Germany's Bundesbank confirmed yesterday that the German gold reserves are held overseas by the Federal Reserve, the Bank of England and the Banque de France. The German parliament, the Bundestag, has been examining the accounting of German gold reserves at the Bundesbank. The parliament's Budget Committee, one of the most powerful committees in the German parliament, had requested a critical report by the Federal Audit Office. "The decision has been unanimous," the paper quoted the Christian Social Union budget expert Herbert Frankenhauser. The newspaper report alleged "account cheating" regarding the German gold reserves. According to a Bild report, the federal auditing office complained of "inadequate diligence of the accounting of the gold reserves, which are stored in some foreign countries. Repatriation of the gold reserves is encouraged.” The Bundesbank confirmed that it, like many central banks, keeps part of its reserves in vaults at foreign central banks and said some of its gold is held at the Federal Reserve Bank of New York, the Banque de France and the Bank of England. It declined to say how much gold in total is held overseas or how much gold is stored with the Federal Reserve, Bank of England and Banque de France. The Bundesbank statement said it had complete confidence in the integrity of the central banks where the gold is held. "From these central banks, the German Bundesbank annually gets confirmation of the gold holdings in troy ounces as a basis for its accounting," the Bundesbank’s statement said.
- JPMorgan Said to Weigh Bonus Clawbacks After Loss (Bloomberg)
- Obama Says JPMorgan Loss Shows Need for Tighter Rules (Bloomberg)
- Greeks Try New Tack, Seeking Technocrat Slate (WSJ)
- Euro zone finance ministers dismiss Greek exit "propaganda" (Reuters)
- Romney’s business record under fire (FT)
- Tide Turning in Japan Deflation Fight, BOJ’s Top Economist Says (BBG)
- Euro Chiefs May Offer Leniency to Greece (Bloomberg)
- Portugal's Progress Won't Guarantee Funding (WSJ)
- EU Bank-Liquidity Bill Proceeds; U.K. May Protest (WSJ)
- Cameron pressed to boost enterprise (FT)
While gold is now negative year to date in dollar terms, it remains 0.7% higher in euro terms. Gold prices dropped 3.7% last week and silver fell 5.1% to $28.89/oz. The smart money, especially in Asia, is again accumulating on the dip. Demand for jewellery and bullion in India has dipped in recent weeks but should resume on this dip – especially with inflation in India still very high at 7.23%. Also of interest in India is the fact that investment demand has remained robust and gold ETF holdings in India are soon to reach the $2 billion mark. This shows that recent gold weakness is primarily due to the recent bout of dollar strength. Morgan Stanley has said in a report that gold’s bull market isn’t over despite the recent price falls. Morgan Stanley remains bullish on gold as it says that the ECB will take steps to shore up bank balance sheets, U.S. real interest rates are still negative, investors have held on to most of their exchange traded gold and central banks are still buying gold.
- Default now or default later? (FT)
- Monti warns of tears in Italy's social fabric (Reuters)
- Fear Grows of Greece Leaving Euro (FT)
- Greek Elections Loom as Key Bailout Opponent Defies Unity (Bloomberg)
- Santander, BBVA to Set Aside 4.5 Billion Euros for New Cleanup (BBG) - Thank god they both passed the stress test
- Austerity Blow for Merkel in German State Election (Reuters)
- Apple Founder Wozniak to Buy Facebook Regardless of Price (Bloomberg) - so... another ponzi.
- Dimon Fortress Breached as Push From Hedging to Betting Blows Up (Bloomberg)
- Saudi and Bahrain Expected to Seek Union: Minister (Reuters)
- Obama Pitches Equal Pay to Win Women Even as Charges Drop (BBG)
All you need to read and some more.
Another weekend, another stunner in local European elections, this time as Merkel's CDU gets a record low vote in the state elections of Germany's most populous state North Rhein-Westphalia. According to a preliminary projections by ARD, the breakdown is as follows:
- CDU: 26%
- Pirates: 7.5%
- FDP: 8.5%
Good news: no neo-nazis. Bad news: record defeat for the Chancellor. And the bext news for twitter fans: Angela_D_Merkel ist aus. Hannelore Kraft: in.
After sell-side analysts had been begging for it, pardon, predicting it for months, the PBOC finally succumbed and joined every other bank in an attempt to reflate, even as pockets of inflation are still prevalent across the country, although the recent disappointing economic data was just too much. Overnight, the Chinese central bank announced it was cutting the Reserve Requirement Ratio by 50 bps, from 20.5% to 20.0%, effective May 18. The move is expected to free up "an estimated 400 billion yuan ($63.5 billion) for lending to head-off the risk of a sudden slowdown in the world's second-largest economy" as estimated by Reuters. "The central bank should have cut RRR after Q1 data. It has missed the best timing," Dong Xian'an, chief economist at Peking First Advisory in Beijing, told Reuters. "A cut today will have a much discounted impact. So the Chinese economy will become more vulnerable to global weakness and the slowing Chinese economy will in turn have a bigger negative impact on global recovery. Uncertainties in the global and Chinese economy are rising," he said. The irony, of course, is that the cut, by being long overdue, will simply accentuate the perception that China is on one hand seeing a crash in its housing market and a rapid contraction int he economy, while still having to scramble with high food prices (recall the near record spike in Sooy prices two weeks ago). In the end, the PBOC had hoped that it would be the Fed that would cut first and China could enjoy the "benefits" of global "growth", and the adverse effects of second hand inflation. Instead, Bernanke has delayed far too long. When he does rejoin the race to ease, that is when China will realize just how short-sighted its easing decision was. In the meantime, the world's soon to be largest source of gold demand just got a rude reminder that even more inflation is coming.
Zero Hedge has a habit of trying to simplify that which is otherwise unnecessarily complex, convoluted and opaque. Today, we wish to explain the primary reason why Europe has still not be engulfed in fire and brimstone and collapsed straight to the 9th circle of overlevereged Hell(as). The reason, as we henceforth dub it, is Ponzi PatriotismTM.
While everyone's attention is focused on Dimon-related puns and trying to comprehend what actually happened at JPM (while at the same time pretending to be an expert in CDO trading models and VaR), UBS' Art Cashin provides some 'fact is better than fiction' on Greece (ah yes the other tempest in a teapot). Between the PASOK defense minister's money-laundering charges and the fact that British bookies won't take any more bets on Greece exiting the Euro (which given no CDS market has started on GGB2s seems to have become the market of choice for that trade), it seems, as the ever-prescient father-of-fermentation notes that "Europe still lurks".
77.8 on expectations of 76.0. Highest since January 2008. Yup: the US "consumers" (of what? Patek Philippes? Cristal? 8 balls? Dorsia deserts?) polled by Reuters, have not had it better in 4 years. After all what is there not to be confident about: record number of people on disability, foodstamps, out of the labor force, market sliding, banks imploding, Europe about to fall apart, gas near record highs, home prices quadruple dipping, and the prospect of much, much higher taxes next year to boot. Whatever - just charge it.
All you need to read and some more.
Highly respected economist and strategist David Rosenberg has told that Financial Times in a video interview (see below) that gold “will go to $3,000 per ounce before this cycle is over.” Markets are repeating the downturns of 2010 and 2011 and it is time to search for safety, David Rosenberg of Gluskin Sheff tells James Mackintosh, the FT Investment Editor. Rosenberg sees a “very good opportunity in gold” as it has corrected and seems to be “off the radar screen right now”. He sees gold as a currency and says the best way to value gold is in terms of money supply and “currency in circulation.” As the “volume of dollars is going up as we get more quantitative easing” he sees gold at $3,000 per ounce. Mackintosh says that Rosenberg’s view is a “pretty bearish view”. To which Rosenberg responds that it is “bullish view on gold and gold mining stocks.” Mackintosh says that it is “bearish on everything else”. Rosenberg says that it is not about being “bullish or bearish,” it is about “stating how you view the world” and he warns that the major central banks are all going to print more money and keep real interest rates negative “as far as the eye can see.”
- China Industrial Output Growth Slows Sharply In April (WSJ)
- Indian industrial output shrinks unexpectedly (AFP)
- China’s Inflation Moderates, Adding Room for Easing (Bloomberg)... a nickel for every "imminent RRR-cut" prediction
- Drew Built 30-Year JPMorgan Career Embracing Risk (Bloomberg)
- Spain Offered Time to Curb Deficit (FT)
- France Entrepreneurs Flee From Hollande Wealth Rejection (BBG)
- Venizelos Eyes Unity Deal After Agreement With Democratic Left (Ekathimerini)
- Berlin Reaches Out to the Periphery (FT)
- Bernanke Speaks About Risks From End of Pro-Growth Plans (Bloomberg)
EUROPICIDE! They've Pointed The Liquidity Pistol At Their Collective Heads, Cocked It, Now Hear The Trigger Pull...Submitted by Reggie Middleton on 05/11/2012 03:22 -0400
You don't need to be an economist to understand the utter foolishness, the circular logic supported folly of "But after buying 325 billion pounds of government debt with newly created money, 50 billion pounds of which has been purchased in the last three months"