Thursday, January 24, 2013

Jill Sommers, CFTC commissioner resigns/Canada's Royal Mint

Good evening Ladies and Gentlemen:

Gold closed down $16.60 to finish the comex session at $1669.50.  Silver also faltered down  71 cents to finish the day at $31.70.  As expected, another raid was orchestrated by the bankers for two reasons:

i) options expiry on gold and silver metal contracts.  The options expiry is Monday.
ii) the huge OI in silver and generally the bankers try and force silver holders to relinquish some of their long positions.

Today, Jill Sommers, a CFTC commissioner who is totally against us resigned.
It is possible that many rats are fleeing a leaking ship.

The Royal Canadian Mint announced that it two was rationing silver sales.
As this was announced, the silver price was tumbling.  Go figure!!

Even with today's whacking of gold, our shiny yellow metal hit record levels of 150,000 Japanese yen/oz.

Julian Philips, an Austrian school economist provides an important commentary on the German repatriation of gold.  He is of the opinion that the gold at the FRBNY is unallocated and if that is the case, the Americans would surely engage in massive derivatives on that in situ gold.

Russia announced today that it was not going to buy any more risky paper sovereign assets and it will stick to gold.  Already Russia has 950 tonnes of gold as official reserves.

In paper stories, the Spanish unemployment rates rises to 26.02% and both Spanish and Greek youth see their unemployment skyrocket past 55%.  The total unemployment rate for all of the youth in the Euro zone is 20%.

Today, the oldest bank in the world Banca dei Paschi de Siena announced more derivative losses at its bank and these were off balance sheet and unknown to all. If this bank hid losses, you can imagine other banks in Italy and Spain did the same.

In USA news, the Kansas City Fed Mfg index fell again making 5 out of 5 regional areas saw their manufacturing sectors fall.

We will discuss these and other stories but first let us head over to the comex and assess trading today............

The total comex gold open interest fell dramatically today from 461,369 down to 455,918 for a loss of 5451 contracts. The mini raid yesterday certainly saw some of the weaker longs leave the gold arena.  The non active front January gold month saw it's OI rise by 1 contract from 28 up to 29.  We had zero notices filed yesterday so in essence we gained one contract or an additional 100 oz of gold will stand for delivery. The next big active delivery month is February and we are now only 1 week to go before first day notice.  Here the OI fell from 180,044 down to 160,918 for a loss of a monstrous 19,126 contracts.  I would have to say that anybody playing the comex as a leverage play is totally out of their mind. It would seem that the bankers knocked out approximately 15,000 longs who did not wish to play anymore as they refused to roll into April or June.  It is amazing how they never learn.  The estimated volume on the raid today was good at 207,341.  The confirmed volume yesterday was less at 187,856.

The total silver comex OI shockingly rose today by 1916 contracts as the silver players are playing to a different drummer than gold. The new OI for tonight rests at 144,195 rising from yesterday's level of 142,279.  No doubt the major object of interest in the raid on our precious metals today was to knock the silver "leaves" from the silver tree.  We will certainly find out tomorrow but I doubt very much if many silver "leaves" were forced out.

The non active front January silver contract month saw it's OI fall from 31 down to 17 for a loss of 14 contracts.  We had 15 delivery notices filed yesterday so again we gained one contract or an additional 5,000 oz of silver will stand in the January delivery month.

The next big active delivery month is March and here the OI rose by 1084 contracts from 77,682 up to 78,766.  The estimated volume at the silver comex today was good at 46,565.  The confirmed volume yesterday was much less at 38,295.

Comex gold figures 

Jan 24.2013    The  January contract month

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
650.45 (Brinks,HSBC)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
No of oz served (contracts) today
 0    (nil oz)
No of oz to be served (notices)
29 (2,900 oz)
Total monthly oz gold served (contracts) so far this month
968  (96,800 oz) 
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

317,417.61 oz
We had a totally uneventful day at the gold vaults.
The dealer had no deposits and no    withdrawals.

We had 0   customer deposits

total deposit:   nil oz

We had 2 customer withdrawals:

i) out of Brinks:  514.40 oz
ii) out of HSBC 136.05 oz

total withdrawal:  650.45 oz

We had 3 adjustments:  

i) 2698.78  oz was adjusted out of the dealer (registered) account into the customer account at HSBC (eligible)

ii) 588.865 oz was adjusted out of the dealer (registered) account into the customer account at JPMorgan  (eligible)

iii) 5838.773 oz was adjusted out of the dealer (registered) account at Scotia and into the customer account at Scotia.(eligible)

Thus the dealer inventory rests tonight at 2.267 million oz (70.5) tonnes of gold.

The CME reported that we had 0 notices filed for nil oz of gold.The total number of gold notices standing thus remains at 968 for 96,800 oz of gold. To obtain what is left to be served upon, I take the OI for January  (29) and subtract out today's delivery notices (0) which leaves us with 29 notices or 2900 oz of gold left to be served upon our longs.

Thus the total number of gold ounces standing in this non active month of January is as follows:

96,800 oz (served)  +  2900 oz (to be served upon) =   99,700 oz or 3.102 tonnes.
we gained 100 oz of additional   gold standing for the January delivery month.

Generally, January is a very weak delivery period for both gold and silver and thus the 3.102 tonnes of gold is quite a surprise.


January 24.2013:   The January silver contract month

Withdrawals from Dealers Inventory126,739.741 oz
Withdrawals from Customer Inventory  314,869.145 oz (CNT,Delaware, Scotia,)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory   1,017,030.07 oz (CNT, Brinks)
No of oz served (contracts)0  (nil oz)
No of oz to be served (notices)27  (135,000 oz)
Total monthly oz silver served (contracts)695  (3,545,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month2,592,665.3
Total accumulative withdrawal of silver from the Customer inventory this month8,227,640.3

Today, we  had huge activity  inside the silver vaults.

 we had one dealer deposit and one dealer withdrawal.

Dealer (registered) deposit: 121,510.70 oz into Brinks

Dealer withdrawal:  out of Scotia:  126,739.741 oz

We had 2  customer deposits of silver:

I) Into Brinks:  5,229.09 oz
ii) Into Scotia:  1,217,838.18 oz

total deposit:  1,223,067.27 oz

total customer deposit; 1,223,067.27 oz

we had 3 customer withdrawals:

i) out of Scotia:  300,453.89 oz  

ii) out of Delaware: 7416.255 oz

iii) Out of CNT;  6999.000  oz (another perfectly round number at CNT)

total customer withdrawal:  314,869.145 oz

we had 1  adjustments: 

Out of HSBC:  exactly 10,256.32 oz was transferred out of the dealer account and into a customer account at HSBC.

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. 

When you see massive deposits and withdrawals you know that there is turmoil inside the silver vaults. 

Registered silver remains today at :  38.010 million oz
total of all silver:  150.950 million oz.

The CME reported that we had  7  notices filed for 35,000 oz of silver.The total number of notices filed so far this month rises to 717 for 3,585,000 oz.  To obtain what is left to be served upon, I take the OI standing for January (17) and subtract out today's delivery notices (7) which leaves us with 10 notices or 50,000 oz left to be served upon our longs.

Thus the total number of silver oz standing for the month of January is as follows:

3,585,000 oz (served)  +  50,000 (oz to be served upon)  = 3,635,000 oz
we  gained 5,000 oz of additional silver  standing for January. This is turning out to be a great delivery month for silver as we now surpass the  3 million oz mark in amounts  standing heading towards 4 million oz.


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:   Jan 24.2013 



Value US$71.520   billion

Jan 23.2013:



Value US$72.476  billion

Jan 22.2013:



Value US$72.586  billion

Jan 18 2013:



Value US$72.323   billion

Jan 17.2013:



Value US$71.746 Billion

we lost another 2.4 tonnes of  gold at the GLD.
What a farce!!

and now for silver:

Jan 24:2013:

Ounces of Silver in Trust343,687,009.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,689.86

Jan 23.2013:

Ounces of Silver in Trust343,687,009.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,689.86

Jan 22.2013

Ounces of Silver in Trust345,137,860.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,734.99

Jan 18.2013:

Ounces of Silver in Trust345,137,860.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,734.99

Jan 17.2013:

Ounces of Silver in Trust345,137,860.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,734.99

we neither gained nor lost any oz silver inventory at the SLV  

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 3.1%  to NAV for Cdn funds. ( Jan 24 2013)   

2. Sprott silver fund (PSLV): Premium to NAV fell to 2.10% NAV  Jan 24./2013
3. Sprott gold fund (PHYS): premium to NAV  fell to 3.06% positive to NAV Jan 23/ 2013..

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 4.2% in usa and 4.3% 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. 
I am now glad that these two funds are starting to show a bigger positive to NAV 

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.



And now for the major physical stories we faced today:

Goldcore discusses gold trading early this morning from Europe:

Major points of interest:

1,  Even though gold is down against most currencies, it is up in yen.
2.  It is at record levels of around 150,000 yen/oz
3. Credit Suisse reports gold owners have removed their gold from the euro zone afraid of the currency crisis.
4. Spanish youth unemployment now has risen to record heights.
5. Mark Faber at his best.

(courtesy Goldcore)

Faber To Shiller: “You Keep Your U.S. Dollars And I’ll Keep My Gold”

Tyler Durden's picture

From GoldCore
Faber To Shiller: “You Keep Your U.S. Dollars And I’ll Keep My Gold”
Today’s AM fix was USD 1,677.00, EUR 1,258.06, and GBP 1,059.18 per ounce.
Yesterday’s AM fix was USD 1,692.25, EUR 1,268.84, and GBP 1,066.19 per ounce.
Silver is trading at $31.92/oz, €24.05/oz and £20.26/oz. Platinum is trading at $1,692.75/oz, palladium at $718.00/oz and rhodium at $1,200/oz.

Cross Currency Table – (Bloomberg)
Gold fell $4.90 or 0.29% in New York yesterday and closed at $1,685.60/oz. Silver fell to $32.08 in Asia then rallied to a high of $32.47 in the afternoon in NY trade, but then it dropped off in the last few hours and finished with a gain of just 0.25%.
Gold edged down in most currencies on Thursday, easing off the one month high hit earlier in the week. More speculative players may be taking profits after the recent run from $1,625/oz to over $1,695/oz or 4.3%.
It is noteworthy that while gold is weaker in most currencies today it is again higher in Japanese yen as the yen has fallen sharply on the international markets due to concerns that the yen will be devalued in the coming months.
Gold in yen terms remains near record multiyear highs above 0.150 million yen per ounce. New nominal highs in yen terms above 0.2 million yen per ounce are only a matter of time (see charts). 
Bloomberg reported that Credit Suisse says gold holders may have withdrawn gold from the euro zone due to the region’s debt crisis. They noted the Bundesbank comment about capacity becoming available in its own vaults in Germany.
The World Economic Forum is into its second day in Davos, Switzerland, and with the theme of ‘Resilient Dynamism’ it appears a good time to announce or spin positive news in Europe such as a slight growth in consumer morale and confidence.  
I’m not sure what Europe the Davos attendees are living on but Ireland, Spain, Portugal and Greece’s ‘recoveries’ are bleak at best.
Spanish youth unemployment has risen again and is now nearly at 60%.
The U.S. House of Representatives passed a Republican led plan to allow the federal government to keep borrowing money through mid-May.
The borrowing and money printing party can continue a little while longer but it would be prudent to prepare for the hangover. 
Owning physical gold today is akin to drinking plenty of water and having a few pain killers to hand. When this party ends, those not owning gold are going to suffer one hell of a financial hangover.
“Everyone should keep gold in their portfolios” as the precious metal will be able to offer value to investors even in a worst-case scenario, said Marc Faber, the publisher of the Gloom, Boom & Doom report.
“In the worst case scenario, in the systemic failure that I expect, it would still have some value,” Faber, who is also the founder and managing director of Marc Faber Ltd., said today at an event hosted by Evli Bank Oyj in Helsinki.
Faber said his outlook was so bleak that he is “hyper bearish”. He joked that “sometimes I’m so concerned about the world I want to jump out of the window.”
He wisely said that `I advise everyone to have some gold.'
Faber said that he thought there could be a flight out of cash and overvalued bonds and into equities and gold. 
In response to a question from Yale University’s Robert Shiller querying the recommendation to hold gold, Faber said: “I’m prepared to make a bet, you keep your U.S. dollars and I’ll keep my gold, we’ll see which one goes to zero first.”
Shiller, who is the co-creator of the S&P/Case-Shiller index of property values, responded "I'm inclined to think gold prices after this crisis might return to a lower level. Given the low yields of the alternatives [ie, bonds], the valuation of the stock market doesn't look so bad."
Faber, whose advice has protected millions of investors in recent years, warned of a global systemic crisis possibly due to massive size of the global derivatives market which is now worth over an incredible $700 trillion.
He warned “when the system goes down,” and only plastic credit cards are left, “maybe then people will realize and go back to some gold-based system.”

What's Going To Happen To The Price Of Gold And Silver In 2013?
Join us for a webinar on Jan 30, 2013 at 1300 GMT.
Join two experts - Money Week columnist, Dominc Frisby and GoldCore's Head of Research, Mark O'Byrne for a one hour webinar as they discuss the outlook for gold and silver in 2013. 

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the big story of the day:


Royal Canadian Mint starts rationing silver coins

12:36a ET Thursday, January 24, 2013
Dear Friend of GATA and Gold:
Jason Hamlin of Gold Stock Bull reports that, following the U.S. Mint, the Royal Canadian Mint has begun rationing its silver coin production:
It's not that silver isn't available. It seems to be that the mints don't want to buy the metal necessary to meet coin demand, lest they allow the price of silver to be pushed up to jeopardize the government-backstopped price suppression scheme.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Jeff Nielson is pounding the table on our two precious metals, gold and silver:

(courtesy Jeff Nielson/GATA)

Jeff Nielson: Thinking silver? Talk to the gold bugs

4:53p CT Wednesday, January 23, 2013
Dear Friend of GATA and Gold:
Jeff Nielson of Bullion Bulls Canada today reflects on GATA's presentations at the Vancouver Resource Investment Conference, noting that the organization stresses research and public record rather than "conspiracy theory" and that GATA's research into market manipulation has heavily involved silver as well. Nielson's commentary is headlined "Thinking Silver? Talk to the Gold Bugs" and it's posted at Bullion Bulls Canada here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


The following is a must read from Julian Philips, an Austrian School economist.

He describes the big picture behind Germany's taking 1/2 of it's gold back in 7 years, and his

reasoning is basically the same as ours.  He states that gold at the Federal Bank of NY is in unallocated

 form.  I have always thought that gold at the FRBNY was earmarked and could not be touched.

Maybe I was wrong.  If this is so, then I have no doubt that the USA engaged in massive derivatives on

this gold underwriting many obligations on the in situ gold stationed at this important foreign depository.

(courtesy Julian Philips/ Gold//Silver forecaster)

The Big Picture behind Germany Taking Half of Its Gold Home
By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch 

-- Posted Thursday, 24 January 2013 | Share this article | Source:
Bundesbank announced last week that they’ll repatriate 674 metric tons of their total 3,391 metric tonne gold reserves from vaults in Paris and New York to restore public confidence in the safety of Germany’s gold reserves. The transfer from the Federal Reserve is set to take place slowly over a seven year period and will only be completed in 2020.
The Bundesbank, the central bank of Germany is to store half of its gold reserves in its own vaults in Frankfurt.

It is planning a phased relocation of 300 tonnes of gold to Frankfurt from New York and 374 tonnes to Frankfurt from Paris by 2020.

In doing so, the Bundesbank will have 50% of its gold reserves in Frankfurt, 37% in New York and 13% in London.

The Bundesbank said that it is focusing on the two primary functions in relocating its gold reserve, to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centers abroad within a short space of time.

Germany is the second largest gold holding country with 3,391.3 tonnes, behind the US with 8,133.5 tonnes.

Germany’s central bank will repatriate part of its $200 billion gold reserves stored in vaults in the Federal Reserve in New York and the Banque de France in Paris.

Before German reunification in 1990, 98% of Germany’s gold was stored abroad. The Bundesbank then started to bring its gold home and in 2000 transferred 931 tonnes from the Bank of England to Germany. It will continue to hold about 13% of its gold reserves in London, even after 2020.

With the introduction of the euro (12 years ago) the Bundesbank sees no need to hold any reserves at the Banque du France as it will no longer need them there for exchange for foreign currency, after all France uses the same currency now.

"This is above all a historical anomaly which is now being corrected," said David Marsh, chairman of think tank OMFIF, which issued a report earlier this month in which it foresaw growing importance for gold due to uncertainty stemming from the rise of China’s Yuan as an alternative to the dollar.

·         There have been widespread stories that the Fed does not have the gold to return as gold held for governments is usually, ‘unallocated’. This suggests that the German gold reserves were not ‘allocated’. Ordinarily, central bank monetary reserves should be held in an ‘allocated’ format to evidence to whom they belong. As it is, held in an ‘unallocated’ form, in simplistic terms, this means that should the Fed fail, foreign central banks holding their gold there would be that unsecured creditors. This concern has been voiced inside Germany. It has been noted that the gold of Germany has not been audited in the past and it should be, on a regular basis. The German Court of Auditors told legislators that the gold had "never been verified physically" and ordered the Bundesbank to secure access to the storage sites. It called for repatriation of 150 tons over the next three years to test the quality and weight of the gold bars. But Germany has decided to move more than in this recommendation. It is said that Frankfurt has no register of the numbered gold bars.
·         We noted that it is going to take 7 years or 10 shipments a year to move it to Germany. This is odd because it can be done much faster. Are they allowing the banks from which it is being drawn to pull it back from those to whom it has been leased? If this is the case and they have to go out and buy the gold to supply Germany with, will we see the three central banks [the Fed, the Bank of England and the Banque de France] enter the open gold market as buyers of the gold they can’t access in that time or has seven years been decided on because this matches the maturation of the leases?
·         The function of gold reserves is to ensure the flow of trade in such critical times that it is the last remaining asset a nation has that is acceptable to overseas creditors, when other national assets fail. As Greenspan put it, it is ‘money in extremis’. But is it necessary to keep all a nations gold outside the country for this purpose? The decision to repatriate half the gold only leaves gold available in the world’s financial centers for such purposes, while the gold held at home is available to be sent elsewhere. The problem of holding gold at home is that if it is needed for creditor payment it resides in the jurisdiction of the debtor, not a happy position.
·         As we said above, it appears reasonable to think that as France is in the same currency, there seems little point in holding any of Germany’s gold in France. With the U.K. still using the pound sterling, keeping Germany’s gold there still makes sense. The same applies to the U.S. which remains the wealthiest nation in the world, at the moment.
·         Are the nations where the gold is held the right places to store it? What if they face crises themselves? Is the move being made because of expectations of crises in those countries? What future monetary scene did Germany see that prompted the moves we see now? Nearly all the world’s nations are acknowledging that China is headed to the top of the wealthy nations pile and is going to take the Yuan to a major global reserve currency, but the prospect of holding German or any other developed nation’s gold in the People’s Bank of China takes a leap of faith and an admission that power and wealth has moved East into politically unknown waters that is just too much at this time.

As we said above, the move of this gold to Frankfurt will allow time to ensure the central banks where the gold is held, to get hold of the gold if they do not have it at the moment. The prospect of developed world central banks now competing with those of the emerging world in the gold market may well start the next leg of the gold bull market because this new, persistent, price-insensitive buying has the power to take gold to a whole new level! We watch to see. If this does happen, then the whole nature of gold in the money system will change even before the changes are ‘officially’ accepted. Gold will be in a ‘de facto’ pivotal position in the monetary system again. It will be a short time from that point before it is ‘officially’ accepted then. The way will have been paved for China to arrive on the scene and gold to have a vital function in the monetary system between two very different and unconnected, politically and economically, power blocs, the developed world and the emerging world with China as its hub.

The last time the world was divided on this basis was at the start of both world wars. The consequences to the monetary world then were so devastating and saw the destruction of national currencies on both sides, in Europe.

History teaches us another lesson. Ahead of the second war, when it became apparent that extremists had taken power in Germany and war became a probability again, gold came into the picture very forcefully. We  are all aware of the 1933 confiscation of gold then, with the stated objective of expanding the money supply through the devaluation of the dollar in the U.S. but one side of that event has not been the subject of full public examination.

Is the fear of future crises in those countries a motive for the move of Germany’s gold back home? It certainly was so in Venezuela’s case, fearful of the U.S.’s power over its gold and reserves. We don’t expect any further statement on the reasons from Germany because that’s the nature of central banks. But history tells us that there are other reasons which discount the future. These confirm the move of gold back to the monetary system and why confiscation of private gold has become a probability in the future too.

When the U.S. dollar was devalued in 1935, it was done so only in terms of gold. It was not devalued against foreign currencies. Exchange rates were then fixed against each other. Other governments did not devalue their currencies against gold. The result was that while gold was trading outside of the U.S. in the foreign currency equivalent of $20, there it was trading at $35 in the U.S.

With markets relatively unsophisticated in those days, alongside limited communication abilities the original “arbitrageurs” [dealers between two markets] found they could buy gold at the foreign currency equivalent of $20 and sell it into the U.S. for $35. Is it any wonder that they U.S. gold stocks roared up to 26,000+ tonnes?

Was this a financial error in an undeveloped world? We have no doubt it was not. It was the ideal quick way to shift the gold reserves of Europe away from the war zone to the relative safety of the U.S. The war arrived in Europe four years later.

But foreign governments weren’t stupid. European governments permitted this move, even though it was seen as a market event. Remember that gold was the basis of money then so such a shift had to happen with government approval. This had to happen within the monetary system in force at the time. The fact that it happened so smoothly implied total government cooperation.

We see it also as an example of how the banks work completely with monetary authorities to ensure complete control over the monetary system. The same is true today as we see the efforts of governments primarily directed at repairing the banking system and government finances with scant attention to the national economies below them.

With a war on the way Europe sent its gold to the U.S. without governments being seen to do it. The move came about as a result of ‘market forces’.

But you may rightly say that surely that wasn’t the end of the story? Of course not!

With a huge U.S. army based in Europe after the war, the flood of dollars from the U.S. to Europe happened from the forties right through to the sixties [Eurodollars] continued. European nations, including France, Italy, Switzerland and Germany led by President de Gaulle, kept selling their U.S. dollars for gold. Once Europe’s gold returned to it [as the war was out of the way and reconstruction just about complete], Europe had its gold back. Then the change in the monetary system changed and the dollar, the exclusive currency in which nations could buy their oil to run their economies with closed the gold window and excluded gold from the day-to-day system but remained in national vaults. It was then that the experiment, now 42 years old, in un-backed paper currencies began. European central banks were then rewarded by the extraordinary rise in the gold price in the seventies and eighties.

This two-way process of gold to and from the U.S. only became visible with hindsight.

Protect against the confiscation of your gold by contacting us through or for more information.


A wonderful reason for gold to fall in price today:  Russia announcing that is buying gold and moving away from risky paper assets

(courtesy Reuters/GATA)

Russian central bank to keep buying gold, moving away from risky paper assets

By Darya Korsunskaya
Thursday, January 24, 2013
DAVOS, Switzerland -- The Russian central bank will continue to buy gold as it seeks to diversify its foreign reserves away from paper assets it views as risky, First Deputy Chairman Alexei Ulyukayev said today.
The Bank of Russia has built up the world's fourth-largest foreign reserves, worth $530 billion, by buying oil export dollars to keep the rouble competitive. The hoard includes two rainy-day budget funds that guard against fiscal shocks.
The bank has also been a bullion buyer and the share of gold in its reserves is approaching a medium-term target of 10 percent, raising questions over whether it would keep buying gold.

Ulyukayev, speaking during the World Economic Forum, said the central bank would continue to buy gold, but gave no indication on whether there would be any change in the share of its reserves it allocates to the precious metal.
"We are buying metal and will continue to pursue this course," Ulyukayev told reporters in Davos. "This is a course of asset diversification in a situation when investing in securities or deposits remains risky."
Russia's central bank is undertaking a shift from a managed float of the rouble to inflation targeting, which is leading it to scale back its accumulation of forex via market interventions as it fine-tunes interest rate policy.
But the government wants to bolster its ability to withstand economic shocks, and will transfer $30 billion in surplus revenues from last year to its fiscal Reserve Fund, meaning that the central bank's reserves will grow.
Ulyukayev oversees the Bank of Russia's asset management and is viewed as a contender to take the helm when Chairman Sergei Ignatyev retires in June. He dodged a question when asked whether President Vladimir Putin had chosen him for the job.
"It's good that he's made up his mind -- better an end to the horror than horror without end," joked Ulyukayev, a liberal economist who has published his own book of poetry.
The Kremlin dismissed reports that Putin had already made up his mind. "The process continues, but not as actively as some are writing -- there's still plenty of time," Dmitry Peskov told Reuters. A candidate should be chosen in March.
Ulyukayev, 56, has weighed into an intensifying debate over the "currency wars" that have broken out as advanced economies pursuing aggressive monetary stimulus in a bid to grow their way out of a debt trap.
He recently accused Japan of "protectionist monetary policy" and, detailing the current composition of the central bank's foreign exchange reserves, he made no mention of the yen.
According to a breakdown given a year ago, the central bank held 1.6 percent of its forex reserves in yen. It was not immediately clear whether or when that position had been sold.
Russian bankers in Davos said, meanwhile, that it would make sense for the central bank to expand its allocation to gold.
Another source familiar with the central bank's thinking said, however, that there were no plans to change the 10 percent share. Russia's central bank bought 80 tonnes of gold last year, and it plans to buy a similar amount in 2013.
At the end of last year, the central bank held nearly 950 tonnes of gold, worth some $51 billion, its figures show.
It owned 400 tonnes of gold at end of 2006 and the price of the yellow metal has since rallied by $1,000 as the regulator bought up around half of Russia's gold mining output.
Giving a breakdown of the currency portion of Russia's foreign reserves, Ulyukayev said the U.S. dollar accounted for 46 percent and the euro 40.5 percent.
Sterling has a 9 percent share, the Canadian dollar 3 percent, and the Australian dollar, added to Russia's reserves last year, at 2 percent.
Separately, he said that inflation could exceed 7 percent in February but should start to ease from March onward. Consumer inflation reached 6.6 percent in 2012.
He saw no grounds for further monetary stimulus but left open the direction of the central bank's next interest-rate move. "It could be one way or the other," he told reporters.


The following is interesting:

Commissioner Jill Sommers Announces her Resignation

Washington, DC – Today, Commissioner Jill Sommers made the following statement:
“As I prepare to leave the Commodity Futures Trading Commission I would like to acknowledge the hard work and dedication of my fellow Commissioners and the many talented staff with whom I have had the pleasure of working for the past five years. While many challenges remain in finalizing the implementation of the Dodd-Frank Act, I have every confidence that the American public will be well-served by their continuing efforts.”

I wonder if something is bothering her on the silver front!!


  And now for the major paper stories:

Marc to Market discusses the ins and outs of the two European LTRO's.
Tomorrow will be the first time that nation's banks can repay their LTRO's
Although Spain and Italy borrowed approximately 60% of the one trillion euros, also German banks
borrowed 10% as did the French banks. Probably we will see the latter two repay the LTRO.
What should be noted of course is that this reduces the ECB balance sheet while the USA balance sheet
expands by 85 billion USA.  Thus we should see continual strength in the Euro against the dollar.
However, remember that this causes problems for German exports and will certainly cause continued 
hardship in Spain and Italy as their exports continue to plummet into non euro countries.

(courtesy Marc to Market)

Ten Things You Should Know about the LTRO

Marc To Market's picture

1. Banks that borrowed from the ECB under the Long Term Repo Operation (LTRO) can begin repaying, if they want. Banks must notify the ECB on a weekly basis about how much they want to repay. The ECB will publish amount to be paid back and the number of banks every Friday for the next few years, starting tomorrow.
2. Banks borrowed roughly 1 trillion euros in the two LTRO 3-year operations (Dec 11 and Feb 12). Italian and Spanish banks are believed to have accounted for around 60% of the use of the LTRO, German banks a little more than 10% and French banks a little less than 10%.
3. Estimates of repayment range from 100-250 bln euros, but may come in drips and drabs.
4. Since the LTRO was designed to help with the refinancing cliff faced by European banks (and secondarily by the sovereigns), early repayment would be consistent with the easing of financial conditions. This essentially means access to market funding. Many banks have reportedly issued debt in the past few months. Bank borrowing from the ECB has fallen, so for example, Spanish bank borrowing from the ECB in Dec was the lowest since May and Portugal borrowings were at their lowest since Feb. In addition, deposits at Spanish and Greek banks have stabilized as 2012 drew to a close.
5. However, there is some fear that a two-tier banking system is crystalizing in Europe, with the large banks in the core countries having greater access to the markets than small banks and banks in the periphery. Although the ECB is not going to publish the names of individual banks, some banks may seek to announce their repayment on ideas that it will bolster investor confidence.
6. There has been some fear that the early repayment would push up short-term European rates and the implied interest rate of the March Euribor futures contract did increase by about 15 bp at the start of the year, but has since stabilized, following some calming words by an ECB official. For more than a week now the daily closing implied yield is between 26 and 28 bp.
7. The implication of early repayment and the reduced borrowing is consistent with a reduction of the ECB's balance sheet. As of Jan 18 (most recent data), the ECB's balance sheet was the smallest since the end of last Feb. The reduction of the ECB's balance sheet comes as the US Federal Reserve is expanding its balance sheet via buying $85 bln of MBS and Treasuries a month.
8. Some participants give a privileged place in their fx explanatory model to the monetary policy and in particular the quantity of money. While recognizing that monetary factors can influence foreign exchange prices, our experience suggests that other variables also impact.
9. Three market segments appear to be participating in the euro's advance. Central banks, especially in the Middle East, have reportedly been buyers of euros. Real money is reportedly buying (short-end) of Spanish and Italian bonds. Equity funds investing in Europe have also reported net inflows. Lastly, momentum and trend followers in the IMM futures have been buying euro contracts. The gross longs futures contracts are near their highest level since mid-2011, while gross shorts are at their lowest level since Sept '11.
10. Although most of the other major currencies have weakened against the dollar, the euro has been resilient. After rallying from $1.30 at start of the year to $1.34 by mid-Jan, it has been trading broadly sideways in a $1.3250-$1.3400 range. The trend line going back to the July '11 lows near $1.2040 remains intact (though sterling has convincingly broken a similar trend line). It comes in now near $1.31. On the upside, a break of $1.34 could quickly see $1.35, the high from last year.


As we suspected, the unemployment rose in the final quarter of 2012 in Spain to 26.02% as 6 million poor souls have lost their jobs. The 3rd quarter unemployment rate registered 25.01% and this is a big blow to Rajoy. This rate is the highest since 1976, the year after Franco's death.

(courtesy Bloomberg)

Spanish Jobless Rate Hits Record After Rajoy’s First Year

Spanish unemployment rose to a record in the final quarter of 2012 as Prime Minister Mariano Rajoy’s government imposed the deepest budget cuts in the country’s democratic history.

The number of jobless approached 6 million people, or 26.02 percent, from 25.01 percent in the previous three months, the National Statistics Institute in Madrid said today. That matched the median forecast of 10 economists surveyed by Bloomberg. Spain is now home to a third of the euro region’s unemployed.

Jobseekers queue to enter an employment center as it opens in Barcelona. Photographer: David Ramos Vidal/Bloomberg
Jan. 23 (Bloomberg) -- Spanish expatriates Carlos Hernandez Sonseca, Raquel del Rosario and Pablo Medina talk about their decisions to leave their home country and seek jobs in Britain. They spoke with Bloomberg's Carol Olona in London on Jan. 18. (Source: Bloomberg)
Jan. 24 (Bloomberg) -- European Employment Commissioner Laszlo Andor and Organization for Economic Cooperation and Development Secretary General Angel Gurria talk about job creation in the euro area, growth and structural change. They speak with Francine Lacqua on Bloomberg Television's "Countdown" on the sidelines of the World Economic Forum's annual meeting in Davos, Switzerland. (Source: Bloomberg)
People wait for an employment agency to open in Madrid. The number of jobless approached 6 million people in the final quarter of 2012. Photographer: Denis Doyle/Bloomberg
The jobless number rose as Rajoy marked his first anniversary in office. It is now the highest since at least 1976, the year after dictator Francisco Franco’s death heralded Spain’s transition to democracy. Some officials predict the slump that hit the euro area’s fourth-largest economy in 2008 will extend into this year.
“The government expects unemployment to come down in 2013 but it seems too optimistic given not only the weak economic activity we expect but also the usual lag between activity and unemployment,” said Ricardo Santos, a euro-area economist at BNP Paribas SA in London. “This will continue going forward given that the bulk of the cuts in the public sector is yet to be made.”

IMF Forecast

The International Monetary Fund yesterday cut its forecast for economic growth in Spain this year, forecasting that gross domestic product will contract 1.5 percent after previously predicting a drop of 1.4 percent.
The Bank of Spain said separately that the recession worsened in the fourth quarter due to budget cuts. The central government and the regions started implementing Rajoy’s fifth package of austerity measures in a year, including higher sales tax and cuts in unemployment benefits, public-sector jobs and wages.
Meeting the European Union deficit target for 2013 will require “a very ambitious additional fiscal effort,” the Bank of Spain said. The European Commission said this week that Spain will probably miss its 2012 goal of 6.3 percent of GDP, and in 2013 it sees the shortfall at 6 percent.
“The government’s forecast of a 0.5 percent contraction this year is already looking way too optimistic,” Jonathan Loynes, chief European economist at Capital Economics Ltd. in London, said by telephone. “We predict a 2.5 percent drop as the negative forces in recent quarters, including a dreadful labor market, persist.”

Seat Jobs

Carmaker Seat may cut as many as 740 jobs affecting 400 temporary workers and 340 office employees, La Vanguardia reported this week. Other measures being considered are reducing working hours and cutting wages to boost productivity amid adverse conditions for sales, the newspaper said.
Rajoy has still won time among investors as a rally in securities of so-called peripheral countries enables him to avoid seeking a full international bailout. Spain sold 7 billion euros ($9.3 billion) of 10-year bonds via banks on Jan. 22, data compiled by Bloomberg show.
“It is necessary to distinguish between the markets and the real economy, which continues to be worrying,” Sara Balina, chief economist for Spain at Madrid-based consultancy Analistas Financieros Internacionales, said in a telephone interview. AFI forecasts an average unemployment rate of 27.3 percent this year. “More fiscal consolidation efforts will have to be made and exports won’t make up for a deteriorating domestic demand.”
Rajoy has requested the Spanish regions divide their combined deficit by five in the two years through the end of 2013, even as education and healthcare represent over half of their spending and the recession undermines tax receipts.
While Economy Minister Luis de Guindos this week ruled out additional budget cuts, the government is working on an overhaul of public administrations that could further fuel unemployment this year. Expansion newspaper said yesterday a draft law pares more than 60 percent of local government jobs across Spain.
To contact the reporter on this story: Angeline Benoit in Madrid at
To contact the editor responsible for this story: Craig Stirling at


Unemployment for the youth of Spain and Greece hit the stratosphere with today's readings well north of 55% for both countries and the entire eurozone at 20%.  

(courtesy zero hedge)

Racing To The Revolution: Spain Vs Greek Youth Unemployment

Tyler Durden's picture

Spanish and Greek youth unemployment surged to yet another new record as joblessness among the under-25 cohort is now above 55% for both of these troubled nations. "We haven't seen the bottom yet," one analyst notes as the BBC notesthat the youth unemployment in these nations is more than double the euro-area average. As we have noted many times, this ludicrous state of affairs (in nations that proclaim the worst is past) is by far the most-concerning for European stability. Even Frau Merkel opined this morning in Davos that:
Yet, there is nothing being done. Across the 27-nation bloc, there are 5.8 million people aged under-25 that remain long-term unemployed. This has always and forever led to extreme events and social unrest, as we warned here (must read). As the year warms up, which nation will 'spring' first?


Now they are laying blame on Greece's problems with faulty statistics.  Not the government who fudged the figures:

(courtesy zero hedge)

Head Of Greek Statistics Bureau Accused Of Falsifying Economic Data Puts Blame Where It Truly Lies

Tyler Durden's picture

Back in 2011, when day after day the true ugly nature of the Greek economy was being exposed for all to see well just after the second and before the third bailouts of the country were a fact, and as the decade-long obfuscation campaign to present the economy far stronger than it was in reality was crashing and burning, Greece decided to do something unique: it would put all the blame on the president of its newly created, independent Greek statistics service ELSTAT, accusing him of making the country look worse than it was (as if that was at all possible). Just like in the US, the blame would never reach those who were truly responsible, and instead would find a scapegoat in a person who was new to the scene, had no political ties and connections, and could not defend himself.
Today, he has defended himself... but to no avail: he will be thrown under the bus, as the economic data lies and manipulation have resumed, only this time with someone to take the blame if only for a while. Then, in a few months when the lies are uncovered to have resumed, the charade can repeat itself all over again.
The highlights from his naive plea for justice are below:
In any event, it is striking that a criminal prosecution for “erroneous production of the public finance statistics of the country” did not take place when “greek statistics” were a constant source of concern for the European and international community, but it took place instead when the responsible European institution had accepted the Greek fiscal data as consistent with the rules and the methodology that are provided for and are binding in European Law and the national statistical institute of Greece had regained its lost credibility.

The continuous safeguarding of the unswerving application of the law, including European law, constitutes the only guarantee that the staggering effort of the Greek people in the context of the economic adjustment and reform program will be carried out on firm ground and that their sacrifices will amount to a solid investment for a better future.

Fully respecting this effort of the Greek people, I will continue to apply the law, despite the adversities. The faithful application of European Law in the production of Greek public finance statistics, and specifically of the deficit of 2009, cannot but be recognized also by Greek Justice.

Good luck:

The full release is below (link): see zero hedge


Hollande no long declaring war on the big banks.  He is now worried about about his private sector shedding jobs and the wealthy leaving the country for good.

(courtesy Wolf Richter/

A Year After Declaring War On The Banks

testosteronepit's picture

On January 22, 2012, French presidential candidate François Hollande shook up the banks: “It has no name, no face, no party, it will never be candidate, it will therefore never be elected, yet it governs: that enemy is the world of finance,” hesaid. It “freed itself from all rules” and “took control of the economy, of society, and even our lives.” He’d fight it, he said, and promised some tough reforms.
But as the private sector in France sank deeper into an economic and fiscal quagmire, his words, designed to endear him to the left wing of his Socialist Party, were swept under the rug. And you’d think that since becoming President of France, he has been tutored by JPMorgan Chase CEO Jamie Dimon.
A year later, Dimon had some choice words himself, while at the World Economic Forum in Davos, Switzerland, where bankers, business leaders, politicians, and whoever was able to get in were hobnobbing for the better of the world.
Dimon lashed out at regulators and their feeble, slow, and confused efforts to rein in the banking industry so that it wouldn’t shove the world into another crisis. They were “trying to do too much, too fast,” he said. He defended inscrutable megabanks with their meaningless financial statements. “Businesses can be opaque,” he said. “They’re complex.” A word that in a financial crisis excuses everything, even massive bailouts that will haunt generations to come. “You don’t know how aircraft engines work, either,” he mollified us, based on the logic that we still get on a plane and fly across the Pacific.
And so the CEO of America’s largest TBTF bank, recipient of the Fed’s bailout trillions, praised the Fed because “they saved the system.” Indeed, they not only saved the system that had shoved the world into the financial crisis, but they also bailed out and enriched those who were, and still are, integral part of it—who now, according to Dallas Fed President Richard Fisher, “believe themselves to be exempt from the processes of bankruptcy and creative destruction” [for more on Fisher’s feisty fight against TBTF, read.... How Big Is ”BIG?”].
This is the world Hollande declared war on, back in the day. But now, France is sinking into a new crisis, and this time it’s the already diminutive private sector that is gasping for air and shedding jobs—and moving overseas, along with the rich and not-so-rich for whom the fiscal and rhetorical climate has become too hostile. 
Not a day passes without another confirmation or a new indication. Today, the statistical agency Insee released its monthly Business Climate Index, which, after a soupçon of an uptick, has deteriorated again in the categories of Industry, Wholesale, Construction, and Retail. Only Service saw an improvement. The index, at 86.75, is down from 87.02 in December, and below where it was in October 2009, during the financial crisis.
Given this scenario, what happened to Hollande’s “enemy” and the reforms to rein it in? It’s not that he didn’t try—though there simply isn’t much appetite around the world for confronting the banks. For example, even the highly anticipated Basle III liquidity rules that were supposed to make global banks more stable and another financial meltdown less likely, well... A couple of weeks ago, after years of negotiations and intensive lobbying by the banks, the rules were finalized. In watered-down form. And implementation was delayed until 2019. A huge win for the banks.
Nevertheless, Hollande’s vow to separate the banks’ retail operations from their speculative activities coagulated into a proposal for a law that was presented to parliament last December. The government prided itself that it was the first in the EU to put banking reform on the table. Four years after the financial crisis. As Dimon said: “trying to do too much, too fast.” The proposal, of course, came with such huge concession to the banks that effectively not much will change.
And his vow to impose a tax on financial transactions? It has also turned into a proposal, and the EU just issued its blessingfor the tax. The 11 countries, including France and Germany, that are considering such a tax are now free to impose it. Against a wall of opposition from the banks. Nothing will happen in Germany before the election later this year. But in France, which is dying for additional revenues, the tax might pick up momentum.
These days, tangled up in a real war in Mali, Hollande no longer declares war on the financial world. In fact, he already has the first taxpayer-funded bank bailouts under his belt, including the€7 billion bailout of Banque PSA Finance. He’d “saved the system,” Dimon would say, because when push comes to shove, citizens and taxpayers, and their kids, are the ones who pay, not bank investors. And it doesn’t matter who is president.
France’s economic foundations are cracking. Unemployment is rising incessantly. The private sector is comatose. Car sales sank 13.9% in 2012, from a lousy 2011; sales by its native automakers plunged even more. Now home sales are grinding to a halt. And the finger-pointing has already started. Read....  The Next Shoe To Drop In France.


as Japanese exports to China plummets, the story gets more insane as time marches on...
Japan just detains a Chinese fishing boat:

(courtesy zero hedge)

Japan Detains Chinese Fishing Boat

Tyler Durden's picture

While the seasonally adjusted, BLS-estimated version of the China-Japan conflict says that things are normalizing, following the arrival of a Japanese envoy visiting Beijing to "soothe relations" which have been frayed since September and have led to a collapse in Japanese exports to China, the unadjusted reality is once again different, and the latest update comes from Reuters which informs that Japanese authorities have detained a Chinese boat for fishing in Japanese waters, China's Xinhua news agency said on Thursday, "even as the two countries moved to defuse tensions that flared last year over disputed islands." It is now China's turn to "de-escalate" by returning the favor in kind.
From Reuters:
The boat, registered in Zhejiang province in eastern China, was found in waters near Goto, in Nagasaki prefecture in southern Japan, Xinhua said. The captain was being taken ashore following questioning.

In recent weeks Japanese military planes have scrambled numerous times against Chinese planes approaching airspace over the islands. Chinese planes have also shadowed Japanese planes elsewhere over the East China Sea.

The Chinese fishing fleet are ranging further and further offshore as fishing stocks near the Chinese mainland are depleted. Their presence in Japanese territory and in disputed waters is contributing to friction between the two Asian economic powerhouses, whose maritime borders are not defined.

In a similar case in late December, Japanese authorities stopped a fishing boat registered in the Chinese coastal province of Fujian, and detained its captain.
Naturally, any hopes that Japanese exports to China may soon normalize
can also be thrown out of the window. At least on an reality-unadjusted
basis. In other news, remember when Japan was a net exporter? Neither do we:


More derivative losses for Banca Monte dei Paschi de Siena

(courtesy zero hedge)

Will The Super Goldman Mario Brothers Succeed In Covering Up The Latest Italian Bailout Scandal?

Tyler Durden's picture

"And the hits just keep on coming."
It was about a week ago when Bloomberg reported that the world's oldest bank, Sienna's Banca Monte dei Paschi (BMPS) had masked a massive (for its size) loss courtesy of a Deutsche Bank-facilitated derivative transaction dubbed "Project Santoini." The trade, which led to a $2 billion loan from Deutsche Bank in December 2008, helped Monte Paschi mitigate a €367 loss from an older derivative contract with Deutsche Bank. As part of the arrangement, the Italian lender made a losing bet on the value of the country’s government bonds: one wonders if DB made BMPS buy some of its Italian holdings because, as is well-known, it was about this time that the German bank was getting uber bearish on all the periphery (for more on the details of the derivative read here).
This was the first time anyone in the general public had head about "Project Santorini."
Not surprisingly "Santorini" did not help the firm and in a few months later, the firm sought a €1.9 billion bailout from the Italian government - the first of many. Then in 2012, the bank requested more bailout funds after it became the only bank to fail the minimum capital requirement set by European regulators. CEO Fabrizio Viola, 55, requested an additional 500 million euros, bringing the total cost of the bailout to 3.9 billion euros, after the lender said in November that structured financings linked to government securities had soured. It is likely that yet another bailout of BMPS is imminent.
Then yesterday, as we reported, that BMPS had engaged in yet another previously undisclosed derivative trade named "Alexandria", this time with Nomura whose impact we immediately unclear but one which would result in an earnings hit of €220 million. However, while previously BMPS tried to get off the hook and put the blame on Deutsche, in this case Nomura said the bank's Chairman, Giuseppe Mussari, had "fully reviews and approved" the trade.
This was the first time anyone in the general public had head about "Project Alexandria."
And the market finally took notice, maybe because of the news of two previously unknown and losing derivative deals with two separate banks, both of which had supposedly gotten the blessing of the regulator - the Bank of Italy - coming to light in under one week, or maybe because the abovementioned Mussari promptly quit his post as Italy's top banking lobbyist in the aftermath of the disclosures: in all ways analogous to the departure of the US assistant attorney general yesterday in the aftermath of the "Untouchables" Frontline episode. Because if there is a departure, there is fire.
The result: the stock plunged.
Today it's deja vu again, as the news keeps on coming, this time from Reuters, which reported that BMPS could face total losses as much as $1 billion on prior derivatives trades which have only recently been discovered. The shares promptly plunged, and BMPS was halted for trading minutes before the Italian market closed:

From Reuters:
the world's oldest bank has now said it is reviewing three loss-making structured trades related to its Italian sovereign bond holdings which only recently came to light and were negotiated by its previous management.

"Yes. The actualized shortfall is around that amount," the bank's chief executive Fabrizio Viola was quoted by daily newspaper Il Messaggero as saying when asked if 720 million euros was a certain loss rather than simply a maximum risk.
UBS said in a research note on Thursday it was including in its estimates a loss of 720 million euros on the derivative trades, pending more clarity, pushing the full-year expected loss to over 2 billion euros.

"Since the bank's statement spoke of an analysis exclusively of three products, the worry is there could be more and that's spooking the market," one analyst said, asking not to be named.

Viola, who has said the three products were never submitted to the bank's board, told Il Messaggero the management would now open every drawer in the bank for caution's sake. "But I think we're very close to completing the (clean-up) job," he said.

A spokesman for main shareholder Fondazione Monte dei Paschi di Siena told Reuters it did not exclude taking legal action depending on the outcome of analyses under way.

The bank said on Wednesday that 500 million euros requested in extra state aid in November would be enough to absorb a hit on its capital from the structured trades, which were linked to its massive 24 billion-euro Italian government bond portfolio.
Naturally, the implication is that after 4 years of endless bailouts and "recovery", nobody has any clue still just what is on Europe's bank balance sheets. And the further implication is that if BMPS was doing it, everyone else was, of course, doing it, and much more dirty laundry is soon set to be uncovered, especially since the Italian banking business puts simple incest to shame:
The central bank also said the new management, headed by Chairman Alessandro Profumo, had produced documents that had previously been hidden.

Profumo, former CEO at Italy's biggest bank UniCredit, took up his new role at Monte Paschi last April in place of Giuseppe Mussari while Viola took over as CEO in February from Antonio Vigni.

Mussari stepped down as head of Italy's banking association late on Tuesday, although he has denied any wrongdoing.

"You'll have to ask them (the old management). I can only make suppositions. And I prefer to keep them to myself," Viola told Il Messaggero when asked why the Bank of Italy had not been informed.

On Thursday, Italy's Treasury minister Vittorio Grilli said there was no sign that other Italian lenders could face problems similar to those at Monte Paschi.

"It's an isolated case and I don't see any reputational risk for other Italian banks which are much more solid than foreign banks as regards their exposure to derivative," said Giovanni Fiori, professor of accounting and business at Rome's LUISS Guido Carli university.
Of course there will be more "cases" - to assume this is isolated is the height of stupidity and naivete, but what else is an Italian minister to do to preserve the precarious stability attained after months of endless bluster from the ECB that Europe is "fine" -why pull a Juncker and lie of course.
But not even that is the biggest issue. Because should the BMPS dirty laundry be truly exposed for all to see, then the stench will go far. Very far. As far as Frankfurt and the ECB headquarters, because as we first explained yesterday, the person who may well be held accountable for BMPS' endless transgressions is none other than ECB head, and former Goldmanite, and prior head of the Bank of Italy: Mario Draghi.
Recall from Yesterday:
Bank Of Italy Throws The Book At Monte Paschi For "Hiding Derivative Documents"

As we reported previously, the stock of the oldest bank in the world, Italy's venerable Banca Monte Dei Paschi of Siena, was halted in early trade after plunging on news that the bank had engaged in not only the previously reportedsecret derivative transaction with Deustche Bank to hide losses before a prior government bailout, but yet another derivative transaction, this time with Nomura, signed three years ago and whose intention, ironically, was to reduce 2012 earnings by some €220 million.

What the ultimate purpose of these deals was is still unclear and will likely become apparent eventually, however it will likely require the former Chairman of the bank, Giuseppe Mussari,who served as Chair from 2006 until April 2012, and who officially quit his post as Italy's top banking lobbyist after today's revelations, to testify. One person whom he may testify againstis none other than current ECB head Mario Draghi, who just happened to be the head of the Bank of Italy from 2006 to 2011, or theentire period when Monte Paschi was engaging in what increasingly appears to have been fraudulent activity.

But don't worry: just like in the US, nobody of signfiicance is about to go down for this "glitch" which is about to be blamed on some poor mid-level shmuck, and which nobody in the senior level management had any idea about, and certainly not the person who ultimately would have had to give the green light: the current head of the ECB. Sure enough from Bloomberg:
It was all Fabrice Tourre's fault. Or better, yet:an algo did it!

Would it be the same magistrates who are also reviewing Berlusconi for "alleged" sex with minors?
* * *
Sure enough not even 24 hours later, Mario Monti, speaking in Davos, said something that immedately confirmed just what is at issue here:
Translation, it was not the Bank of Italy's fault, and that of its then-head, Mario Drahi, that it failed in supervising the iconic Sienna bank. Because, you see, it is all the evil management's fault. The same "management" whose Chairman just happened to be head of the entire Italian banking lobby. Until yesterday.
And another, less politically correct translation: a (super) Goldman brother is helping another (super) Goldman brother out before the reporters figure out just what happened.
Naturally, since justice no longer exists in a Ponzi empire doomed to less than beautiful deleveraging, there will be no heads rolling over this matter besides those that already have, however one wonders: if Mario Draghi allowed such glaring unreported transactions, whose significance nobody grasped or know about at the time, and whose impact is only now being appreciated, to happen under his nose while in Italy, just what has been happening now that he is head of the biggest central bank in the world?
The other question: if and when BMPS fails, and its shareholders sue the Bank of Italy, will they also sue the man who presided over the Bank of Italy from 2006 until 2011?
And if Monte Paschi is the canary in the 2013 Italian bailout coalmine, who will be next: first in Italy, and then all over Europe?
Because once the other cockroaches, to take literary freedom with mixing and matching metaphors, are exposed - what will happen to all those sworn vows that Europe is now, finally, fixed, uttered most recently by none other than the Super Goldman Mario brothers?

Your early morning commentary from Mark Grant

his message:  watch out!!

(courtesy Mark Grant/Out of the Box)

Learning A Harsh Lesson

Tyler Durden's picture

Via Mark J. Grant, author of Out of the Box,
A Moment's Notice
“In each age men of genius undertake the ascent. From below, the world follows them with their eyes. These men go up the mountain, enter the clouds, disappear, reappear, People watch them, mark them. They walk by the side of precipices. They daringly pursue their road. See them aloft, see them in the distance; they are but black specks. On they go. The road is uneven, its difficulties constant. At each step a wall, at each step a trap. As they rise the cold increases. They must make their ladder, cut the ice and walk on it, hewing the steps in haste. A storm is raging. Nevertheless they go forward in their madness. The air becomes difficult to breath. The abyss yawns below them. Some fall. Others stop and retrace their steps; there is a sad weariness. The bold ones continue. They are eyed by the eagles; the lightning plays about them: the hurricane is furious. No matter, they persevere.”

                                    -Victor Hugo

The present is a time when things are in great confusion.We are creating money from nothing and yet enjoying the fruits of their labors. The economies in Europe and in Japan and America are worsening and yet yields for their sovereign debt are barely off all-time lows. The stock markets of the world, following the 2008/2009 financial crisis, are back at new highs. All of this has taken place because the world’s central banks, acting in concert, have pumped enough small pieces of paper into the fire to keep it burning long into the night and so all of the markets on the planet have been stoked with fuel. The blaze has burned brightly and while others have enjoyed their success in equities; beginning last spring I suggested the more conservative approach of long corporate bonds where compression has been a huge winner and, according to most indexes, the strategy has outperformed the stock markets while maintaining the relative security of senior debt. So much for the arcane science of Wizardry.

“Though this be madness, yet there is method in it.”

                       -William Shakespeare, Hamlet

The manna continues to flow from heaven, the central banks’ balance sheets balloon, everything is postponed, everything is delayed, more money is tossed upon the table, the politicians in America and in Europe dither, no one wants to confront the real problems, more money is thrown about and those with intelligence wonder when it will all end. There is a sinking feeling to be found in the boardrooms of a number of large money managers that all of this central bank flotation of the world cannot go on forever without consequences.  When the fundamentals of the markets are out of line with their performance then history teaches us that at some point rational behavior will cause a correction. What concerns me the most, quite frankly, is that the plastic envelope has been stretched so thin by the outpouring of manufactured money that when the prick comes, the black swan arrives to be noticed, that the rubber band will snap with an alarming amount of elasticity.

“Logical consequences are the scarecrows of fools and the beacons of wise men.”

                      -Thomas Huxley

It was just five years ago when the world learned a rather harsh lesson. It was a lesson that cost Americans 36% of their wealth. It was a lesson that spewed what capital that was left into the bond markets and evaporated the capital available for equities. It was caused by “easy money” manufactured by the banks and it met its Waterloo when it became clear that mortgages and mortgage securitizations could not be paid. The dawning realization caused a downdraft that sunk many a ship while making fortunes for the ones hauling the right tack. Hindsight proclaimed that we should have seen it and foresight now proclaims that we shall meet our Master again soon. The difference in then and now is that the banks created the problem and this time it is the central banks that have created the problem and while some may argue that the central banks can print indefinitely, and perhaps they can, it is not without consequence when it occurs.

“Sooner or later everyone sits down to a banquet of consequences.”

                          -Robert Louis Stevenson

So the next crisis, the sovereign debt crisis, will occur when some country’s debt cannot be paid and when some funding country refuses to accept the bill for their own citizens. The yield on anyone’s debt, first dismissed by the EU as unfair and now heralded as a sign that things are improving, is little more than a charade of masks. The yields have fallen because of the free-flowing paper that must be parked somewhere. Yet whether the yield is 4.00% or 7.00% if the principal cannot be re-paid then the coupon is of little consequence. In each of the troubled nations in Europe there is grave doubt in my mind if their debts can be serviced even as they add more debt to their woodpile. You can consider Greece, Portugal, Ireland, Spain or Italy and reach the same conclusion about any of them. Most can fund for the moment because of the capital available but when the gimmickry has run its course then woe to those left holding this bag of tricks. It is a very dangerous game of musical chairs in my opinion.

The distinction, of course, is that the banks can’t print money and the central banks certainly can but the other side of this coin has not changed and that is that the debtors still must pay their bills. To date the ability of the creditors to pay has been earmarked, perhaps pockmarked, by the ECB and the EU handing out money, in one form or another, to the debtors so they can meet their obligations but as the situations in Spain and Italy deteriorate then the size of the capital that will be needed will press the ability of the financial sound nations in Europe to cope with the sheer mass of the solution that will be demanded.

The correct bet of last year was certainly on the side of the central banks but the correct bet of this year may soon turn out to be on the side of the consequences of their actions. There is no sheet of paper, no matter how thin, without two sides; no coin without a heads and a tails and no action, as Newton correctly remarked, without a reaction.

Each strategy has consequences and bad strategies may have lethal consequences. Keep playing for now but when the turn comes or the black swan lands be prepared to abandon ship upon a moment’s notice. That is my counsel.


Your early Thursday morning currency crosses;


This morning we  see tiny euro strength  against the dollar. The yen was the big story of the morning yesterday as it lost big time against on the dollar.    The pound, this morning again  some weakens against the USA dollar with the Canadian dollar for the first time going below the USA in value.  We have a slight  risk is off situation as most European bourses  are in the red. Gold and silver are  down  in the early morning, with gold trading at $1677.70 and silver at $31.86 

Euro/USA    1.3325 up  .0019
USA/yen  89.56  up .99
GBP/USA     1.5828  flat
USA/Can      1.0006  up .0009


your closing 10 year bond yield from Spain: 

(back down in yield)



5.011000.05600 1.11%
As of 11:59:51 ET on 01/24/2013.


Your closing Italian 10 year bond yield: 
slight decrease in yield.

Italy Govt Bonds 10 Year Gross Yield


4.162000.03300 0.79%
As of 11:59:55 ET on 01/24/2013.


Your 5:00 pm Thursday currency crosses:

The Euro strengthened dramatically in the afternoon  and then held the 1.337  level  throughout the rest of the day. 
The Yen tumbled   in the afternoon, reaching it's nadir at 90.14, closing at 90.088 . The pound continues to weaken finishing off at 1.5789   ; the  Canadian dollar was the big loser of the day, falling badly to the USA dollar and it is now the USA dollar is trading above the Cdn dollar.
Currency wars  again!!

Euro/USA    1.3370 up    .0064
USA/Yen  90.088  up 1.518
GBP/USA     1.5789 down .0039
USA/Can      1.0026  up .0029


Your closing figures from Europe and the USA:
England, Germany and the USA in the green/France and Spain in the red:

i) England/FTSE up 67.27  or 1.09%

ii) Paris/CAC up 26.00 or  0.7% 

iii) German DAX: up 40.59. or .53%

iv) Spanish ibex:up 52.3 or 0.61%

and the Dow: up 46.00 points or .33% 


And now the major USA stories of the day:

The Kansas city Fed index plummets and joins other regions seeing their manufacturing sector blow up:

(courtesy zero hedge)

Kansas Fed Joins NY, Philly And Richmond Fed In Contracting; Employment Index Drops To 2009 Levels

Tyler Durden's picture

We are now four-for-four (five-for-five if we include the drastic downward revisions in the Chicago PMI) for regional Fed business outlooks taking a serious (and consistent) turn for the worse. Kansas Fed manufacturing just missed expectations turning negative once again. Amid the sub-indices (which were broadly weak) was a plunge in employment as it fell to August 2009 levels. This weakness in Kansas follows Richmond's quadruple dipEmpire State's weakness, and Philly's major miss and in aggregate suggests a very weak ISM to come. Of course, all of this flies in the face of today's US PMI which beat expectations and pushed to recent highs.

Kansas City Fed Employment Subindex...

and combined with the other real-time surveys points to considerable weakness to come in ISM...


Initial jobless claims drop to lowest level as 365,000 souls are dropped off the extended claims.
Will this cause the unemployment level to drop again?

(courtesy zero hedge)

Initial Jobless Claims Drop To Lowest Since January 2008 As 366K People Fall Off Extended Claims

Tyler Durden's picture

While it is unclear how many states' data the BLS had to estimate today, the weekly initial claims print was impressive, sliding even lower than last week, when it came at 335K, and refuting expectations of a rise to 355K, instead reversing and printing the lowest weekly number since January 2008: 330K. What is impressive is that the NSA number dropped by a whopping 120K in the past week, making one wonder how much of the ongoing moves are simply a seasonal adjustments mismatch (a question even Goldman asked last night). Perhaps just as curious is that a whopping 365,641 people dropped off Extended Claims in the first week of January, unclear if this had anything to do with the Fiscal Cliff can kicking: certainly a third of a million Americans suddenly stopped receiving weekly jobless claims benefits from Uncle Sam. The biggest news from this is that with so many people dropping out of the labor force, the January unemployment rate will truly plunge, which is precisely the red flag observed by traders, and is the reason why the market is not taking this news in stride. Remember - all it takes for the end of endless QE is a stable improvement in the labor pool. Could this be it? Of course not, but doubts are starting to emerge.


The following needs no explanation:

(courtesy zero hedge)

And The Reason For Today's Five Years Initial Claims Low Is...

Tyler Durden's picture

... is not the economy, which as we pointed out earlier just crossed into "worst recovery ever" territory, or even actual layoff events. The reason is, as always when there is a massive "beat" in any US economic data, the same tried and true estimation magic out of the BLS appearing so conveniently at appropriate times, which estimated the claims numbers of 3 states, among which those of the most populous: California.
From Bloomberg: "The number of applications was estimated for California, Virginia and Hawaii because of the holiday-shortened week, the Labor Department spokesman also said."
In other words, upcoming revisions due to "holiday shortened" estimations and seasonal adjustments will be epic, but by then no algos will care. More to the point - the administration is literally throwing the kitchen sink to 'restore confidence' that Bernie is still alive and walking.


The massive purchases of treasuries finally causes the Fed's balance sheet to top 3 trillion dollars.
The USA balance sheet rises and the ECB balance sheet temporarily fall, setting up a big rise in the euro.

(courtesy zero hedge)

Fed's Balance Sheet Tops $3 Trillion, But...

Tyler Durden's picture

... that's not true. The Fed's balance sheet, from a transaction basis, topped $3 trillion some 5-6 weeks ago. The only reason the Fed reported a $3 trillion number in today's H.4.1, or $3.013,333 trillion to be precise, is because all those MBS purchased in September and October following the September 13 reactivation of QE4EVA finally settled. In reality, the Fed's balance sheet is now some $3.12 trillion as there is about a $80-$120 billion lag between what the Fed has actually purchased, and what has settled. Luckily, at least Treasury purchases take far less to settle.
None of the above should come as a surprise to anyone: the Fed's balance sheet has been, even purely nominally, at $2.8/2.9 trillion for months. Wake us up when the Fed's balance sheet is $4 trillion, in precisely 11 months.


Well that about does it for today.

I arrived home early and had enough time to complete the report for you on time

see you on Saturday



Anonymous said...

Now all we need is that piece of shit Bart Chilton to resign - or get arrested as he and the others SHOULD BE for collusion!

Anonymous said...

Government+Liars+Cartel= Protected THIEVES.

Anonymous said...

CME Group =(translation) Crime Made Easy

Budd said...

Jill is the first of many to jump ship as the sh* t begins to hit e fan! The CFTC is about o become the laughing stock of the world. It and the Cimex will have. " lots a splainin to do". Keep buying pgld and pslv with both hands at these soon to be discount store prices! Budd

Mark said...

Today SLV gave back some of that newly deposited silver as 6.4 million shares (6.1899 million ounces) were redeemed.

Anonymous said...

Todays trading was such make believe I thought that I'd see the tooth fairy appear. what a bunch of bologna.

Makes you wonder how the mining companies made it when gold was 400 an ounce.

no manipulation here


Anonymous said...

" Keep buying pgld and pslv with both hands at these soon to be discount store prices! Budd "
Budd ~ You're probably a guy who means well, but nothing, not a thing would make me drop a penny into any investment which pretends to be connected to gold and silver !
Take the hint and run away from the likes of pgld and pslv as fast and far as you can ! You'll find that you sleep better at night !

Fred said...

To Max--

I'm not sure why you'd say today's trading was "make believe".
Several of the news items were fairly significant.

India raises the import duty on gold, making it more expensive there, India drops it's subsidy on diesel, meaning Indians spend more on gas and have less to spend on gold and the House passes it's kick-the-can-down-the-road budget proposal which takes a little heat off the market.
AAPL dropped a huge amount, and as one of the most widely held hedge fund stocks, you may have seen some players simply reducing risk.

Now you and I know all these metals are going higher in price..but those news items gave plenty of folks a reason to take some profits and sit back for a while and comtemplate.

For us it was an opportunity to add to our positions.

Don't look a gift horse in the mouth.

Anonymous said...

Good points Fred!

just getting impatient....can't wait to see the pm's fly. Yes I also did some buying as well.


PeaknikMicki said...

"just getting impatient....can't wait to see the pm's fly. Yes I also did some buying as well."

If buying leveraged remember Friday is normally a down pressure day and options expiry is only Monday.
I would be surprised not to see some more downside.
(Personally I am thinking V shape bounce as a bit down from here is already over done. Maybe just to test 31-31.50 and 1650-1660. Time will tell...)

Anonymous said...

Actually we should be seeing a new low of $29.30/$29.70 first to middle of next week which may be the last low buying opportunity for a while.

Mark said...

Seems that most of the big gain in SLV is disappearing back into the ether. SLV lost another 6.4 million shares/6.19 million oz on Friday.

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