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Switzerland’s ‘Save our Swiss Gold’ referendum was convincingly rejected yesterday by the Swiss electorate following an aggressive anti-gold campaign in recent weeks that had been closely watched both in Switzerland and abroad. 

Unusually, it involved the Swiss National Bank (SNB) very actively, and ultimately successfully, trying to convince the electorate along with the main political parties to return a ‘no’ vote.

Key Events In The Coming Week

Following last week's holiday-shortened week, which was supposed to be quiet and peaceful and was anything but thanks to OPEC's shocking announcement and a historic plunge in crude prices, we have yet another busy week of macroeconomic reports to look forward to.

'We Are Entering A New Oil Normal"

The precipitous decline in the price of oil is perhaps one of the most bearish macro developments this year. We believe we are entering a “new oil normal,” where oil prices stay lower for longer. While we highlighted the risk of a near-term decline in the oil price in our July newsletter, we failed to adjust our portfolio sufficiently to reflect such a scenario. This month we identify the major implications of our revised energy thesis.  The reason oil prices started sliding in June can be explained by record growth in US production, sputtering demand from Europe and China, and an unwind of the Middle East geopolitical risk premium. The world oil market, which consumes 92 million barrels a day, currently has one million barrels more than it needs.... Large energy companies are sitting on a great deal of cash which cushions the blow from a weak pricing environment in the short-term. It is still important to keep in mind, however, that most big oil projects have been planned around the notion that oil would stay above $100, which no longer seems likely.

Visualizing Peak Popopulation

Even with having existed for millions of years, the process for humans to reach 1 billion in population was long and arduous. It is only about 12,000 years ago that humans started engaging in sedentary agriculture. While population has exploded exponentially, unfortunately the resources on our planet are finite.

Gold Shortage, Worst In 21st Century, Sends 1Y GOFO To Lowest Ever... And India Just Made It Worse

While we have covered the aberration that is a negative gold GOFO rate previously and in extensive detail in this post, an abridged version of what negative GOFO means comes courtesy of Deutsche Bank's recent discussion on what a successful Swiss gold referendum. To wit: "It is interesting to note that benchmark gold-dollar swap rates have recently traded negative, meaning investors are paying to borrow gold. This is unusual as gold is traditionally used as a source of collateral for cash financing.... [A] number of factors may play a role, such as excess dollar liquidity or an increased demand for collateral on the back of the global regulatory developments." In short a gold shortage at the institutional, read commercial and central bank, level. And not just a shortage but the biggest shortage in history, judging by today's latest plunge in the 1 Month GOFO which just dropped to -0.5% and , worse, 1 Year GOFO that just hit its lowest print in the 21st century, and is also about to go negative: something that has never happened before further suggesting the gold shortage could go on for a long, long time!

This Sunday May Mark The End Of Western Monetary Dominance

Western dominance was born from a distrust in the dominant reserve currency at the time. Its decline will be because they followed the same route. And the canary in the coal mine is what’s happening in Switzerland this weekend.

Here Comes France: Right-Wing Leader Marine Le Pen Demands Central Bank Repatriate French Gold

First Germany, then the Netherlands, perhaps Switzerland this weekend, and now the French right-wing Front National, which shockingly came first in May's European parliament elections, and whose leader Marine Le Pen is currently polling in first place in a hypothetical presidential election (in both a first and run off round), ahead of president Hollande, has sent a letter to the governor of the French Central Bank, the Banque de France, demanding that France join the list of nations which have repatriated, or at least tried to, their gold.

"Britain Is In The Wrong Place," Daniel Hannan Blasts "The World Economy Has Left Europe Behind"

I love the idea that prosperity can be decreed by a G20 communiqué. World leaders in Brisbane have airily committed themselves to two per cent growth. (Why only two per cent? Why not 20 per cent? Or 200 per cent? Who knew it was so easy?) Meanwhile, in the real world, the divergence between Continental Europe and the rest of the planet accelerates. David Cameron can hardly have failed to notice, as he looked around the G20 table, that his European colleagues are the ones with the worst problems. Britain is in the wrong place.

Frontrunning: November 24

  • Grand jury expected to resume Ferguson police shooting deliberations (Reuters)
  • PBOC Bounce Seen Short Lived as History Defies Bulls (BBG)
  • Home prices dropped in September for the first time since January (HousingWire)
  • UPS Teaches Holiday Recruits to Fend Off Dogs, Dodge NYC Taxis (BBG)
  • US oil imports from Opec at 30-year low (FT)
  • Hedge Funds Bet on Coal-Mining Failures (WSJ)
  • Putin Woos Pakistan as Cold War Friend India Buys U.S. Arms (BBG)
  • How the EU Plans to Turn $26 Billion Into $390 Billion (BBG)
  • The $31 Billion Bet Against Brazil’s New Finance Minister (BBG)

As The "Sanctions War" Heats Up, Will Putin Play His 'Gold Card'?

The topic of ‘currency war’ has been bantered about in financial circles since at least the term was first used by Brazilian Finance Minister Guido Mantega in September 2010. Recently, the currency war has escalated, and a ‘sanctions war’ against Russia has broken out. History suggests that financial assets are highly unlikely to preserve investors’ real purchasing power in this inhospitable international environment, due in part to the associated currency crises, which will catalyse at least a partial international remonetisation of gold. Vladimir Putin, under pressure from economic sanctions, may calculate that now is the time to play his ‘gold card’.

Goldman's "Top Trade Recommendations For 2015"

  • Top Trade #1: EUR/$ downside via a one-year EUR/$ put spread.
  • Top Trade #2: 10-year US Treasuries above 3% but not below 2% in mid-2015, through cap and floor spreads at zero cost.
  • Top Trade #3: Long a Dec-2015 Eurostoxx 50 ‘bull’ call spread.
  • Top Trade #4: Long US High Yield credit risk via 5-year CDX HY junior mezzanine tranches.
  • Top Trade #5: Long an equity basket of EM crude oil importers (Taiwan, Turkey and India).
  • Top Trade #6: Short CHF/SEK.
  • Top Trade #7: Bearish Copper relative to Nickel, on supply divergence.
  • Top Trade #8: Long US Dollar against a basket of ZAR and HUF.