Monday, July 1, 2013

July 1/GLD bleeds another 1.2 tonnes/Total dealer comex falls again to 1.336 million oz/ China up its consumption for the first six months to 800 tonnes and will certainly topple 1000 tonnes/yr/

Good evening Ladies and Gentlemen:

Gold closed  up $31.10 to $1255.90 (comex closing time ).  Silver rose by 8 cents to $19.56  (comex closing time)

In the access market at 5:00 pm, gold and silver finished trading at the following prices :

gold: 1252.60
silver:  $19.64

At the Comex, the open interest in silver fell by 706 contracts to 138,472.  

The open interest on the entire gold comex contracts rose by 9606 contracts to 409,081 with  gold's rise in price on Friday.

Tonight, the Comex registered or dealer inventory of gold falls again as it rests tonight at 1.336 million oz or 41.55 tonnes.  This is getting dangerously low.  The total of all gold at the comex (dealer and customer) rose slightly again and this time it rests at  7.502 million oz or 233.34 tonnes of gold.

JPMorgan's customer inventory remained constant today at 143,212.149 oz or 4.45 tonnes.  Its dealer inventory remains at 401,877.493 oz but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory.

The total of the 3 major gold bullion dealers( Scotia , HSBC and JPMorgan)  in its  gold Comex dealer account registers only 27.044 tonnes of gold

The GLD  reported another bleed of 1.2 tonnes in inventory. The SLV inventory of silver showed no gain nor loss of inventory.

Today we have great physical commentaries from Bill Holter of Miles Franklin,
Michael Kosares, Alasdair Macleod and Oppenheimer's Carter Worth.

On the paper side of things, we have a great commentary from Ambrose Pritchard Evans of the rise of Marine LePen in France, Mark Grant on the lack of a European bank union, and Bloomberg's Fam, on the spiraling out of control, Egypt.

We will go over these and many other  stories today, but first......

Let us now head over to the comex and assess trading over there today.
Here are the details:

The total gold comex open interest  rose  by a rather large 9606 contracts from 399,475 up to 409,081 with gold rising by $12.40 on Friday.  We are now into the the non active July contract and here the OI rests at 150 down 38 contracts . We had 23 delivery notices filed on Friday so in essence we lost 15 contracts or 1500 oz of gold standing for the July delivery month.  The next active delivery month for gold is August and here the OI rose by  2874 contracts from  221,260 up to 224,134. The estimated volume today was good at 204,763 contracts.(remember no rollovers). The confirmed volume on Friday was  huge at 338,201.  

The total silver Comex OI surprisingly fell by 706 contracts with silver rising in price Friday by 88 cents.The total of all comex silver OI stands at 138,472 contracts. We are now into the big delivery month of July  and here the OI fell by 660 contracts down to 2996. We had 500 notices filed today so in essence we lost 160 contracts or 800,000 oz rolled or was cash settled.  The estimated volume today was good coming in at 50,728 contracts.  The confirmed volume on Friday was excellent at 90,425.  

Comex gold/May contract month:
July 1/2013

 the July opening contract month 

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
702.57 (HSBC)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
 4817.232 (Scotia)
No of oz served (contracts) today
 1 (100  oz)
No of oz to be served (notices)
149  (14,900 oz)
Total monthly oz gold served (contracts) so far this month
24  (2400 oz)
Total accumulative withdrawal of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

34,848.35 oz

We again had little activity at the gold vaults
The dealer again  0 deposits and no  withdrawals.

We  had one customer deposits today :

i)  Into Scotia:  4,817.232 oz

total customer deposits:  4,817.232  oz

It is very strange that having left the  big delivery month of June, we are witnessing hardly any gold enter the dealer to settle upon contracts.

 we had 1 small   customer withdrawals

i) Out of HSBC: 702.57  oz

 total customer withdrawals: 702.57  oz

Today we had 1 adjustment

i) Out of HSBC:  16,515.024 oz was adjusted out of the dealer and into the customer account of HSBC.  No doubt this was used to settle upon longs standing and HSBC issuance.

Thus tonight we have the following JPMorgan gold inventory:  (same as Friday)

JPM dealer inventory:  401,877.493 oz   12.50 tonnes
JPM customer inventory:  143,212.149 oz  or 4.45 tonnes

As we reported to you 4 weeks ago, that JPMorgan withdrew a huge amount of gold from its customer account:

 Out of JPMorgan:  217,844.96 oz.

If you will recall, we needed to see 100,000 oz of gold removed from JPMorgan's customer account. (1000 contracts served upon our longs in mid May).

The last Tuesday in May (May 28), we  had 15,416.93 oz removed from the JPM's customer account. No doubt that this gold was part of the 1000 contracts issued by JPMorgan customer account and thus we calculated that as of tonight 28,389.579 oz was settled upon, leaving 71,611.00 oz  still left to arrive in the settling process.

 Tuesday, June 11, we had 217,844.96 actual ounces leave JPMorgan

and on, June 28.2013 we had 4,817.251 oz leave jPMorgan

On Friday, June 28th we had 23 notices filed and all of these were issued by JPMorgan on the customer side.

Today, one contract was issued but not from JPMorgan.

In summary on the customer side of things for JPMorgan:

Thus on JPMorgan customer side:

On Friday, the 28th of June, I reported that we had from the beginning of June,  2543 notices or 254,300 oz issued.  If we add the 71,611.00 oz owing from  May issuance, we get  325,911 oz.  If we subtract the actual withdrawal of gold from JPMorgan of 222,662.21 (which includes Friday's  withdrawal customer side 4,817.25),  this still leaves 103,248.79 oz that needs to be settled upon from the vaults of JPMorgan customer side.

The total dealer comex gold falls again and it rests tonight at its nadir of 1.336 million oz or 41.55 tonnes of gold.

The total of all comex gold, dealer and customer rise slightly again  tonight to  7.502 million oz or  233.34 tonnes..

Now for JPMorgan's dealer side and what the inventory should be:

 On  June 11.2013 we reported that 4935 contracts have been issued by JPMorgan's house account(dealer account) since first day notice and not yet subtracted out of inventory

You will also recall three weeks ago on  Saturday (and again on that following Monday night,) I reported that JPMorgan had 470,322.102 oz in it's dealer account. From that day until now, 68,444.61 oz was either withdrawn or adjusted out(on the dealer side), leaving the dealer side  at 401,877.493  oz where it sits tonight.

On the dealer side here are the last 17 trading sessions as to notices issued from JPMorgan's dealer side:

 Friday:  zero
 Monday:  1
 Tuesday:  0
 Wednesday :  0
 Thursday:  0
 Friday:  0
 Monday:  0 .
 Tuesday:  0
Wednesday: 0
Thursday:  0
Friday: 0
Tuesday: 0
Wednesday: 0
Friday: 0
Monday:  0

Thus,  4946 notices have been issued by JPMorgan (dealer side) for the month  of June  for 494,600 oz  and these ounces have yet to settle from JPMorgan's dealer side.

JPMorgan's dealer vault registers tonight 401,877.493 oz.

Somehow we have a huge negative balance as   i) the gold has not left JPMorgan's dealer account and has yet to settle


ii) it is now deficient by 92,722.51 oz   (401,877.493 inventory - 494,600 oz issued =  92,722.51 oz)

In other words, the entire 401,877.493 oz must be first transferred out of Morgan's dealer category ( in the same format as in the customer category) leaving it with zero,  plus the 92,722.51 of additional deficient gold

JPMorgan has not had any deposits in gold in quite some time. As a matter of fact, zero ounces has entered on the dealer side from the beginning of 2013.

How will JPMorgan satisfy this shortfall??

Another disturbing piece of news is the low dealer gold inventory for our  3 major bullion banks(Scotia, HSBC and JPMorgan). Their dealer gold lowered to  to 27.044 tonnes tonight from 27.55)

i) Scotia:  231,619.164 oz or 7.204 tonnes  ( last Monday... 285,596.23 oz or 8.88 tonnes)
ii) HSBC:  236,168.152 oz or  7.34 tonnes  (Friday 252,683.176 oz or  7.85 tonnes
iii) JPMorgan: 401,877.493 oz or 12.50 tonnes (last Thursday 408,709.03 oz , 12.71 tonnes)

Brinks dealer account has the lions share of the dealer gold at 447,198.56 oz 13.909 tonnes

Today we had 1 notices served upon our longs for 100  oz of gold (and none issued by JPMorgan customer). In order to calculate what I believe will stand for delivery in July, I take the OI for July (150) and subtract out today's notices (1) which leaves us with 149 notices still left to be served upon our longs.

Thus on first day notice we have the following gold ounces standing for metal:

24 contracts served x 100 oz =  2400 oz, +  149 contracts left to be served upon x 100 oz  =  14,900 oz to give us  17,300 oz  or .53 tonnes of gold.  We lost 15 contracts or 1500 oz of gold that will not stand in July.

Ladies and Gentlemen: we have a three-fold problem:

i) the total dealer inventory of gold falls to a very dangerously low  level of only 41.55 tonnes and none of the 9.5 tonnes delivery notices from May and the major part of the 30.70 tonnes from June  issued by JPM  on its dealer side  has  yet to leave.

ii)  a) JPMorgan's customer inventory remains at an extremely low 143,212.149 oz.
If you are a customer of JPMorgan and have your gold in its vault, I think it is best to remove it before we have another fiasco like MFGlobal.

ii  b)  JPMorgan's dealer account rests tonight at 401,877.493 oz.  However all of this gold has been spoken for plus an additional 92,722.51 oz of deficient gold.

iii) the 3 major bullion banks have collectively only 27.044 tonnes of gold left in their dealer account. 


now let us head over and see what is new with silver:


July 1/2013:  July silver contract month:

opening stats:

Withdrawals from Dealers Inventory4844.70 (Brinks)
Withdrawals from Customer Inventory 392,714.903 oz (Brinks , Delaware,) 
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 2,019,727  oz (CNT,Scotia)
No of oz served (contracts)500  (2,500,000 oz)
No of oz to be served (notices)2496 (12,480,000 oz)
Total monthly oz silver served (contracts) 979  (4,895,000)
Total accumulative withdrawal of silver from the Dealers inventory this month4844.70
Total accumulative withdrawal of silver from the Customer inventory this month401,855.17  oz

Today, we  had huge activity  inside the silver vaults.
 we had 0 dealer deposits and 1  dealer withdrawal.

i) Out of Brinks dealer: 4844.70 oz

We had 2 customer deposits:

i) Into CNT:  602,024.90  oz
ii) Into Scotia: 1,417,702.29

total customer deposit:  2,019,727.19

We had 2 customer withdrawals:

i) Out of Brinks;  370,849.71  oz
ii) Out of Delaware: 21,865.19 oz

total customer withdrawal  :  392,714.903 oz

we had 3 adjustments  today

i) out of JPMorgan  20,052.35 oz was adjusted out of the dealer and into the customer

ii) Out of CNT:  1,000,536.85 oz out of the customer and into the dealer.
iii) Out of HSBC:  45,904.80 oz out of the dealer and into the customer.

Registered silver  at :  42.874 million oz
total of all silver:  166.117 million oz.

The CME reported that we had  500 notices filed for 2,500,000 oz today. 
To calculate what will stand for this active delivery month of July, I take the number of contracts served thus far this month at 979 x 5,000 oz per contract = 4,895,000 oz  + 2496 notices left to be served upon our longs x 5000 oz per contract = 12,480,000 to give us a total of 17,275,000 oz

we lost 181 contracts or 905,000 oz will not stand in July from the first day reading.

Thus on this second day notice here are the standings:


979 contracts served x 5000 oz per contract (served) or 4,895,000  oz + 2496 notices x 5,000 oz or  12,480,000 =   17,275,000 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.

Now let us check on gold inventories at the GLD first:

July 1/2013: we had another nose bleed of 1.2 tonnes of gold.



Value US$38.670  billion

June 28.2013:  



Value US$37.137,611  billion

June 27.2013:



Value US$38.408  billion

June 26.2013: 



Value US$38.517  billion

June 25.2013:



Value US$39.850  billion

June 24.2013:



Value US$40.764  billion

June 21/2013:



Value US$41.210  billion

June 20.2013



Value US$41.348  billion

June 19.2013:



Value US$44.1026   billion 

June 18.2013:



Value US$44.002  billion

June 17/ 2013:



Value US$44.649  billion

June 14.2013:



Value US$44.860   billion

June 13/2013:



Value US$44.659  billion

June 12/ 2013:



Value US$44.8682  billion

June 11.2013:



Value US$44.592  billion

June 10.2013:



Value US$44.885   billion

Today we lost 1.2 tonnes of physical gold ounces from the GLD vaults.

The registered  vaults at the GLD will eventually become a crime scene as real physical gold  departs for eastern shores leaving behind paper obligations to the remaining shareholders.   There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat  (same banks)

As a reminder the total comex gold had inventories of around 11 million oz in 2011. Today it rose slightly to  7.502 million oz  (233.32 tonnes)

GLD gold:  968.3 tonnes.


July 1.2013:  no change

Inception Date4/21/2006
Ounces of Silver in Trust318,481,348.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

June 28.2013:

And now for the ETF  silver SLV:  

Inception Date4/21/2006
Ounces of Silver in Trust318,481,348.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

June 27.2013:

Inception Date4/21/2006
Ounces of Silver in Trust317,998,855.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

June 26.2013:

Inception Date4/21/2006
Ounces of Silver in Trust317,709,349.100
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

June 25.2013:

Sponsor's Fee0.50%
Inception Date4/21/2006
Ounces of Silver in Trust317,709,349.100

June 24.2013:

Sponsor's Fee0.50%
Inception Date4/21/2006
Ounces of Silver in Trust317,709,349.10

June 21.2013:

Inception Date4/21/2006
Ounces of Silver in Trust323,885,835.500
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

June 20;2013:

Inception Date4/21/2006
Ounces of Silver in Trust321,473,111.500
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

June 19.2013:

Inception Date4/21/2006
Ounces of Silver in Trust321,473,111.500
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

June 18.2013:

Inception Date4/21/2006
Ounces of Silver in Trust321,473,111.500
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

Inception Date4/21/2006
Ounces of Silver in Trust321,473,111.500
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

June 14.2013:

Inception Date4/21/2006
Ounces of Silver in Trust321,473,111.500
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

june 13.2013;

Inception Date4/21/2006
Ounces of Silver in Trust321,473,111.500
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

June 12.2013:

Inception Date4/21/2006
Ounces of Silver in Trust321,473,111.500
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

June 11.2013:

Inception Date4/21/2006
Ounces of Silver in Trust321,135,274.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

So far at 6:00 pm no change in 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  at negative 1.4% percent to NAV in usa funds and a negative 1.4%  to NAV for Cdn funds. not in Canada .

2. Sprott silver fund (PSLV): Premium to NAV rose  to positive .49% NAV July 1/2013
3. Sprott gold fund (PHYS): premium to NAV  rose to negative-0.44% to NAV June 26/ 2013  


And now for the major physical stories we faced today:

a gold review for the first 6 months and it is not pretty!!

(courtesy Goldcore)

Review Of First Half, 2013 & Outlook

Published in Market Update  Precious Metals  on 1 July 2013
By Mark O’Byrne

IntroductionWith the end of the second quarter it is important to take stock and review how various assets have performed in the first half of 2013 and assess the outlook for the rest of 2013 and, more importantly,  the coming years.
Global stock, bond, commodity and precious metal markets have been highly volatile since Federal Reserve Chairman Ben Bernanke again suggested that the Fed would soon cut the pace of its highly unorthodox money printing and bond buying.
Gold and particularly silver had a torrid quarter and have significantly underperformed the vast majority of equity and bond markets in the quarter and in the last six months.
Markets were volatile prior to Bernanke’s “jawboning”, particularly after the Bank of Japan said it would boost the monetary base by ¥60 trillion to ¥70 trillion ($600 billion or $700 billion) annually. This led to record gold prices in Japanese yen in April prior to a series of mini Nikkei crashes and gold falling sharply in all currencies. 
Review of Asset Performance H1, 2013
Precious MetalsGold prices fell 23% for the quarter, their largest quarterly fall since gold began trading in 1971. The 27% fall this year is the worst first-half performance since 1981.
Silver slumped 31% in the second quarter and was down 36% in the first half.
Platinum tumbled 16% in the second quarter and is down 12% year to date.
Palladium fell 15% in the second quarter and is down 3.6% year to date.
The global benchmark MSCI World Equity Index was down 1.2% in the second quarter but remains up 7% year to date after strong gains in the first quarter due to cheap money and hopes of a continuing global economic recovery.
Wall Street's three major indices finished the quarter with slight gains, with the Dow up 2.3%, the S&P 500 up 2.36% and the Nasdaq up 4.1%. 
The DJIA is just 3.2% below its record high set May 28 and up 13.8% in 2013. That is the best first-half performance for any year since the technology-stock-driven bull market of 1999 which was followed by the stock market crash of the early 2000s.
The Standard & Poor's 500-stock index rose 2.4% in the quarter and posted a first-half gain of 12.6%, the best since 1998. The Russell 2000 Index, which tracks small-company stocks often seen as closely tied to the U.S. economy, rose 2.7%. 
Concerns about China and other emerging markets and geopolitical unrest saw that MSCI's broadest index of Asia-Pacific shares outside Japan down 7% for the year. 
The MSCI Emerging Market stock index dropped 9.1%.
Bloodletting was not confined to the precious metals markets and there was considerable bloodletting in the bond market, as the yield on the U.S. Treasury 10-year note rose to 2.49% on Friday, from 1.84% on April 1 and from 1.63% on May 2, a low for the quarter. 
Treasuries through the iShares Barclays 20-year-plus ETF fell 8.9% in the last three months, its worst performance over the last 10 quarters.  The Barclays investment grade corporate-bond index fell 3.3%.
Also hit hard were emerging-market bonds, where investors were caught flat footed, not just by worries about the Fed but also by concerns about China's economy and political unrest in Brazil, Turkey and in the Middle East.
Commodities saw weakness in general with copper, corn and coffee all having deep declines in the quarter due to concerns about global economic growth. 
The Standard & Poor’s GSCI Spot Index of 24 commodities fell 6.7% last quarter, the most in a year.
NYMEX oil had a monthly gain of 4.7% in June but still had a second-quarter fall of around 1%. Yet, it remains up 5.75% year to date.
Brent crude oil sank 7.1% since March for a third quarterly decline, the longest streak in 15 years and is down 7.4% year to date.
Natural gas prices declined 11% this quarter but remain up 7% this year.
Copper, near its lowest price in three years, lost 10.3% in the quarter and 15% in the second half.
Copper was depressed by concerns over slower growth in top consumer China and saw its third quarterly decline in a row.
Year to date corn, wheat, coffee and sugar are down 22%, 15%, 16% and 13% respectively.
Soybeans have eked out a 2% gain and cotton is 14% higher year to date.
Part of the reason for weakness in commodities was the strength of the dollar which is the strongest currency in the world year to date.
The euro, Danish krone, Swiss franc and Swedish krona have also displayed strength so far in 2013.
The weakest currencies have been the precious metals, the Japanese yen, the Australian dollar and the Norwegian krone. 
Outlook For 2013 and Rest of DecadeThe volatility of recent weeks is but a mere small taste of the volatility in store for all markets in the coming months and years. The global debt crisis is likely to continue for the rest of the decade as politicians and central bankers have merely delayed the day of reckoning. They have ensured that when the day of reckoning comes it will be even more painful and costly then it would have been previously.
Macroeconomic, Systemic, Geopolitical and Monetary RisksDespite a degree of irrational exuberance and complacency in markets in recent months, some of which have contributed to the fall in gold and silver prices, there remain significant risks. 
>> Macroeconomic
The global economic recovery remains very tentative. China, Japan, the U.S., the UK, most European countries and all major economies face major challenges and there is a real risk of double dip recessions and a global recession.
>> SystemicMany western banks and sovereign nations are bordering on insolvency and remain very vulnerable.
Contagion remains the real concern and there is a real risk that periphery economies are canaries in the coalmines and herald coming problems for larger industrial nations such as Japan, China, the UK and the U.S.
 Should this happen long term interest rates would likely rise from the unsustainable record low levels seen today.
>> Geopolitical
Geopolitical risk from terrorism and war remains high and there are many geopolitical hot spots in the world especially in the Middle East - in Syria and between Iran and Israel. Tensions between Iran and Israel and the U.S. could lead to a military incident that degenerates into a regional conflict in the Middle East.
Other potential flashpoints are in Afghanistan, Pakistan, the Koreas and increasing tensions between the U.S. and China and the U.S. and Russia.
While there is little risk of a direct military confrontation between the U.S. and emerging superpower China, there is a risk of war being waged through proxies and of economic war involving economic protectionism and currency wars.
>> Monetary 
The initial skirmishes of the ‘global currency wars' have been seen in recent years. 
These currency wars involve competitive currency devaluation and currency debasement as governments and central banks internationally devalue their currencies in order to maintain job sustaining, export growth and maintain fragile economic recoveries.
We are experiencing a mere lull in currency wars but expect them to return with a vengeance when economic growth falters.
Bail-Ins, Sovereign Debt and Currency Devaluations
There will be banking and sovereign casualties in the coming years with obvious ramifications for those seeking to protect and grow wealth.  Thus, it has never been more important for investors and savers internationally to have diversified portfolios. 
Lack of diversification and being overweight equities and property and the use of leverage and speculation led to much wealth destruction in recent years.
Today, many investors and savers are overweight cash deposits and long term government bonds and are thus being recklessly conservative. This is despite the real risk of further sharp losses in government bond markets and the real and underappreciated risk of “bail-ins”.
With bail-ins set to become policy in the western world, retail and corporate depositors need to be extra selective and vigilant. Owning physical gold outside the banking system becomes even more important so as to protect from deposit or asset confiscation. 
It is important to acknowledge the risks posed to the European Monetary Union due to a potential sovereign default still remain. Greece, Italy, Spain, Ireland and even France all remain vulnerable and the Eurozone debt crisis could rear its ugly head at any stage in the coming months.
Despite Fed talk that they may ‘taper’ and reduce QE, loose monetary policies internationally are set to continue which will support the precious metals in the long term.
New Bank of England governor, Mark Carney is likely to be a dovish inflationist who may debase sterling, making gold important for people in the UK looking to preserve their wealth.   
Sterling is already down 5% and 7% against the dollar and euro so far in 2013 and we expect further weakness in sterling in the coming months.
The short term outlook for the precious metals is, as ever, uncertain. Further weakness is possible although there is strong support for gold at the $1,200/oz level from a technical and fundamental perspective.  There is robust international demand for gold at these levels and gold is becoming increasingly uneconomical to mine at these depressed price levels.
Pound, euro and dollar cost averaging into a physical gold position protects from volatility and from short term price risk and remains prudent.
Longer term we continue to believe that gold is in a secular bull market which will continue from 2015 to 2020. We continue to believe that gold should reach and surpass its inflation adjusted high of $2,400/oz in the coming years.
Given the variety of macroeconomic, systemic, geopolitical and monetary risks in the world today, owning an internationally diversified portfolio with healthy allocations to gold and silver bullion has never been more prudent.


Very Michael Kosares

Bernanke's conundrum -- What it might mean for gold

12:46p ET Monday, July 1, 2013
Dear Friend of GATA and Gold:
With the Federal Reserve apparently signalling that it doesn't want to monetize quite as much U.S. government debt, it seems that foreign governments and private investors don't want to own as much of it either. This, Centennial Precious Metals proprietor Michael Kosares writes, indicates that that Fed won't be able to "taper" its bond purchases at all. Indeed, Kosares adds, QE4 may already have begun, and investors should watch what the Fed does, not what it says. Kosares' commentary is headlined "Bernanke's Conundrum -- What It Might Mean for Gold" and it's posted at Centennial's Internet site,, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


A remarkable commentary from Alasdair Macleod who states that in gold as of last week, the top 4 USA banks are net long in gold.  In silver, they are still net short by 18,000 contracts but the large specs are short an unprecedented to 133 million oz.  Not only that but the manufacturers are also buying the silver metal creating an illiquid market/

a must read...

(courtesy Alasdair Macleod/GATA) 

Alasdair Macleod: Gold's undervaluation is extreme

1:08p ET Monday, July 1, 2013
Dear Friend of GATA and Gold:
In a comprehensive review of the world financial situation, GoldMoney's research director, Alasdair Macleod, concludes that gold is terribly underpriced relative to all the other money floating around and that central banks are panicking over interest rates and the failure of the gold price plunge they engineered, which only intensified demand for real metal.
Macleod concludes about gold: "The conditions are in place for a spectacular price readjustment on valuation and economic grounds alone. Furthermore, the short positions on Comex have been transferred to the hedge funds, leaving the bullion banks less exposed to escalating systemic risks. It is now in the latter's interests to keep their gold and silver books as level as possible as a bear squeeze on the market shorts gets under way and starts the revaluation process."
Macleod's commentary is headlined "Gold's Undervaluation Is Extreme" and it's posted at GoldMoney's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Oppenheimer's Carter Worth who called for the huge drop in gold is now calling for everyone to jump on the band wagon for gold miners.

(courtesy Oppenheimer/zero hedge)

Oppenheimer: "Time To Cover All Shorts In Gold And Gold Miners" Because "Gold Stocks Are So Bad, They're Good"

Tyler Durden's picture

Whether lucky or good, Oppenheimer's Carter Worth was accurate in calling for a drop in gold back in January of 2013. From his note at the time: "For those without the time or inclination to read past the first page (we're told by the marketing experts that many people don't read past the first page of most research reports) here is the summary, in one word, of today's edition of "Money in Motion" focusing on Gold Bullion: SELL."
Fast forward to today, when the technician pulls a U-Turn, and says that "at this time, we believe gold and gold miners represent good risk/reward. Indeed, the recent extreme weakness is judged to be the reciprocal or correlative of the extreme strength witnessed in the summer of 2011. The "despair" relating to gold now is as palpable as "euphoria" then."
And always one with a witty turn of the phrase, Worth summarizes his shift in sentiment as follows: "The bottom line, by our work, is this: at this time it is right to cover all shorts in gold and gold miners… and we would look for opportunities on the long side.... The charts of the individual equities are atrocious. And that is the circumstance that compels today's report. The stocks are judged to be "so bad, that they're good"."
Worth's short-term target, based on charts and squiggles: $1,395.
Some more squiggles...
And even more squiggles:
There are many more squiggles in the full report, leading Worth to also give a "buy" reco on the following miners:
Of course, as we showed over the weekend when we demonstrated the unprecedented technical sentiment dislocations behind gold with a stunning amount of gross gold shorts, should the long-overdue gold squeeze indeed take place, then $1395 will be merely the first stop.

Bill Holter in his latest commentary spells out exactly why we are buying gold:

(courtesy Bill Holter/Miles Franklin)

The "reason"...

 I'd like to write about something that is so basic that you may scratch your head and wonder why I would even bother.  I have written many times and others have shown that the "price" of Gold is manipulated.  This is no longer "conspiracy theory", it is fact.  I titled this piece "the reason" and will discuss it from 2 standpoints, from the manipulators and from yours. 
  First, "why" is there any reason to rig the price of Gold?  This is easy, governments have every reason TO rig the price and in a fiat world where the money that they create competes directly with Gold, they would be crazy not to suppress the price of their competitor.  Gold is the canary in the Goldmine.  If the canary dies then you will soon be dead also just as it follows that if the price of Gold is "rising" in Dollars or Euros or Yen, "something" must be wrong with them.  The thought process of central banks is that if you can disconnect the alarm then there will be no fire...or at least no one will know that there's a fire.  It is truly this simple, the central banks believed (for too long) that if they could keep the lid on the price of Gold then they could do whatever they pleased and no one would know.  This was true 10 or 20 years ago, they had supply that they could feed into the market...this excess supply is very close to being used up.  We know this because demand has exceeded known supply by at least 1,500 tons per year for going on close to 20 years, so far more than half of what centrals banks already gone.
  Then from YOUR standpoint, if you know that the price of Gold is "rigged" can go one of 2 ways in your train of thought.  Some people think, "oh I wouldn't touch it BECAUSE the price is rigged".  Or, as I believe, this IS the very reason to own Gold, because you are able to purchase it cheaper than if it were in a freely traded market.  If central banks want to "subsidize" Gold buyers then so be it, don't look a gift horse in the mouth.  Just buy it and put it away because you know that it is cheaper than a freely traded true market price.
  Until last Wednesday or maybe Thursday there was a litany of "bashers" jumping up and down and screaming that the "permabulls" are wrong and that the likes of Martin Armstrong are correct.  If you agree that the evidence clearly points to the prices of Gold and Silver being manipulated then it follows that you should look for "bottoms".  If you cannot see that Gold is clearly manipulated (there is clear motive, clear ability in the paper markets and clear evidence of action) then I cannot help you (Armstrong). 
  If you understand that the price is manipulated and has been for years now then how can you "risk" trying to call a top?  How can trade and "hope" that you guess correctly?  What if you guess wrong and the rigging either stops or fails?  How do you get back in?  Gold has corrected and Silver has crashed by more than 50% on the paper markets but the upside is many many times the current prices, do you risk getting in maybe 10% or even 20% lower than current prices while sitting on the sidelines?  The "sidelines" being "cash Dollars, Euros or Yen etc.) and out of something that when all is said and done will trade at multiples of current prices in fiat?
  Trying to call "top" in a long term bull market is a mugs game as you can only truly be correct 1 time.  This "1 time" is when the bull market is over for good or at least for many years.  For example, would you have done the right thing in 1976 by selling your Gold at close to $200 if you were not back in as it traded down close to $100?  As Richard Russell is fond of saying, "very very few people ever ride a bull market from start to finish".  I am going to say that there is FAR more risk in NOT owning Gold than owning it.  I am not even talking about the possibility of a finite percentage loss versus the possibility infinite gains, I am talking about the potential (probability in my view) of the entire financial system coming down.  It was only last Monday that we heard of Chinese banks going offline and their whole system having liquidity problems...were this to spread and go global would you rather have Dollars in a bank or Gold out of the system?  Do you believe this scenario to be possible (I hope you do)?  If so do you have any idea when?  Where?  Are you willing to bet that you or someone else that you listen to is smart enough to know "when"? 
  Here is the point, if you bought Gold at $1,900 nearly 2 years ago you still bought it at a "subsidized" price.  When push comes to shove shortly will you lament about "what a bad buy" it was to have paid $1,900?  Or will you just be happy that this capital was not part of the "bail in" where depositors lose money to save their bank?  Will you think "gee, if I only listened to the top callers I would have more ounces"? 
  Those who know me personally know that I became bullish on Gold some 15 years ago.  My thought process has evolved over time but my basic premises have never ever changed.  If you bought at $1,900 or $1,600 I will tell you that you got your purchase "cheap", if you bought last Friday at $1,200 then you got it cheaper but at least you own it.  I would not have any interest at all in Gold if I thought it was going to $2,500 per ounce and then fall off.  I have an interest in owning Gold because it is wealth, "wealth" that will carry you to the next system whatever it may be.  Maybe the mainstream pricing will be in SDR's, in Yuan or some new currency called "wombats" or something like that.  The point is this, you will be afforded a place at the table, a ticket to entry, Gold will allow you in.  Dollars on the other hand will not be accepted and when the new "rules" are made, those with Dollars will have no say.  Choosing to "trade" Gold for Dollars means that you stand a chance to be holding those Dollars when the inevitable "shunning" of Dollars takes place.  "Trading" is a risk not worth taking in my opinion even if you are trying to trade for more ounces rather than Dollars.
Regards,  Bill H.     P.S.  I will give it one more day to see if JP Morgan delivers from both their dealer inventory and from the customer side.  They are contracted to deliver roughly 100,000 ounces more Gold IN JUNE than they had in their inventories as of Friday afternoon.  As I see it, they need to completely empty their inventory AND deliver another 100,000 ounces to honor contracts.  It is still not even clear that delivery was made on the 1,000 call options from May.  This is a very big deal if you believe in contract law, if not...oh well there's always dancing with the stars or the America's got talent.


My goodness!!.  Chinese consumption of gold for the first 6 months of the year hit 800 tonnes.
and will surely top 1,000 tonnes for the year.

(courtesy Reuters/The Economic Times)

China's 2013 gold consumption to top 1,000 tonnes: China National Gold

Reuters Jun 28, 2013, 10.49PM IST
(China's gold consumption…)
SHANGHAI: China's gold consumption is set to exceed 1,000 tonnes for the year, having reached about 800 tonnes in the first half, state-owned China National Gold
said on Friday. China National Gold, the country's largest producer, said Beijing should take advantage of the current rout in prices to build reserves of the bullion to ensure economic and financial safety.

And now for our major paper stories today which will influence the price of gold and silver:

Your early morning risk sentiment from Europe/Asia:

1. Chinese PMI down again showing China slowing in growth.
2. Japanese tanken index up.
3. European PMI's improve on the periphery and deterioration in the core. Overall European PMI 48.8 a month high. On Germany disappoints with a reading of 48.6 vs expectations of 48.7, thus indicating that this nation is slowing down.

thus in a nutshell, today was "RISK ON"

More PMI by country:

  • Ireland 50.3: 4-month high
  • Spain 50.0: 26-month high
  • Italy 49.1: 23-month high
  • Netherlands 48.8: 4-month high
  • France 48.4: (flash 48.3) 16-month high
  • Austria 48.3: 4-month high
  • Greece 45.4: 24-month high
  • Germany 48.6 (flash 48.7): 2-month low
Details from Ransquawk,Soc Generale, and Jim Reid/Deutsche bank)

"Risk On" Sentiment Returns In Aftermath Of Stronger European Manufacturing Data

Tyler Durden's picture

Following the Friday plunge in the ISM-advance reading Chicago PMI, it was a night of more global manufacturing data, which started off modestly better than expected with Japanese Tankan data, offset by a continuing decline in Chinese PMIs(which in a good old tradition expanded and contracted at the same time depending on whom one asked). Then off to Europe where we got the final print of the June PMI which continued the trend recent from both the flash and recent historical readings of improvement in the periphery, and deterioration in the core. At the individual level, Italy PMI rose to 49.1, on expectations of 47.8, up from 47.3; while Spain hit 50 for the first time in years, up from 48.1, with both highest since July and April 2011 respectively. In the core French PMI rose to a 16-month high of 48.4 from 48.3, however German PMI continued to disappoint slowing from 48.7, where it was expected to print, to 48.6. To the market all of the above spelled one thing: Risk On... at least until some Fed governor opens their mouth, or some US data comes in better than expected, thus making the taper probability higher.
More PMI by country:
  • Ireland 50.3: 4-month high
  • Spain 50.0: 26-month high
  • Italy 49.1: 23-month high
  • Netherlands 48.8: 4-month high
  • France 48.4: (flash 48.3) 16-month high
  • Austria 48.3: 4-month high
  • Greece 45.4: 24-month high
  • Germany 48.6 (flash 48.7): 2-month low
Overall, at the macro level Markit reported that the Final Eurozone Manufacturing PMI at 16-month high of 48.8 in June up from a flash: 48.7, with the PMIs rising in all nations except Germany. How sustainable is this latest bifurcation at a time when the periphery-supporting carry trade is ending will be seen very soon.
The above manufacturing data, together with hope that China's liquidity situation may be normalizing following yet another drop in Chinese SHIBOR rates (it isn't, and once the market realizes that China is effectively undergoing a $1 trillion deleveraging the eye of the hurricane will shift) has set a mood of optimism for the first day of the second half, sending US futures sufficiently high to nearly offset all of Friday's losses.
More on sentiment from Ransquawk:
Stocks in Europe continue to edge back toward their best levels of the session, as market participants react positively to reports that Japonica Partners amended its Greek bond offer and increased total size of offer to EUR 4.0 bn from EUR 2.9 bn, however at a price of 40% of par, compared to 45 cents a month ago.
  • Of note, Japonica Partners said it would purchase the Greek bonds issued last year through a tender offer that expires today. Japonica said it planned to purchase almost 10% of the total debt outstanding, which has a face value of EUR 29.6 bn.
  • Peripheral bond yield spreads are seen tighter by 8-13bps, while the Euribor curve is trading marginally steeper. However credit spreads continue to show signs of improvement, with the iTraxx Crossover index down 8 bps
  • Stocks being driven higher by consumer services and industrial sectors. The risk on sentiment remains supported by better than expected macroeconomic data out of Europe and the UK this morning. While overnight in Asia, the Nikkei 325 also benefited from a positive BoJ Tankan survey, which pointed to an improving outlook to Japan's industries.
On today's docket we have Manufacturing ISM which should make for interesting reading in light of last Friday’s
disappointing Chicago PMI print which came in at 51.6 vs the previous
month’s reading of 58.7 and consensus expectations of 55.0. In keeping with the tradition of Baffle with BS, we expect the ISM to come in well above expectations to offset the major Chicago PMI disappointment.
* * *
Goldman has more on the European June PMI data:
Bottom line: The Euro area final manufacturing PMI for June printed at 48.8, 0.1pt higher than the Flash reading (and consensus expectation). The June final manufacturing PMI stands 0.5pt higher relative to the May reading and 2.1pt above the April reading. Among the large Euro area economies, material increases in June were registered in France, Italy and Spain, while a somewhat noticeable (0.8pt) decline was recorded in Germany.
1. The final reading of the June manufacturing PMI for the Euro area was 48.8, one tenth above the flash reading released on June 20. This Final/Flash difference is somewhat consistent with developments since January, where the final manufacturing PMIs have been 0.2pt higher than the Flash print on average.
2. The final Euro area manufacturing PMI was up half a point in June, building on previous gains in May. The index now stands at its highest level since February 2012 and has generally been trending upwards since reaching a trough of around 44 during last summer.
3. The forward-looking orders-to-stocks difference rose further as the increase in the 'new orders' sub-component (0.3pt) was higher than the increase in the 'stock of finished goods' sub-component (0.1pt). New orders rose more materially in May and with the (small) increase in June, Euro area new orders now stand 4pt higher than in April and at the highest level since mid-2011.
4. The figure for Germany was revised down marginally relative to its Flash reading. The German manufacturing PMI came in at 48.6, 0.1pt down relative to its Flash and 0.8pt down on the month. In contrast, the French PMI came in one tenth above the Flash reading, and the index rose 2pt on the month to 48.4 (Chart 1). The German manufacturing PMI decline in June may be related to the flooding, and other German business indicators, such as the flash services PMI and the Ifo, showed robust increases in June.
5. Unlike Germany and France, the Italian and Spanish manufacturing PMIs do not provide a flash reading. Both the Italian and Spanish PMI showed a monthly gain; now for the third consecutive month. The June Italian manufacturing PMI rose from 47.3 to 49.1, notably higher than expected (Cons: 47.8). The Spanish PMI also surprised on the upside in June, improving from 48.1 to 50.0 (Cons: 48.5).
6. Manufacturing PMIs outside the four major Euro area economies rose modestly on the month. The largest increase was registered in Ireland which rose half a point (to 50.3). The manufacturing PMI for Greece and the Netherlands also ticked up (Chart 2).
7. In our macroeconomic forecast, we expect the Euro area recession to continue in the first half of 2013, with a stabilisation of economic activity in the second half of the year and a very modest recovery in area-wide GDP towards year-end. Both our PMI-based indicator and the Euro area CAI improved for a third consecutive month after declines in February/March.

* * *
DB's Jim Reid has the full weekend event recap, and what to look forward to:
The week ends with a payroll report that will have the market on tapering tenderhooks although Independence Day the day before might leave the markets more sparsely populated than usual for such a big release. As we stand, consensus is forecasting a 165k and 175k gain in the headline and private payrolls respectively (vs 175k and 178k previous). The unemployment rate is expected to tick down to 7.5% from 7.6%. A number around this level won't really settle the tapering argument but one notably below or above will certainly lead the arguments fairly aggressively one way or the other. So with time running out until the September FOMC, such prints are going to be huge for markets. Other important data releases include today's ISM manufacturing (consensus 50.5) and all the usual equivalent PMI numbers from around the globe. China has kicked off proceedings this morning with an official manufacturing PMI reading for June of 50.1. Though in line with consensus estimates, the result is the lowest in four months. Meanwhile the final HSBC manufacturing PMI came in at 48.2, slightly below a preliminary reading of 48.3 and 1pt below the final May reading of 49.2.
The reaction from Asian markets this morning to the Chinese data has been relatively muted. Most Asian equities are trading about half a percent lower but this was partly driven by the late sell-off in US equities on Friday which saw the S&P500 (-0.43% on the day) lose 0.6% in the final half hour of trading. The Hang Seng is closed for a public holiday today while the Shanghai Composite (-0.8%) and ASX200 (-1.4%) are both softer. The Nikkei is +0.4% helped by a strong Tankan quarterly survey which continues the recent run of better Japanese data. The large manufacturers’ index improved to 4 versus estimates of 3 and Q1’s reading of -8. The large manufacturers’ outlook component increased to 10 (vs 7 expected and -1 previously). The dollar-yen’s creep back up to 100 (99.4 as we type) is also helping sentiment in Japanese equities.
Aside from the PMIs there was also a fair bit other China-related news over the weekend. Firstly, there were some interesting comments from President Xi over the weekend on growth. The state news agency, Xinhua, quoted President Xi as saying that the performance of government officials shouldn’t be judged solely on their record in boosting GDP growth and more importance should be placed on improving people’s livelihood, social development and environmental quality.
Some commentators have taken this to mean that top officials are legitimising the case for slower growth. As far as bank liquidity is concerned, the Chairman of China’s banking regulator said in a speech over the weekend that banks had about RMB1.5trillion in excess reserves as of June 28th that could be used for payment and settlement needs, or 2x normal requirements.
We should also note the ECB meeting this week which could be interesting even if the general consensus is for no changes in refi/deposit rates. At moment only one economist surveyed by Bloomberg is expecting the ECB to cut the refi rate, and no economists are expecting a cut in the deposit rate to negative territory at this meeting. Nevertheless, Draghi's press conference usually offers up something for the market to pounce upon. Also worth watching out for is chatter about redemptions now we've passed H1 end. This has been scaring a lot of people I've talked to over the last week or so. Will there be a deluge post month/half year end in EM (equities and FI), rates and credit? That's the billion dollar question.
Over the next 24 hours, final Euroarea PMIs (including the first readings for Spain and Italy) and the US ISM manufacturing will be attracting most of the attention. The ISM should make for interesting reading in light of last Friday’s disappointing Chicago PMI print which came in at 51.6 vs the previous month’s reading of 58.7 and consensus expectations of 55.0. Over the course of the rest of the week, there will be plenty of economic data releases as we build up to the Thursday’s ECB meeting and Friday’s all-important payrolls.
Starting with Tuesday, we have US factory orders and the RBA’s board meeting. On Wednesday, the focus will be on the services PMIs for China and the Euroarea. The US non-manufacturing ISM and ADP employment prints will provide the final indications on the trend in employment ahead of Friday. US equity markets shut early on Wednesday ahead of Independence Day on Thursday. On Thursday, we have the ECB meeting/Draghi press conference together with the BoE’s first MPC meeting with Carney at the helm. Friday will be all about payrolls, but we should also highlight that German factory orders and Spanish IP will be released on the day.
* * *
SocGen's macro highlights see, not surprisingly, the ECB's wednesday meeting the the Friday NFP as the key events of the week.
Anything but a quiet start to the week and the second half of the year is penciled in for today in the wake of Friday's whipsaw price action across different asset classes. A good deal of anxiety has returned to the market after a deceptive bounce in risk assets in the middle of last week, and which has accordingly seen positions adjusted in the light of dovish central bank speak (Fed, ECB, BoE). Gold in particular (and the ZAR as a result in EM FX) continues to bear the brunt of corrective flows and technically the slide may not be over until stability returns around the $1,155 level even as prices are staging a decent $20 bounce overnight.
This week is indeed all about the ECB and US non-farm payrolls, two events separated by the 4th of July holiday in the US, and so there will be a 24-hour stint where liquidity could be poor and thus have a significant bearing on the price action. If the ECB was surprisingly neutral last month, risk/reward suggests a more candidly dovish message this time despite a round of better data. As we pointed out on Friday, the constellation has changed after the spike in periphery yields and council members gave the game away last week by stressing the importance of accommodation in the light of rising US yields to keep control of funding and borrowing rates in the periphery. Fresh policy initiatives are unlikely to be on the table, but press reports that a ‘360-degree review' of the ECB's tools is underway means concrete measures may soon be presented if the periphery sell-off worsens. Ironically, US payrolls data on Friday may be the judge of that. Solid data will nudge the Fed closer to tapering and could bring about another leg of higher yields. The SG forecast of the manufacturing is 51.5, above the consensus of 50.5. Also due today are final EU PMIs, CPI, unemployment and the UK manufacturing PMI.
Ahead of the RBA decision tomorrow, AUD/USD sank to a 33-month low on Friday and, briefly trading below 0.9144, will have pushed bulls deeper into hibernation. Technicians are targeting a 6% move to 0.8550 from here, and could get some help from the central bank if another dovish message is rolled out in the statement. Given the weak data from China lately, there could be another push lower in short-term Australian yields.


The following commentary shows that China's PMI continues to implode.  Its reading today is the lowest in 9 months: (50.1 vs 50.8 previous)

(courtesy zero hedge)

China PMI Drops To Lowest In 9 Months; Schrodinger's Economy Continues

Tyler Durden's picture

Following South Korea's dip back into contractionary mode (PMI sub-50 for first time in six months - prompting JPY strength and NKY weakness, on implicit KRW weakness retaliation), it appears China's government-sanctioned PMI (printed at 50.1 relative to 50.8 prior and 50.1 expectations) is converging down to the nation's HSBC PMI (whose Flash print was 48.3 - final due at 2145ET). This is the equal lowest print in 9 months but provides just enough cover to the current administration to maintain its tight policy stance - even if it was the biggest MoM drop in 10 months. On a side-note, all PMI sub-indices also fell MoM. The market's response is modest AUD strength and Nikkei weakness which suggests investors were hoping for a little weaker data to push China a litte closer to folding on their bubble-popping position.


Japan's domestic manufacturing sector is quite bleak as car sales plunge by 15.8%.This is the second straight month of declines.

(courtesy zero hedge)

Abenomics Update: Domestic Japanese Car Sales Plunge 15.8%

Tyler Durden's picture

While last night's Tankan manufacturing reports met lowered expectations, it seems the reality of the domestic Japanese economy remains as bleak as ever. As Nikkei reportsJapan's domestic sales of new cars, trucks, and buses declined 15.8% for a year earlier in June for the second consecutive month. Even if one argues that Abenomics goal is not just boosting the domestic economy, total Japanese car sales were down almost 11% YoY as Honda saw its sales drop a stunning 40.7%. The latest figures continue this year's downward trend and while some blame the particularly sharp drop on fewer selling days in June, the auto dealer's association also said reflects the "ongoing severe" situation in the domestic market.

Via Nikkei,

The latest figures continue this year's downward trend as sales have flagged after the government subsidies on eco-friendly cars expired in September. The association said that sales for the first half of this year are so far 11.6% off from a year earlier. While the association partly attributed the particularly sharp drop last month to the fewer number of selling days, it said it also reflects the "ongoing severe" situation in the domestic market.

Of Japan's Big Three auto makers, Honda Motor Co. suffered the steepest percentage fall in sales in June with a drop of 40.7% to 26,757 vehicles, followed by Toyota Motor Corp. which logged a 18.3% decline in sales to 121,514 vehicles. Nissan Motor Co. posted a 12.4% drop to 37,309 vehicles.


It seems that Marine Le Pen is gaining rapidly in support within France. She wishes to remove France from the EU and bring back the franc. Her candidate won in a by election last week with a popularity vote of 46%,  The candidate won over the socialists in the socialists own turf.

(courtesy Ambrose Evans Pritchard/UKTelegraph)

France's triumphant 'Joan of Arc' vows to bring back franc and destroy euro
Marine Le Pen is spoiling for a fight. The leader of France's Front National vows to smash the existing order of Europe and force the break-up of monetary union, if she wins the next election.
Mrs Le Pen said her first order of business on setting foot in the Elysee Palace will be to announce a referendum on EU membership, "rendez vous" one year later. "I will negotiate over the points on which there can be no compromise. If the result is inadequate, I will call for withdrawal," she said.
By Ambrose Evans-Pritchard
4:39PM BST 30 Jun 2013
Telegraph UK
It is no longer an implausible prospect. "We cannot be seduced," she said, brimming with confidence after her party secured 46pc of the vote in a by-election earthquake a week ago. Her candidate trounced the ruling Socialists in their own bastion of Villeneuve-sur-Lot.
"The euro ceases to exist the moment that France leaves, and that is our incredible strength. What are they going to do, send in tanks?" she told the Daily Telegraph at the Front National's headquarters, an unmarked building tucked away in the Paris suburb of Nanterre. Her office is small and workaday, almost austere.
"Europe is just a great bluff. One side there is the immense power of sovereign peoples, and on the other side are a few technocrats," she said.
For the first time, the Front National is running level with the two governing parties of post-War France, Socialists and Gaullistes. All are near 21pc in national polls, though the Front alone has the wind in its sails.
Yet it is the detail in the Villeneuve vote that has shocked the political class. The Front scored highest in the most Socialist cantons, a sign that it may be breaking out of its Right-wing enclaves to become the mass movement of the white working class.
Commentators have begun to talk of "Left-LePenism" as she outflanks the Socialists with attacks on banks and cross-border capitalism. Anna Rosso-Roig, a candidate for the Communist Party in the 2012 elections, has just defected to the Le Pen camp.
The Socialists had thought the rising star of Marine Le Pen would work to their advantage, splitting the Right. Now they discern a deadly threat. Industry minister Arnaud Montebourg lashed out last week, blaming Brussels for playing into the hands of the Front National by running roughshod over democracies and pushing austerity a l'outrance.
Mrs Le Pen said her first order of business on setting foot in the Elysee Palace will be to announce a referendum on EU membership, "rendez vous" one year later. "I will negotiate over the points on which there can be no compromise. If the result is inadequate, I will call for withdrawal," she said.
The four sticking points are the currency, border control, the primacy of French law, and what she calls "economic patriotism", the power for France to pursue "intelligent protectionism" and safeguard it social model. "I cannot imagine running economic policy without full control over our own money," she said.
Asked if she intends to pull France of the euro immediately, she said: "Yes, because the euro blocks all economic decisions. France is not a country that can accept tutelage from Brussels," she said.
Officials will be told to draw up plans for the restoration of the franc. Eurozone leaders will face a stark choice: either work with France for a "sortie concertee" or coordinated EMU break-up: or await their fate.
Mrs Le Pen fears that other EMU states will resist and let "financial Armaggedon" run its course, but it is a risk that has be taken.
Her plan is based on a study by economists from l'École des Hautes Études in Paris led by Professor Jacques Sapir. It concludes that France, Italy, and Spain would all benefit greatly from EMU-exit, restoring lost labour competitiveness at a stroke without years of depression.
They say the eurozone's North-South imbalances have already gone beyond the point of no return. Attempts to reverse this by deflation and wage cuts must entail mass unemployment and loss of the industrial core. The current strategy of internal devaluation is self-defeating in any case, since recession causes debt ratios to climb faster.
Prof Sapir said the gains are greatest in a coordinated break-up with capital controls where central bank intervention steers the new currencies to target levels. The model assumes that the D-Mark and Guilder is held to a 15pc rise against the old euro, while the Franc falls 20pc.
The gains are less if EMU collapses in acrimony and currencies overshoot. This would inflict a violent deflation shock on Germany, but would still be strongly positive for the Latin bloc.
"A lot of politicians have been coming to see me, both Gaullistes and Socialists. They agree, but don't want to come out publicly. They want somebody else to take the lead. If Marine Le Pen wishes to use my work, I have no problem," he said.
Mrs Le Pen is a single mother of 44, more relaxed about gay rights and abortion than she lets on, closer in some ways to the assassinated Dutch populist Pim Fortuyn than to her cantankerous father Jean Le Pen, who stepped down as party leader two years ago. Mr Le Pen in turn deplores her eclectic modernism as an overlay of "petit bourgeois" views picked up in Paris schools.
She has carried out a quiet purge of the Front, pushing known anti-semites to the sidelines. Vichy nostalgia is out. While her father called the Holocaust an historical "detail", she calls it the "pinnacle of human barbarism". She courts Jewish favour, aiming her fire at Jihadists instead. "Political parties are like people. There is adolescence when you do do crazy things, and then maturity. We are now ready for power," she said.
This campaign of "dédiabolisation" or image detox seems to have worked. Only a minority of voters still thinks the Front is a "threat to democracy". Mrs Le Pen is winning over white working class women in droves. The feminized Front is no longer the party of the angry white male. The softer image is why finance minister Pierre Moscovici describes her as "more dangerous than her father".
It is her defence of the French welfare model and her critique of capitalism that gives her a Leftist hue -- some call it 1930s national socialism -- so far in outlook from Britain's UKIP. She sounds like Occupy activists in her attacks on high finance and the way corporations profit from labour arbitrage, playing off wages in the West against cheap labour in Asia. "It is the law of the jungle," she said.
Nor is she on the UKIP page with her broadsides against Washington and Nato, or her call for France to retake its place as "non-aligned" voice in a multipolar world. It is an anti-Atlanticist patriotism.
She claims to be the true heir of General Charles de Gaulle, accusing the Gaulliste UMP party of selling its soul to Europe and the Anglo-Saxon order. "There was a de Gaulle of the Left, and a de Gaulle of the Right. There were two de Gaulles. We stand for both," she said.
Mrs Le Pen said the Socialists are in melt-down, victim of their own subservience to EU economic doctrines, while their barrage of attacks on Germany's Angela Merkel smacks of a dependency syndrome. "They whine about Chancellor Merkel, the wicked enforcer who metes out punishment, but Merkel is merely defending the interests of Germany, which are not the same as ours."
She said the EMU crisis is structural. North and South need different exchange rates. "The D-Mark would be rising if it were not for the euro, and that means Germany has a chronically undervalued currency. The euro is far too strong for France, and it is eating away our competitiveness," she said.
It is hard know whether the French people would ever vote en masse for an all-out clash with Europe, let alone for her Jeanne d'Arc messianism. Yet the longer the economic slump goes on, the greater the risk for Brussels and Berlin that French patience will snap, setting off one of those eruptions that have punctuated French history through the ages.
A recent Pew Foundation survey said French support for the EU Project has collapsed from 60pc to 40pc over the last year, and 77pc think economic integration has been damaging.
President Francois Hollande says the EMU crisis is "finished" and recovery is at hand, though it is not clear what will break the vicious cycle as France carries out fiscal tightening of 1.8pc of GDP this year and the deepest cuts in half a century. Monetary policy remains contractionary for most of Latin Europe.
"If the government really tries to force the budget deficit down to 3pc of GDP, the economy will contract again next year by 0.5pc to 0.8pc," said Prof Sapir. "Unemployment will continue rising by 30,000 to 40,000 a month. There may be another 600,000 people without jobs by the end of 2014."
France endured the same slow torture in the early 1930s under the Gold Standard, stoically accepting the "500 deflation decrees" of premier Pierre Laval. The dam broke in 1936 with the election of spurned outsiders, then the Leftist Front Populaire, with Communist support. The Gold Standard collapsed.
The emergence of Marine Le Pen as a contender for office in Europe's pivotal power may prove the electric shock needed to force a radical shift in EMU crisis strategy, or at least to force France's Socialist Party to break with Germany and fight for a full reflation agenda, if only to avert its own ruin.
"We have succumbed to a spirit of slavery in France. We have forgotten how to lead, and our voice is not heard any more," she said. It will be heard now.


From Bloomberg:  we learn taht Ireland is set to tap the ESM for 30 billion euros. This should be interesting to follow especially when they have limited the rescue funds to the entire banks at 60 billion euros.

(courtesy Bloomberg)

"Ireland planning to tap ESM: Bloomberg cited comments from Irish Finance Minister Michael Noonan, who said on RTE television that Ireland is planning to ask the ESM for as much as €30B to cover some of the government's cost of bailing out the banking system during the sovereign debt crisis. The article pointed out that when Eurozone finance ministers recently agreed to cap direct recapitalizations from the bailout mechanism at €60B, they also said that retroactive application would be decided on a case-by-case basis. German Finance Minister Schaeuble noted at the time that the flexibility was intended for Ireland."

Sunday night we witnessed massive protests in Egypt's main streets:

(courtesy Bloomberg)

Mursi’s Opponents Amass in Egypt’s Streets in Protest

Opponents of Egyptian President Mohamed Mursi marched in the hundreds of thousands on the first anniversary of his taking office yesterday, seeking to oust the Islamist leader they say has betrayed their movement for change. At least five people were reported killed.
Mursi’s critics remained early today in Tahrir Square, epicenter of the 2011 uprising, and outside the presidential palace in Cairo to protest what they say is a looting of power by the Muslim Brotherhood, from which Mursi hails. His supporters, some wielding makeshift shields and sticks they say are for self-defense, vowed to protect Mursi’s leadership, saying it derives from the election that made him the country’s first democratically chosen civilian president.
The dueling rallies were the culmination of polarization that has sparked bouts of violence and helped send economic growth plummeting to one of the lowest points in two decades. Unrest in the run-up to June 30 claimed at least eight lives and left Egyptians anxious about what to expect next.
“There’s a good scenario that could happen, which is for the president to recognize that his rather unilateral approach has created a big political crisis and that he would need to offer some compromises,” Yasser el-Shimy, a Cairo-based analyst with the International Crisis Group, said. “The worst- case scenario, however, is if the big turnout induces the opposition to” insist “that Mursi must leave immediately.”
Such a departure was unlikely, he said, and “a lot of this is going to depend on how sustained the momentum can be.”

Biggest Challenge

The demonstrations are the biggest challenge Mursi has faced. The military warned last week it won’t let the nation descend into chaos.
One person was killed in an attack on a protest in the city of Beni Suef, south of Cairo, while another died in Alexandria, the state-run Middle East News Agency said. Three others were killed in Assiut, Upper Egypt, the state-run Ahram Gate reported. At least 253 people were injured in different provinces, MENA said, citing the Health Ministry.
In Cairo, at least 36 cases of mob sexual assaults were reported in Tahrir Square by the Operation Anti-Sexual Harassment group. The Muslim Brotherhood’s headquarters in the city’s Moqattam district was attacked by about 500 protesters armed with Molotov cocktails and set on fire, MENA said.

Markets Roil

Egypt’s financial markets have reflected the ferment. The benchmark EGX 30 stocks index slumped 13 percent in June. The country’s default risk soared to a record 888 basis points last week, putting Egypt among the riskiest 10 credits in the world, according to data compiled by Bloomberg.
The EGX 30 added 1.4 percent yesterday, though the 148 million Egyptian pounds ($21 million) of shares traded equaled only 38 percent of the market’s one-year daily average, according to data complied by Bloomberg.
“I am protesting because I found no bread, freedom or social justice in our country,” 35-year-old Marian Makram said, repeating some of the main demands of the 2011 revolt that unseatedHosni Mubarak. “Everything is going from bad to worse. At home, there are power cuts. On the streets, there is no gas and no security. Enough,” she said, waiving a red card outside the Ittihadiya palace reading “leave.”
Opponents turned concrete barriers outside the presidential complex into a canvas for graffiti. “The revolution is continuing,” read one scribble. “No to the Brotherhood,” declared another.

A Failure

Across town, in Tahrir Square, Ayman Mohamed, who is 40 and unemployed, said Mursi’s management has been a “failure.” “All what we have done is move backward, and he doesn’t seem to have a plan,” he said. “If I had a good job and was treated with respect, why would I have protested?”
The National Salvation Front opposition bloc said the legitimacy of the regime has fallen and that it has no choice but to leave immediately. It called for protests to continue and said Egyptians should strike.
The demonstrations cap weeks of surging anger amid an economic crisis that has sent unemployment soaring beyond 13 percent and foreign reserves dropping by more than half since the uprising. Fuel shortages have sparked long lines at gasoline stations, clogging streets and feeding anger at Mursi.
Presidential spokesman Ihab Fahmy urged protesters to remain peaceful to avoid civil strife. “The right to peaceful protest is guaranteed to all, but violence, killing and sabotage are highly condemned,” he said at a news conference. “The state won’t treat law-breaking lightly.”

Way Out

Fahmy said dialog was the way out of the crisis. Mursi’s critics have spurned such calls, saying the government wasn’t serious.
As Mursi’s opponents -- an amalgam of secularists, youth activists, former regime supporters and Egyptians frustrated with the stumbling economy -- converged on Tahrir Square and elsewhere in the country, his supporters rallied in the capital’s Nasr City district, not far from the Ittihadiya palace.
Some manned entrances, checking IDs and frisking those on their way in. Others chanted: “Islamic, Islamic,” and “There is no god but God; we are the soldiers of God.”
They say the president won a democratic election and any change must come through the ballot box.
“The president was chosen by the people,” 48-year-old Mohamed Farag said. “He must complete his term. At the end of the term, the ballot box will be the arbitrator, and we will accept the result even if it brought us a Christian.”

Fair Chance

Mursi, he said, wasn’t given a fair chance after taking over “a ruined country, rife with corruption.”
Mursi has offered similar arguments in rejecting calls for an early presidential vote.
If Egypt were to replace someone elected “according to constitutional legitimacy -- well, there will be people or opponents opposing the new president too, and a week or a month later, they will ask him to step down,” Mursi told Britain’s Guardian newspaper in an interview published yesterday.
The president and his supporters blame the nation’s plight on frequent protests and the opposition’s rejection of dialog.
The opposition has been encouraged by the 22 million signatures the Tamarud, or Rebel, campaign maintains it has collected demanding Mursi’s ouster. His critics have also taken comfort in the defense minister’s warning last week to protect Egypt from chaos. Mursi told the Guardian newspaper that he was “very” confident the military wouldn’t intervene.
Tensions in Egypt have resonated abroad, with U.S. President Barack Obama saying he’s monitoring protests “with concern” and that his “most immediate” priority is making sure U.S. embassies and consulates are protected. A U.S. citizen, Kenyon College student Andrew Pochter, was among at least three people killed in Alexandria on June 28.
To contact the reporters on this story: Mariam Fam in Cairo at; Tamim Elyan in Cairo at; Nadine Marroushi in Cairo

Egypt's Morsi Still President As Ministers Resign, Muslim Brotherhood Offices Destroyed

Tyler Durden's picture

With over a million people crowded into the streets of Cairo (and 16 reported dead and 781 injured according to The Jerusalem Post), the situation in Egypt is becoming more unstable. Amid cheers of "the people demand the fall of the regime," protesters set fire to and ransacked the Muslim Brotherhood's main offices all over Egypt. Many saw this as another victory towards their goal of Egypt not being ruled under Islamic law noting, that they "feel victorious, but we'll only have truly won once Morsi leaves." It seems the pressure is building as five Egyptian ministers have just resigned amid the growing chaos.

The Muslim Brotherhood offices:

The headquarters of Egypt's Muslim Brotherhood have been burned and ransacked following an all-night siege – one day after millions protested on Egypt's streets calling for President Mohamed Morsi's resignation.


With police nowhere to be seen, Brotherhood cadres returned fire, killing at least four, and injuring at least 80 – according to medics at the scene.


"It's a great feeling. I've wanted to do this for three years," said Ahmed Yassin, a student from Alexandria, holding the office nametag of Mohamed el-Badie, the Brotherhood's leader. "Their offices are being trashed all over Egypt – but this was the most important, because they are running the country from this office."


Inside, there was chaos, with black smoke still billowing through the upper rooms, and looters fighting over the spoils. Outside, a crowd of 200 chanted "the people demand the fall of the regime", indicative of the view that the Brotherhood has seized control of most of the state.


The scene at the headquarters was a microcosm of the extreme polarisation affecting Egyptian society, which is divided between those who may be religious, but do not seek an Islamic state – and Islamists like the Brotherhood, which seeks to use the concepts of Islamic law to govern Egypt.Even state institutions appear to have been drawn into the division. The police, who defended the same building during a similar attack in March, did not intervene on Sunday.

"I feel victorious," said Ahmed Badawy, a Cairo resident hi in the hand by birdshot, fired by Brotherhood members during the night. "But we'll only have truly won once Morsi leaves.


The finally this decree from the Egyptian military:

Egyptian Military Coup In 48 Hours If No Solution Found

Tyler Durden's picture

The Egyptian Military just made a public statement on Egyptian TV and it appears the country is close to another military coup:
In other words, do as the people want, calm this down now, or we will step in within 48 hours.


Mark Grant's message to us:  stay away from any European bank, whether it is a deposit,
or a holder of preferred banking stocks or holding their equity.  There will be no banking union for at least 5 years and thus you are at your peril buying into these:

(courtesy Mark Grant/Out of the Box and Onto Wall Street) 

The European Banking Union That Is Not

Tyler Durden's picture

Submitted by Mark J. Grant, author of Out of the Box,
There is no European Banking Union. This is a good place to start. It does not exist which is why all of the ballyhoo and discussion in the Press is of such little importance. This grand scheme is nothing more than theory at this point and not a very good theory at that.

Under any scenario presented some plan does not go into place for five years. The legislation could be changed, altered or retracted seventeen times during this timeframe. So when it comes to the next sovereign or banking crisis in Europe there is no Greek template, no Cyprus template and the reality is that there is no template at all for anyone to follow or for investors to rely upon. So for the next five years it will be the whim of the European Union that will dictate what measures should be taken.

This reality has contagion and fallout attached. The risk of owning subordinated debt, preferred stocks and equity in European banks is now incalculable. No one has any idea if another Cyprus conclusion might be forthcoming so that the differentiation between owning American securities and European securities is huge in my opinion. While the risk factor cannot be quantified it is still quite apparent to me that there is much more risk now in owning European securities and also that the market has not, at this point, adequately priced in this risk.

If you have money in a European bank, a depositor either as an individual or a corporation, if you own securities from equity to senior debt, if you have any kind of repo agreement; you are now in a position of heightened risk.

Both Greece with its retroactive clause changes and Cyprus with its seizure of assets, conversion of deposits to equity and the freezing of accounts with capital controls inaugurated, demonstrates one thing clearly; there was no due process of law at least as we know it in the United States. In each of these examples it was political whim that dictated the decisions and for the next five years there will be nothing different. For the next five years it will be politics devoid of the Rule of Law that will decide how anyone is treated when there is a crisis and given the financial condition of the European banks I can virtually assure you that new crises will be forthcoming.

Let's stick to just what we know. Greece, Cyprus, Ireland, Portugal, Spain, Italy and France are in trouble. I am not discussing the markets here but their underlying economic condition. Each of these countries are in a perilous state. If one major bank in any of these nations gets in trouble then you have no idea and I have no idea how the EU might respond. Is it to be the Greek template, the Cyprus template or some new scheme that will be implemented in a late night furry of political decision making? What can be said with accuracy is that there is no template for these decisions and that there will not be one during the next five years!

As usual there will be money made for those that get the timing right. Certain speculators will profit. As usual there will be money lost for those that get the timing wrong. Certain speculators will suffer.

What is of the utmost importance to understand though is that the discussion of a banking union has not led to the creation of one and that a massive amount of risk remains on the table for those that do business with the European banks. Any kind of business. I repeat, any kind of business.

"There was a tiny pop, and the place where Sirius’s head had been was flickering flame once more.”

      -J.K. Rowling, Harry Potter and the Order of the Phoenix

your closing Japanese 10 year bond yield very early Monday morning:

 up in yield by 3 basis points:

Japan Govt Bond Year to maturity 10 Year Simple Yield


0.880.03 3.63%
As of 03:06:00 ET on 07/01/2013.


Your opening 10 year USA 10 year bond Monday morning: 

up 4 basis points from Friday night.....extremely dangerous as our interest rate swap underwriters are still underwater:

US Generic Govt 10 Year Yield


2.530.04 1.58%
As of 06:45:00 ET on 07/01/2013.


The USA index is down early this morning by 16 cents at 83.07.  


Early Monday  morning currency crosses   (7 am)

Monday morning we  see a little  euro strength against the dollar from the close on Friday  with this time  trading well above  the  1.30 mark at 1.3048.  The yen this  morning,is weaker  trading down 50 basis points to 99.58 yen to the dollar (dollar up).   

The pound, this morning is a touch stronger against the USA dollar, with this time still trading well below  the 1.53 column at 1.5224. The Canadian dollar currency is a touch weaker against the dollar trading above the 1.05 column at 1.0507.  We have the sentiment this morning with a slight  risk is on situation with all of our European  bourses   in the green.   The Nikkei exchange was on a roller coaster ride this morning finishing up by 175 points or 1.28% after being down for most of the session, being fueled by the low yen value and thus being advantage to the yen carry traders.  The Japanese 10 year bond yield finished up in yield by 3 basis point to .88%. 

Gold this morning is trading at 1238.0 and silver at 19.50.

Euro/USA    1.3048 up  .0039
USA/yen  99.58  up  .342
GBP/USA     1.5224 up .0015
USA/Can      1.0507 down  .0029


Your closing Spanish 10 year government bond:

(  drop in yield of 16 basis points/nobody read that OMT will be limited to 60 billion euros )



4.600.16 3.42%
As of 11:59:00 ET on 07/01/2013.


Closing Italian 10 year bond yield:

(Draghi's pledge for more oMT/more jawbonning)

Italy Govt Bonds 10 Year Gross Yield


4.420.13 2.86%
As of 11:59:00 ET on 07/01/2013.


Your closing 10 year USA 10 year bond yield: (same close as Friday)

US Generic Govt 10 Year Yield


2.470.01 0.44%
As of 16:20:00 ET on 07/01/2013.

Your closing figures from Europe today. Key crosses late Monday afternoon 5 pm:

The Euro strengthened slightly this  afternoon closing this time well above the 1.30 mark at 1.3062.  The yen  proceeded to weaken in the afternoon in value finishing well above the 99 barrier to 99.62.   The pound weakened a lot from early this morning  , closing down at 1.5217.   The Canadian dollar strengthened this afternoon against the dollar finishing the day at 1.0495.

The USA index was down 22 cents at 83.01 


Euro/USA    1.3062 up  .0053
USA/Yen  99.62 up 0.483  
GBP/USA     1.5217 up .0008
USA/Can      1.0495 down .0015


Closing bourses figures for Monday

i) England/FTSE  up 92.31 points or  1.49% 

ii) Paris/CAC up 28.57  points or  0.76%
iii) German DAX: up 24.70 pts (or  .31%)  
iv) Spanish ibex up  144.40  points or 1.86% 

v) Italian bourse (MIB) up: 220.29  or  1.45%

and the Dow up 65.36 points (0.44% )....

And now for USA news:

More b.s. data from the USA

(courtesy zero hedge)

Manufacturing ISM Beats As Expected, Employment Index Drops To Lowest Since September 2009

Tyler Durden's picture

No surprise in today's most important economic report: just as we predicted first thing this morning, "In keeping with the tradition of Baffle with BS, we expect the ISM to come in well above expectations to offset the major Chicago PMI disappointment." Just as expected, the headline June ISM just printed at 50.9, a beat of expectations of 50.5, and up from May's 49. And just to make sure everyone is completely baffled with unbelievable BS, while the New Orders number rose from 48.8 to 51.9, and Production (+4.8), Prices (+3), Inventories (+1.5), and Deliveries (+1.3), all rose, it was the time of Employment Index to drop from 50.1 to 48.7: the first sub-50 print since September 2009. In other words, just as every week/strong economic report is offset by a matchin strong/weak economic report a few days later, expect this Friday's NFP to come in blistering and to deny the ISM weak jobs number especially since Goldman is now warning of a "disappointment" to consensus (and with that put the Taper tantrum back front and center).
From the ISM's Holcombe: "The PMI™ registered 50.9 percent, an increase of 1.9 percentage points from May's reading of 49 percent, indicating expansion in the manufacturing sector for the fifth time in the first six months of 2013. The New Orders Index increased in June by 3.1 percentage points to 51.9 percent, and the Production Index increased by 4.8 percentage points to 53.4 percent. The Employment Index registered 48.7 percent, a decrease of 1.4 percentage points compared to May's reading of 50.1 percent. Manufacturing employment contracted for the first time since September 2009, when the index registered 47.8 percent. The Prices Index registered 52.5 percent, increasing 3 percentage points from May, indicating that overall raw materials prices increased from last month. Comments from the panel generally indicate slow growth and improving business conditions."
The breakdown:
Visually, the headline print:
And just the employment index:
From the respondents:
  • "Business remains good to improving." (Miscellaneous Manufacturing)
  • "Industry volumes picking up with improved housing starts." (Electrical Equipment, Appliances & Components)
  • "Indications are that customers have acceptable inventory levels, and as a result, are backing down on new orders and reassessing market conditions." (Wood Products)
  • "Last couple of weeks a little slower." (Furniture & Related Products)
  • "Seeing signs of life through summer retail [sales] promotions — still an overall soft market." (Food, Beverage & Tobacco Products)
  • "Business is steady. Qualified CNC machinists are hard to find." (Fabricated Metal Products)
  • "Weather conditions are causing uncertainty in agricultural markets." (Machinery)
  • "Continued slow improvements." (Transportation Equipment)
  • "June sales appear to have rebounded from what was a lackluster May." (Paper Products)
  • "Slow growth continues to choke the recovery. We are not out of the woods yet by any stretch of the imagination." (Chemical Products)
And the breakdown of commodities up and down in price:
Commodities Up in Price
  • Aluminum Products; Caustic Soda (3); Corrugated Boxes (11); Corrugated Packaging (2); Lumber (6); Plastic Products; Plywood; and Polypropylene*.
Commodities Down in Price
  • Butter; Hydraulic Components; Polypropylene (2)*; Stainless Steel (2); Steel (3); Steel — Cold Rolled; Steel — Hot Rolled (2); and Sugar (2).
As a result, algos are buying stocks head over fist, because algos are buying stocks head over fist.


And today's action:

Early Exuberance Fades As Stocks Slip And Bond Yields Dip

Tyler Durden's picture

We appeared to go from good is good (but the underlying macro data this morning also provided some bad is good news)to good is bad by the close. The Discretionary sector almost reached back to unchanged from the FOMC statement but that appeared to be the short-term-top as it faded back by the close. Interestingly with bonds rallying notably from overnight high yields, bond-like stocks actually suffered today (great un-rotation?). Credit markets were entirely unimpressed by the early excitement in stocks and as we entered the last hour stocks began to sink and credit rally for the divergence. Gold and Silver diverged this afternoon with the yellow metal holding gains and coupling with WTI for a 1.5% gain on the day (andgold's best 2 days in over 4 years) while Silver slipped this afternoon to end -0.3%. The USD slow-leaked all day (-0.2%) amid AUD strength and modest JPY weakness (that provided some support for risk-assets early on). Volume was awful - around 30% below average. VIX fell on the day but rose notably more than stocks would imply into the close as hedgers grabbed on but stocks were sold as the Egyptian situation escalated.

The discretionary sector almost made it back to unchanged from FOMC - and note how Utes were sold heavily (even as bonds have rallied in the last 2 days)...

Across the indices, AAPL's 3.6% gain today provided the outperformance juice for NASDAQ but they remain down 1.5-20.% from the FOMC...

The S&P 500 stalled at its 50DMA once again as volume fell and the last 5 days has been the best of the year...

Credit wasn't buying it and into the close we saw pairs trading to bring them closer into line...

Treasuries rallied off overnight Asia session spike high yields... with 2.50% seemingly the tractor beam for 10Y for now

Gold and silver diverged as Copper was well bid (because China didn't explode last night?) and WTI pushed on above $98 and narrowed the Brent-WTI to $5 for the first time in months...

Charts: Bloomberg and Capital Context
Bonus Chart: It appears the complacency among the gold market participants that the precious metal is going to keep falling has never been higher (based on options-implied skewness)...

Bonus Bonus Chart: Don't be too excited about the recent drop in retail gas prices...


Shifty said...

Did JPM make the deliveries for June or have they got more time to deliver? Why no default if it's July and they still need to settle?

AuBull said...

Because the deliveries only involve a warrant on registered gold changing ownership; the JPM vault inventories are not impacted.

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