovely.


Hayes repeated his request for a “low” submission on the three-month Japanese yen Libor. Darin messaged back: “as i said before - i dun mind helping on your fixings, but i’m not setting libor 7 [basis points] away from the truth i’ll get ubs banned if i do that, no interest in that.” Darin eventually submitted a Libor rate two basis points less than the “unbiased” figure of 0.69 percent.

In levying the record $700 million fine, David Meister, the CFTC’s director of enforcement, said that “when a major bank brazenly games some of the world’s most important financial benchmarks, the CFTC will respond with the full force of its authority.” That’s good as far as it goes, and the CFTC is to be commended for rooting out the global Libor manipulation scandal.

But an even more emphatic message needs to be sent to UBS by its prudential regulator in the U.S.:You are finished in this country. We are padlocking your Stamford, Connecticut, and Manhattan offices. You need to pack up and leave. Now.


and here is the Bloomberg article quoted above:

(courtesy Bloomberg)

UBS Libor Manipulation Deserves the Death Penalty

There is no point in mincing words: UBS AG (UBSN), the Swiss global bank, has been disgracing the banking profession for years and needs to be shut down.
The regulators that allow it to do business in the U.S. -- the Federal Reserve, the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Office of Comptroller of the Currency -- should see that the line in the sand was crossed last week. On Dec. 19, the bank paid $1.5 billion to global regulators -- including $700 million paid to the CFTC, the largest fine in the agency’s history -- to settle claims that for six years, the company’s traders and managers, specifically at its Japanese securities subsidiary, manipulated the London interbank offered rate and other borrowing standards.
William Cohan

About William D Cohan»

William D. Cohan is the author of the recently released "Money and Power: How Goldman Sachs Came to Rule the ... MORE
Libor is a benchmark index rate, off which trillions of dollars of loans are priced on a daily basis. According to the Wall Street Journal, two of the many victims of the Libor fraud -- a scandal that so far has nabbed Barclays Plc and UBS but will probably include other large global banks -- were the quasi-federal housing agenciesFannie Mae and Freddie Mac, which together claim to have lost more than $3 billion as a result of the manipulation.
The same day of UBS’s global settlement, which included the Japanese subsidiary pleading guilty to fraud, two former UBS traders, Tom Hayes and Roger Darin, were sued by the Justice Department and charged with “conspiring to manipulate” Libor.

Benchmark Manipulation

“The alleged conspirators we’ve charged -- along with others at UBS -- manipulated the benchmark interest rate upon which many transactions and consumer financial products are based,” Attorney General Eric Holder said in a statement. “They defrauded the company’s counterparties of millions of dollars. And they did so primarily to reap increased profits, and secure bigger bonuses, for themselves.”
To see the level to which UBS employees descended, one need look no further than their written communications, as per U.S. prosecutors’ document dump. “Mate yur getting bloody good at this libor game,” one broker told a UBS derivatives trader. “Think of me when yur on yur yacht in monaco wont yu.”
But, then again, UBS and bad behavior have become nearly synonymous. During the financial crisis, UBS took writedowns totaling some $50 billion, prompting the company to produce a 76-page, single-spaced, Orwellian transparency report. “In the aftermath of the financial market crisis it was revealed,” the report said, “that UBS had taken a serious turn in the wrong direction under the leadership of the senior management then in charge of the bank. The result was an enormous loss of trust.”
In February 2009, UBS entered into a deferred-prosecution agreement with the Justice Department and admitted to helping American taxpayers defraud the Internal Revenue Service. UBS agreed to provide the names of some clients whom it had helped to avoid U.S. taxes and to pay a fine of $780 million.
Then, last month, came the conviction of former UBS “rogue” trader, Kweku Adoboli, on charges that he hid trading losses totaling more than $2.3 billion. The U.K.’s Financial Services Authority fined UBS some $47 million and charged that its oversight of London traders was too trusting. The bank seems more than a little out of control.
The latest example of the bank’s shameful behavior can be found in the false bravado of the traders who for years manipulated Libor and thought they could get away with it. The gruesome details can be found in the Dec. 19 report from Britain’s Financial Services Authority.

‘Wash Trades’

It found that unidentified UBS traders entered into “wash trades” -- described as “risk-free trades that canceled each other out” and had no commercial rationale -- in order to “facilitate corrupt brokerage payments” to three individual brokers at two other firms.
In a Sept. 18, 2008, telephone conversation, Hayes promised that if one broker kept the six-month Japanese yen Libor unchanged for the day, he would in exchange “pay you, you know, 50,000 dollars, 100,000 dollars ... whatever you want ... I’m a man of my word.” Lovely.
We also find out that a year earlier, Hayes had a chat on his Bloomberg terminal with Darin in which he pushed to find out what rate for Japanese yen Libor UBS would submit to the governing body that set the rates. “Too early to say yet,” Darin replied, before estimating that 0.69 percent “would be our unbiased contribution.”
Hayes repeated his request for a “low” submission on the three-month Japanese yen Libor. Darin messaged back: “as i said before - i dun mind helping on your fixings, but i’m not setting libor 7 [basis points] away from the truth i’ll get ubs banned if i do that, no interest in that.” Darin eventually submitted a Libor rate two basis points less than the “unbiased” figure of 0.69 percent.
In levying the record $700 million fine, David Meister, the CFTC’s director of enforcement, said that “when a major bank brazenly games some of the world’s most important financial benchmarks, the CFTC will respond with the full force of its authority.” That’s good as far as it goes, and the CFTC is to be commended for rooting out the global Libor manipulation scandal.
But an even more emphatic message needs to be sent to UBS by its prudential regulator in the U.S.: You are finished in this country. We are padlocking your Stamford, Connecticut, and Manhattan offices. You need to pack up and leave. Now.
(William D. Cohan, the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. He was formerly an investment banker at Lazard Freres, Merrill Lynch and JPMorgan Chase. The opinions expressed are his own.)
To contact the writer of this article: William D. Cohan at .
To contact the editor responsible for this article: Tobin Harshaw at


We will closed out tonight's commentary with this piece from Karl Dinninger and Greg Hunter of

By Greg Hunter’s 
Analyst Karl Denninger says, “The best thing we could do as an economy is go straight off the fiscal cliff and not come back because that would take about half of the deficit off the table immediately.”  The reason why the U.S. deficit is so large, according to Denninger, “Both sides want to spend more than they take in in taxes.”  Denninger says the Federal Reserve enables the U.S. to live well beyond its means.  Denninger contends, “The $85 billion a month the Fed is putting into the system enables deficits and spending. . . . When you debase the currency in this fashion, there is no free lunch.”   One thing that needs to be fixed is the Alternative Minimum Tax (AMT).  Denninger says, “It is going to hammer tens of millions of middle class families that have never had to pay it before.”  Instead of a tax refund, some middle class families might owe a few thousand dollars in 2013.  The AMT might get a patch, but Denninger thinks, “There will be no deal on the Fiscal Cliff by January 1st.” Join Greg Hunter as he goes One-on-One with Karl Denninger of

Well that about does it for tonight.  I will you all a Merry Christmas and I will report to you on Wednesday.


Anonymous said...

Thanks Harvey and a very Merry Christmas to you and your family.


Anonymous said...

Mr Willie's math is wrong, $80.4k per kilo. Kilo = 35.2oz times $25 per oz would equate to $880 per kilo on my calculator.

MICHAEL said...

I noticed the same thing. Kind of ruins the plan of flying a kilo of gold in your private jet for $800.
I think it's 32.1543 troy ounces in a kilo. 1000/31.1=32.1543 Mr. Willie you need to pay a little more attention to what you're doing.

Anonymous said...

Sorry, I was going with the 2.2 lbs per kilo. The 28.3 gr per oz., not troy.

Dex Banner said...

Wondering what caused the dramatic plunge in gold and silver earlier? Wonder no more: the CME's counterpart in China, the Shanghai Gold ...Wondering what caused the dramatic plunge in gold and silver earlier? Wonder no more: the CME's counterpart in China, the Shanghai Gold ... DB Mall

Harvey Organ said...

I believe Willie was using a Shanghai contract of 1000 oz in his calculations


J said...

Jim Willie, Von Greyez and Sprott are all fat lying snake-oil salesmen.

Another disappointing year for gold and silver. They rely on the greater fool hypothesis.

Better to invest in real assets like land, oil development and good businesses. Not in metals hyped by kooky conspiracy theorists.

J said...

If gold closes any day below 1585-90, it will retest 1407.

Silver will be retesting 2850-2900, and if that does not hold, then back to 2604.

Fairly good chance of the lower scenario since that is what the manipulators (bankers) probably want.

Anonymous said...

Hey people, load up the truck. FMB is back and J is back with low forecast. Remember the last time? Silver went up 7 dollars.

J said...

Misrepresentation of facts. But yes, this could be a good time to accumulate on weakness if you don't already have a position.

However, there are better opportunities elsewhere again, just like this past year.

PeaknikMicki said...

So J, instead of talking as if you are suggesting everyone to runb out and sell their physical, why don't you just encourage people to hedge their metal with shorts on say CFD's if they think there is a pullback???
That way you hold on to your physical, it is a pure paper money trade, you can set stops, you can trade nearly 24/5 and the spreads are minimal.

J said...

Good suggestion. Time to hedge gold was its failure to hold 1705, and silver's failure at 3250. Maybe they already saw their bottom, I dont know. I would be very concerned (and hedge) if silver closed below 2850, or if gold broke 1550 or closed the year below 1570.

The primary bull market is not over, but typically the 13th year of a major bull is a terrible year. And 2013 is the 13th year of the bull in precious metals. Plus most analsysts are very bullish gold and silver for 2013. Very scary.

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shannawhite277 said...

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Tom Hardy said...

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