Saturday, August 25, 2012

SATURDAY, AUGUST 25, 2012 Republican party platform discussing gold standard/Mary Schapiro defeated at SEC with respect to Money Markets/Hilsenrath saves the day by stating the Fed as "Further scope for action" and thus a possible QEIII is forthcoming/German finance ministry discussing "Grexit"/


Good morning Ladies and Gentlemen:

Gold closed up 20 cents at comex closing time at $1669.80.  Silver also rebounded to post a positive gain of 16 cents to $30.61. On Thursday afternoon I sent an email to Bart Chilton warning him that a raid was imminent in both silver and gold.  Gold was up $32.00 and silver was up a huge 90 cents on Thursday, yet all of the major gold/silver equities like Barrick, Agnico Eagle, Newmont, Eldorado etc were down in price for the day.  This is a sure sign that our bankers decided to coordinate activities with respect to a raid on our precious metals the following day. And that is exactly what the crooks did. The bankers were well aware of the huge rise in OI again in silver, reaching 3 year highs and they knew that they had to try and eliminate as many silver leaves from the silver tree as possible.  On Friday, they tried.  However physical demand was extremely strong in London and the "long" forces were ready as they knew the drill.  The bankers were thoroughly defeated on Friday as they used up their valuable ammunition by supplying the necessary short paper and the bankers retreated to higher ground. Further  visible evidence of their dismay came in the access market in silver and gold after the comex closed:

 gold advanced another 90 cents:  $1670.70
 silver advanced another 21 cents:  $30.82

Europe started the day on the downside as Mario Draghi announced that there will be no new news coming forth from the ECB until after the 12th of September (German Constitutional Court decision).  This is a red herring as they just do not have a plan yet. Obama, sensing trouble as his opponent, Romney gained 4% points on him, (they are now even) urged the EU to save Greece.  He did not want to see economic turmoil during his re election bid. The Fed responded with it's mouthpiece John Hilsenrath in the Wall Street Journal stating that the Fed "has further scope for action" and it may increase its balance sheet to accommodate another round of "official" QE.  The Dow rose to finish the day up 100 points and Europe reversed course and also ended the day higher.  We will go over all of these stories but first........

Let us now head over to the comex and see how trading fared on Friday.


The total gold comex OI fell by 6 contracts from 137 to 131.  We had 22 notices filed
on Thursday so in essence we gained another 16 contracts or 1,600 oz of additional gold.
The September gold contract month saw its OI fall by 15 contracts from 1099 down to 1084.
The next official delivery month for gold is October and here the OI rose by 203 contracts from 27,633 to 27,836. The estimated volume today was on the low side coming in at 105,179.  The confirmed volume on Thursday was a little better at 165,748.

The total silver comex OI rose to 3 year highs coming in at 129,496 rising by 2627 contracts from Thursday's level of 126,869.  The bankers already knew this figure Thursday night when the raid was orchestrated to commence starting immediately in Thursday's access market, through the European trading session and then onto Wall Street. There was only one problem for the bankers :  they were met with a huge demand for physical and paper contracts which nullified the raid. The August silver contract mysteriously saw its OI rise by 24 contracts,( from 80 to 104) despite only 1 notice filed on Thursday.  We thus gained an additional 23 or  115,000 oz of silver standing. We are now exactly one week away from first day notice which will occur on Friday August 31.2012. In this month of September we had the OI fall by 3186 contracts from 32420 down to 29,234.  All of these guys rolled into December as they continue the play the paper game. The estimated volume at the silver comex was quite good coming in at 59,923. The confirmed volume on Thursday was a real humdinger coming in at 94,470.  The bankers must have been busy and they were joined by our high frequency traders but their attempts to quell demand failed.


August 25-.2012   August/gold







Ounces
Withdrawals from Dealers Inventory in oz
nil 
Withdrawals from Customer Inventory in oz
nil
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
4,469.78 (HSBC)
No of oz served (contracts) today
(35)  3500 oz 
No of oz to be served (notices)
(96) 9,600
Total monthly oz gold served (contracts) so far this month
(9709) 970,900 oz
Total accumulative withdrawal of gold from the Dealers inventory this month
23,956.16 oz
Total accumulative withdrawal of gold from the Customer inventory this month


 
129,119.7
Activity inside the gold vaults were very quiet again tonight.

The only transaction was a deposit into the HSBC vault of a customer to the tune of 4,469.78 oz
We had no dealer activity and no customer withdrawal.

We did have a tiny adjustment of 103.40 oz at Scotia whereby gold left the customer to enter the dealer. Quite possibly this was a lease arrangement.

The total registered or dealer gold inventory rests this weekend at 2.754 million oz or  85.66 tonnes of gold.

The CME notified us that we had 35 notices filed for 3500 oz of gold.  The total number of
notices filed so far this month total 9709 for 970900 oz of gold.  To obtain what is left to be filed upon
I take the OI standing for August (131) and subtract out Friday's notices (35) which leaves us with 96 notices or 9600 oz of gold.

Thus the total number of gold ounces standing in this delivery month of August is as follows:

970900 oz (served)  + 9600 oz (to be served upon) =  980,500 oz or 30.49 tonnes of gold
we gained 1600 oz of additional gold.  The 30.49 tonnes of delivery notices is very impressive for August!
We are witnessing high amounts of gold settling on the gold comex with no gold coming in. Strange!!

August 25.2012:  silver  

Silver
Ounces
Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 653,697.51 (Brinks,Delaware,Scotia  )
Deposits to the Dealer Inventory598,359.29 (Brinks)
Deposits to the Customer Inventorynil
No of oz served (contracts)103  (515,000)
No of oz to be served (notices)1 (5,000)
Total monthly oz silver served (contracts)286 (1,430,000)
Total accumulative withdrawal of silver from the Dealers inventory this month310,045.28
Total accumulative withdrawal of silver from the Customer inventory this month5,873,823.1

The silver vaults were busy again on Friday.

The dealer at Brinks received the following:

1. Into Brinks:  598,359.29 oz

The customer had no deposits of silver.

We had the following customer withdrawal:

i) Out of Brinks: 2070.000 oz
ii) Out of Delaware: 984.50 oz
iii) Out of Scotia: 650,643.01

total withdrawal:  653,697.51 oz

we one one tiny adjustment of 94.00 oz leave the dealer at Scotia and re-enter the customer at Scotia.
The registered or dealer inventory rests this weekend at 36.157 million oz
The total of all silver rests at 139.919 million oz.


The CME notified us that we had a whopper of a delivery notice to the tune of 103 contracts or
515,000 oz.  The total number of notices filed so far this month total 266 for 1,430,000 oz.
To obtain what is left to be filed upon, I take the OI standing for August (104) and subtract out Friday's notices (103) leaves us with just 1 contract left to be served upon or 5,000 oz.

Thus the total number of silver oz standing in the month of August is as follows;

1,430,000 oz (served) +  5,000 oz (served)  =  1,435,000 oz
we gained a huge 115,000 oz of additional silver on Friday standing.

If I am a betting man, I will wager than this level will increase as the August month closes out.

Let us wait and see.

end

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.


Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.


August 25.2012:



Total Gold in Trust

Tonnes:1,286.50

Ounces:41,362,338.79

Value US$:68,930,858,673.82






aug 23.2012:


TOTAL GOLD IN TRUST

Tonnes:1,286.50

Ounces:41,362,338.79

Value US$:68,859,227,931.90






august 22.2012:



TOTAL GOLD IN TRUST

Tonnes:1,281.98

Ounces:41,216,874.37

Value US$:67,659,450,898.13







august 21.2012:




TOTAL GOLD IN TRUST

Tonnes:1,278.96

Ounces:41,119,897.41

Value US$:67,398,152,701.61









TOTAL GOLD IN TRUST

Tonnes:1,274.74

Ounces:40,984,128.24

Value US$:66,172,182,169.47







august 18.2012:



TOTAL GOLD IN TRUST

Tonnes:1,274.74

Ounces:40,984,128.24

Value US$:66,164,105,540.61








august 16.2012:




TOTAL GOLD IN TRUST

Tonnes:1,263.58

Ounces:40,625,295.43

Value US$:65,168,987,766.06





for the first time in 8 days, we have not seen an increase in gold at the GLD.They decided to give the boys a little rest with all of that lifting.




And now for silver:  


August 25.2012:

Ounces of Silver in Trust315,746,223.000
Tonnes of Silver in Trust Tonnes of Silver in Trust9,820.81




aug 23.2012:

Ounces of Silver in Trust314,583,226.200
Tonnes of Silver in Trust Tonnes of Silver in Trust9,784.63



august 22.2012:

Ounces of Silver in Trust312,935,630.400
Tonnes of Silver in Trust Tonnes of Silver in Trust9,733.39



aug 21.2012:


Ounces of Silver in Trust312,935,630.400
Tonnes of Silver in Trust Tonnes of Silver in Trust9,733.39


aug 20.2012:

Ounces of Silver in Trust312,935,630.400
Tonnes of Silver in Trust Tonnes of Silver in Trust9,733.39


aug 18.2012:


Ounces of Silver in Trust312,935,630.400
Tonnes of Silver in Trust Tonnes of Silver in Trust9,733.39



august 16.2012:

Ounces of Silver in Trust312,935,630.400
Tonnes of Silver in Trust Tonnes of Silver in Trust9,733.39

  Yesterday they  added 1.216 million oz of silver. On Thursday, 1.648 million oz of "silver" landed in the SLV  vaults. Judging from the problems they are having over at the LBMA as they refuse to settle on any silver or gold unless it stays in the LBMA system, our bet is that these two deposits are some paper sort of paper obligation. 

end


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 4.5percent to NAV in usa funds and a positive 4.5%  to NAV for Cdn funds. ( Aug25-.2012)

2. Sprott silver fund (PSLV): Premium to NAV  rose to  3.64% to NAV  august 25 2012   :
3. Sprott gold fund (PHYS): premium to NAV rose  to 5.09% positive to NAV August 25 .2012). 

Note:  have you noticed that slowly Sprott's gold fund has been rising in positive to NAV. today it rests at its high point of 5.09%. .  Even now the Central fund of Canada is gaining in its positive to NAV. as we now see CEF at a positive 4.5% in usa and 4.5% in Canadian. Investors are seeking out physical supplies.

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.



end





At around 3:30 pm Friday, the CME released the COT report from August 14.2012 through to August 21.2012.  It always goes from a Tuesday to a Tuesday.

Here is the gold COT report which shows the position levels of our major players:

(courtesy Goldseek.com)



Gold COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
170,780
40,096
26,253
137,903
309,125
334,936
375,474
Change from Prior Reporting Period
9,345
-7,035
935
-9,515
17,767
765
11,667
Traders
182
55
70
49
54
260
161


Small Speculators




Long
Short
Open Interest



63,811
23,273
398,747



9,795
-1,107
10,560



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, August 21, 2012




My goodness, this was some report.

Our large speculators:

Those large speculators that have been long in gold liked the lay of the land and bought a monstrous 9,345 contracts and today they are very happy campers as gold rose smartly in the week.

Those large speculators that have been short in gold also thought it wise to cover a massive 7,035 contracts from their short side.

Our commercials:

Those commercials that have been long in gold and are close to the physical scene, covered a rather large 9515 contracts.

Those commercials that have been short in gold continued on their merry way by adding a monstrous 17,767 contracts to their short side.

Our small specs;

Those small specs that have been long in gold, added a huge 9795 contracts to their long side and these guys are also happy campers this weekend.

Those small specs that have been short in gold covered 1107 contracts from their short side.

The specs did the right thing, the commercials increased their risk by supplying the necessary paper.

Conclusion:  the bankers again went net short on the week to the tune of 27,282 contracts and this is bearish from the standpoint that the banks will raid which they have attempted to do yesterday.  Sooner or later the banks luck will run out.

and now for our silver COT report:




Silver COT Report: Futures
Large Speculators
Commercial
Long
Short
Spreading
Long
Short
35,646
14,446
24,554
43,146
75,623
3,329
-2,284
-2,571
-4,651
4,424
Traders
70
45
48
32
37
Small Speculators
Open Interest
Total
Long
Short
127,776
Long
Short
24,430
13,153
103,346
114,623
2,676
-786
-1,217
-3,893
-431
non reportable positions
Positions as of:
128
110

Tuesday, August 21, 2012
  © SilverSeek.com  

The silver COT followed closely the gold COT report:
Large Speculators:

Those large specs that have been long in silver added a rather large 3,329 contracts to their long side.
Those large specs that have been short in silver, covered 2284 contracts from their short side.

Our commercials;
Those commercials that have been long in silver, covered a huge 4651 contracts from their long side.
Those commercials that have been short in silver added another 4424 contracts to their short side.

the net result from the commercials is a net 9075 contracts short.

Our small speculators;
Those small specs that have been long in silver added a rather large 9795 contracts.
Those small specs that have been short in silver covered 1107 contracts from their short side.
Conclusion:  extremely bearish as the bankers went net short by 9075 contracts.
It seems that the bankers are loathe to supply the necessary paper.






And now for some physical stories:

This is the big story of the day first reported late last night.  The Republican party will consider adopting the gold standard and also audit the Fed.  Governor Romney has now stated publicly that Bernanke must go
even though his insiders initially stated that Bernanke will stay.  The platform calls for a commission which will link the price of gold to the dollar. In other words,  paper money can not be expanded unless they have a like amount of gold in its vaults. Since the USA is the reserve currency of the world, it would need to control just about all of the gold ever mined to back all of USA currency floating around the globe.

Then, this assumes that that the USA still have its gold.  I strongly feel that they have leased out the majority of their gold as did other European nations like England, Holland, Belgium etc.  With gold in private hands, this would necessitate either confiscation or an offer of some kind to return private gold back into the banks of public authorities.   Again, this would be difficult.

Let us see how this plays out in the next few weeks.  We have two commentaries on this subject and it is well worth your time reading both of them.  The first is from Tyler Durden of zero hedge and the second commentary is from Simon Black:


(courtesy zero hedge)





Republicans Consider Returning To Gold Standard: Real Or Red Herring?

Tyler Durden's picture



Stranger than fiction perhaps but the FT is reporting that the gold standard has returned to mainstream US politics for the first time in 30 years with a 'gold commission' set to become part of official Republican party policy. While this could simply be a reach for as many Ron Paul marginal voters as possible (with the view that the GOP would never really go for it); it appears drafts of the party platform from the forthcoming rain-soaked convention call for an audit of the Fed and a commission to look at restoring the link between the dollar and gold. The FT, citing a spokesperson, adds that "There is a growing recognition within the Republican party and in America more generally that we’re not going to be able to print our way to prosperity," but "We’re not going to go from a standing start to the gold standard," although it would provide a chance to educate politicians and the public about the merits of a return to gold. Interestingly, the Republican platform in 1980 referred to "restoration of a dependable monetary standard", while the 1984 platform said that "the gold standard may be a useful mechanism."

The FT does its best to placate the hysteria and walk it back with:
A return to a fixed money supply would alsoremove the central bank’s ability to offset demand shocks by varying interest rates. Thatcould mean a more volatile economy and higher average unemployment over time.
But we remind readers of the actual lengths (and volatilities) of economic cycles over time (as per Deutsche's Jim Reid):
...we think that the three ‘super-cycles’ between 1982-2007 were the exception rather than the norm and existed largely because of a near 30 year secular global decline in inflation that transcended the business cycle.

...every business cycle threatening incident was dealt with using aggressive intervention. This led to more and more confidence in the ability of the authorities which coupled with lower and lower interest rates increased public and private leverage to previously unthinkable levels.




One could argue that the most recent three 'Golden-Era' mega-business-cycles are 'unsustainable' fiat-driven monstrosities. The business cycle appears to be naturally shorter but we have centrally-planned it by creating more and more debt since 1971 - perhaps a return to the gold standard or hard money will increase the frequency of recessions but they can be projected and planned for and managed - as opposed to the cliff-like plunges and bubblicious thrusts of their current unsustainable experiment.

Guest Post: A Gold Standard: Easier Said Than Done

Tyler Durden's picture





Submitted by Simon Black of Sovereign Man blog,
If you haven’t heard yet, the committee which is drafting the platform for next week’s US Republican National Convention has announced that they are including a proposal to return to thegold standard. Big news.
Ironic… given that it was a Republican president (Richard Nixon) who abolished the gold standard in the 1970s. Regardless, it’s nice to see the issue thrust into the spotlight. But does it stand a chance of actually becoming a reality?
Let’s look at some numbers.
Remember, a gold standard is a monetary system in which individual currency units are fixed to an amount of gold held by the government; under a gold standard, the paper money supply cannot be expanded without also increasing the amount of gold on hand.
With a full gold standard, 100% of the money supply is backed by gold. In practice, a smaller amount of gold may be fixed to back the money supply.
According to the World Gold Council, all the gold that has ever been mined in the world is now valued at roughly $10 trillion. This is essentially the same number as the current M2 money supply in the United States.
In other words, to fully back its existing money supply, the US government would have to control every ounce of gold that has ever been mined in the history of the world.
At present, the market value of the federal government’s gold holdings only amounts to about $250 billion. Now, I’m making a big assumption that Uncle Sam is accurately reporting his gold holdings. But we shouldn’t worry much about this, US gold holdings are going to be audited soon. By the Treasury Department. How impartial.
Anyhow, this $250 billion worth of gold bullion constitutes a mere 2.5% of US money supply. So advocating a return to the gold standard is much easier said than done.
Even under a flimsy, partial gold standard, the amount of gold backing the currency would certainly need to be north of 2.5%. Even if just 10%, this would suggest either:
(a) money supply would contract by 75%, spurring massive deflation [unlikely]
(b) the gold price increases to $5,000 [more palatable]
Clearly one of the key risks in this scenario is that the US government would need to acquire as much gold as they can get their hands on, likely through Roosewellian-style gold confiscation.
Let’s be honest, though. This talk of a return to the gold standard is probably just a pipe dream. The numbers don’t make sense. Besides, why would any politician want to be constrained from conjuring money out of thin air?
But just in case the idea gains momentum, it may be worth a speculation.
One could, for example, buy some options on long-dated futures; the call option to buy gold at $2,350 in December 2017 costs around $225 right now. Assuming that silver also rockets in price, one could pay ~$2 for an option to buy an ounce of silver in December 2016 with a strike price of $80.
If a return to the gold standard drives precious metals prices through the roof over the next five years, those options could be worth 20x what you pay today. If it ends up being nothing, your exposure is limited.
Naturally, there are a number of risks associated with making such speculations in public markets… not the least of which is the counterparty risk associated with the exchange itself.
I’ve long written that public markets are completely broken. Exchanges are just government lap dogs who make a sport of supporting fraud and fleecing the little guy.
If you have the means, you can reduce this risk by investing through foreign exchanges. Hong Kong’s exchange currently has a cash-settled gold futures contract (100 troy ounces of 995 gold priced in USD) and will eventually introduce options. Other global exchanges (Shanghai, Singapore, etc.) also transact gold futures.
Of course, nothing beats owning physical metal, preferably stored overseas. If Roosewellian-style gold confiscation becomes reality once again, the safest place for your gold is going to be a snug safety deposit box in a place like Hong Kong or Singapore.

Fast and far moves just ahead for gold and silver, von Greyerz tells King

 Section: 
10:19p ET Thursday, August 23, 2012
Dear Friend of GATA and Gold:
Matterhorn Asset Management's Egon von Greyerz today sticks his neck way out with King World News, predicting stunningly fast moves up in gold and silver, with gold reaching $4,000 without a major correction. Some of us pray to live to see the day when gold reaches just $1,800 and figure that $4,000 and higher won't be reached any time soon without central banks getting ahead of the collapse of their currencies, getting out of gold's way, and forthrightly remonetizing the metal. But none of us will hate von Greyerz if he's off by a few days. An excerpt from his interview is posted at the King World News blog here: 
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end

Yesterday I forwarded to you Eric Sprott and David Baker's paper on ZIRP and NIRP and how devastating these two policies are to global economies.  They destroy pension funds, insurance companies as well as highlight to the world the craziness of the financial system as it proclaims the worthlessness of paper money.  If you have not read this piece, I urge you to do so.

The second paper written by John Embry of Sprott in Investor's Digest highlights to the world gold in short supply. He describes how China, Russia, and India are loading the boat and moving gold onto their shores.

He describes the problems in Greece which cannot be fixed and then emphasizes that problems in Spain are so great that it would be impossible to correct without the printing of more money.

He then discusses the USA:
He is in the camp that more QE must be forthcoming as there is only one course left to shield the USA from a deflationary collapse and that is QE to infinity.
Finally, he discusses the woes at Barrick Gold:

1. Barrick announced a production cut from 9 million oz to 8 million this year as large scale mining has finally taken a toll on gold's largest producer.
2. Barrick has delayed production (as I promised you that this would happen) for a least a year due to cost overruns.
3. They have indefinitely postponed production of the big Donlin Creek Project in Alaska
4. They have indefinitely postponed production of the big Cerro Casale Project in Chile which the own 75:25 with Kinross gold.
the 1 million oz reduction this year represents 1.33% of world production off the table at the time of increasing demand for metal coming from countries of eastern persuasion.

I urge you to read this important paper by John Embry

(courtesy Sprott Asset Management/Eric Sprott/David Baker/John Embry)




Sprott guys on ZIRP and NIRP and the gold supply crunch

 Section: 
10:10p ET Thursday, August 23, 2012
Dear Friend of GATA and Gold:
The latest commentary by Eric Sprott and David Baker of Sprott Asset Management describes how zero and negative interest rates are destroying savers, pension funds, and insurance companies and signify the impending end of the increasingly crazy world financial system with a proclamation of the worthlessness of government money -- a time when gold in hand may be even more valuable than it is now. The Sprott-Baker commentary is headlined "NIRP: The Financial System's Death Knell?" and it's posted at the Sprott Internet site here:
Meanwhile Sprott Asset Management's John Embry, writing for Investor's Digest of Canada, argues that growing demand for gold from central banks is bumping up against the realization that much supposedly "allocated" gold held for customers by investment banks is illusionary. Embry's commentary is headlined "Gold Increasingly Likely to Be in Short Supply" and it's posted at the Sprott Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end



Eric Sprott  moves on to discuss leasing with Eric King of Kingworld news.
The central banks are still leasing gold they know they will never get back.

(courtesy Eric Sprott/Kingworldnews)



Central banks still leasing gold they'll never recover, Sprott says

 Section: 
2:25p ET Friday, August 24, 2012
Dear Friend of GATA and Gold:
Sprott Asset Management's Eric Sprott today tells King World News he suspects that some central banks are still leasing gold to quell the gold price and they'll never get it back, and they'll lose it sooner as markets realize that the world financial system is bankrupt and dependent on bailouts. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end


I brought this to your attention on Wednesday night, the fact that Pimco's Bill Gross has increased h gold to 11.5% from 10.5% in his big bond fund.  He purchased his gold in the $1500 plus level.  According to Nic Johnson, his co portfolio manager, their concerns are three:
i) loose monetary policy
ii) high levels of sovereign debt
iii) rising commodity prices

all of which will fuel an inflation outbreak.
Bill Gross is watching the 10 year USA bond with great interest.  A rise in yield will mean inflation is building and the deflation play is basically over. (A rise in the 10 yr treasury also spells trouble for JPMorgan and their colossal interest rate swaps.

(Jim Sinclair commentary/Bill Gross/Pimco) 


Dear CIGAs,
Dow Jones is reporting this morning that PIMCO’s Commodity Real Return Strategy Fund, with about $20 billion in assets, has raised its gold holdings to 11.5% of it total assets from 10.5% two months ago. The position was apparently taken when gold dipped towards $1500 according to comments from Nic Johnson, its co-portfolio manager.
Their concern is a triple one – loose monetary policy, high levels of sovereign debt and rising commodity prices are going to fuel an inflation outbreak as we move ahead.
Sounds familiar doesn’t it?
Here is the point – the chart in gold showed tremendously strong support in gold on any retreats in price down below the $1600 level a short while back. Gold would dip down into these levels but would immediatey attract strong buying and would rebound back higher. WE remarked that this sort of chart action showed ACCUMULATION by deep-pocketed players, whether those were of Asian origin or large investment funds elsewhere. REgardless, these well capitalized players are positioning themselves for what they see coming down the road.
Note, that this is not MOMENTUM BASED buying. That crowd only enters the markets AFTER it starts moving higher and takes out technical resistance levels. They are now coming into gold and into silver. ACCUMULATION puts a floor in a market; momentum based buying drives it higher into a trend.
We’ll need to keep a close eye on the yield on the Ten Year Note to see how that acts as we move forward. If the inflation play is replacing the deflation play, we have seen the lows in interest rates for a very long time.

end



And courtesy of Ed Steer, we learn that Eric Sprott received a tiny 320,000 ounces of silver that he purchased.
He still has more than 1 million ounces left to go to complete his deal.  Already it has taken 44 days to receive just under 7 million ounces out of 8 plus million.

(courtesy Ed Steer)

Sprott's Physical Silver Trust reported receiving 320,000 ounces of silver yesterday...and still has over a bit over a million ounces left to be delivered from their latest offering. Since they got the first tranche on July 11th, they have received just under seven million ounces...and since they purchased a bit more than eight million ounces, they're just awaiting the balance...44 days [6+ weeks] since receiving the first shipment. It will be interesting to see how long it takes to get the rest. From this information it should be obvious that good delivery bars are not exactly laying around.

end

Here is your early morning gold and silver report from Goldcore.  Notice the huge demand reported from Hong Kong and India two of our major physical centres.

The author discusses in detail the 4 major risks to the globe and all will have gold/silver as beneficiaries:

1. Macroeconomic Risk:  this is when all of our industrial giants face a recession at the same time.
These countries are the Eurozone, the UK, USA, China, and Japan. If all of these nations falter at once, then we could have either:

i) inflation
ii) deflation
iii) stagflation

or worse..hyperinflation

Policymakers are very concerned of deflation and they are desperately trying to steer away from this monster.

2. Systemic risk.  An example of a systemic risk is a failure like Lehman brothers causing cascading events to freeze all economic activity. A failure in the shadow banking system is another event which could create it's own Black Swan event.

3. Geopolitical event.  This would be Israel launching an attack on Iran and they respond with nuclear attacks on Israel and surrounding Arab neighbours causing much destruction. The rise in the price of oil and the turmoil would freeze all economic activity...another black swan event.

4. Monetary Risk.  This is the risk of continue ZIRP  (zero bound interest rate policy) coupled with NIRP (negative interest rate policy).  This destroys the value of the dollar, creates havoc to various industries like the insurance industry and also causes economic output to falter as valuations become suspect.

This is a very important read for you:

(courtesy Goldcore)


From GoldCore


Precious Metals ‘Perfect Storm’ As MSGM Risks Align
Today's AM fix was USD 1,666.50, EUR 1,329.16, and GBP 1,051.88 per ounce.
Yesterday’s AM fix was USD 1,662.50, EUR 1,324.07and GBP 1,047.57 per ounce.
Silver is trading at $30.37/oz, €24.36/oz and £19.25/oz. Platinum is trading at $1,541.00/oz, palladium at $642.50/oz and rhodium at $1,025/oz.
Gold climbed $14.60 or 0.88% in New York yesterday and closed at $1,669.40. Silver surged to a high at $30.81 and finished with a gain of 2.28%. The precious metals have broken out this week with sharp gains being seen in all four precious metals.
Silver as expected led the gains and surged 8.55% in the week, palladium is up 6%, platinum 5% and gold up 3%.
Currency Ranked Returns – (Bloomberg)
Gold gave back some gains on Friday but it’s still set for its biggest weekly rise in more than 2 months due to the very strong fundamentals.
Today, US durable goods orders are published at 1230 GMT and weakness would confirm weakness in the US economy and should lead to further safe haven demand for gold.
The European Central Banker is fighting to save the European fiscal union and quantitative easing seems certain in Europe.  Investors will wait to see if central bankers are coordinating their efforts and announce further QE at the same time.
Reuters reported increased demand for bullion in Hong Kong with one bullion dealer reporting “purchases by investors in the physical market.”
There are even signs of a pickup in physical demand in India with strong buying being done by stockists ahead of the busy marriage season.
The use of the term “perfect storm” by market participants is a bit clichéd and over used at this stage however it is appropriate with regard to looking at the fundamentals driving the precious metal markets and particularly gold and silver. 
GoldPrices in Dollars – (Bloomberg)
All of the recent focus has been on the Fed and the will it or won’t it engage in QE3 saga. Many of us said long ago that some form of QE on a significant scale is inevitable. However, it is important to realise that the Fed is just one factor driving precious metals higher. 
The Fed is not the be all and end all and while the Fed can jaw bone and manipulate prices higher and lower in the short and medium term - in the long term the free market and forces of supply and demand will dictate prices.
Silver Prices in Dollars – (Bloomberg)
There is a frequent tendency to over state the importance of the Fed and its policies and ignore the primary fundamentals driving the gold market which are what we have long termed the ‘MSGM’ fundamentals.
As long as the MSGM fundamentals remain sound than there is little risk of gold and silver’s bull markets ending.
What we term MSGM stands for macroeconomic, systemic, geopolitical and monetary risks.
The precious metals medium and long term fundamentals remain bullish due to still significant macroeconomic, systemic, monetary and geopolitical risks.
a) Macroeconomic risk is seen in the risk of recessions in major industrial nations with much negative data emanating from the debt laden Eurozone, UK, Japan, China and U.S. in recent days.
It remains difficult to pinpoint the nature of the coming recessions and possibly a Depression and whether it will be deflationary, inflationary, stagflationary or the less likely but possible none the less ‘Black Swan’ of hyperinflation.
Deflation remains the primary concern of most policy makers, politicians, bankers and investors.
However, the risk of deflation is a short term one and the monetary policy response or M means that various forms of inflation remain the medium and long term threat. 
b) Systemic risk remains high as little of the problems in the banking and financial system have been properly addressed and there is a real risk of another 'Lehman Brothers' moment and seizing up of the global financial system.
The massive risk from the unregulated “shadow banking system” continues to be underappreciated.
‘Financial weapons of mass destruction’ in the world wide shadow banking system are now estimated at over $60 trillion in late 2011. 
Globally, a study of the 11 largest national shadow banking systems found that they totalled to $50 trillion in 2007, fell to $47 trillion in 2008 but by late 2011 had climbed to $51 trillion, just over its estimated size before the crisis. 
c) Geopolitical risks are elevated - particularly in the Middle East. This is seen in the serious developments in Syria and between Iran and Israel. There is the real risk of conflict and consequent affect on oil prices and global economy. 
There are also simmering tensions between the U.S. and its western allies and Russia and China. 
Recent days have seen massive industrial unrest in the platinum sector in South Africa, the largest producer of platinum in the world (some 80% of supply) and fifth largest gold producer. There are genuine concerns that unrest in the platinum sector could spread to the gold sector with a consequent impact on gold supply.
Resource nationalism is being seen throughout the world and some developing nations look set to demand higher prices in terms of debased fiat currencies for their finite natural resources. 
d) Monetary risk is high as the policy response of major central banks to the first three risks continues to be to be ultra loose monetary policies, ZIRP, NIRP, the printing and electronic creation of a tsunami of money and the debasement of currencies. 
Should the MSG risk increase even further in the coming months than the central banks response will again be by monetary and further currency debasement which risks currency wars deepening.
This risks the devaluation of all fiat currencies and serious inflation in the coming months and years.
Cross Currency Table – (Bloomberg)
Conclusion
Therefore, we remain bullish in the long term and advise that investors and savers should have a healthy allocation of their wealth in gold in a portfolio to protect against the MSGM fundamental risks.
However, as ever markets are unpredictable and in the short term can do anything. This is particularly the case today with financial markets seeing significant volatility. Euro/dollar has been more volatile than gold in recent days.
We caution that gold could see another sharp selloff and again test the support at €1,200/oz and $1,550/oz. 
If we get a sharp selloff in stock markets in the traditionally weak ‘Fall’ period, gold could also fall in the short term as speculators, hedge funds etc . liquidate positions en masse.
To conclude, always keep an eye on the MSGM and fade the day to day noise in the markets.
We remain bullish in the medium and long term and those who maintain an allocation to gold will be rewarded. However, we caution that there is the possibility of further weakness in the short term.
This seems unlikely due to the bullish technicals having aligned with the fundamentals however “event risk” is high and it would be foolish to completely discount the risk of yet one more sell off.
For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS
Spam Saves The Day – Zero Hedge

And now for our major paper stories:


Here is your opening Spanish 10 yr yield at 7;00 am est Friday:

SPANISH GOVERNMENT GENERIC BONDS - 10 YR 

Add to Portfolio

GSPG10YR:IND

6.405000.05900 0.93%
As of 06:55:00 ET on 08/24/2012.


end


Italy Govt Bonds 10 Year Gross Yield

 Add to Portfolio

GBTPGR10:IND

5.758000.05900 1.04%
As of 06:55:00 ET on 08/24/2012.

end


Here are your early  indices results from Europe's major bourses which certainly had an effect on NY:

i) FTSE at 7 am down 9.75 points or .17%
ii) DAX Germany down 24.43 points or .35%
iii) Paris CAC down 4.69 points or .14%

and finally the Spanish IBEX:

down 30.70 points or .42%


and now your early currency crosses:

i) Euro/USA 1.2519
ii) USA/Can .9932
iii) USA/Japan 78.47

and your opening USA 10 yr bond yield:  (7 am)

US Generic Govt 10 Year Yield

 Add to Portfolio

USGG10YR:IND

1.650600.02730 1.63%



end

Early Friday morning, we finally saw the euro weaken against the dollar as European stock fell again. Europe was headed for its first weekly drop in 3 months following weak USA economic reports and problems in fixing Europe's ongoing debt crisis.  England's  GDP contracted again by 1/2% compared to a drop of .7% last month.
Europe continues to contract which will be bad news for exporting nations like China and Japan, as purchases of goods wane.

(courtesy Bloomberg)


Euro Weakens, Commodities Decline On U.S. Data, European Talks


The euro weakened against the dollar, oil and metals fell and European stocks headed for the first weekly drop in 12 weeks after disappointing U.S. economic reports and sluggish progress in fixing Europe’s debt crisis.
The euro slipped 0.4 percent against the dollar as of 12:05 p.m. in London. Copper declined 0.8 percent and oil slipped 0.4 percent. The Stoxx Europe 600 Index was little changed, poised for a 1.9 percent weekly retreat, its first since the beginning of June. Futures on the Standard & Poor’s 500 Index fell less than 0.1 percent. Ten-year Treasuries extended their biggest weekly advance in almost three months.
A worker inspects copper sheets stacked at the Public Procurement Service Busan base warehouse in Busan, South Korea. Photographer: SeongJoon Cho/Bloomberg
Aug. 24 (Bloomberg) -- Alan Higgins, chief investment officer at Coutts & Co., discusses his investment strategy forgold, high-yield debt and Asian stocks. He speaks with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
German Chancellor Angela Merkel and French PresidentFrancois Hollande will meet the Greek prime minister today and tomorrow to discuss the pace of reform. Orders for U.S. durable goods probably rose in July, economists said before a report today, after Labor Department figures yesterday showed U.S. jobless claims rose more than forecast last week. Britain’s economy contracted less than initially estimated in the second quarter, the statistics office said today.
“Economic data has been pretty poor,” said Stephen Halmarick, the Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion of assets. “The practicalities of what needs to be done to address this are huge. The rally seems to have been a bit more about hope over reality.”

Weekly Advance

Commodities as measured by the S&P GSCI gauge are still heading for a fourth weekly advance after entering a bull marketon Aug. 21, climbing more than 20 percent from June 21. Oil fell to $95.88 a barrel in New York and copper dropped to $7,624.50 a metric ton in London. Zinc and aluminum also retreated on the London Metal Exchange. Cotton slumped 1.3 percent for a third consecutive decline.
“Falling equity markets and poorer economic data from the three major oil consumer regions - the U.S., China and Europe - have put paid to the surge in oil prices for the time being,” Eugen Weinberg, head of commodity research at Commerzbank AG in Frankfurt, said today in a note.
Possible oil-production stoppages next week, when Tropical Storm Isaac is forecast to enter theGulf of Mexico, are likely to temper declines in the oil price, he said.
Reserve Bank of Australia Governor Glenn Stevens said today the country’s commodity boom will peak within the next year or two. BHP Billiton Ltd. and Rio Tinto Group both slipped more than 2 percent, leading European equities lower, and a gauge of mining companies fell 1.8 percent. The Stoxx 600 (SXXP) index of European equities eased for a third day.

European Recession

“The market has had a good rally so far, and the pullback we’re seeing is a healthy breather,” said Manish Singh, the head of investment at London-based Crossbridge Capital, which has more than $2 billion under management. “Europe is still in recession and U.S. growth is anemic, too.”
HSBC Holdings Plc lost 1 percent as two people with knowledge of the case said the lender has begun talks with U.S. regulators to settle an investigation into laundering the funds of countries including Iran and Sudan.
S&P 500 futures were little changed as the equity benchmark headed for its first weekly retreat in seven weeks. A report today will show that durable-goods orders climbed 2.5 percent in July, their largest increase this year, according to the median estimate in a survey of economists.Consumer confidence dropped last week to the lowest level since January, according to the Bloomberg Consumer Comfort Index.

U.K. GDP

U.K. gross domestic product fell 0.5 percent, compared with a 0.7 percent decline estimated on July 25, the Office for National Statistics said today in London.
The MSCI Asia Pacific Index (MXAP) lost 1.2 percent, erasing a weekly gain. Whitehaven Coal Ltd. (WHC) slumped 11 percent in Sydney after a group led by billionaire shareholder Nathan Tinkler said it isn’t proceeding with a takeover offer.
Ten-year Treasuries rose for a sixth straight day, the longest winning streak since May 2011, with the yield dropping to as low as 1.65 percent. German 10-year bund yields fell four basis points to 1.34 percent.
Spanish 10-year bond yields rose five basis points to 6.40 percent. European Union Economic and Monetary Affairs Commissioner Olli Rehn said in a statement yesterday that the EU is focused on its aid program for Spain’s banks and hasn’t received a request for a full bailout from the nation.
The euro snapped a four-day advance against the dollar after German lawmaker Volker Kaudersaid Europe’s largest economy can’t make more money available for Greece. The 17- nation currency weakened to $1.2518, paring its biggest weekly advance since the five days through Feb. 24. The greenback appreciated against all but four of its 16 major peers.
The cost of insuring European company debt rose, with the Markit iTraxx Crossover index of credit-default swaps linked to 50 companies with mostly high-yield credit ratings climbing six basis points to 595 basis points. The gauge is heading for its first weekly increase since the beginning of July.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Stephen Voss at sev@bloomberg.net


end



The Obama administration is warning Europe to bail out Greece.  They are scared that a default by Greece will cause turmoil on the financial markets during the re election campaign.  A faltering economy benefits Romney

(courtesy zero hedge)


Obama Requests Europe Bail Out His Reelection

Tyler Durden's picture




Color us unsurprised; but the UK's Independent is reporting that American officials are worried that if the Troika decides Greece has not done enough to meet its deficit targets, it will withhold the money - triggering Greece's exit from the eurozone weeks before the presidential election. British government sources have suggested the Obama administration is urging eurozone Governments to hold off from taking any drastic action before then - fearing the resulting market destabilization could damage President Obama's re-election prospects. The Troika are expected to report in time for an 8 October meeting of eurozone finance ministers which will decide on whether to disburse Greece's next EUR31bn aid tranche, promised under the terms of the bailout for the country. European leaders are thought to be sympathetic to the Obama lobbying, fearing that, under pressure from his party in Congress, Mitt Romney would be a more isolationist president than Mr Obama. So once again GRExit is assured economically; but it is an entirely political decision.


end



It looks like Draghi was bluffing after all.  The ECB will await the Germany Constitutional ESM ruling before setting his plan into action.  This is nothing but a red herring. It is a forgone conclusion that the German Constitutional court will somehow favour Merkel although there may be some conditions attached to their ruling. It seems to me that Draghi's plan has not been thought out well enough and needs re-engineering.

(courtesy Bloomberg)




ECB Said To Await German ESM Ruling Before Settling Plan



European Central Bank President Mario Draghi may wait until Germany’s Constitutional Courtrules on the legality of Europe’s permanent bailout fund before unveiling full details of his plan to buy government bonds, two central bank officials said.
With the court set to rule on Sept. 12, investors looking for Draghi to announce a definitive purchase program at his Sept. 6 press conference might be disappointed, according to the officials, who spoke on condition of anonymity because the deliberations are not public. The program is still being worked on and staff may not be able to finalize it by then, said the officials, who are familiar with thinking on the ECB Governing Council. An ECB spokesman in Frankfurtdeclined to comment.
Mario Draghi, president of the European Central Bank, gestures as he speaks during a news conference at the ECB headquarters in Frankfurt, on Aug. 2, 2012. Photographer: Hannelore Foerster/Bloomberg
European Central Bank President Mario Draghi may wait until Germany’s Constitutional Court rules on the legality of Europe’s permanent bailout fund before unveiling full details of his plan to buy government bonds, two central bank officials said. Photographer: Hannelore Foerster/Bloomberg
German Finance Minister Wolfgang Schaeuble warned on July 10 that a delay in activating the ESM could lead to a “significant worsening of the debtcrisis.” Photographer: Jock Fistick/Bloomberg
Draghi announced on Aug. 2 that the ECB may intervene in the secondary market to reduce bond yields in countries such as Spain and Italy if they apply to Europe’s bailout fund for aid and accept the conditions attached. The European Stability Mechanism, intended to replace the temporary European Financial Stability Facility, hasn’t entered into force yet as legal wrangling over its compatibility with the German constitution continues.
While Draghi is likely to give a progress report on the bond plan after the Sept. 6 rate decision, the ultimate design of the ECB’s program may depend on the uncertainty over the permanent bailout fund being resolved, so the officials said it makes sense to wait for the German ESM court ruling.

Timing Issues

Full details of the ECB’s plan could be a month away, they said. While the Bundesbank opposes ECB bond purchases, it expects to be outvoted, one of the officials said.
Spain’s two-year note yield climbed seven basis points after the story was published, to 3.79 percent at 12:24 p.m. in London. The rate on similar-maturity Italian securities increased 13 basis points to 3.33 percent. The euro extended losses to trade at $1.2506, down 0.5 percent today.
Draghi said on Aug. 2 that ECB working groups would design a bond purchase program “over the coming weeks,” fueling speculation that he would unveil the plan after the bank’s next policy meeting.
Bond markets rallied after Der Spiegel magazine reported on Aug. 19 that the ECB would decide at its September policy meeting whether to impose a cap on borrowing costs for countries including Italy and Spain.
The ECB took the unusual step of responding to that article, saying in a statement that the Governing Council hadn’t discussed the plan and it was “absolutely misleading to report on decisions which have not yet been taken.”

ESM Court Ruling

Germany’s Constitutional Court is deciding whether to suspend the 500 billion-euro ($627 billion) ESM following lawsuits by German lawmakers, academics and political groups who say the fund contravenes domestic law. If the start of the ESM is delayed further, crisis managers would have to get by with the 240 billion euros left in the temporary EFSF.
German Finance Minister Wolfgang Schaeuble warned on July 10 that a delay in activating the ESM could lead to a “significant worsening of the debt crisis.”
Draghi’s bond-buying plan hinges on the government-backed bailout funds acting first, which would require countries to make a formal request for aid and to sign up to conditions in a Memorandum of Understanding. Neither Spain nor Italy has made such a request.
To contact the reporters on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net; Stefan Riecher in Frankfurt at sriecher@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
end




The German finance ministry are now working on what will be the costs of a Greek exit.  It won't be pretty!!

(courtesy Reuters)


German finance ministry studying "Grexit" costs: paper





BERLIN | Thu Aug 23, 2012 11:00pm EDT

(Reuters) - A working group led by Germany's deputyfinance minister is studying the possible economic impact of a Greek exit from the euro zone, a newspaper reported on Friday, as Chancellor Angela Merkel prepared for talks with Greece's prime minister.
Merkel says she wants Greece to stay in the common currency despite increased German impatience with the repeated failure of Athens to meet reform targets under its two multi-billion euro bailout packages.
The Financial Times Deutschland newspaper, citing finance ministry sources, said the decision to set up the working group showed that Merkel and Finance Minister Wolfgang Schaeuble wanted to be fully prepared for a possible "negative scenario".
"Colleagues are making calculations about the financial consequences (of a Greek exit) and are considering how a domino effect on other euro member states might be prevented," the daily quoted the ministry sources as saying.
The group, made up of around 10 officials from various departments of the finance ministry, is led by Deputy Finance Minister Thomas Steffen, a member of Merkel's centre-right Christian Democrats (CDU), the paper said.
Asked about the working group, a spokesman for Schaeuble told the newspaper the government had to be prepared for all scenarios, including "improbable ones".
Merkel will urge Greek Prime Minister Antonis Samaras in their talks on Friday in Berlin to stick with tough reforms aimed at putting the country's public finances back onto a sustainable basis.
Samaras says his government is committed to keeping Greece in the euro zone but wants some leeway in implementing more tough austerity measures in a country suffering its fifth year of recession. (Reporting by Gareth Jones; editing by Andrew Roche)


end

Even though  the Spanish stock market rose today on hope of a bailout, the Spanish 10 yr bond yields rose for the second day in a row.  As well the Spanish 5 year Credit default swaps broke back above 500 basis points signalling a higher risk of default. The poor showing of the Spanish bonds is something that worries Mario Draghi.

(courtesy zero hedge)


Europe Ends Weak Week With Spanish Risk At 10-Day High

Tyler Durden's picture



Despite the valiant attempts to create something from absolutely nothing in the last few minutes of the European week (to wit Hilsenrath's Bernanke story and ECB bond 'corridor' rumors), Europe fell back from its hope-ridden highs this week.Spanish 5Y CDS broke back above 500bps, as did its 10Y spread to Bunds - giving back 10 days of 'gains' - while the exuberant front-end closed the week basically unchanged (but 40bps higher in yield from Monday's best levels). For context, Spanish bond spreads remain well above the peak crisis levels of last November - having bounced perfectly off them on Monday.European stocks ended today with small gains but all red on the week with Spain's IBEX -3.4%. EURUSD gained 200pips on the week as Fed QE hope faded and we suspect the re-appearance of EU pain repatriated more EUR - though it was playing catch up to swap-spreads also.
European stock markets this week...

Europe's sovereign bond risk this week...

but Spain has now retraced the last 10 days' gains in risk... (lower pane is CDS, middle is spread to bunds)

and for context...Spain never really got 'safe'

and Spain's front-end has slid notably in the last few days..

Guest Post: Why You Always Want Physical Everything

Tyler Durden's picture





Submitted by Simon Black of Sovereign Man blog,
On the way from San Marino yesterday, I had to stop for some gas near Rimini, a beautiful beach town on Italy’s Adriatic coast. As an aside, Italian gas prices are among the highest in Europe… and the world… at €1.77 per liter (almost USD $8.50 per gallon).
Naturally, the vast majority of this is due to taxes. From the € 1.77 per liter, only about € 0.48 can be attributed to the price of oil. Profit margin and distribution costs run about € 0.28. The rest of it (just over 1 euro) is tax. This amounts to an effective tax rate of over 130% on fuel.
Anyhow, when I pulled in to the gas station, I whipped out my American Express card and asked the attendant in broken Italian to turn on the pump. He acted like I had just punched him in the gut, wincing when he saw my credit card. “No… cash, only cash,” he said.
I didn’t have very much cash on me, so I drove to the next station where a similar experience awaited me.
This is a trend that is typical when economies are in decline– cash is king. Businesses often won’t want to spend the extra 2.5% on credit card merchant fees… but more importantly, distrust of the banking system and a debilitatingly extractive tax system pushes people into cash transactions.
You can’t really blame them. In Italy there’s massive distrust of the local banking system. Most of the banks are insolvent, and the government has already started imposing capital controls by limiting withdrawals in some cases to 1,000 euros.
As a result, many bank customers are facing substantial difficulty in accessing their funds; it’s easy to understand why they want to deal in physical cash– the counterparty risk is much lower.
Nobody gives these issues much thought… right up until they get shut out of their account. But these are the real consequences of counterparty risk: anytime your asset is simultaneously someone else’s liability, you might have a big problem when tough times arise. This is when physical cash becomes a premium asset.
It’s the same thing with gold and silver when you think about it. In the early days of the post-Lehman financial crisis, precious metals prices were tanking. At least, on paper.
Gold and silver contract prices may have been plummeting in futures exchanges around the world, but simultaneously, premiums for physical gold and silver coins were skyrocketing. The US mint was unable to keep up with demand for physical coins, and premiums hit double digits by December 2008.
It was an obvious example of the huge disparity between the paper price and the physical price. And in tough times, the paper price is irrelevant. Physical is all that matters.
Cash is in the same boat. When you look at the numbers, the amount of physical currency in circulation is dwarfed by the digital money supply.
In the EU, the M2 money supply is 8.77 trillion euros, of which only 861 billion is in physical cash… about 9.8%. In the US, the proportion is similar– $10.02 trillion M2 money supply, $1.1 trillion in physical cash. The rest is all digits in a database.
It’s a prudent idea to heed this lesson from Italy, for as the banking malaise in southern Europe spreads, cash is likely going to be a premium asset in the rest of the world as well. And it certainly makes sense for individuals to have some holdings of cold, hard cash in addition to physical metal.
After all, if you’re only generating 0.0000001% interest in your bank account anyhow, what difference does it really make to hold physical cash? You’re not worse off for it, but you’ll be a lot better prepared in case something goes wrong.

Jim Sinclair’s Commentary
Where there is smoke someone is apt to yell fire.
US sending aircraft carrier back to Persian Gulf four months early
Defense secretary tells sailors early deployment needed amid Iran and Syria fears 
By Times of Israel staff August 24, 2012, 8:35 am
The US is deploying a large aircraft carrier to the Persian Gulf, the Department of Defense confirmed Thursday, cutting short leave for thousands of soldiers to send them back to the Middle East ahead of schedule.
The move comes amid growing fears of a possible military strike on Iran’s nuclear facilities, which analysts say could spark a wider war or the closing of the Strait of Hormuz, a key shipping lane that the US has said it will use its power to keep open.
The US Navy said the USS John C. Stennis was being deployed early “to maintain combatant commander requirements for the presence in the region.” The ship was scheduled to return to the gulf only in December and had arrived stateside in March.
Sailors were told about the early deployment in July.
Defense Secretary Leon Panetta addressed the sailors before leaving, telling them Iranian fears and the conflict in Syria were the main concerns behind sending them early.
“I understand that it is tough,” Panetta said. “We are asking an awful lot of each of you, but frankly you are the best I have and when the world calls we have to respond.”

SPANISH GOVERNMENT GENERIC BONDS - 10 YR 

Add to Portfolio

GSPG10YR:IND

6.419000.07300 1.15%
As of 12:00:00 ET on 08/24/2012.

Italy Govt Bonds 10 Year Gross Yield

 Add to Portfolio

GBTPGR10:IND

5.714000.01500 0.26%
As of 12:00:00 ET on 08/24/2012.

US Generic Govt 10 Year Yield

 Add to Portfolio

USGG10YR:IND

1.686500.00860 0.51%
As of 08/24/2012.

 end

I found this next Bloomberg article important as Mary Schapiro was defeated at the SEC by 3 of her cohorts who felt it was too great a risk to the money markets if they were allowed to selectively withhold payment in order not to break the buck.  The policy makers wished to avoid another financial crisis if the NPV price was really below a buck and with all investors realizing this, they would stampede the money markets by withdrawing their cash  and thus breaking the banks. Three commissioners saw right through Schapiro and voted against her..a real slap in her face. 


(courtesy Bloomberg)


Money Funds Test Geithner, Bernanke As Schapiro Defeated


Fed Governor Daniel Tarullo has said the central bank could tighten rules on banks’ borrowing from money-market funds, and Boston Fed President Eric Rosengren has said officials have the option to force banks to back their money funds with capital. The Fed and the Treasury could also work through the Financial Stability Oversight Council, a new regulatory panel formed under the Dodd-Frank Act, to seize oversight of money funds from the SEC and grant that power to the Fed.

“There’s real unanimity in the bank regulatory arena about the need to do something about money-market funds,” Karen Shaw Petrou, managing partner of Washington-based Federal Financial Analytics Inc., said in an interview. “What the Fed can do, and I think will try to, is put the funds back in a much more limited corner, by isolating them from integration with the banking sector.”

SEC Chairman Mary Schapiro this week abandoned a four-year effort to adopt tougher rules for money funds as three fellow commissioners said they wouldn’t support her proposal. The announcement marks a victory for the fund industry, which had lobbied against the plan.

‘National Disgrace’

Former SEC Chairman Arthur Levitt called the decision by three commissioners to block Schapiro’s proposal a “national disgrace” and said the Obama administration should pursue the issue through the Financial Stability Oversight Council, or FSOC, the panel Congress charged under Dodd-Frank with monitoring the country’s financial threats.
“This is an important time for the President to weigh in” and for the Fed and Treasury to make “changes in how the system works,” Levitt said in an interview on Bloomberg Television.
FSOC is headed by Timothy F. Geithner, the Secretary of the Treasury. Other voting members include Fed Chairman Ben S. Bernanke, Schapiro, and heads of the Federal Deposit Insurance Corp., the Commodity Futures Trading Commission and the Comptroller of the Currency.
The Treasury Department is consulting with the Fed, SEC and other regulators “to consider the appropriate next steps to reduce risks to financial stability from money-market funds,” according to an e-mailed statement yesterday from Suzanne Elio, a Treasury spokeswoman.

Political Hurdles

FSOC faces technical and political hurdles to enacting new rules, said Satish Kini, a partner inWashington at the financial institutions group of law firm Debevoise & Plimpton LLP.
The council could call for more stringent rules by labeling money funds collectively as systemically important. Under this power, FSOC can only recommend that the SEC address the threat they pose. Before making any recommendation, FSOC must first put out a proposal for public comment and assess the costs of any proposal, Kini said.
“I suppose that this step, if taken by FSOC, may put more pressure on the commissioners, but it’s not a pathway to direct law or regulation, since it is only a power to recommend action,” he said.

Systemically Important

FSOC also could designate individual funds or fund families, beginning with the largest, as systemically important and authorize the Fed to regulate them directly. The council hasn’t yet created the criteria for designating systemically important entities in the asset-management industry. FSOC has said it will consider adopting metrics specifically for such firms.
Designation standards would probably need to be posted for comment and adopted before designating any individual asset managers. FSOC could also run into a political opposition if it took this individual designation approach.
“Certainly it will look like an end-around the primary regulator,” Kini said. “Some members, indeed many members of Congress, would be up in arms over that.”
Schapiro’s plan was opposed by Republican SEC commissioners Troy Paredes and Daniel M. Gallagher, as well as by Democrat Luis A. Aguilar, who worked at Atlanta-based fund manager Invesco Ltd. in the 1990s.

‘Just Outrageous’

“There is much to be investigated related to the cash- management industry, as a whole, before a fruitful discussion can be initiated,” Aguilar said yesterday in a statement. “To move forward without this foundation is to risk serious and damaging consequences in contravention of the Commission’s mission.”
Schapiro has worked to make money funds more stable since the collapse of the $62.5 billion Reserve Primary Fund in September 2008. Its closing triggered a wider run on money funds, helping to freeze global credit markets.
The run abated only after the Treasury guaranteed money- fund holdings against default for a year and the Fed financed the purchase of fund assets at face value to help the funds raise cash to meet redemptions.
Schapiro has argued the funds’ stable $1 share price encourages investors to flee at the first sign of trouble. That’s because those who react quickly can sell their shares at $1 each even if the net asset value has dropped below that level.

Schapiro’s List

Schapiro’s staff this month produced a list for Congress of more than 300 instances over the past 40 years in which fund companies have sought permission from the SEC to support funds. The list was presented as evidence that funds weren’t as stable as the funds industry maintained.
Levitt, the former SEC chairman, said Aguilar’s call for more study of the matter was “disingenuous.”
“This is just outrageous,” said Levitt, who is a director of Bloomberg LP, the parent ofBloomberg News. “This issue has been studied to death.”
Schapiro’s plan would have given fund managers a choice of switching to a floating share price that reflected the market value of holdings, or establishing a capital buffer to protect against credit losses and redemption restrictions to discourage investor flight.

Not Over

Industry executives said the plan would destroy the attraction of funds to investors and deny companies, cities and states a cheap source of short-term funding. Money funds can buy debt securities within 13 months of maturity, including short- term bonds issued by state and local governments and companies, as well as asset-backed securities typically issued by banks.
Fund companies and the Investment Company Institute, the industry’s trade group, said that while they welcomed the announcement, they didn’t expect Schapiro’s decision meant the end of the regulatory battle.
“I think there’s a sense of relief, but we don’t think this is over yet,” Robert F. Deutsch, head of money market funds at New York-based JPMorgan Asset Management, said in a telephone interview.

Money Spent

Deutsch said it was unfair to say the industry had too much influence in blocking the proposed regulation.
“We spent lots of time and money on proposed solutions,” Deutsch said. “It was only when Schapiro started to go down this path that we backed off because we were no longer having a two-way dialogue.”
Schapiro rejected an alternative proposal that would have given funds authority to halt or limit withdrawals in times of crisis, according to a person with direct knowledge of the discussions. At least two commissioners made the proposal, which would allow firms to stop investor flight similar to how hedge funds operate, said the person, who asked not to be named because the talks have been private.
The 10 biggest money-fund managers and the ICI reported combined lobbying spending of $16 million in the first half of 2012 and $31.6 million last year in disclosures that reference money-market mutual funds, according to a review of documents by Bloomberg News. That compares with $16.7 million in all of 2010.

Fed’s Options

“We believe that fund shareholders and the economy benefit from the fact that there is no current plan for further regulation of money-market mutual funds,” Adam Banker, a spokesman for Fidelity Investments in Boston, said in an e- mailed statement.
The Fed’s Tarullo has said the central bank could act on its own by limiting banks’ reliance on money funds as a source of short-term cash. Money funds are the largest collective buyer of short-term debt in the U.S. When investors fled money funds in September 2008, money funds stopped lending, a sudden withdrawal that threatened the ability of companies, including many banks, to roll over short-term debt.
Rosengren has said the Fed might require banks to set aside capital to backstop their money funds in the event of a crisis. Prominent bank-owned money-fund sponsors include New York-based JPMorgan Chase & Co. (JPM), the second-largest provider with $240 billion in assets, and Goldman Sachs Group Inc., with $133 billion, according to research firm Crane Data LLC.
“In the absence of such action, there are several second- best alternatives,” Tarullo said June 12, referring to options beyond Schapiro’s proposed reforms.
To contact the reporter on this story: Christopher Condon in Boston atccondon4@bloomberg.net
end
 Here is the real story behind the true durable good report:

(courtesy zero hedge)

July Core Durable Goods Ex-Transports And Defense Implode

Tyler Durden's picture




Today's Durable Goods number was blistering, if only on the headline. Coming at $230.7 billion, it was up a whopping $9.4 billion or 4.2%, on expectations of a 2.5% increase. The reason for the surge: the volatile transportation segment, which rose 14.1% to $80.4 billion. This is entirely due to Boeing aircraft orders, which rose to 260 this year compared to 10% of that a year ago, which however, as Quantas reminded us yesterday, can and will be promptly reversed (see: "Boeing hit by 'biggest-ever 787 order cancellation'"). In other words next month will be a headline disaster. So what happened beneath the headline when excluding volatile series: well - Durable Goods ex-transportations decline -0.4% in July, missing expectations of a +0.5% print, with the June number revised down from -1.1% to -2.2%. It gets worse: Nondefense capital goods excluding aircraft tumbled in July, and imploded to -3.4%, crashing below expectations of a -0.2% print, with the previous print revised from -1.4% to -2.7%). This means that indeed the brief blip higher in economic activity in the summer was largely transitory and was purely a byproduct of seasonal adjustment.
Headline- good:
Non-Headline- atrocious:

end


John Williams on the above durable goods results;

(courtesy John Williams/jim sinclair commentary.)

Jim Sinclair’s Commentary
Here is the latest from John Williams’ www.ShadowStats.com
- Real Durable Goods Orders and New- and Existing-Home Sales Stagnate Below Pre-2001 Recession Levels
No. 466: July Durable Goods Orders and Home Sales
Web-page: http://www.shadowstats.com
end




This is what we are to expect from the Jackson Hole summit:

i) if Bernanke discusses the mechanisms for a possible easing but promising little, then you can bet
that they will engage in "official" QE III prior to the election is things go off the rails.

ii) if Bernanke does not mention any mechanisms for a possible easing, then be rest assured that no QE III will be coming until after the election.

(The latest figures from the CBO suggest that tax revenues entering the federal coffers are approximately 2.4 trillion dollars.  The expenditures projected this coming fiscal year is 4 trillion dollars leaving a deficit of 1.6 trillion dollars.  With Europe, and Japan in turmoil and just about every nation on earth, who on earth will buy the USA debt?  maybe Iceland?  They are doing great after thumbing their nose at the bankers.

The USA is engaging in QE by the use of swaps.  It never enters the balance sheet because the swaps are to be unwound.  The problem however is that they are continually reswapped over and over again. The bonds purchased sit off balance sheet and also forms part of the shadow banking industry.)

The Definitive QE3 Odds Calculator

Tyler Durden's picture





The odds of Fed easing at the September FOMC meeting seem close to 50-50 (with both sides vehemently talking their books - Fed officials and equity managers alike). Recent data has been a bit better: payrolls, claims, retail sales, and industrial production. As UBS' Drew Matus notes, other factors that will play a role include the ISM report, claims reports, and 'fiscal cliff'-related events. However, the primary determinant will be the upcoming August payroll report. The chart below ignores these other factors and offers up the odds of further easing in September based on the base case that Bernanke’s primary concern is the state of the US labor market. July’s 8.3% unemployment rate and payroll gain of 163k put current odds of further easing at 45%.


UBS: What To Expect From Wyoming
We look for Chairman Bernanke’s August 31st speech kicking off the Jackson Hole Conference to explain what mechanisms the Fed would use to ease further but avoid promising that further easing will be forthcoming. We believe that additional easing is conditional primarily on the behaviour of the labor market. Prior to the FOMC’s decision on September 13th, there will be an additional payroll report and two additional initial claims releases.
Alternatively, the absence of a detailed discussion on easing options may signal the Fed is more likely to wait until after the US election, resetting market expectations to the December 12th FOMC meeting.
We expect Chairman Bernanke to lay out a path of additional easing that would follow the Bank of England’s (BOE) “Funding for Lending” scheme to address the transmission mechanism of monetary policy rather than simply provide additional liquidity to market participants. We believe this experiment by the BOE will provide the inspiration for a Fed program through which banks would be rewarded (vis-à-vis the Discount Window) for meeting targets related to their behaviour: increasing bank lending, accommodating distressed mortgage refinancing or writing down principal for outstandingloans.
Although we would not necessarily expect a new program to provide much of a boost to the US economy, it would show that the Fed is willing to do more non-traditional activity and is willing to boost the size of its balance sheet to improve US economic outcomes. It would likely prove an appealing experiment for Chairman Bernanke and would have several advantages relative to another round of quantitative easing (QE).
  • First, it would not increase concerns around the proper functioning of either the US Treasury or mortgage-backed securities markets. This would be a significant advantage should the US hit the fiscal cliff, with the resulting sharp decline in Treasury debt issuance.
  • Secondly, the program would not immediately increase the size of the Fed’s balance sheet and would also likely not be as large as a QE program, limiting the impact on thecurrency.
  • Thirdly, the program would be more efficient as any subsidy would be directly tied to an improvement in lending/loan forbearance; in contrast, earlier QE arguably has boosted excess reserves more than lending.
  • Additionally, it is important to note that nothing would preclude further QE at a later date.  

end



We will close this report with this week's wrap up courtesy of Greg Hunter of USA Watchdog
followed by another Wolf Richter report on the inside story with respect to Germany and Greece:

First Greg Hunter on a recap of the past week's events:

(courtesy Greg Hunter)



Greg Hunter’s USAWatchdog.com 
Remember how I’ve been telling you there is no real recovery?  Dr. Marc Farber said this week he thinks there is now a “100% chance” of a global recession.  How can Faber make this call and we have any meaningful recovery?  We simply do not, and what we have are bailouts and bottom bouncing.  Faber has made many monster calls on the economy.  In 2009, he told everyone to buy stock, and the market more than doubled.  I would not bet against him.  Maybe that’s why the Fed is signaling it will, once again, start quantitative easing or money printing.  It meets at the end of the month at Jackson Hole, Wyoming.  Expect a big announcement then.
This may also be why gold and silver have been rising in price lately.  It looks like some sort of gold standard and an audit of the Federal Reserve are going to be part of the Republican platform this November.  If the Republicans are serious, they may have a chance of capturing Ron Paul supporters which are young voters.
Tensions are still high in the Middle East.  Fighting is still raging in Syria, and the rhetoric is still at a fevered pitch between Iran and Israel.  Last week, a senior Iranian commander was quoted as saying he would“welcome” an attack because it would give Iran a reason “get rid of” the Jewish state “forever.”
Finally, I am in the Midwest this week, and the drought here is serious.  The crops have been hit hard.  A friend of mine says he expects to lose 70% of his crops.  Other people are expecting to get zero, and are bush hogging the corn fields.  I cannot believe this isn’t going to show up soon in much higher prices for food.  If this drought continues into next year, the world will be in trouble.  Join Greg Hunter as he gives his analysis of these stories and more in the Weekly News Wrap-Up.

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