India

Together, “Chindia” imported 296.55 tonnes of gold in May. This surpasses current monthly mine supply globally by 14%. Clearly there is an imbalance in the gold market when demand from two countries alone exceeds total mine supply, which must then be supplemented by existing stocks. Yet prices remain in a downward trend as speculative short selling continues to depress prices. 

• Trump at center stage as Republicans square off in first debate (Reuters)
• Cleveland Debate Offers GOP Hopefuls a Chance to Break Away from the Pack (WSJ)
• Bank of England Keeps Key Interest Rate at 0.5% in 8-1 Vote (BBG)
• Emerging stocks submerged, UK gears up for 'Super Thursday' (Reuters)
• No IMF decision on Greek bailout until autumn, Swedish rep tells paper (Reuters)
• Japan Heads Toward Nuclear Unknown With Post-Fukushima Restarts (BBG)
• Activist Ackman Takes $5.5 Billion Stake in Snacks Giant Mondelez (WSJ)

"What can we do?"

Standard Chartered’s new CEO Bill Winters thinks the bank is positioned well in "markets which will offer outstanding opportunities for decades to come", and while that may be true, the opportunities in those markets didn’t prove to be all that outstanding in the first half of the year, as the bank’s EM and commodities exposure contributed to a 44% decline in H1 profits and prompted a 50% dividend cut. 

Something surprising happened on Friday afternoon: in the latest daily COMEX update 25,386 ounces of Registered gold had been "adjusted" out of registered and into eligible. This reduction in deliverable Comex gold pushed the amount of registered Comex gold to an all time low: at 351,519 ounces registered Comex gold has never been lower! It also means that as of Friday's close there was a whopping 123.8 ounces in potential paper claims to every ounces of physical gold.

We have lived through a credit hyper-expansion for the record books, with an unprecedented generation of excess claims to underlying real wealth. In doing so we have created the largest financial departure from reality in human history. Bubbles are not new – humanity has experienced them periodically going all the way back to antiquity – but the novel aspect of this one, apart from its scale, is its occurrence at a point when we have reached or are reaching so many limits on a global scale. The retrenchment we are about to experience as this bubble bursts is also set to be unprecedented, given that the scale of a bust is predictably proportionate to the scale of the excesses during the boom that precedes it. Deflation and depression are mutually reinforcing, meaning the downward spiral will continue for many years. China is the biggest domino about to fall, and from a great height as well, threatening to flatten everything in its path on the way down. This is the beginning of a New World Disorder…

Note that the classic sign of crisis and capital flight, higher interest rates, falling currency, and falling bank stocks are now visible in Brazil (and elsewhere). Indeed, the correlation between Brazilian bond yields and Brazilian financials/BRL turned sharply negative during each of the past 3 systemic crises (Asia ‘98, Tech ‘02 & Lehman ’08) and is doing so again today.

The journey from hubris to humiliation in EM has taken roughly 5 years. As BofAML notes, despite muted asset returns, 2015 has seen the emergence of two big trends: the risk of a bubble in US health care & technology; and the crash in EM/Resources/Commodities. The two trends are best exemplified by the "Map of Hubris & Humiliation" which shows among other things that the market cap of MSCI Russia is currently equivalent to Intel’s, while the market cap of Netflix equals that of MSCI Chile.

In an interview on Bloomberg’s “First Up” show, Treasurer for the Perth Mint, Nigel Moffatt, said “Our biggest restriction is the amount of unrefined gold we’re getting in from producers”, adding, “everything we get in is going straight out the door as soon as we refine it.”

Shortly after we reported the latest market-rigging scandal, in which ITG was busted for frontrunning sellside clients in its dark pool in what has been since dubbed a "trading experiment" (because it sounds better than criminal conspiracy to defraud clients), and which will cost the company a record for a private Wall Street firm $22 million settlement, we had one question for AQR's Cliff Asness yesterday morning: "Hi @Cimmerian999, is Hitesh Mittal the AQR employee who was formerly at ITG and is part of the SEC settlement?"   We got no answer from the AQR head, but luckily Bloomberg noticed, and as it turns out the answer to our question was a resounding yes.

The ruling does not outlaw “bail-ins” per se. It simply ensures that guarantees given to bondholders cannot be retrospectively revoked. EU nations who have not yet ratified the BRRD have until the end of July to adopt the new EU bail-ins rules

The bear market in bullion is an artificial creation. This artificial, indeed fraudulent, increase in the supply of paper bullion contracts drives down the price in the futures market despite high demand for bullion in the physical market and constrained supply. 

Some downward risk to the gold price remains due to the momentum of the recent severe correction in price. He points out that GoldCore had suggested on Bloomberg three years ago that a 50% correction in price was not unlikely at that time as is normal in long term bull markets.

The unwinding of the US dollar carry trade will be particularly severely felt where leverage is highest!

There are times when a loud cry of “The emperor has no clothes!” can be most copacetic. And so, let me point out something quite simple, yet very important. The old world order, to which we became accustomed over the course of the 1990s and the 2000s, its crises and its problems detailed in numerous authoritative publications on both sides of the Atlantic - it is no more. It is not out sick and it is not on vacation. It is deceased. It has passed on, gone to meet its maker, bought the farm, kicked the bucket and joined the crowd invisible. It is an ex-world order.