Exchange Traded Fund
Gold analysts are the most bullish in five months according to Bloomberg. Thirteen analysts surveyed by Bloomberg expect prices to rise next week, four were bearish and five neutral, the highest proportion of bulls since March 8.
It would seem the demand for physical gold and the apparent limit on paper-gold decompression (given recent musical chairs in COMEX and Gold ETF holdings rising) are hitting at an inopportune time for the confidence-inspiring central banks of the world... Seasonally (for 30 years), August has marked the cylical low.
The latest World Gold Council Gold Demand Trends report, which covers the period April-June 2013, confirms again how recent falls in the gold price were due to speculators selling paper gold rather than a decline in actual demand for physical gold.
It highlights, once again, that the price falls have generated significant increases in demand, most notably from store of wealth, jewelry, bullion coin and bar buyers in Turkey, Dubai and the Middle East, Vietnam, India, China and the rest of Asia.
Meanwhile speculators, primarily banks and hedge funds, exited their positions in the gold ETFs and futures markets. This led to liquidations of just 402 tonnes of ETF gold worth only $18.3 billion.
A low cost of capital is the underpinning of much of the exuberance that shareholders are showing for stocks as management are able to lever-up (in the face of deteriorating fundamentals) to reward shareholders (via buybacks or state-sponsored dividends). With rates surging in the last few days, a critical question is how much will it take to accelerate outflows from bond funds and lead to significantly wider credit spreads for corporations? As BofAML notes, the consensus is now that a 3.5% 10Y rate is enough to trigger a disorderly rotation by which institutional investors are unwilling (based on risk expectations) to bid for the yieldier credit market debt as retail flows out. This is crucial since if the credit markets sell-off, firms will be unable to fund the expectations priced into equity markets and lead to a shift back to the sidelines from risk-assets in general.
South Africa supplies almost 60% of the world's platinum (including secondary supply) and 30% of the world's palladium (including secondary supply).
According to Johnson Matthey, platinum production fell almost 16% in 2012 while palladium production declined 10% last year alone.
With prices well below their recent highs, looming production cuts will leave markets tight supporting prices and likely leading to higher prices.
A record deficit in platinum supplies is set to push prices higher and demand is boosted by the new exchange traded fund (ETF).
Sales of silver coins by the U.S. Mint have set a record high in the first half of 2013 seeing the best start to a year ever.
Year to date Silver Eagle sales are at 30.3 million, a record pace that was supported by soaring July sales. Silver Eagle sales had a record year in 2011. That year, it took until September 21, 2011, to reach above 30 million in sales for the year.
Therefore, 2013 looks set to be a record year for Silver Eagle sales.
In a 43-page research report, the Federal Reserve has authored a rather concerning tome warning that the mechanical positive-feedback rebalancing of Leverage ETFs (LETFs) resembles the portfolio insurance strategies, which contributed to the stock market crash of October 19, 1987. The impact of LETFs on broad stock-market indexes become significant during periods of high volatility (shown empirically in 2008/9 and H2 2011) as they show that LETF rebalancing in response to a large market move could amplify the move and force them to further rebalance which may trigger a “cascade” reaction. Furthermore, executing orders within a short period of time, such as the last hour of trading, may cause disproportionate price changes (especially in financial stocks). The Fed warns that a significant price reduction at market close may also impair investor confidence with accelerating depressed prices at the close potentially driving large investor outflows overnight.
Those seeking the definitive, one-stop fund flow heatmap covering the key paper asset classes over the past 10 years, are advised to bookmark this page.
Traditionally, metals markets are supposed to be a solid fundamental signal of the physical and psychological health of our overall economy. Steady but uneventful commodities trade meant a generally healthy industrial base and consumption base. An extreme devaluation was a signal of deflation in consumer demand and a flight to currencies. Extreme price hikes meant a flight from normal assets and currencies in the wake of possible hyperinflation. This is how gold and silver markets were originally designed to function – however, welcome you to the wacky world of 2013, where bad financial news is met with the cheers of investors who believe stimulus will last forever, where foreign investors dump the U.S. dollar in bilateral trade while mainstream dupes argue that the Greenback is invincible, and where everyone and their uncle seems to be buying precious metals yet the official market value continues to plunge. The reason our entire fiscal system now operates in a backwards manner is due to one simple truth - every major indicator of our economy today is manipulated by our central bank...
A bearish take on U.S. stocks is about as fashionable as a beehive hairdo at the moment, which makes it a decent time to think like a contrarian. Sell-side strategists with a sense of reality are few and far-between but as ConvergEx's Nick Colas warns, the most important reason for caution currently is, obviously, valuation and complacency. U.S. stocks currently reflect, both in price level (16x current year earnings) and implied volatility (an 11 handle VIX), an economic acceleration which has yet to fully flower. In addition, Colas adds, domestic equities look good in part simply because everything else – Europe, Japan, emerging markets, etc... - look so bad. Wouldn't an accelerating U.S. economy spill over to other regions? So what is lurking around the corner for the next lucky Fed head? And what about the three main memes for why the 'bull' can keep running?
With manufacturing flatlining, I was surprised to find that Industrials were actually the only outperforming equity in the entire bunch.
The LBMA clearing statistics therefore essentially represent huge daily trading through unallocated accounts, most of which is classified as spot delivery, but which is backed by very small physical metal foundations. The clearing statistics while interesting, need to be made more transparent and granular beyond the headline data. Otherwise they tend to obscure rather than illuminate.
Silver, like gold, is largely subject to the same underlying supply/demand dynamics (whether legal or not) where on the margin it trades merely as a precious metal, and those misguided pundits out there who claim that the drop in gold Comex holdings is purely a function of ETF reallocation, are surprisingly mum when it comes to explaining Comex silver which has not followed the move of gold in physical holdings and is in fact near all time holding highs despite an even more aggressive plunge in its price. Alternatively if indeed gold's inventory plunge was driven by the permissive nature of Singapore vaults as willing recipients for all the gold that has departed the assorted Comex system vaults, and thus are merely a physical receptacle to absorb the pent up Chinese "golden" demand, it would explain why this has not happened to silver. At least not yet. That may change very soon because as Bloomberg reports, silver is the new gold when it comes to vaulting in Singapore, and thus China's precious metal warehousing ambitions.
- More Doctors Steer Clear of Medicare (WSJ)
- Syrian Looters in Bulldozers Seek Treasure Amid Chaos (BBG)
- Siemens CEO Peter Löscher Is Set to Leave His Post After Series of Earnings Misses (WSJ)
- Silver Vault for 200 Tons Starts in Singapore as Wealthy Buy (BBG)
- Omincom and Publicis merger shows that advertising is now firmly in the business of Big Data: collecting and selling the personal information of millions of consumers (NYT)
- Apple supplier accused of labour violations (FT)
- 'BarCap was the Wild Wild West – that’s what we called it’ (Telegraph)
- P&G chief seizes opportunity in era of three-day stubble (FT)
- Federal Reserve 'Doves' Beat 'Hawks' in Economic Prognosticating (WSJ) - LOL: Fed "hawks"
US Equities continue to diverge from the underlying fundamentals and most asset classes.