Veteran investor Marc Faber, author of The Gloom, Boom and Doom Report, reiterated the need for gold in a diversified portfolio when interviewed on CNBC. "Now, I want to be diversified, I want to own some gold, I want to own some shares, I own the most in Asia, and some in Europe because I think in Europe there’s still better value than in the US, and I own some bonds and cash and real estate."
Singapore and Hong Kong appear to be competing for the a new global gold price benchmark. Further details emerged at the weekend about the planned launch by Singapore of a new 1kg physically deliverable gold contract for the Asian wholesale gold market. Last week, CME announced a new 1 kilogramme gold contract in Hong Kong.
While today's key news event will likely be the preannounced latest, third, round of anti-Russian sanctions and the Russian retaliation, the reality as DB notes, is that the market seems to be seeing "some fatigue" in this story with the ECB, Scotland and next week's Fed meeting taking center stage. As a result, and ahead of expectations of change in Fed language which should carry a more hawkish tone, the dollar has been bid up some more overnight, leading to fresh multi-year highs in the USDJPY, and the now-paired TSY trade, with 10Y yields up to 2.57%, although this may now be in short-term oversold territory. The latest Scottish poll appears to have dented some of the "Yes" momentum, with 52% of the polled saying they would vote No in the referendum, although right now neither side has a clear majority when factoring in the undecideds: which means it will come down to the wire next week, with clear implications for Europe's secessionist movements if the Yes vote still manages to prevail, not to mention massive ramifications for the UK.
Many precious metals investors like the idea of physical bullion because, unlike paper money, it is difficult to counterfeit. That said, when there is a will, there is a way. In recent years, there have been extremely concerning cases of gold counterfeit, and investors that are not fully prepared can get duped. That’s why we worked with our friends at Silver.com to put together this handy infographic list of ways to test for fake gold or silver.
At a global aggregated level deflation has been non-existent over the last 80 years. Prior to the twentieth century, Deutsche Bank notes that years of deflation were almost as common as years of inflation. However this all changed over the last 100 years or so as global currency links to precious metals broke down periodically and then collapsed as of 1971. Furthermore, since then inflation has had an upward bias relative to most of prior history, and as such, Deutsche warns, the longer-term investor has evidence that they must approach the current low levels of bond yields with extreme caution.
First fines have been imposed for manipulation of the gold fixing, the silver fixing is even discontinued entirely. But is everything in order with the platinum fixing? Have there been manipulations – and are they part of a larger manipulation campaign?
Bank of England plans to make bondholders and depositors bear the cost of bailing out failing banks has led Moody’s to downgrade its outlook on the UK banking sector.
It appears JPY weakness (or generalized USD strength) is mirroring the demise of precious metals (and oil) this morning. Gold's 1.7% drop is the biggest in 6 weeks and drops the yellow metal to near 3-month lows. Treasury yields are up 5-8bps at the long-end. Troublingly, for the carry bulls, equity futures are not playing along with the JPY weakness.
Gold Lock Down Despite Aggressive Plan To Ban Russia From SWIFT, Terrorism & War Risk; Palladium At Multi-Year High Over $900Submitted by GoldCore on 09/01/2014 16:14 -0400
The 13 year anniversary of the 911 attacks in 2001 looms next week and given developments in recent days and weeks, one must be wary of new attacks in the UK , U.S. and other western nations. The UK has raised the country's terror threat level from substantial to severe, its second highest level. MI5 and MI6 said there was no information to suggest an attack was imminent.
September is the hottest month of the year for gold prices, rising on average 3% over the past 20 years. As the yellow metal tests hovers off 2-month-lows, Bloomberg notes that "Indian jewelers and dealers will be stocking up in the coming weeks," ahead of the festival period, which runs from late August to October (andis followed by the wedding season) when bullion is bought for part of the bridal trousseau or in jewelry form as gifts from relatives. As GoldCore's Mark O'Byrne notes, "a lot of traders are aware of this trend towards seasonal strength... They tend to buy and that creates momentum."
The global economic downturn of 2008, in particular its monetary facet, readily invites comparison between the troubles of the modern world and those of the Roman Empire; just as Western currencies have declined precipitously in value since their commodity backing was removed in stages starting roughly a century ago, Roman currencies were also troubled, and present a cautionary tale. The Roman coin in use through most of the empire was the denarius, which demonstrated a persistent decline in value, starting from the time of transition from Republic to Empire, and continuing until its decimation during the Crisis of the Third Century AD. Although efforts by Diocletian taken after the monetary collapse are commonly associated with Roman economic reform, there were other efforts by earlier, lesser known emperors that suddenly and unexpectedly improved the silver content and value of the denarius. Firsthand accounts and archeological findings provide sufficient detail to allow examination of these short, if noteworthy, periods of voluntary restorative policies – and their architects.
Expect market participants coming back from vacation, and probably everything that worked in August will get “taken out to the woodshed” in September.
It is unclear exactly why stock futures, bonds - with European peripheral yields hitting new record lows for the second day in a row - gold, oil and pretty much everything else is up this morning but it is safe to say the central banks are behind it, as is the "de-escalation" algo as a meeting between Russia and Ukraine begins today in Belarus' capital Minsk. Belarusian and Kazakhstani leaders will also be at the summit. Hopes of a significant progress on the peace talks were dampened following Merkel’s visit to Kiev over the weekend. The German Chancellor said that a big breakthrough is unlikely at today’s meeting. Russian FM Lavrov said that the discussion will focus on economic ties, the humanitarian crisis and prospects for a political resolution. On that note Lavrov also told reporters yesterday that Russia hopes to send a second humanitarian aid convoy to Ukraine this week. What he didn't say is that he would also send a cohort of Russian troops which supposedly were captured by overnight by the Ukraine army (more shortly).
As we noted early on, by the time the cash markets opened this morning, the narrative of compliant Kuroda and drug-peddling Draghi had been painted as worth more than a yellowing Yellen's hawkish comments. And so it was that stocks, despite weak macro data this morning in the US - bad news is great news - surged as cash markets opened and tagged S&P 2,000 for the first time ever. However, once Europe closed, that exuberance faded in stocks. Treasuries rallied (30Y closed -2bps) with the front-end weakening very modestly. USD strength (on notable EUR weakness) sent oil and precious metals modestly lower on the day but Copper had a good day (+0.6%). Today was the lowest S&P futures (non-holiday) trading of the year as the Nasdaq rose for the 9th day in a row.
UPDATE: Every dip is to be bought... USD now higher and gold, silver lower
After a week of punishment, precious metals are kneejerking higher this morning on the heels of a Citi FX note explaining they are cutting all USD longs - "This is an opportunistic exit as we feel we may be due for a squeeze of USD long positions similar to what happened at this point in the cycle last year." The USD Index is sliding quickly and Treasury yields inched higher (but remain -1.5bps despite equity strength).