Thursday, February 7, 2013

Another blatant attack on our precious metals by the bankers/Silver OI remains very high/German industrial production implodes/Greek tax collections plummet/USA weekly jobless claims rise again

Good evening Ladies and Gentlemen:

The price of gold fell today by $5.20 down to $1672.50.  Silver also fell by 47 cents to $31.39

Today gold and silver were all over the map as the bankers refused to let our two precious metals escape.
We had two waterfalls today  with the early hit at its usual time 3 am, a big rise in gold and silver price after 8 am and then another hit after Draghi remarked that he was worried about deflation with the high euro.
Now the manipulations are blatant and obvious to all.

There is no doubt that the bankers have their eyes set on the high OI for March and the high OI for the entire silver complex.

German industrial production fell badly today signalling that this export nation is having trouble exporting goods with a high euro. Spain's industrial production fell for the 16th consecutive month.
In Greece, tax receipts plummeted again.  How on earth can Greece fund itself?

In the USA we had another weak jobless report.

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

The total comex gold open interest fell by 588 contracts falling from 423,982 down to 432,394.  The active February gold contract delivery month saw it's OI fall by 99 contracts from 2234 down to 2135.  We had 99 delivery notices filed yesterday so we lost 88 contracts or 8800 oz of gold standing for the February contract month.  The non active March gold  month gained 11 contracts up to 1164. The next active gold contract month saw it's OI fall by 76 contracts from 253,889 down to 253,813.  The estimated volume today was good at 180,048.  The confirmed volume yesterday was very poor at 107,393.

The total silver comex OI continues to play havoc to our bankers by rising by 50 contracts up to 151,562. The non active February silver delivery month saw it's OI remain constant at 17 contracts.  We had 0 delivery notices filed yesterday so we neither gained nor lost any silver ounces standing for February.  The next big delivery month is March or 3 weeks away.  The March OI remains elevated at 70,865 a drop of only 1102 contracts from yesterday reading at 71,967.  The estimated volume today was very good at 54,782.  The confirmed volume yesterday was not good at all, coming in at 31,998.

Comex gold/February contract month:
Feb 7.2013    

Withdrawals from Dealers Inventory in oz
96.45 (HSBC)
Withdrawals from Customer Inventory in oz
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
3375.75 (HSBC)
No of oz served (contracts) today
 0    (nil  oz)
No of oz to be served (notices)
2124  (212,400) oz
Total monthly oz gold served (contracts) so far this month
10,322  (1,032,200 oz) 
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month


We had little activity at the gold vaults.
The dealer had no deposits but did have one    withdrawal.

i) out of HSBC dealer vault:  96.45 oz.

We had 1   customer deposit:

i) Into HSBC:  3375.75 oz

total deposit:   3375.75 oz

We had 0  customer withdrawal:

total withdrawal: nil oz

We had 1 big adjustments:

i) from the JPM vaults:  255,756.56 oz of gold leaves the dealer and enters the customer.  This equates to 7.9 tonnes of gold.  This is probably a settlement.

Thus the dealer inventory rests tonight at 2.669 million oz (83.04) tonnes of gold.

The CME reported that we had 0 notices filed for nil oz of gold today.   The total number of notices so far this month is thus 10,322 contracts x 100 oz per contract or 1,032,200 oz of gold.  To determine how much will stand for February,  I take the OI standing for February (2135) and subtract out today's notices (0) which leaves me with 2135 notices or 213,500 oz left to be served upon our longs.

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

1,032,200 oz (served ) + 213,500 oz (to be served upon) = 1,245,700 oz or 38.71  Tonnes.

we lost 88 contracts or 8800 oz of gold.


February 7.2013:   The February silver contract month

Withdrawals from Dealers Inventory801,018.56 (Brinks)
Withdrawals from Customer Inventory  629,415.01 (Brinks, scotia)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory  311,160.91
No of oz served (contracts)4  (20,000 oz)  
No of oz to be served (notices)13  (65,000  oz) 
Total monthly oz silver served (contracts) 76  (380,000  oz) 
Total accumulative withdrawal of silver from the Dealers inventory this month984,015.06
Total accumulative withdrawal of silver from the Customer inventory this month1,542,444.01

Today, we  had huge activity  inside the silver vaults.

 we had no dealer deposit and one dealer withdrawal.

i) Out of Brinks:  801,018.56 oz

We had 3  customer deposits of silver:

1) Into Delaware:  982.80 oz
ii) Into HSBC:  305,200.91
iii) Into Scotia:  4977.20

 total customer deposit:  311,160.91 oz

we had 2 customer withdrawals:

i) out of Scotia:  626,412.71 oz
ii) Out of Delaware: 3002.30

total customer withdrawal:  629,415.01  oz

we had 2  adjustments:

i) a counting error where 10,327.000 is added to Brinks
ii) from CNT vault, 20,002.6 oz  is removed from the customer and added to the dealer.

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

Registered silver remains today at :  36.261 million oz
total of all silver:  157.3910 million oz.

The CME reported that we had  4 notices filed for 20,000 oz of silver for the February contract month. To obtain what is left to be served upon our longs, I take the OI standing for February (17) and subtract out today's notices (4) which leaves us with 13 notices or 65,000 oz left to be served upon our longs. 

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

380,000 oz (served)  +  65,000 oz (to be served upon)  =  445,000 oz

We neither gained nor lost any silver standing for February.

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:   Feb 7.2013:



Value US$71.284   billion

Feb 6.2013:



Value US$71,455   billion

Feb 5.2013:



Value US$71.424  billion.

Feb 4.2013:



Value US$71.104    billion

Feb 1.2013:



Value US$71.235     billion 

we  gained 1.81 tonnes of gold at the GLD today.

and now for silver:

Feb 7:2013:

Ounces of Silver in Trust335,036,944.900
Tonnes of Silver in Trust Tonnes of Silver in Trust10,420.81

feb 6.2013:

Ounces of Silver in Trust335,036,944.900
Tonnes of Silver in Trust Tonnes of Silver in Trust10,420.81

 Feb 5.2013

Ounces of Silver in Trust335,175,993.900
Tonnes of Silver in Trust Tonnes of Silver in Trust10,425.14

feb 4.2013:

Ounces of Silver in Trust335,175,993.900
Tonnes of Silver in Trust Tonnes of Silver in Trust10,425.14

we neither nor gained any silver at  the SLV today. (6 pm est figures)


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. ( Feb 6 2013)   

2. Sprott silver fund (PSLV): Premium to NAV fell to 2.38% NAV  Feb 7./2013
3. Sprott gold fund (PHYS): premium to NAV  rose to 2.82% positive to NAV Feb 7/ 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 3.3% in usa and 3.1% in Canadian.This fund is back in premiums to it's former self with respect to premiums per NAV. 

The silver Sprott fund announced a big silver purchase and this reduces the premium to NAV temporarily. 

It 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:

First gold trading from Europe and Asia courtesy of Goldcore.

Gold Sentiment Poor Due To Range Bound Trade and Banks Bearish Predictions

-- Posted Thursday, 7 February 2013 | Share this article | Source:

Today’s AM fix was USD 1,675.75, EUR 1,235.99 and GBP 1,065.86 per ounce.
Yesterday’s AM fix was USD 1,670.00, EUR 1,234.93 and GBP 1,066.55 per ounce.
Cross Currency and Precious Metal Table – (Bloomberg)
Gold climbed $4.50 or 0.27% yesterday closing at $1,677.50/oz. Silver closed up 0.13% at $31.83.
Gold is little changed today in pound, euro and dollar terms after the Bank of England and the ECB kept interest rates at record low levels. Ultra loose monetary policies continue.

Gold in Japanese Yen, 4 Day – (Bloomberg)

The ECB kept interest rates at 0.75% and the BOE kept interest rates at 0.5% the lowest level since 1694. The BOE pledged to maintain their ‘stimulus’ or money printing or debt monetisation programmes.
This morning the Japanese yen fell to new record lows against gold on the TOCOM at over 157 million yen per ounce.
Ultra loose monetary policies are set to continue which is bullish for the precious metals.
Mario Draghi’s news conference begins at 1330 GMT and the ECB President could set the course for the single currency.  If Draghi’s speech warns about the recent rise in the euro then the euro may fall against the dollar and gold.
Gold's range bound trading between $1,650/oz and $1,700/oz since December continues.
Gold in USD, 2 Year – (Bloomberg)

Physical gold volumes have been quite low in recent days with very few new buyers coming into the market. More clients have been selling than buying in recent days. But the more aware and risk averse money continues to add to their allocations.

The mix is quite unusual as normally there is a clear bias towards clients selling or buying. On recent years, during gold’s bull market the bias has been towards buying.
Recent technical action has been poor and the short term trend is down and this allied to perceptions that the global economic situation has improved slightly is leading to the preponderance of sellers.

Sellers have also be emboldened by recent bold pronouncements of the end of gold’s bull market – by many of the same banks who never predicted the bull market or advised their clients to own gold in the first place.

Many of the banks, now predicting gold’s bull market will end in 2013, never predicted gold’s bull market in the first place. Most were bearish on gold in the early to mid years of the bull market and most only became bullish quiet recently.

Very few have been consistent and very few have been bullish on gold in the long term.

It is also worth noting that most of them do not understand gold and continue to see it as a trade.

Many of these banks primary focus is short term profit, often trading profits, and therefore they do not understand the long term, passive diversification benefits of gold in a portfolio or as financial insurance.

It is also not profitable for them to advise a buy and hold diversification strategy as more prudent advisers have been advising in recent years. 

While sentiment towards gold remains poor after recent weakness, the smart money is focused on the fundamentals and is positioning itself for higher gold prices in the medium term. Soros, Gross, Faber, Rogers, Paulson and other respected investors who predicted the crisis have large allocations which they continue to hold.
Silver in USD, 3 Year – (Bloomberg)
Investors need to be patient, fade out the day to day noise from banks and hedge funds and focus on gold’s value rather than its price movements – particularly in the short term.

It remains important to focus on the long term diversification benefits of having an allocation to gold, silver, platinum and palladium.

Gold edges up before ECB meets, PGMs near 17-mth highs - Reuters
Gold Rises in Asia, Near-Term Outlook Weak; Precious Metals Lower – The Wall Street Journal
China's 2012 gold output up 12% - Paper - Reuters
Gold vending machine in Florida may be first of many – The Palm Beach Post

'Europe's A Fragile Bubble', Citi's Buiter Warns Of Unrealistic Complacency – Zero Hedge
Does China Still Love Gold? – Market Oracle
Video: Horror Bankers Attack – Max Keiser
Video: Goldsmiths put the nation's coins through their paces – The Telegraph
14 Fitzwilliam Square
United Kingdom:
No. 1 Cornhill

+353 (0)1 632 5010
+44 (0)203 086 9200
+1 (302)635 1160


Turkey refuses to halt the gold flow into Iran:

(courtesy Reuters)

Turkey refuses to halt gold flow to Iran

By Asli Kandemir and Evrim Ergin
Thursday, February 7, 2013
ISTANBUL -- Turkey will not be swayed by U.S. sanctions pressure to halt gold exports to Iran but Tehran's demand for the metal may fall this year, Economy Minister Zafer Caglayan said today.
U.S. officials are concerned that Turkey's gold sales, which allow Iran to export natural gas, provides a financial lifeline to Tehran, which is largely frozen out of the global banking system by Western sanctions imposed over its nuclear programme.
Trade in Turkish gold bars to Iran via Dubai is drying up as banks and dealers increasingly refuse to buy the bullion to avoid sanctions risks associated with the trade.
Turkey has a six-month U.S. waiver exempting it from financial sanctions against Iran, which is due to expire in July.
"We will continue to make our gold exports this year to whoever seeks them. We have no restrictions and are not bound by restrictions imposed by others," the Turkish minister told reporters.
"There may be a decline in demand for gold exports. This is nothing to do with sanctions. We are not subject to these sanctions until July anyway, but there may be a decline in demand from Iran," he said.
Caglayan declined to say why he anticipated Iranian demand might fall.
Turkey, Iran's biggest natural gas customer, has been paying the Islamic Republic for oil and gas imports with Turkish liras because sanctions prevent it from paying in dollars or euros.
Iranians then buy gold in Turkey, and couriers carry bullion worth millions of dollars in hand luggage to Dubai, where it can be sold for foreign currency or shipped to Iran.
Caglayan, who has repeatedly said that Turkey's gold trade with Iran is carried out by private firms and is not subject to U.S. sanctions, said other firms, including U.S. and European companies, were continuing their exports to Tehran.
"Turkey is doing whatever is required by international obligations. The companies of those imposing an embargo on Iran today, forbidding product exports to Iran, are exporting to Iran under different guises," he said.
The U.S. State Department said in December that diplomats were in talks with Ankara over the flow of gold to Iran after the Senate approved expanded sanctions on trade with Iran's energy and shipping sectors, which would also restrict trade in precious metals.
That increasing U.S. pressure has already started to create troublesome repercussions for exporters of Turkish gold.
The spotlight on the gold-for-gas exchange contributed to a cut in Turkey's gold exports to the United Arab Emirates to some $400 million in December from nearly $2 billion in August, according to the latest official trade data.
Separately, Caglayan said Turkish state-owned Halkbank will continue its existing transactions with Iran but some other banks, with activities in the United States, had pulled back in response to U.S. pressure.
Asked about a decision by India no longer to use Halkbank to pay for its Iranian oil imports, he said: "This is India's decision not Halkbank's."
A Turkish official told Reuters that trade with Iran through a third party was no longer allowed under tighter U.S. sanctions which went into effect on Wednesday.
"For example, Halkbank would not be able to be an intermediary in India's oil purchases from Iran," he said.

* * *

What will the central bank of India think of next?

(courtesy GATAReuters)

India's central bank keeps scheming to push people out of real metal and into imaginary gold

Reserve Bank of India Considers More Gold Import Curbs
By Suvashree Dey Choudhury and Siddesh Mayenkar
Wednesday, February 6, 2013
MUMBAI -- The Reserve Bank of India could limit gold imports by banks in "extreme circumstances," the bank said on Wednesday as it put forward measures to help the world's biggest consumer of gold rein in purchases and battle a record-high current account deficit.
India, which imported about 750 tonnes of gold last year with 60 percent of that through banks, has already increased the import duty on gold, which now stands at 6 percent.
But a record high current account deficit of 5.4 percent of GDP in the September quarter has raised concern at the central bank, prompting it to link further monetary policy easing to a lower current account deficit (CAD).
"If the CAD remains sustainably high -- say, in 5.5-6 percent range, for the next three or four quarters, then it might be a case of an extreme situation," a senior official with direct knowledge of the matter told Reuters.

The RBI said it would also consider introducing gold-linked financial instruments to divert savings of inflation-wary Indians from gold bars and coins into bonds, it said in a report published on Wednesday.
The recommendations now go to government for review and after its feedback, the RBI should announce new restrictions and products to curb gold import demand in the next few months.
The government has been warned of a credit downgrade by rating agencies due to high fiscal and current account deficits.
Duty rises helped to cut imports by 25 percent last year but analysts were sceptical these measures would have any serious impact on purchases in a country whose obsession with gold means households have more stored away than the U.S. Federal Reserve.
And the central bank itself, describing demand for gold as "excessive," added that it would be reduced only if inflation were benign and there was price and macroeconomic stability.
Headline inflation fell to a three-year low of 7.18 percent in December but still remains above the central bank's comfort level of around 5 percent.
"More restrictions from the government will result in more illegal imports ... unofficial imports have already started in Mumbai," said Kumar Jain, vice president of the Mumbai Jewellers Association, which groups 12,000 jewellers.
Other measures could include a special "gold bank" that would buy gold from individuals at much higher rates than those offered by local jewellers in an attempt to move some of the 20,000 tonnes of gold stored by households into the economy.
"Even if these proposals are implemented, the impact on gold imports will be limited till the point it is possible to unlock the idle gold stock," said Samiran Chakraborty, regional head of research Standard Chartered Bank of India.
"I think these rules could have a marginal impact on the current account deficit due to the shock-and-awe effect, but not a sustained impact," Chakraborty added.
The central bank itself admits these are only small steps and unlikely to bring down gold imports significantly in India.
"Demand for gold in India is autonomous and may not be amenable for reduction through policy intervention. Several studies have empirically validated that gold can be regarded as a long-run inflation hedge," the RBI said in its report.
Other measures proposed include removing incentives for banks to trade bulk gold with jewellers as banks have been charging them rates below the so-called base rate offered to their best customers, a move which could sharply bring down gold loans. Banks extend gold loans in the form of gold bars to traders at a fixed rate.
The central bank also wants to educate rural customers, who buy some 70 percent of imports, about investing in gold-related products, but fell short of details. Some 70 percent of India's population lives in rural areas where access to banks is poor.


I smell a rat here.  However trading volumes are well down and that certainly bothers the crooked CME.

(courtesy zero hedge)

CME Cuts Gold, Silver Margins

Tyler Durden's picture

Any trader of paper gold and silver will likely never forget the endless and certainly parabolic barrage of margin hikes that the CME imposed in the spring and summer of 2011 which had only one purpose: to break the back of the relentless anti-fiat rally in the precious metals (and which culminated with the historic May 1 take down of silver when the metal plunged some 15% in the span of seconds). Since then, perhaps as a result of initial and maintenance margins still at residual levels indicative of when the S&P was some 30% lower and some $4 trillion less in slushing global central bank liquidity, the upside euphoria in gold and silver has been decidedly hobbled, perhaps so much that the CME is now scrambling to find a whole new set of gullible investors who will obediently put their money in the paper trap, only to see a surge followed by yet another mauling from soaring margin demands. After all, the CME needs trading volume to keep the cash flow flowing - killing the paper market in any one product suits nobody. Sure enough, moments ago, the CME once again cut margins in a slew of products, most notably gold and silver, by some 10% and 14%.
Good luck CME with finding people gullible enough to trust you this time around.

And now for your important paper stories which will certainly have an influence on gold and silver.

First, overnight sentiment

Important points:

1.  The key German industrial production number at .3% rise sequential m/m on adjustments but unadjusted y/y it dropped 1.1% (expectations of .5 drop).
2. Spain's industrial output stagnated for the 16th consecutive month, plunging 6.9% m/m and 8.5% y/y 

3.  Bank of England, no change in rate/no change in their 375 billion pounds of QE
4. ECB next on the carpet.
5.  The Eur/USA cross is up and that is the driver for stocks being upwards.
6. Snapshot of early sovereign yields and currencies

7.  Details by Jim Reid of Deutsche Bank

(courtesy zero hedge/Deutsche Bank) 

Sentiment Mixed As A Jittery Europe Looks Forward To Draghi

Tyler Durden's picture

It has been another quiet overnight session, with macro data decidedly mixed and "adjusted", because while the key German December Industrial Production number came in sequentially at 0.3% on expectations of a 0.2% rise, it fell more than expected on an unadjusted Y/Y basis, dropping 1.1%, on expectations of just a 0.5% drop. On the other hand, Spain's industrial output not unexpectedly stagnated for a 16th consecutive month, plunging by 6.9% in December in line with expectations, and sliding by a whopping 8.5% Y/Y. In bond auction news, Spain sold some €4.61 billion in 2015, 2018 and 2029 bonds, all pricing with yields substantially higher than recent January auctions, which in turn sent the Spanish 10 Year to 2 month highs of 5.52% after the auction, however it has since regained most of the losses.
Elsewhere, Mark Carney - the new BOE head - was speaking in parliament, saying that central banks should be flexible in meeting inflation targets and that any change to monetary regimes should not be made lightly. "It’s entirely possible, in fact probable, that the the current stance of policy is consistent with the economy achieving escape velocity" he added. And speaking of the BOE, it came out moments ago with its latest rate decision which as was expected by all, was unchanged at 0.5%, and no addition to its GBP375 billion QE. We expect that to change in 3-4 months when Goldman's Carney is fully embedded into the Bank.
In under an hour it will be the ECB's turn to announce that despite the recent surge in the EURUSD, nothing will change in the ECB's outlook as Draghi really has no options: since the natural trendline of the EURUSD absent ECB intervention is much lower, should the central bank actively manage the currency to a level where it would otherwise promptly be, contracting exports outside the Eurozone would be the last of Draghi's worries as redenomination risk comes surging back.
But perhaps the most important driver of risk, for the second day in a row now, has been the simple fact that Europe has opened. As the chart below shows, the 3 am Eastern, or 9 am European open ramp in the EURUSD is now the major driver of prevailing EURUSD, and thus ES levels. As it turns out no actual fundamentals are needed to move the EURUSD, but a simple on/off switch of the overall market.
Snapshot summary of where Europe is currently:
  • Spanish 10Y yield down 1bp to 5.43%
  • Italian 10Y yield down 3bps to 4.56%
  • U.K. 10Y yield up 3bps to 2.13%
  • German 10Y yield up 2bps to 1.65%
  • Bund future down 0.15% to 142.33
  • BTP future down 0.09% to 110.71
  • EUR/USD up 0.33% to $1.3568
  • Dollar Index down 0.2% to 79.56
  • Sterling spot up 0.4% to $1.5724
  • 1Y euro cross currency basis swap little changed at -20bps
  • Stoxx 600 up 0.33% to 285.46
A more comprehensive recap of events as usual from DB's Jim Reid:
Yesterday the DAX dipped 1.09% and is now down -0.41% YTD. The CAC moved down to flat on the year yesterday, marginally ahead of the Spanish IBEX (-1.36% YTD) which has been down in 2013 for a few days now. Spanish 10- year yields are also 18bp higher for the year and the Italian equivalent yesterday also went above its 2013 starting point.
In European Credit iTraxx Main is flattish YTD, Senior Financials are 15bps wider and although Xover is tighter YTD after a very strong post fiscal cliff early Jan rally, it’s now 37bp off the tights. Non-financial Euro Cash HY is now also wider in spread terms in 2013. Elsewhere in fixed income 10 year Treasuries are 21bp higher on the year and many parts of the EM universe has been struggling in both FI and equities.
So 2013 feels stronger probably because the high-profile US market is leading the way but elsewhere the picture is more mixed. As we discussed in our outlook and here in recent days, we think February will be a tougher environment as the Italian elections near. The fear was always that the pro-reform parties would not be well clear by the time the poll black-out starts on Saturday. Well, these fears were amplified yesterday as polls showed that Berlusconi has cut the lead of centre-left frontrunner Pier Luigi Bersani to just 3.7%, or within the poll’s margin of error of 4%. The same poll had Bersani leading by 14% on January 2nd. Watch out for the latest polls released over the next couple of days.
We should be clear that it’s still most likely that the election will present markets with a pro-reform outcome but we think it’s unlikely the markets will want to be too long risk before there is firmer evidence of such an outcome.
So there was broad weakness across yesterday’s session with the Stoxx600 closing 0.36% lower led by weakness in the CAC (-1.40%) and DAX (-1.09%). It was an up-and-down day in credit markets marked by wide trading ranges in Europe Main and Xover but both ended the day relatively unchanged at 1-2bp wider. Across the Atlantic, both the Dow and the S&P 500 staged an afternoon rally to close +0.05%. In terms of earnings, the consistent theme of US earnings outperformance continued yesterday with 79% of 24 S&P 500 companies beating EPS and 83% of them outperforming revenue estimates. This compared with just 62% EPS beats and 46% revenue beats for Stoxx600 constituents yesterday.
Now moving on to previewing today’s ECB and BoE meetings, there are no economists polled on Bloomberg that are expecting any changes in rates or policy from either central bank. With that in mind, perhaps the more interesting  element will come from the central bank chiefs themselves. President Draghi’s press conference at 1:30pm London time will be closely watched in light of the softer ECB Bank Lending Survey released last week. Draghi may also comment on  the recent concerns around the euro’s strength and the impact of recent LTRO repayments from European banks.
In the UK, BoE governor-in-waiting Mark Carney will take questions from the Treasury Select Committee at 9:45am ahead of the BoE announcement at midday. The Committee has said it will be questioning Carney about the efficacy of monetary policy tools and whether the existing framework is appropriate for the UK after a prolonged period of anaemic  growth.
Turning to Asian markets, most equity bourses are trading with a risk off tone led by losses on the Nikkei (--0.89%) and Hang Seng (-0.37%) while the ASX200 (+0.3%) closed with a gain. Ahead of the Chinese New Year break, newswires are reporting that the PBoC has injected a record $138bn into the banking system via reverse repos this week. The Shanghai Composite (-1.3%) is poised for its first fall in almost two weeks though after the PBoC’s fourth quarter monetary policy report published on Wednesday which hinted at the central bank’s concern that inflation risks will increase this year. The report also said that joint policy easing by other nations may push up commodity prices. Local press also reported that China may slow approval for new homes in some cities in the first half of the year. Elsewhere, the USDJPY (-0.2%) is consolidating around the 93.5 level. Japanese PM Abe defended his  economic policy by saying that his push for monetary easing is about overcoming deflation rather than competitive currency devaluation. Japan’s finance minister also defended the government’s policy saying that only Germany is criticising Japan on recent yen moves.
Looking at the day’s calendar, industrial production numbers for December are due from Spain and Germany. In the US, weekly jobless claims and consumer credit numbers are the main items of the data docket. Events wise the two-day EU Leaders Summit kicks off in Brussels today but all eyes will be on Draghi and Carney today.


 The ECB keeps rates unchanged today

(courtesy zero hedge:

ECB Keeps Rates Unchanged As Trade-Weighted Euro Soars

Tyler Durden's picture

As expected by most, the ECB just announced its three key interest rates unchanged, meaning the surge in the trade- weighted EUR will continue to weigh on European exports.
From the ECB:
7 February 2013 - Monetary policy decisions

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.75%, 1.50% and 0.00% respectively.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today.
Today's lack of action by the ECB means that Europe's GDP will start seeing cuts as a result of a soaring trade-weighted EUR as noted below:
From Bloomberg:
The euro has climbed 11 percent on a trade-weighted basis since Mario Dragi pledged on July 26 to do whatever it takes to preserve the currency.A 10 percent gain against a basket of trading partners reduces euro-area GDP by 0.5 percentage point in the first year, according to Elga Bartsch, chief European economist at Morgan Stanley in London
That's 0.5% the Eurozone can't afford to lose.
Nexd up: Drahi's press conference at 8:30am in which he resembles Greenspan in his meandering and meaningless rhetoric ever more.


Then Draghi spoke and the Euro tumbled as Draghi fears the dreaded deflation:

(courtesy zero hedge)

URUSD Plunges As Draghi Fears Deflation Risks

Tyler Durden's picture

Doing his best not to get dragged into the currency war conversation, ECB head Mario Draghi is, however, concerned at the impact of a stronger EUR on inflation (or to be more accurate dis-inflation). Noting not only that there remain downside risks to the economic outlook, as we highlighted previously (an 11% rise in trade-weighted EUR since July), his comments (that have smashed the EURUSD down 120pips so far) appear to be addressing a surging EUR.


Not only the periphery are collapsing but so is Germany.
Just take a look at it's industrial production:

(courtesy zero hedge)

Forget Europe's Periphery, The Core Is Collapsing

Tyler Durden's picture

A glance at headlines over the past few months and there is little mention of anything but Europe's periphery struggling but market performance implying that a turnaround is about to occur. Most of this is based on a belief that the core is doing 'well' and that the periphery is gradually becoming more competitive. However, as if elections were not enough to worry Frau Merkel, it turns out, as Diapason's Sean Corrigan notes,Germany's Industrial Production, stymied by a surging EUR, has just suffered its third biggest quarterly decline on record - plunging back to 2007 levels. Furthermore, France's Industrial Production is back at levels first seen in 1997 - also plunging (perhaps explaining Hollande's recent exclamations at EUR strength); as the core is starting to soften significantly.

Charts: Bloomberg

Graham Summers have got it right on.  France is spiraling out of control joining its friends, Spain, Italy Greece, Portugal and Cyprus:

(courtesy Phoenix Research Capital/Graham Summers)

Sacre Bleu! France Collapses Right as Spain, Italy and Greece Become Embroiled in Corruption Scandals

Phoenix Capital Research's picture

The following is a excerpt from a recent client letter.

The house of cards that is Europe is close to collapsing as those widely held responsible for solving the Crisis (Prime Ministers, Treasurers and ECB head Mario Draghi) have all been recently implicated in corruption scandals.

Those EU leaders who have yet to be implicated in scandals are not faring much better than their more corrupt counterparts. In France, socialist Prime Minister Francois Hollande, has proven yet again that socialism doesn’t work by chasing after the wealthy and trying to grow France’s public sector… when the public sector already accounts for 56% of French employment.

France was already suffering from a lack of competitiveness. Now that wealthy business people are fleeing the country (meaning investment will dry up), the economy has begun to positively implode.

The first sign of this came actually came from Germany. As we noted a few months ago, Germany had prepared a working group to examine the impact of an economic collapse in France.

German Finance Minister Wolfgang Schaeuble has asked a panel of advisers to look into reform proposals for France, concerned that weakness in the euro zone's second largest economy could come back to haunt Germany and the broader currency bloc.

Two officials, speaking on condition of anonymity, told Reuters this week that Schaeuble asked the council of economic advisers to the German government, known as the "wise men", to consider drafting a report on what France should do…

"The biggest problem at the moment in the euro zone is no longer Greece, Spain or Italy, instead it is France, because it has not undertaken anything in order to truly re-establish its competitiveness, and is even heading in the opposite direction," Feld said on Wednesday.

"France needs labour market reforms, it is the country among euro zone countries that works the least each year, so how do you expect any results from that? Things won't work unless more efforts are made."

This German concern has proven to be well founded, as the recent spate of French economic data has been truly horrific.

Auto sales for 2012 fell 13% from those of 2011. Sales of existing homes outside of Paris fell 20% year over year for the third quarter of 2012. New home sales fell 25%. Even the high-end real estate markets are collapsing with sales for apartments in Paris that cost over €2 million collapsing an incredible 42% in 2012.

Since the EU Crisis began in 2008, France and Germany have been the two key countries backstopping the implosion. The fact that France is now facing an economic implosion does not bode well for the future of the Euro or the EU.

The other sovereign backdrop for the EU, Germany, is also experiencing an economic slowdown.

The German economy was hit hard by the euro zone crisis in the final quarter of last year, shrinking more than at any point in nearly three years as traditionally strong exports and investment slowed,the Statistics Office said on Tuesday…

Gross domestic product shrank by 0.5 percent in the final three months of 2012, the worst quarterly performance since Germany fell into a recession during the global financial crisis in 2008/2009 and only the second contraction since it ended.

The parlous fourth quarter pushed overall growth for the year down to 0.7 percent, a sharp slowdown from the 3.0 percent registered in 2011 and a post-reunification record of 4.2 percent in 2010. The 2012 figure was a tad below a Reuters consensus forecast for growth of 0.8 percent.

Thus, we find that Europe’s primary political market props (EU leaders including ECB head Mario Draghi) are coming unraveled at the precise time that EU banks are showing warning signs andthe most important EU economies are heading sharply south.

2013 is going to be a very interesting year for Europe.

( courtesy,Phoenix Capital Research/Graham Summers)


Tax revenues plunge in Greece.  How on earth is the government going to fund itself?

(courtesy zero hedge)

Greek Tax Hikes Backfire As Tax Revenues Plunge 16%

Tyler Durden's picture

There was some hope that Greece, which for the past few months was desperately trying to show it has a primary surplus when in fact it was merely shoving unpaid bills under the rug, was at least getting its runaway deficit situation under control. This, despite what many sensible people pointed out was the return of nearly daily strikes, which meant zero government revenue as zero taxes could be levied on zero wages. Turns out the sensible people were again right, and the Greek and European propaganda machine has failed once more as the Greek Finance Ministry just reported that despite big tax hikes demanded as part of austerity measures by international lenders, tax revenues fell precipitously in January, with the Greek Finance Ministry reporting a 16 percent decrease from a year earlier, and a loss of 775 million euros, or $1.05 billion in one month.
This means that the government took in only €4.05 billion ($5.47 billion) in tax revenues in January, far short of its target of €4.36 billion ($5.89 billion), a $420 million shortfall in one month, which also came during an annual holiday sales period for shops who are bleeding customers and shutting down by the thousands.
It is all downhill from here as the feedback loop of more spending cuts is activated to offset declining revenues, leading to even less revenue, and culminating with the complete collapse of Greek society.
If Greece fails to meet revenue targets it will trigger a correction clause at the end of each quarter of the year, setting off automatic spending cuts except for pensions and salaries. That could further harm already-depleted government services.

Finance Ministry officials attributed the decline in tax revenues to the drop in consumption, as revenues from Value Added Tax (VAT) shrank by 15 percent, while those from the special consumption taxes were also lower. Greeks hammered by big pay cuts, tax hikes and slashed pensions have cut back spending even on essential items, with supermarket sales falling 500 million euros, ($6763 million) in 2012.

The numbers could have been worse as the government gained revenues from doubled property taxes and big hikes in income taxes that have hit most Greeks except for tax cheats who continue to largely escape sacrifice or prosecution.
This may well be the last straw for a "fixed" Greek crisis - "the only options left for the government is to collect from tax evaders and improve tax collections, although tax hikes have led to many more Greeks trying to hide their income, statistics showed." Of course, nobody could have predicted that too.
The Troika and other EU countries offered to help Greece collect taxes but little interest has been shown by the government. The new General Secretary for State Revenues, Haris Theoharis, plans to meet directors of the 36 biggest tax offices in the country to study ways of collecting expired debts, according to proposals by the country’s creditors and the European Commission’s Task Force for Greece.
Does this mean that paying hedge funds at 50 cents on the dollar on their worthless Greek bonds was not the best idea?
But, but the spin was that if only all Greek debt was converted into zero coupon perpetuals all would be well?
Or maybe they were just referring to Deutsche Bank. As for the Greek population, where everyone is simply doing what they can to survive, which certainly does not mean paying taxes to the government, it is every man, woman and child for themselves.
Finally, one can only hope that the US will learn something from what this terminal collapse of a socialist utopia looks like. Sadly, it won't.


Finally, the failed Anglo Irish bank is being liquidated as Ireland itself is having funding problems:

(courtesy UK Telegraph and special thanks to Robert H for sending this down to us)

Ireland votes to liquidate Anglo Irish Bank

Anglo Irish Bank, now known as IBRC, will be liquidated under the plan and its outstanding debt will be converted into a new long-term bond intended to spread the repayment over a longer period of time cutting the cost to the state.
The changes will require the consent of the European Central Bank, which is expected to come today, and follows negotiations between Irish and ECB officials.
At present, the Irish government must pay €3.1bn (£2.7bn) every year to service the debt it took on to rescue the bank, equivalent to about 2pc of the country's GDP over the next decade.
The plan will involve the replacement of €28bn of promissory notes with long-term Irish government bonds that will allow the state to repay the money at a slower rate.
Enda Kenny, Ireland's prime minister, said the winding up of Anglo Irish was "long overdue" as he insisted that without the costs of the bank rescue Irish debt levels would be lower than those of Germany.
"This closes a sad and tragic chapter in our economic history," said Mr Kenny at an emergency session of Ireland's parliament that went on until 3am this morning.
Anglo Irish's collapse precipitated Ireland's financial crisis. The lender's collapse in 2008 forced the government to provide a guarantee for the debts of the country's entire banking system.
Ireland was eventually force to request an €67.5bn bailout from the EU and IMF as the costs of the banking rescue proved too much for the state to afford.
Three of Anglo Irish's former executives, including its former chief executive, will go on trial next year on fraud charges.


Your early Thursday morning currency crosses;  (8 am)


Thursday morning we  see some euro strength  against the dollar   from the close on Wednesday. The yen this the morning again is a little weak  against on the dollar,   at 93.59 yen to the dollar .    The pound, this morning  rose against the USA dollar, at 1.5710. The Canadian dollar strengthened a touch against the dollar.   We have a mixed risk  situation  this morning with some European bourses in the red like England and the German DAX up. Gold and silver are  down  in the early morning, with gold trading at $1675.50 (down 2.90)  and silver at $31.72 (down 14 cents)

Euro/USA    1.3555  up .0027
USA/yen  93.59  up  .151
GBP/USA     1.571  up .0048
USA/Can      .9953 down .0004


your closing 10 year bond yield from Spain: 

...a slight decrease in yield.



5.420.03 0.55%
As of 11:59:54 ET on 02/07/2013.

yesterday's closing yield:



5.450.07 1.30%

As of 11:59:52 ET on 02/06/2013.


The Italian 10 year bond yield:

Italy Govt Bonds 10 Year Gross Yield


As of 11:59:46 ET on 02/07/2013.

same as yesterday's yield:




4.580.13 2.83%

As of 11:59:49 ET on 02/06/2013.


Your 5:00 pm closing Wednesday currency crosses:

The Euro continued with its morning weakness finishing close at 1.3388.
The yen weakened this afternoon falling to 93.63 to the dollar .  The pound rose slightly  against the dollar .  The Canadian dollar fell a tiny fraction against the dollar.  The USA index gained huge to the tune of 56 cents to 80.26.  Currency wars at its finest.

Euro/USA    1.3388  down  .0134
USA/Yen  93.63  up .184
GBP/USA     1.571  up .0051
USA/Can      .99756  up .0019


Your closing figures from Europe and the USA:
everybody in the red today except Germany 

i) England/FTSE down 66.92   or 1.06%

ii) Paris/CAC down 41.85 or 1.15% 

iii) German DAX: up 9.67 or .13%

iv) Spanish ibex down 41.6 points  or 0.52%

v) Italian bourse (MIB) down 202.29 points or 1.22%

and the Dow: down 42.47 points or 0.3% 


And now the major USA stories of the day:

Things not doing too well in the USA as initial jobless claims remains stubbornly high:

Initial Claims Miss For Second Week In A Row As Nonfarm Productivity Tumbles Most Since 2008

Tyler Durden's picture

As is the case every Thursday, the BLS reported its weekly initial claims which unlike two weeks ago did not estimate the initial unemployment claims for America's most populous state when the number plunged, and has now missed expectations for two weeks in a row, printing at 366K, on expectations of a 360K number, while last week's 368K was as usual revised upward to 371K. As a result, the Mainspin Media already has its headline:Initial Claims decline by 5,000. Such is life under the US Department of Truth, even as unadjusted initial claims spiked by 16.7K to 386K in the week ended February 2. In other news, people on Extended Unemployment Comp plunged by 288K after soaring in the week prior, and making some wonder just what is going on with the EUC 2008 data series for it to get such massive weekly shifts each week.
But perhaps, more importantly, the BLS also reported Q4 unit labor costs and nonfarm productivity and as a result of the previously reported adjustments to worker data and negative GDP print, it was widely expected that productivity would drop. It did, but it did so far more than most expected, plunging by a whopping 2%, which "reflects increases of 0.1 percent in output and 2.2 percent in hours worked. (All quarterly percent changes in this release are seasonally adjusted annual rates." The offset: unit labor cost which soared by 4.5% in the fourth quarter of 2012, the combined effect of the 2.0 percent decrease in  productivity and a 2.4 percent increase in hourly compensation. Unit labor costs rose 1.9 percent over the last four quarters.

Rick Santelli at his finest:

Santelli On The Hypocrisy Of The Elites: "No One Will Ever Take Away The Punchbowl"

Tyler Durden's picture

The infamous Bob Rubin appeared on CNBC this morning - extolling the "nobody could have seen this crisis coming" meme- and Rick Santelli went after the hypocrisy of these so-called elites and what they did and didn't know. The glaring hypocrisy of claiming that S&P knew that everything they rated was a P.O.S. and yet no-one else could have seen the crisis coming. The crony capitalism of Geithner's proximity to Rubin's Citi during the dark days - especially considering the increasing evidence in book after book - prompts Santelli to suggest we "draw our own conclusions." From saving the GSEs to Maxine Waters ignorance and Barney Frank's slamming of any pessimists, Santelli covers a lot of ground fast but notes, with venom, that none of these 'elites' ever want to be the naysayer (due to the implications) and they will never "take away the punchbowl," and while he proclaims that if S&P goes down then everyone should suffer clawbacks, he reminds us all, "you can't fight City Hall."


What the USA spend on this last quarter:

(courtesy CBO/zero hedge)

What The US Government Spent Its Money On Last Quarter

Tyler Durden's picture

The most vocal justification provided for the disappointing Q4 GDP print by the mainstream was an increase in US government "austerity" resulting in a decline in the government contribution to the economic bottom line in the last quarter (or first fiscal quarter of 2013). Ironically, both total spending and total debt issuance in the past quarter increased, which means that far from being austere, the US actually spent more, not less, i.e., the opposite of austerity.
And while it is true that Defense spending declined by a tiny amount in the past quarter compared to the year ago, it was more than offset by a surge in Medicare and Medicaid, as well as Social Security, or, as they are better known, welfare. And, as the CBO yesterday showed, these two components of US spending, which together account for half of all US spending and which couldn't be funded by all US revenues even if the government spent $0.00 for all other programs, which will soar in the coming years as US society ages, as more workers retire, and as more are reliant on Uncle Sam for the payment of every bill. So the next time someone say that the US has a defense spending problem and nothing else, show them this chart.
Oh, and those concerned about the decline in interest payments on a year over year basis, don't be. Here is the OMB's forecast for what US interest expense will be in the next decade. Needless to say, it is growing fast to quite fast...
... although since by 2022 the Fed will own all US debt and promptly remit it to the Treasury, a condition most prominently observed during the Weimar hyperinflation, it is arguable that the US will have bigger problems by 2022 than what the debt interest payment is.


Well that about does it for today.

I will see you Saturday morning



Retired Pipefitter said...

You wrote: "The active February gold contract delivery month saw it's OI fall by 99 contracts from 2234 down to 2135. We had 99 delivery notices filed yesterday so we lost 88 contracts or 8800 oz of gold standing for the February contract month. The non active March gold month gained 11 contracts up to 1164."

Reviewing your numbers, Harvey, it appears that no contracts were lost for Feb.

Thanks for all you do. I read your analysis every day. AND, I enjoy spotting the trolls. Great fun!!

Anonymous said...

CME Cuts Gold, Silver Margins
Submitted by Tyler Durden on 02/07/2013 18:40 -0500

Precious Metals

Any trader of paper gold and silver will likely never forget the endless and certainly parabolic barrage of margin hikes that the CME imposed in the spring and summer of 2011 which had only one purpose: to break the back of the relentless anti-fiat rally in the precious metals (and which culminated with the historic May 1 take down of silver when the metal plunged some 15% in the span of seconds)....CME - Crime Made Easy .

Anonymous said...

Hi everyone. I have a question please. Harvey wrote "Silver OI remains very high"

I know that OI means "Open Interest" but I'd like to know is high OI a good thing or a bad thing for us real silver stackers and why? I'm sorry to say that I really don't know what Open Interest is but I know Harvey writes a lot about it so I'd finally like to know for certain if its good or bad for us and if possible I'd like to know WHAT it is actually and WHY its good or bad. I hate to ask a dumb question but its bugged me for a long time not knowing and even though I have tried to read about it I still don't get it. I have never traded and wouldn't even know where to begin but I have been buying real silver for over two years now.

Thanks kindly!

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