Gold World News Flash |
- JPMorgan et al Head For the Silver Exits
- The Next Big Emerging Markets?
- Housing: An Exercise In Truth-Finding
- Record Commercial Real Estate Deterioration In June As CMBS Investors Pray For 50% Recoveries
- Rosenberg: Gold Sell-Off Is a Buying Opportunity
- ECRI's Growth Guage Continues to Decline
- IPO Market Sizzles - In China
- Trading Week Outlook: August 2 - 6, 2010
- Gene Arensberg: Gold a buy, silver not quite yet
- Nielson: The End Game is Either Hyperinflation or Debt Implosion - Got Gold?
- AIMCo Sees Returns Rebound in 2009-2010
- Butler: JP Morgan "Covering Its Silver Shorts Like Crazy"
- Discount Window Borrowings Plunge To Just $11 Million, Lowest Since 2007; And Other Observations On The Future Of Fed Liabilities
- Marc Faber Questions if Dow Could Hit 1,000
- July Asset Class Performance
- Silver Prices Retreat in July 2010
- Bullion Prices and Business July 2010 Review
- Ancient Tetradrachm Featured in Heritage Boston ANA Auction
- Morgan ‘covering like crazy’ in silver, Ted Butler tells King World News
- Morgan ‘covering like crazy' in silver, Ted Butler tells King World News
- Adrian Douglas: What’s unravelling is gold price suppression
- Adrian Douglas: What's unravelling is gold price suppression
- Gold in BIS swaps said to have come from looted bank customers’ deposits
- Gold in BIS swaps said to have come from looted bank customers' deposits
- Have We Seen The Final Bottom For Gold or Just a Temporary One?
- This Past Week in Gold
- [1154] The Truth About Markets – London – 31 July 2010
| JPMorgan et al Head For the Silver Exits Posted: 31 Jul 2010 08:09 PM PDT Gold did virtually nothing on Friday until Hong Kong closed for the weekend and the London a.m. gold fix was in at 10:30 a.m. local time. From there, gold gained about five bucks between then and 8:45 a.m. in New York... and then lost it all within the next hour of trading. But the moment that the London p.m. gold fix was in at 10:00 a.m... gold caught a bid... and by the end of Comex trading at 1:30 p.m. Eastern, gold was up fifteen bucks. From there it basically traded sideways for the rest of the day. Gold's low price [around $1,166 spot] was early in the Far East trading day... and the high [$1,184.60 spot] was in New York moments before the Comex close. Silver's price pattern was very similar to gold's... but was more 'volatile'. In my brief conversation with Ted Butler yesterday, he felt that most of silver's price action after the Comex open was JPMorgan covering short positions. Silver managed to slice through $18 to the upside... but wasn...
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| The Next Big Emerging Markets? Posted: 31 Jul 2010 08:09 PM PDT By Frank Holmes CEO and Chief Investment Officer When countries get grouped together for economic or political purposes, an acronym or other shorthand device is soon to follow. OPEC, EU and G7 are a few of the old standards, while G20, PIIGS (European nations with dangerously large sovereign debt burdens), and of course BRICs are newer examples. Now The Economist is getting into the game with “CIVETS.” This venerable magazine is not reinventing itself as a British version of National Geographic – we’re not talking about the civets that prowl the treetops in the tropical forests of Africa and Asia. CIVETS in this case refers to Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa – six countries that could be the next wave of emerging markets stardom. The Economist’s basic case: these six have large and young populations, diversified economies, relative political stability and decent financial systems. In addition, they a...
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| Housing: An Exercise In Truth-Finding Posted: 31 Jul 2010 08:08 PM PDT Market Ticker - Karl Denninger View original article July 31, 2010 09:26 AM Now comes Hankey Pankey Paulson trying to cover up his own legacy, with the following piece of bilge: [INDENT]A significant root cause of the crisis was the combined weight of government policies promoting homeownership; these are apparent in the housing GSEs, the Federal Housing Administration (FHA), the Federal Home Loan Banks, the federal tax deduction for mortgage interest and various state programs. Homeownership was overstimulated to the point that it was unsustainable and dangerous to the broader economy. [/INDENT]Uh huh. Remember this, it's all the Democrats fault. It's not the fault of those who put together "faux capitalism" - that is, the principle that when one wins one keeps the money. When one loses - and especially when one blows an intentional bubble and then has it collapse around them, they lose everything they allegedly "made" plus perhaps more. Let's also not forget tha...
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| Record Commercial Real Estate Deterioration In June As CMBS Investors Pray For 50% Recoveries Posted: 31 Jul 2010 06:54 PM PDT
In continuing with the trivial approach of actually caring bout fundamentals instead of merely generous (and endless) Fed liquidity, we peruse the most recent RealPoint June 2010 CMBS Delinquency report. The result: total delinquent unpaid balance for CMBS increased by $3.1 billion to $60.5 billion, 111% higher than the $28.6 billion from a year ago, after deteriorations in 30, 90+ Day, Foreclosure and REO inventory. This represents a record 7.7% of total outstanding CMBS exposure. Even worse, total Special Servicing exposure by unpaid balance has taken another major leg for the worse, jumping to $88.6 billion, or 11.3%, up 0.7% from the month before. And even as cumulative losses show no sign of abating, average loss severity on CMBS continues being sky high: June average losses came to 49.1%, a slight decline from the 53.6% in May, but well higher from the 39.6% a year earlier. Amusingly, several properties reported loss % of 100%, and in some cases the loss came as high as 132.4% (presumably this accounts for unpaid accrued interest, and is not indicative of creditors actually owning another 32.4% at liquidation to the debtor in addition to the total loss, which would be quite hilarious to watch all those preaching the V-shaped recovery explain away. Of course containerboard prices are higher so all must be well in the world). Putting all this together leads RealPoint to reevaluate their year end forecast substantially lower: "With the combined potential for large-loan delinquency in the coming months and the recently experienced average growth month-over-month, Realpoint projects the delinquent unpaid CMBS balance to continue along its current trend and potentially grow to between $80 and $90 billion by year-end 2010. Based on an updated trend analysis, we now project the delinquency percentage to potentially grow to 11% to 12% under more heavily stressed scenarios through the year-end 2010." In other words, the debt backed by CRE is getting increasingly more worthless, even as REIT equity valuation go for fresh all time highs, valuations are substantiated by nothing than antigravity and futile prayers that cap rates will hit 6% before they first hit 10%. We dare all the V-shapists to point out where precisely on the chart above is one supposed to look for this ephemeral economic improvement.
And an even scarier dynamic is currently occurring in the Special Servicing space, where after a slight decline in the rate of deterioration, June once again saw a surge in this forward looking indicator.
RealPoint has this to share on the role of special servicing:
We hope for the sake of all those value investors who have bought into the GGP resurrection story, that they are right, although if one actually goes by such things as fundamentals, which value investors presumably track as well, things are not looking good:
The neverending deterioration has forced RealPoint to reduce its already bleak outlook for future delinquency trends, noting the following dynamics:
The 5 and 7 Year cliff refi issue is particularly notable in a delinquency exposure chart by vintage, where it is all too visible that 10 Year paper in need of rolling is going delinquent at an alarming rate: well over a quarter of all outstanding 1999 CMBS is in delinquency as there is nobody willing to fund a roll of the underlying debt!
And when looking at the most important category of all: liquidations and loss averages, these show no improvement either, as prevailing loss averages amount to about half of total outstanding principal (a finding confirmed recently by Chicago Real Estate Daily, which confirmed that a development site in the South Loop was auctioned off for $11.3 million on total debt of $25.3 million: a less than 50% recovery).
A table of montly average losses shows that there is little to be cheerful for if one is a CMBS investor: in fact half of little may be the best bet (especially for multifamily, industrial and retail property types).
Full RealPoint report here.
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| Rosenberg: Gold Sell-Off Is a Buying Opportunity Posted: 31 Jul 2010 06:38 PM PDT The Pragmatic Capitalist submits: David Rosenberg says the bull market in gold is far from over. While some have been calling for a peak in gold prices Mr. Rosenberg says the evidence continues to favor the continuation of the bull market in the yellow metal:
Complete Story »
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| ECRI's Growth Guage Continues to Decline Posted: 31 Jul 2010 06:35 PM PDT The Pragmatic Capitalist submits: The Economic Cycle Research Institute’s Weekly Leading Index rose for the week from 120.6 to 121.1, but the growth gauge continued to decline to -10.7% as of July 30th. Last week’s decline was revised down to 10.5%. The growth gauge is a 4 week moving average so it is not unusual to see the growth gauge move in the opposite direction of the index. The latest reading is firmly in position that has always preceded recession, however, Lakshman Achuthan continues to believe that the current decline is not yet indicative of a double dip. Complete Story »
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| Posted: 31 Jul 2010 06:03 PM PDT The Burrill Report submits:
We spoke to Greg Scott, president and founder of the consulting firm ChinaBio and publisher of ChinaBio Today, about the thriving IPO market for life sciences companies there, how that’s evolved over the past year and what the outlook is moving forward. Complete Story »
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| Trading Week Outlook: August 2 - 6, 2010 Posted: 31 Jul 2010 04:42 PM PDT All Things Forex submits: The busy trading week ahead will bring a sequence of crucial U.S. economic data culminating with the U.S. Non-Farm Payrolls and Employment Situation report, which could provide further evidence that slow jobs creation and high unemployment could continue to restrain the Fed from raising rates and possibly even force the central bank into offering additional monetary policy stimulus. Complete Story »
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| Gene Arensberg: Gold a buy, silver not quite yet Posted: 31 Jul 2010 02:29 PM PDT 10:30p ET Saturday, July 31, 2010 Dear Friend of GATA and Gold (and Silver): Gene Arensberg's new Got Gold Report shows large commercial traders starting to re-establish short positions in gold while still covering shorts in silver. Gold has fallen into Arensberg's buy zone but silver not quite yet. His report is headlined "COT Flash July 31" and can be found here: http://www.gotgoldreportsubscription.com/COT20100731.pdf CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php Join GATA here: New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth
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| Nielson: The End Game is Either Hyperinflation or Debt Implosion - Got Gold? Posted: 31 Jul 2010 02:28 PM PDT Where a deflationary implosion differs from hyperinflation is that in such an implosion all asset-prices become severely depressed and most people are more likely to move to cash because of its supposed buying power. Read More...
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| AIMCo Sees Returns Rebound in 2009-2010 Posted: 31 Jul 2010 11:23 AM PDT
Last Saturday, Lisa Schmidt of the Calgary Herald reported that AIMCo sees returns rebound:
As reported in the article, official figures won't be released until this fall, when AIMCo files its annual report. You can, however, read AIMCo's 2008-2009 Annual Report and find some very interesting information [Note: Pay attention to the benchmarks used to evaluate alternative asset classes]. Despite the rebound in returns, Mr. de Bever continues to deal with PR issues. But as Gary Lamphier of the Edmonton Journal reports, PR perils part of life for CEO at AIMCo:
I agree with Mr. de Bever. I am a fiscal conservative but fear that if governments pull the stimulus too quickly, then we risk heading into a third depression.
Mr. de Bever is one of the smartest pension fund managers I've ever met. He knows what value means and is patient enough to "sit tight" waiting for the right opportunities to come along. Two years ago, I wrote that AIMCo was lucky to get him as their new CEO. I stand by that comment.
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| Butler: JP Morgan "Covering Its Silver Shorts Like Crazy" Posted: 31 Jul 2010 10:08 AM PDT
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| Posted: 31 Jul 2010 08:58 AM PDT
In all the recent hoopla over Excess Reserves and spurious rumors over whether or not they should generate any form of interest (readers will recall a key catalyst for a surge in the market two weeks ago was the expectedly false rumor that Bernanke would announce the elimination of any IOR (Interest Paid On Reserves) rather than keeping the even current minimal 0.25% rate), everyone seems to have forgotten that old staple: the Discount Window. And probably logically so: while the Excess Reserve issue is one that deals with excess liquidity in the banking system (by definition: otherwise it would be lent out to consumers), Discount Window-related concerns deal with the opposite, or a liquidity deficiency. Logically, the two are mutually exclusive: near record excess reserves held with Federal Reserve Banks simply means that banks are not in any want for money (of any term, but most specifically ultra-short term).Looking at the Fed's H.4.1 statement confirms that for the week ended July 29, the Fed's Primary Credit facility (aka the current version of the Discount Window, together with the Secondary Credit and the Seasonal Credit Facility) usage has plummeted to just $11 million: a negligible number for a "rescue facility" that at the peak of the crisis saw more than $100 billion in overnight borrowings. The finding is not surprising, when considering that the rate on the Primary Credit Facility is 0.75%. As this is higher than the rate on the 2 Year Treasury, there is very little banks can do in reinvesting capital that is more expensive than even long-term funding sources. In other words, with well over a trillion in Excess Reserves, banks are becoming increasingly self-funding, at least in the medium term, and seek to disintermediate themselves from the Fed. In looking at the same problem, but from the perspective of the IOR, the Atlanta Fed concludes: "One broad justification for an IOR policy is precisely that it induces banks to hold quantities of excess reserves that are large enough to mitigate the need for central banks to extend the credit necessary to keep the payments system running efficiently. And, of course, mitigating those needs also means mitigating the attendant risks." An environment in which banks are increasingly leery of relying on the Fed for funding, irrespective of whether IOR at 0.00% or 0.25%, is not one in which consumer should expect to see any incremental lending any time soon. The chart below shows discount window borrowings since 2007, combing the Primary and Seconady Credit facilities.
A glance at the other side, or the Fed's "excess liquidity" liabilities, reveals that while Excess Reserves have declined by almost $200 billion since their peak of $1.227 trillion on February 24, to the current $1.045 trillion, the balance has been more than made up by the Deposits with FR Banks other than Reserves, which during the same period has more than offset the Excess Reserve decline, climbing from $45 billion to $250 billion. Indeed, as the chart below demonstrates, banks continue basking in the glow of the Fed liquidity excess, whether they collect 0.25% on this capital or not. While the $205 billion increase in the latter category deserves an analysis of its own, we will put that off to a future date.
Combining the two charts yields the following observation: there are three distinct regimes visible: the first one pre Bear Stearns, was one in which the ratio of Primary Credit Borrowings to Excess Reserves was negligible. Then, at the collapse of Bear (blue shaded area), the ratio of Discount Window Borrowing to Excess Reserves surged to over 100%, at its peak hitting 250%: this was Regime 2. However, Regime 2 promptly ended when Lehman also failed, pushing the ratio back to historical levels, as Excess Reserves took off to offset for the massive surge in Fed "assets" as part of QE 1.0. With the most recent reading, the ratio of the two is back to 0.0%.
So what happens next? If, as Bullard expects, QE 2 is imminent, then the assets imminently purchased by the Fed will result in yet another massive offset of Excess Reserves: in other words, should QE 2.0 prove to be about $2-3 trillion, all of a sudden banks will find themselves depositing instead of $1 trillion in cash with the Fed, anywhere between $3 and $4 trillion. When one considers the FRNs in circulation are less than $1 trillion (as the other main Fed liability), and this relationships starts to get problematic. If the Fed has difficulty explaining why banks are unwilling to lend to consumers when there is over $1 trillion in cash sitting and collecting dust, or 0.25% as it is technically known, the problem gets even thornier when Bernanke (and Jamie Dimon) have to defend 4 times this number. Surely, the US consumer will demand that banks open up the spigot and provide cash to everyone no matter what their creditworthiness, simply as a result of all the excess money floating around. Will lowering the IOR to 0% at that point help? Not at all due to massive problems such a move would create in the shadow banking system. Very much contrary to expectations of lowering the IOR to 0%, Bernanke in fact provided reasons for why such a move would make no sense:
In other words, all those who say QE2.0 will do nothing to stimulate the economy are correct, as all such a greenlighted action would encourage is the warehousing of yet more cash by banks. And since banks have no incremental incentives to lend it out, it doesn't matter if the Fed's liabilities are $2.5 trillion or $2.5 quadrillion. Instead of stimulating inflation, which is the end goal, all such an action would do is to create further doubts about the stability of the dollar, which in turn, as Ambrose Evans-Pritchard discussed, is a sure way to go to hyperinflation without first passing either Go, or inflation. Hyperinflation: not in the sense of a pull-driven rise in prices from cheap consumer credit, but a complete collapse of faith in the monetary unit of exchange, likely predicated by a rush to physical commodities and a collapse in the paper system supporting the forced shorting of commodities such as gold. And with Treasuries yielding next to zero courtesy of the expectation of the Fed becoming the end buyer for all paper, and stocks surging to infinity, on the assumption that the Fed will not allow the failure of any risk assets, the end result will be the most divergent market in history, in which both inflation and deflation are priced at the very margins with no gray area inbetween (a theme we have been observing increasingly more often on the pages of Zero Hedge). While that may be good in the short-term for long-only holders of any asset classes, in the medium run (not to mention long), it means the end of the financial system, as the Fed will be caught in a Catch 22 whereby it needs to sustain the perception that it will print into infinity to maintain the divergence, or else the convergence will be one of catastrophic proportions. Of course, even the continued decoupling between inflation and deflation will ultimately eat away at the core of the monetary system, resulting in the complete destruction of the dollar. And with both inflation and deflation priced in at the extreme margin, the only sure alternative will be non-paper based forms of exchange. And unless someone can come up with a substitute to the 2,000 year old legacy cash alternative of gold, it is obvious what real asset class will benefit at the end, as society once again reverts from a monetary system to something far simpler, and far less encumbered by the scourge of any society that are Central Banks.
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| Marc Faber Questions if Dow Could Hit 1,000 Posted: 31 Jul 2010 08:30 AM PDT In the August edition of the 'The Gloom, Boom & Doom Report' Marc Faber questions whether the Dow could hit 1,000 as predicted by Robert Prechter, based on his interpretation of Elliot Waves, Fibonacci numbers and socioeconomic trends. Prechter, who has written 13 books on finance, believes that the stock market is historically overvalued in terms of dividends and earnings, because of a "great rise in positive social mood."
But the mood changed in 2000 and the "trend toward negative social mood will lead to an economic contraction," according to Prechter. "Small bear markets lead to recessions, big bear markets lead to depressions. The current bear market will be the biggest in nearly 300 years, so the depression will be correspondingly deep," Prechter said. Prechter goes onto to suggest the bear market is of super-cycle degree, the biggest since 1720-1784 and will therefore see a decline for equities deeper than the decline during the great depression, which saw the Dow fall 89 percent. "The trend toward negative social mood that has been in progress since 2000 and which is about to accelerate will continue to curtail lending and lead to a tidal wave of defaults and a terrific deflation," he said. "The amount of outstanding credit today is so large that system-wide defaults could lead to as much as an 80 percent –90 percent decline in the volume of dollar-denominated credits worldwide," according to Precther. (snippet) And how do you trade the Dow at 1,000? One suggestion from Faber is buying a self-sustainable farm in the middle of nowhere surrounded by high voltage fences and barbed wire and equipped with booby traps and an arsenal of machine guns, hand grenades and armed vehicles guarded by vicious Dobermans. 
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| Posted: 31 Jul 2010 08:24 AM PDT  Hickey and Walters (Bespoke) submit: The S&P 500 SPY ETF rallied 6.83% in the month of July. Below is a table highlighting the performance of key ETFs across all asset classes in July (as well as YTD and over the last week). Interestingly, largecaps here in the US outperformed smallcaps, which usually isn't the case during rallies. Growth and value both performed about the same, while Materials, Industrials, and Energy were the best performing sectors. Globally, Italy (EWI) did the best in July with a gain of 18%. France (EWQ) and the UK (EWU) came in second and third with gains of 14.5%. India (INP), Japan (EWJ), and China (FXI) were up the least during the month. Looking at commodities, oil and natural gas were up while gold and silver were down. The aggregate bond market ETF (AGG) was up 0.56% for the month, while long-term Treasuries (TLT) and TIPS (TIP) were down. And with the dollar down, the British Pound (FXB) was up 4.95%, the Euro (FXE) was up 6.57%, and the Yen (FXY) was up 2.24%. Complete Story »
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| Silver Prices Retreat in July 2010 Posted: 31 Jul 2010 07:57 AM PDT U.S. silver marked a third straight day of gains Friday, but it still declined this week which set prices lower for July.
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| Bullion Prices and Business July 2010 Review Posted: 31 Jul 2010 07:57 AM PDT
Gold prices picked up Friday morning after a government report showed that the U.S. economy lost momentum in the second quarter, renewing fears about the recovery. The yellow metal was also aided by a falling dollar…. Read the rest of Bullion Prices and Business July 2010 Review (1,319 words) © 2010 CoinNews Media Group LLC
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| Ancient Tetradrachm Featured in Heritage Boston ANA Auction Posted: 31 Jul 2010 07:57 AM PDT A nearly 2,500-year old silver coin of Rhegion, an ancient Greek city located in would become Italy, is expected to bring upwards of $25,000 at the Heritage Signature® Auction of Ancient and World Coins at the ANA World's Fair of Money in Boston, Thursday, Aug. 12, starting at 6 p.m.
The silver tetradrachm – lot number 20007 – a coin about the diameter of a quarter but much thicker and heavier, depicts the stylized head of a lion on the obverse and a profile portrait of Apollo, Greek god of wisdom and enlightenment, on the reverse. It was struck between 415 and 387 BC, a time when the Greek cities of Italy and Sicily were competing with each other and with Carthage in North Africa for control of the western Mediterranean. … Read the rest of Ancient Tetradrachm Featured in Heritage Boston ANA Auction (442 words) © 2010 CoinNews Media Group LLC
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| Morgan ‘covering like crazy’ in silver, Ted Butler tells King World News Posted: 31 Jul 2010 07:56 AM PDT 10:20a ET Saturday, July 31, 2010 Dear Friend of GATA and Gold (and Silver): JPMorganChase, the big short in the silver market, is "covering like crazy," silver market analyst Ted Butler remarks in his weekly interview with Eric King of King World News. Butler thinks that both silver and gold turned around this week and he wonders whether, in light of the new financial regulation law, MorganChase will ever come back to shorting silver so much. Butler also is very encouraged by the comments of Commissioner Bart Chilton of the U.S. Commodity Futures Trading Commission and the promise of position limits in the precious metals markets. You can listen to the interview with Butler at the King World News Internet site here: http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/… CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
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| Morgan ‘covering like crazy' in silver, Ted Butler tells King World News Posted: 31 Jul 2010 07:56 AM PDT 10:20a ET Saturday, July 31, 2010 Dear Friend of GATA and Gold (and Silver): JPMorganChase, the big short in the silver market, is "covering like crazy," silver market analyst Ted Butler remarks in his weekly interview with Eric King of King World News. Butler thinks that both silver and gold turned around this week and he wonders whether, in light of the new financial regulation law, MorganChase will ever come back to shorting silver so much. Butler also is very encouraged by the comments of Commissioner Bart Chilton of the U.S. Commodity Futures Trading Commission and the promise of position limits in the precious metals markets. You can listen to the interview with Butler at the King World News Internet site here: http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/… CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
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| Adrian Douglas: What’s unravelling is gold price suppression Posted: 31 Jul 2010 07:56 AM PDT By Adrian Douglas Yesterday the Financial Times published an article headlined "BIS Gold Swaps Mystery Is Unravelled" in an attempt to clarify the recently discovered gold swaps undertaken by the Bank for International Settlements with European commercial banks: http://www.ft.com/cms/s/0/3e659ed0-9b39-11df-baaf-00144feab49a.html I recently published my interpretation of these gold swaps and concluded that they were most likely a secret bailout of one or more bullion banks that do not have enough physical gold to meet burgeoning demand: Lawyers always tell their clients to shut up and not speak to the press because the more they say without proper legal consultation, the more likely they are to incriminate themselves. One has to wonder why lawyers at the BIS didn't offer similar advice to the spokespeople at the BIS, because they have opened their mouths and inserted both feet. The FT reports that "Jaime Caruana, head of the BIS, told the FT the swaps were 'regular commercial activities' for the bank." The FT also reports that "'the client approached us with the idea of buying some gold with the option to sell it back,' said one European banker, referring to the BIS." So we are led to believe that the BIS just casually called up some commercial banks and proposed a "regular commercial" activity of a 346-tonne gold swap. The only problem with this story is that this is the biggest gold swap in history. It was anything but a "regular commercial activity." The FT tries to palm off the biggest gold swap in history as just a matter of the BIS earning a little return on $14 billion. The FT says it has learned that the swaps, which were initiated by the BIS, came as the so-called "central banks' bank" sought to obtain a return on its huge U.S. dollar-denominated holdings. The BIS asked the commercial banks to pledge a gold swap as guarantee for the dollar deposits the banks were taking from the Basel-based institution. And GATA has learned that the moon is made of Swiss cheese. In central banking $14 billion is chump change. The U.S. Treasury auctions between $70 billion and $130 billion of Treasury debt very other week. Only a few weeks ago the European Central Bank created a trillion dollars out of thin air to defend the euro amid the Greek debt crisis. There are two sides to a swap transaction, but one would have to have the IQ of a grapefruit to believe that the important part of this transaction is a piffling $14 billion and not the 346 tonnes of gold that make it the biggest gold swap in history. But the BIS has given us another piece of information. The FT says: "Three big banks — HSBC, Societe Generale, and BNP Paribas — were among more than 10 based in Europe that swapped gold with the Bank for International Settlements in a series of unusual deals that caused confusion in the gold market and left traders scratching their heads." I had assumed in my last article that only one bullion bank was involved, but we now find that more than 10 banks were involved. The first on the list is none other than HSBC, which along with JPMorganChase holds 95 percent of all gold and precious metals derivative positions among U.S. commercial banks as reported to the U.S. Treasury Department. HSBC and JPMorganChase are also holding a massive short position in gold and silver on the New York Commodity Exchange. Further, HSBC is the custodian of the gold that is supposedly backing the exchange-traded fund GLD. In my analysis of the BIS swaps I postulated that a bullion bank had made a swap with one or more central banks and had obtained bullion in exchange for $14 billion. I further postulated that the bullion bank made another swap with the BIS whereupon the BIS gave the bank $14 billion but the bullion bank did not hand over the gold to the BIS but instead credited the BIS with a ledger entry of gold in the BIS unallocated gold account. This would allow the bullion bank to have real gold to meet burgeoning demand while the accounts would show that the same gold had been credited to the BIS. The FT says: "Officials said other commercial banks obtained the gold from the lending market, borrowing bullion from emerging countries' central banks." So the tripartite nature of this shady transaction is confirmed — central banks were a source for the real gold. But the real gold wasn't the "gold" that the BIS received as a swap for $14 billion. The FT explains: "The gold used in the swaps came mainly from investors' deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called 'allocated accounts,' which restrict the custodian banks' ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper 'unallocated accounts,' which give banks access to their bullion for their day-to-day operations." But unallocated gold is not gold at all. It is not gold that has been deposited that is loaned to someone else. It is gold that has been deposited that is loaned simultaneously to many other people. I have estimated that for each ounce in their vaults the bullion banks have loaned or sold 45 ounces. So the FT's story appears to confirm my thesis that the BIS has been credited with 346 tonnes of ledger-entry gold in the BIS unallocated gold accounts held with the bullion banks. This makes the BIS an "unsecured creditor" of the bullion banks as defined by the London Bullion Market Association's description of "unallocated account" holders. The FT story suggests that at least 10 bullion banks needed physical gold bullion desperately. This looks like a rerun of the 1960s London Gold Pool fiasco where central banks dishoarded gold to meet massive investor demand in a futile attempt to maintain a gold price of $35 per ounce. I have spelled out in recent articles that there is a run on the bullion banks has begun and is gaining momentum. Investors and institutions are realizing that "unallocated gold" is not gold at all but just an unsecured promise for gold. So investors and institutions are starting to demand delivery of their metal, and as there is only 1 ounce backing each 45 ounces that are claimed, the situation is turning into what will be a short squeeze of epic proportions. The FT says: "Investors have bought physical gold in record amounts during the past two years and deposited it in commercial banks. European financial institutions are awash with bullion and some are trying to pledge gold as a guarantee." As Jeffrey Christian of CPM Group has explained, the "physical" gold market is in fact a misnomer as that market is actually a paper market backed by only a small amount of physical gold: http://www.cpmgroup.com/free_library1/HEDGING_AND_DERIVATIVES/Bullion_Ba… So investors have bought a record amount of "physical gold," which is actually paper gold that they have never seen, and only about 2.3 percent of what has been sold actually exists. The bullion banks are "awash" with liabilities for the record amount of gold they are supposed to be holding. Investors are now distrusting the bullion banks and are asking for delivery, so is it surprising that the record amount of "physical gold" sales has led to a record gold swap being transacted to give the bullion banks liquidity? The International Monetary Fund has been surreptitiously selling gold at a clip of around 15 tonnes per month since February without any official announcements and without disclosing the recipients. This is another sign that the bullion banks are in serious trouble. When 45 ounces of gold are sold but only 1 ounce is sourced, the result is a massive suppression of the gold price. But the converse is also true: When 45 ounces of gold are demanded for every 1 ounce that is in the vault, the price explosion is beyond imagination. What is unravelling is not the mystery of the BIS gold swaps, as claimed by the Financial Times, but the unravelling of the gold price suppression scheme itself. —– Adrian Douglas is a member of GATA's Board of Directors and editor of the Market Force Analysis letter (www.MarketForceAnalysis.com), which provides indications of market turning points and good times to enter, take profits, or exit a market. Subscribers receive bi-weekly bulletins on the markets of their choice. * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
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| Adrian Douglas: What's unravelling is gold price suppression Posted: 31 Jul 2010 07:56 AM PDT By Adrian Douglas Yesterday the Financial Times published an article headlined "BIS Gold Swaps Mystery Is Unravelled" in an attempt to clarify the recently discovered gold swaps undertaken by the Bank for International Settlements with European commercial banks: http://www.ft.com/cms/s/0/3e659ed0-9b39-11df-baaf-00144feab49a.html I recently published my interpretation of these gold swaps and concluded that they were most likely a secret bailout of one or more bullion banks that do not have enough physical gold to meet burgeoning demand: Lawyers always tell their clients to shut up and not speak to the press because the more they say without proper legal consultation, the more likely they are to incriminate themselves. One has to wonder why lawyers at the BIS didn't offer similar advice to the spokespeople at the BIS, because they have opened their mouths and inserted both feet. The FT reports that "Jaime Caruana, head of the BIS, told the FT the swaps were 'regular commercial activities' for the bank." The FT also reports that "'the client approached us with the idea of buying some gold with the option to sell it back,' said one European banker, referring to the BIS." So we are led to believe that the BIS just casually called up some commercial banks and proposed a "regular commercial" activity of a 346-tonne gold swap. The only problem with this story is that this is the biggest gold swap in history. It was anything but a "regular commercial activity." The FT tries to palm off the biggest gold swap in history as just a matter of the BIS earning a little return on $14 billion. The FT says it has learned that the swaps, which were initiated by the BIS, came as the so-called "central banks' bank" sought to obtain a return on its huge U.S. dollar-denominated holdings. The BIS asked the commercial banks to pledge a gold swap as guarantee for the dollar deposits the banks were taking from the Basel-based institution. And GATA has learned that the moon is made of Swiss cheese. In central banking $14 billion is chump change. The U.S. Treasury auctions between $70 billion and $130 billion of Treasury debt very other week. Only a few weeks ago the European Central Bank created a trillion dollars out of thin air to defend the euro amid the Greek debt crisis. There are two sides to a swap transaction, but one would have to have the IQ of a grapefruit to believe that the important part of this transaction is a piffling $14 billion and not the 346 tonnes of gold that make it the biggest gold swap in history. But the BIS has given us another piece of information. The FT says: "Three big banks — HSBC, Societe Generale, and BNP Paribas — were among more than 10 based in Europe that swapped gold with the Bank for International Settlements in a series of unusual deals that caused confusion in the gold market and left traders scratching their heads." I had assumed in my last article that only one bullion bank was involved, but we now find that more than 10 banks were involved. The first on the list is none other than HSBC, which along with JPMorganChase holds 95 percent of all gold and precious metals derivative positions among U.S. commercial banks as reported to the U.S. Treasury Department. HSBC and JPMorganChase are also holding a massive short position in gold and silver on the New York Commodity Exchange. Further, HSBC is the custodian of the gold that is supposedly backing the exchange-traded fund GLD. In my analysis of the BIS swaps I postulated that a bullion bank had made a swap with one or more central banks and had obtained bullion in exchange for $14 billion. I further postulated that the bullion bank made another swap with the BIS whereupon the BIS gave the bank $14 billion but the bullion bank did not hand over the gold to the BIS but instead credited the BIS with a ledger entry of gold in the BIS unallocated gold account. This would allow the bullion bank to have real gold to meet burgeoning demand while the accounts would show that the same gold had been credited to the BIS. The FT says: "Officials said other commercial banks obtained the gold from the lending market, borrowing bullion from emerging countries' central banks." So the tripartite nature of this shady transaction is confirmed — central banks were a source for the real gold. But the real gold wasn't the "gold" that the BIS received as a swap for $14 billion. The FT explains: "The gold used in the swaps came mainly from investors' deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called 'allocated accounts,' which restrict the custodian banks' ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper 'unallocated accounts,' which give banks access to their bullion for their day-to-day operations." But unallocated gold is not gold at all. It is not gold that has been deposited that is loaned to someone else. It is gold that has been deposited that is loaned simultaneously to many other people. I have estimated that for each ounce in their vaults the bullion banks have loaned or sold 45 ounces. So the FT's story appears to confirm my thesis that the BIS has been credited with 346 tonnes of ledger-entry gold in the BIS unallocated gold accounts held with the bullion banks. This makes the BIS an "unsecured creditor" of the bullion banks as defined by the London Bullion Market Association's description of "unallocated account" holders. The FT story suggests that at least 10 bullion banks needed physical gold bullion desperately. This looks like a rerun of the 1960s London Gold Pool fiasco where central banks dishoarded gold to meet massive investor demand in a futile attempt to maintain a gold price of $35 per ounce. I have spelled out in recent articles that there is a run on the bullion banks has begun and is gaining momentum. Investors and institutions are realizing that "unallocated gold" is not gold at all but just an unsecured promise for gold. So investors and institutions are starting to demand delivery of their metal, and as there is only 1 ounce backing each 45 ounces that are claimed, the situation is turning into what will be a short squeeze of epic proportions. The FT says: "Investors have bought physical gold in record amounts during the past two years and deposited it in commercial banks. European financial institutions are awash with bullion and some are trying to pledge gold as a guarantee." As Jeffrey Christian of CPM Group has explained, the "physical" gold market is in fact a misnomer as that market is actually a paper market backed by only a small amount of physical gold: http://www.cpmgroup.com/free_library1/HEDGING_AND_DERIVATIVES/Bullion_Ba… So investors have bought a record amount of "physical gold," which is actually paper gold that they have never seen, and only about 2.3 percent of what has been sold actually exists. The bullion banks are "awash" with liabilities for the record amount of gold they are supposed to be holding. Investors are now distrusting the bullion banks and are asking for delivery, so is it surprising that the record amount of "physical gold" sales has led to a record gold swap being transacted to give the bullion banks liquidity? The International Monetary Fund has been surreptitiously selling gold at a clip of around 15 tonnes per month since February without any official announcements and without disclosing the recipients. This is another sign that the bullion banks are in serious trouble. When 45 ounces of gold are sold but only 1 ounce is sourced, the result is a massive suppression of the gold price. But the converse is also true: When 45 ounces of gold are demanded for every 1 ounce that is in the vault, the price explosion is beyond imagination. What is unravelling is not the mystery of the BIS gold swaps, as claimed by the Financial Times, but the unravelling of the gold price suppression scheme itself. —– Adrian Douglas is a member of GATA's Board of Directors and editor of the Market Force Analysis letter (www.MarketForceAnalysis.com), which provides indications of market turning points and good times to enter, take profits, or exit a market. Subscribers receive bi-weekly bulletins on the markets of their choice. * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
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| Gold in BIS swaps said to have come from looted bank customers’ deposits Posted: 31 Jul 2010 07:56 AM PDT 8:07p ET Friday, July 30, 2010 Dear Friend of GATA and Gold: If you want to believe the Financial Times, the 346 tonnes of gold swaps recently undertaken surreptitiously by the Bank for International Settlements were a matter of the BIS' requiring three of the world's biggest banks to pledge gold as collateral against U.S. dollar deposits placed with them by the BIS so the BIS could earn a little interest. According to the FT, the banks also needed to raise cash and so were glad to obtain it by collateralizing the BIS' deposits with gold. The FT's latest account of the transaction, published Thursday and appended here, is surely the account the BIS would like the world to settle for as curiosity about the swaps is increasing and raising concerns about the grotesque unaccountability of central banks. And as the mouthpiece of the financial establishment, the FT surely was only too happly to convey this unofficial official story. But it's a doubtful story and raises questions of its own. For why would the BIS deposit money with banks considered so shaky that they would have to be required to pledge gold to secure the deposits? Wouldn't U.S., British, German, or French government bonds provide sufficient income and security for the BIS' funds? The BIS' annual report suggests that the bank already holds such bonds: http://www.bis.org/publ/arpdf/ar2010e8.pdf By depositing money at the three banks — HSBC, Societe Generale, and BNP Paribas — according to the FT — was the BIS really hoping to earn get premium yields from the great business those banks have done lending on condominiums in Florida, Nice, and Madrid? And remarkably, according to the FT the gold obtained by the BIS as collateral from the three banks didn't really belong to the banks at all. Rather, as the GATA Dispatch suggested sarcastically three weeks ago (http://www.gata.org/node/8799), the gold was essentially looted from the three banks' own gold depositors. The FT reports: "The gold used in the swaps came mainly from investors' deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called 'allocated accounts,' which restrict the custodian banks' ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper 'unallocated accounts,' which give banks access to their bullion for their day-to-day operations." At least this part of the FT's story has the ring of truth and confirms what, among others, GATA board member Adrian Douglas and GATA consultant James Turk, founder of GoldMoney, have been warning for some time: that if you own "unallocated gold," you don't really own gold at all but have only a tenuous claim against a counterparty that likely is working against you from the start. In the case of the BIS gold swaps, the tenuous claim is against financial institutions the BIS considers so unreliable that it won't loan them money unless they turn over their customers' gold as security, thereby proving their unreliability. The FT story doesn't address what is to become of the collateralized gold just transferred to the BIS, but the section of the BIS' annual report cited at the link above shows that the BIS is constantly trading gold and gold futures and options, just as the journalist Edward Jay Epstein reported in his long profile of the BIS published in Harper's magazine in November 1983. (See http://www.gata.org/node/8773.) So odds are that the gold purchased from or supposedly kept at those commercial banks by gold investors is now being used by the international banking system to suppress gold's price against the interest of the investors who think they own it. The FT's story is headlined "BIS Gold Swaps Mystery Is Unravelled." The BIS can only hope that people will think so, and the FT can only hope that its story will get people to stop pestering it and other financial news organizations to do some serious, documented, on-the-record journalism instead of playing along with this manipulative, confidential source-based disinformation. CHRIS POWELL, Secretary/Treasurer * * * BIS Gold Swaps Mystery Is Unravelled By Jack Farchy and Javier Blas in London http://www.ft.com/cms/s/0/3e659ed0-9b39-11df-baaf-00144feab49a.html Three big banks — HSBC, Societe Generale, and BNP Paribas — were among more than 10 based in Europe that swapped gold with the Bank for International Settlements in a series of unusual deals that caused confusion in the gold market and left traders scratching their heads. The mystery of who was involved in deals with the BIS, the bank for central banks, and what they were doing, has become clearer. The Financial Times has learnt that the swaps, which were initiated by the BIS, came as the so-called "central banks' bank" sought to obtain a return on its huge US dollar-denominated holdings. The BIS asked the commercial banks to pledge a gold swap as guarantee for the dollar deposits they were taking from the Basel-based institution. When news of the swaps, which were disclosed in a note to the BIS's latest annual report, circulated among traders this month, it caused a sharp fall in the gold price, sending bullion to what was then six-week lows. Gold has since fallen further: It was trading at $1,164 an ounce on Thursday. Some analysts speculated that the swap deals were a surreptitious bailout of the European banking system ahead of last week's publication of stress tests. But bankers and officials have described the transactions as "mutually beneficial." "The client approached us with the idea of buying some gold with the option to sell it back," said one European banker, referring to the BIS. Another banker said: "From time to time, central banks or the BIS want to optimise the return on their currency holdings." Nonetheless, two central bank officials said some of the commercial banks also needed the US dollar funding and were keen to act as a counterparty with the BIS. The gold swaps began in December and surged in January, when the Greek debt crisis erupted and European commercial banks were facing funding problems. Jaime Caruana, head of the BIS, told the FT the swaps were "regular commercial activities" for the bank. In a short note in its annual report, published at the end of June, the BIS said it had taken 346 tonnes of gold in exchange for foreign currency in "swap operations" in the financial year to March 31. In the same fiscal year, the BIS took three times the amount of currency deposits it had taken the previous year as central banks around the world became concerned about using commercial banks for their deposits and turned to the Basel institution. In a gold swap, one counterparty, in this case a bank, sells its gold to the other, in this case the BIS, with an agreement to buy it back at a later date. The gold swaps were, in effect, a form of collateral against the US dollar deposits placed by the BIS with commercial banks. Gold is widely regarded as one of the safest assets, but has not been widely used as collateral in the past. Mr Caruana described the transactions as "loans with a guarantee." Investors have bought physical gold in record amounts during the past two years and deposited it in commercial banks. European financial institutions are awash with bullion and some are trying to pledge gold as a guarantee. George Milling-Stanley, managing director for government affairs at the industry-backed World Gold Council, said: "The gold swaps commercial banks carried out with the BIS demonstrate the effectiveness of gold as an asset class, because even in the depths of the worst liquidity crisis in living memory, institutions with access to gold were able to make use of it to generate dollar liquidity. The issue also feeds right into the current debate among Asian central banks about the lack of assets suitable for use as cross-border collateral." Last year, CME Group, the world's largest derivatives exchange, allowed investors to use gold futures as collateral for some operations. Other institutions, such as central banks, had begun using and requesting gold as collateral in the past two years as perceptions of counterparty risk have risen, bankers and officials said. The gold used in the swaps came mainly from investors' deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called "allocated accounts," which restrict the custodian banks' ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper "unallocated accounts," which give banks access to their bullion for their day-to-day operations. Officials said other commercial banks obtained the gold from the lending market, borrowing bullion from emerging countries' central banks. * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
| |
| Gold in BIS swaps said to have come from looted bank customers' deposits Posted: 31 Jul 2010 07:56 AM PDT 8:07p ET Friday, July 30, 2010 Dear Friend of GATA and Gold: If you want to believe the Financial Times, the 346 tonnes of gold swaps recently undertaken surreptitiously by the Bank for International Settlements were a matter of the BIS' requiring three of the world's biggest banks to pledge gold as collateral against U.S. dollar deposits placed with them by the BIS so the BIS could earn a little interest. According to the FT, the banks also needed to raise cash and so were glad to obtain it by collateralizing the BIS' deposits with gold. The FT's latest account of the transaction, published Thursday and appended here, is surely the account the BIS would like the world to settle for as curiosity about the swaps is increasing and raising concerns about the grotesque unaccountability of central banks. And as the mouthpiece of the financial establishment, the FT surely was only too happly to convey this unofficial official story. But it's a doubtful story and raises questions of its own. For why would the BIS deposit money with banks considered so shaky that they would have to be required to pledge gold to secure the deposits? Wouldn't U.S., British, German, or French government bonds provide sufficient income and security for the BIS' funds? The BIS' annual report suggests that the bank already holds such bonds: http://www.bis.org/publ/arpdf/ar2010e8.pdf By depositing money at the three banks — HSBC, Societe Generale, and BNP Paribas — according to the FT — was the BIS really hoping to earn get premium yields from the great business those banks have done lending on condominiums in Florida, Nice, and Madrid? And remarkably, according to the FT the gold obtained by the BIS as collateral from the three banks didn't really belong to the banks at all. Rather, as the GATA Dispatch suggested sarcastically three weeks ago (http://www.gata.org/node/8799), the gold was essentially looted from the three banks' own gold depositors. The FT reports: "The gold used in the swaps came mainly from investors' deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called 'allocated accounts,' which restrict the custodian banks' ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper 'unallocated accounts,' which give banks access to their bullion for their day-to-day operations." At least this part of the FT's story has the ring of truth and confirms what, among others, GATA board member Adrian Douglas and GATA consultant James Turk, founder of GoldMoney, have been warning for some time: that if you own "unallocated gold," you don't really own gold at all but have only a tenuous claim against a counterparty that likely is working against you from the start. In the case of the BIS gold swaps, the tenuous claim is against financial institutions the BIS considers so unreliable that it won't loan them money unless they turn over their customers' gold as security, thereby proving their unreliability. The FT story doesn't address what is to become of the collateralized gold just transferred to the BIS, but the section of the BIS' annual report cited at the link above shows that the BIS is constantly trading gold and gold futures and options, just as the journalist Edward Jay Epstein reported in his long profile of the BIS published in Harper's magazine in November 1983. (See http://www.gata.org/node/8773.) So odds are that the gold purchased from or supposedly kept at those commercial banks by gold investors is now being used by the international banking system to suppress gold's price against the interest of the investors who think they own it. The FT's story is headlined "BIS Gold Swaps Mystery Is Unravelled." The BIS can only hope that people will think so, and the FT can only hope that its story will get people to stop pestering it and other financial news organizations to do some serious, documented, on-the-record journalism instead of playing along with this manipulative, confidential source-based disinformation. CHRIS POWELL, Secretary/Treasurer * * * BIS Gold Swaps Mystery Is Unravelled By Jack Farchy and Javier Blas in London http://www.ft.com/cms/s/0/3e659ed0-9b39-11df-baaf-00144feab49a.html Three big banks — HSBC, Societe Generale, and BNP Paribas — were among more than 10 based in Europe that swapped gold with the Bank for International Settlements in a series of unusual deals that caused confusion in the gold market and left traders scratching their heads. The mystery of who was involved in deals with the BIS, the bank for central banks, and what they were doing, has become clearer. The Financial Times has learnt that the swaps, which were initiated by the BIS, came as the so-called "central banks' bank" sought to obtain a return on its huge US dollar-denominated holdings. The BIS asked the commercial banks to pledge a gold swap as guarantee for the dollar deposits they were taking from the Basel-based institution. When news of the swaps, which were disclosed in a note to the BIS's latest annual report, circulated among traders this month, it caused a sharp fall in the gold price, sending bullion to what was then six-week lows. Gold has since fallen further: It was trading at $1,164 an ounce on Thursday. Some analysts speculated that the swap deals were a surreptitious bailout of the European banking system ahead of last week's publication of stress tests. But bankers and officials have described the transactions as "mutually beneficial." "The client approached us with the idea of buying some gold with the option to sell it back," said one European banker, referring to the BIS. Another banker said: "From time to time, central banks or the BIS want to optimise the return on their currency holdings." Nonetheless, two central bank officials said some of the commercial banks also needed the US dollar funding and were keen to act as a counterparty with the BIS. The gold swaps began in December and surged in January, when the Greek debt crisis erupted and European commercial banks were facing funding problems. Jaime Caruana, head of the BIS, told the FT the swaps were "regular commercial activities" for the bank. In a short note in its annual report, published at the end of June, the BIS said it had taken 346 tonnes of gold in exchange for foreign currency in "swap operations" in the financial year to March 31. In the same fiscal year, the BIS took three times the amount of currency deposits it had taken the previous year as central banks around the world became concerned about using commercial banks for their deposits and turned to the Basel institution. In a gold swap, one counterparty, in this case a bank, sells its gold to the other, in this case the BIS, with an agreement to buy it back at a later date. The gold swaps were, in effect, a form of collateral against the US dollar deposits placed by the BIS with commercial banks. Gold is widely regarded as one of the safest assets, but has not been widely used as collateral in the past. Mr Caruana described the transactions as "loans with a guarantee." Investors have bought physical gold in record amounts during the past two years and deposited it in commercial banks. European financial institutions are awash with bullion and some are trying to pledge gold as a guarantee. George Milling-Stanley, managing director for government affairs at the industry-backed World Gold Council, said: "The gold swaps commercial banks carried out with the BIS demonstrate the effectiveness of gold as an asset class, because even in the depths of the worst liquidity crisis in living memory, institutions with access to gold were able to make use of it to generate dollar liquidity. The issue also feeds right into the current debate among Asian central banks about the lack of assets suitable for use as cross-border collateral." Last year, CME Group, the world's largest derivatives exchange, allowed investors to use gold futures as collateral for some operations. Other institutions, such as central banks, had begun using and requesting gold as collateral in the past two years as perceptions of counterparty risk have risen, bankers and officials said. The gold used in the swaps came mainly from investors' deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called "allocated accounts," which restrict the custodian banks' ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper "unallocated accounts," which give banks access to their bullion for their day-to-day operations. Officials said other commercial banks obtained the gold from the lending market, borrowing bullion from emerging countries' central banks. * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
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| Have We Seen The Final Bottom For Gold or Just a Temporary One? Posted: 31 Jul 2010 06:43 AM PDT
This essay is based on the Premium Update posted on July 30th, 2010 In the last two essays we have emphasized the influence that the dollar and main stock indices might have on the precious metals and we have summarized our last essay by stating that we are likely to see a short-term bounce to the upside (…) perhaps very soon. Since this is what happened we would like to let you know where – in our opinion – gold is likely to go next. However before providing you with gold charts, please take a moment to study the following euro charts, as it will provide you with useful background information. Let's begin this week's technical part with long-term Euro Index chart (charts courtesy by http://stockcharts.com.) Once again, this week's long-term Euro Index chart shows that there has been little change from last week. However, we have seen a struggle for movement above the resistance line created by the lows of 2005 and 2008. This also closely corresponds to the 38.2% Fibonacci retracement level (of the massive 2000 – 2008 rally) and we presently see the upper border of the resistance area being tested. During a similar period in the past – at the end of 2008, the RSI move to 50 before the euro showed any serious decline. It then moved below 40 for some time as euro tested its previous bottom. This is quite similar to what we have seen recently. The RSI actually dipped into the 20's and has now rebounded to near 50. Although the euro doesn't need to go as low as its previous low (meaning 120 on the above chart) – and we would not recommend basing such forecast based on the RSI alone – there is a possibility that we are very near a local top today with a brief correction likely to be seen in the short-term. Close inspection of the long-term chart shows how the 38.2% Fibonacci retracement level corresponds to today's index level. This is an important point since the retracement level itself is based upon a noteworthy downswing. Let's take a look at the short-term chart below for more details. The short-term Euro Index chart confirms a movement above the Fibonacci retracement level created by the 2000–2008 Euro Index rally. This is also true for the retracement level created from the decline seen between December, 2009 and June, 2010. So, in fact we have two Fibonacci retracement levels that intersect at the same level, thus making the resistance here even stronger. The RSI based on the daily prices is presently near 69 which corresponds to the recent local top seen in mid-July. At this time, we remain bullish for the euro over the next several months or so. A slight move lower may be seen in the short-term which will likely be coupled with a corresponding move higher in the USD Index. The currency exchange rate accounts for more than 50% of the USD Index and for this reason the Euro and USD Indices remain tightly tied in how they react to one another. The implications for gold, silver and mining stocks are positive in the short run as well, which confirms bullish points made above and also in our July 27 Market Alert, in which we've suggested closing short and opening long positions in precious metals. For more details, let's take a look at the below chart. As indicated in that particular alert many strong support levels intersect near the $113 level: the 150-day moving average, the 50% Fibonacci retracement level based on the February to June rally, the lower border of the trading channel, and strong support as indicated by high volume levels. When gold prices decline after a prolonged downward trend and very high volume is seen, this frequently indicates the final day of declining prices. This week's chart indicates the possibility that this may well be the situation at present. The targets, which we projected in prior updates, are being reached now. The first target, circled in red in the chart corresponds to the $113 level. A bottom appears to be in, and the contra-trend rally now seems likely. Moreover, based on Friday's close, the risk-reward ratio appears to be even more favorable than was the case when we've created the above chart. The next target, marked by the blue ellipse above is in the $115 – $117 level for GLD ETF. Higher levels are possible, but it is too early to set higher targets at this time. We will continue to monitor the situation and advise our Subscribers as warranted. That's an important statement so we would like to emphasized it once again – based on Friday's intra-day action it seems that we might need to raise our targets for this rally, but we need some more information to do so. Looking at gold from a non-USD prospective we continue to see a steady decline in price. At this time however, it appears that most the decline is now over. The RSI has moved below 30 and this increases the probability that a local bottom is in. Further confirmation will likely be forthcoming and the bottom we are now close to is probably an initial local bottom and likely not the final one. The lower section shows gold's daily price from our regular USD perspective. Please note that RSI based on the gold:UDN ratio works not only as a bottom indicator for the ratio, but also for gold itself. Summing up, gold appears to be starting a contra-trend rally and it seems that it may be a good time to bet on higher prices in the short-term. The next likely target level for gold is $115-$117, possibly higher. Although $119.5 is a possibility, it does not appear very probable at this time. 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Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free weekly trial to see if the Premium Service meets your expectations. All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. 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| Posted: 31 Jul 2010 06:40 AM PDT By Jack Chan at www.simplyprofits.org
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| [1154] The Truth About Markets – London – 31 July 2010 Posted: 31 Jul 2010 06:24 AM PDT Stacy Summary: Here are some of the articles I refer to: The Aftermath of the Global Housing Bubble Chokes the World Banking System. Market Ticker for charts on US GDP. For more download & listening options, visit Archive dot org
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Wondering if the IPO window is open? Well there’s no doubt about it if you are talking about the IPO market in China. The life sciences sector has raised $6.1 billion through initial public offerings in the past 12 months, far outpacing the activity in the United States. And, despite the collapse of Charles River's (
Gold settled higher for a third day on Friday, as bargain hunters stepped in on expectations prices would ultimately rise following a 5.0 percent loss in July — the biggest monthly decline since December.
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