Traders and speculators are watching the $1,413/oz resistance level. A daily close above this level will likely trigger the beginnings of a short squeeze. Holdings in the largest bullion-backed exchange-traded product expanded yesterday for the first time since May 9. Strong premiums for gold bars in Asia show that jewellers and investors are busy buying bullion on this dip. In Singapore, Reuters reports that “supply constraints” have sent premiums to “all time highs” at $7 to spot London prices. Animal spirits are returning to the gold market in the ‘Land of the Dragon’ in this the ‘Year of the Snake’. The volume for the Shanghai Gold Exchange’s benchmark cash contract surged to 19,599 kilograms yesterday from 15,641 kilograms the day before. In two days the volumes have nearly doubled and surged from 10,094 kilograms to 19,599 or 94%.
- Japan’s Stocks Correction Raises Stakes for Abe’s Growth Plan (BBG)
- China Failure to Grow With $1 Trillion Is Warning to Li (BBG)
- Blankfein Leads Bank CEO Pay With $26 Million Deemed Overpaid (BBG)
- IMF says ‘no evidence yet’ of Abenomics hurting other economies (FT)
- Europe Seeks CFTC Delay in Imposing Swaps Rules on Banks (BBG)
- Fed's Rosengren: 'Modest' QE3 cut may make sense in a few months (Reuters)
- Who’s who of Obama lobbyists pushes Keystone pipeline (FT)
- China to Study Joining U.S.-Led Trade Accord After Japan Added (BBG)
Presenting the key assets JPY108 trillion ($1.16 trillion) GPIF pension fund as of September 2012:
- JPY 68.3 trillion in government bonds: 64%
- JPY 12.6 trillion in foreign stocks: 12%
- JPY 12 trillion in Japanese stocks: 11%
- JPY 9.6 trillion in foreign bonds: 9%
In other words, the fact that the GPIF's overall domestic equity allocation will not decline from 11%, or a little over $100 billion, is the main catalyst for today's move. Putting $100 billion in context: this is how much liquidity the BOJ injects in the stock market in under two months.
One look at the 5%+ plunge in the Nikkei overnight and one would be allowed to wonder if this was it for Abenomics: with a 15% drop from recent highs, and the TOPIX Real Estate index down by more than 20%+ since mid-April, entering a bear market, what's worse is that even the "wealth effect" Mrs Watanabe fanatics would be excused from having much hope going forward. The problem, however, is that in a world in which only the USDJPY matters as a risk signal, and only the stock market remains as a last bastion of "hope", the overnight weakness pushing the dollar yen to just 50 pips above 100 threatened to crush the manipulated rally and force everyone to doubt the sustainability of central planning. So, sure enough, literally seconds we got the much needed stick save without which everything could have come tumbling down, namely based on an unsourced article out of Reuters that Japan's Public Pension Fund is considering a change to its portfolio strategy that could allow domestic equity share of investments to rise in rallying market. The immediate result was an instantaneous surge in the USDJPY which in turn dragged global risk higher across the board, simply due to what algos deemed as yet another procyclical last minute rescue. More importantly this was nothing but a squeeze catalyst coming at just the right time before market open to prevent a rout in global equities. Ironically, that we are back to the Reuters "sticksave" unsourced article, indicates just how weak the reality behind the scenes must be.
Gold edged higher today supported by strong physical demand internationally and especially in Asia.
Demand in the physical market continued to hold prices near $1,400/oz as the recent drops in the spot market encourage buyers internationally to accumulate bullion.
- South China Sea tension mounts near Filipino shipwreck (Reuters)
- OECD cuts economic forecasts as eurozone drags on growth (FT)
- Switzerland frees banks to settle U.S. tax evasion cases (Reuters)
- U.S. Says Firm Laundered Billions (WSJ)... no, it's not HSBC, also: Free Corzine!
- Ardent conservative Bachmann to not seek re-election to Congress (Reuters)
- Russia faults U.S. over 'odious' Syria rights resolution (Reuters)
Over the weekend, when discussing the latest casualty of Bernanke's disastrous monetary policy, the US corporate pension plan, we touched on a topic that has been a recurring theme on these pages: "the start of the unwind of the welfare myth, if only in the private sector for now, made worse by Ben Bernanke's endless tinkering in what was formerly a free market, should be making the guardians of the status quo very, very nervous... and certainly has the disciples of the Bismarckian welfare state delusion on their toes, because they can see very well what is coming down the road." Moments ago none other than Germany's finance minister, Schrodinger Schauble, explained just why this observation is at the core of all modern problem, going so far as using the R-word in the context of Europe (first, and then everywhere else).
The Belgian Central Bank said yesterday that about 25 tons of the European nation’s gold reserves have been lent to bullion banks according to Bloomberg. Nearly 10% or about 25 metric tons of the National Bank of Belgium’s remaining 227.5 tons of gold reserves are currently lent to bullion banks, Director and Treasurer Jean Hilgers told the central bank’s annual meeting in Brussels. The proportion of gold reserves on loan declined from 84.3 tons on December 31, 2011, and averaged 48.1 tons in 2012 as loans matured and some gold loans were reimbursed early. Hilgers said that the Belgian central bank sees gold lending decreasing further this year. During the 1990’s, Belgium sold some 1,000 tons of gold into the market - more than three quarters of its remaining holdings. The Belgian gold reserves, which had already seen sizeable liquidation in late 1978, fell from 33.7 million ounces on 12/31/88, to just 5.7 million ounces on 03/31/98, or a fall of 83% in less than 10 year.
- ‘Cov-lite’ loans soar in dash for yield (FT)
- Cambodian police clash with thousands of garment workers, 23 hurt (Reuters)
- Obama Accepting Sequestration as Deficit Shrinks (BBG)
- Having done nothing to restore confidence in a fragmented market, the SEC turns back to main street fraud (WSJ)
- Europe's austerity-to-growth shift largely semantic (Reuters)
- Germany thwarts EU in China solar fight (FT)
- In EU-China dispute, Beijing warns of trade (FT)
- U.S. Oil Boom Divides OPEC (WSJ)
- Record Cash Sent to Balanced Funds (BBG)
- Hilsenrath: Fed Wrestles With Market Expectations About Pace of QE (WSJ)
- Worse-Than-Cyprus Debt Load Means Caribbean Defaults to Moody’s (BBG)
- States Raise College Budgets After Years of Deep Cuts (WSJ)
- U.K. Banks Cut 189,000 With Employment at Nine-Year Low (BBG)
First, the important news: in a few hours the Fed will inject between $1.25-$1.75 billion into the stock market. More importantly, it is a Tuesday, which means that in order to not disturb a very technical pattern that will have held for 20 out of 20 Tuesdays in a row, the Dow Jones will close higher. Judging by the futures, this has been telegraphed far and wide: it is a Ben Bernanke risk-managed market, and everyone is a momentum monkey in it. In less relevant news, the underlying catalyst for the overnight rip higher in risk was the surge in the USDJPY, which left the gate at precisely Japan open time, and after languishing at the round number 101 support for several days, did not look back facilitated by what rumors said was a direct BOJ intervention via a Price Keeping Operation in which banks bought ETFs directly. This was catalyzed by the usual barrage of BOJ and FinMin individuals engaging in post-crash damage control and chattering from the usual script.
Russia, Greece, Turkey, Kazakhstan and Azerbaijan expanded their gold reserves for a seventh straight month in April, buying bullion to diversify foreign exchange reserves due to concerns about the dollar and the euro. Russia’s steady increase in its gold reserves saw its holdings, the seventh-largest by country, climb another 8.4 metric tons to 990 tons, taking gains this year to 3.4% after expanding by 8.5% in 2012, International Monetary Fund data show. Kazakhstan’s reserves grew 2.6 tons to 125.5 tons, taking the increase to 8.9% this year after a 41% expansion in 2012, data on the website showed. Turkey’s holdings rose 18.2 tons to 427.1 tons in April, increasing for a 10th month as it accepted gold in its reserve requirements from commercial banks. Belarus’s holdings expanded for a seventh month as did Azerbaijan’s. Interestingly, Greece’s gold holdings climbed for a fourth month, according to the IMF data. This could be a sign of rising economic nationalism in Greece or that the Greek central bank realises that if Greece leaves the euro and is forced back onto the drachma that gold reserves will offer a modicum of protection. Only a modicum, because Greece’s gold reserves remain miniscule especially considering the scale of their debts.
Nearly three years ago, following the publishing of "Is The SEC's Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?" which exposed the key aspects of SAC's insider trading strategy, and which linked SAC, and the hedge fund world in general, to expert networks three weeks before virtually anyone outside of the 2 and 20 (or 3 and 50 as the case may be) world had heard of them and before they became a household euphemism for insider trading, we expected the full rabid fury of the world's best paid legal team to fall upon us. It didn't, which meant only one thing: we were correct, or they had bigger fish (to avoid harpooning) on their mind. Turns out it was both.
"When you have city employees, police, and firefighters have taken pay cuts, it doesn't look good," is the somewhat understated response from Detroit's emergency manager to the city's latest debacle. Amid the deepening financial crisis the crumbling region faces, four trustees of its public pension funds spent $22,000 of retirement funds to attend a conference at Waikiki Beach, Honolulu. "It's one of these things we trustees must do to stay on top of the field," is how one of the trustees defended the decision, a second would not comment, and the other two could not be found according to Reuters (we can only imagine what they were up to). Conference representatives noted that "these are intelligent folks there to do a job, not there for vacation," yet many funds did decide to boycott the event as it sent the wrong message. But irony of ironies, Detroit decided it was appropriate - perhaps since one well attended session covered 'how to avoid front-page scandals.'
The data coming out on home prices is rather clear. Home prices are moving up steadily in the last year now increasing at a rate last seen in 2006. Of course, little of this is coming from wage growth but more from easy access to debt, investor demand, and historically low supply. One thing that people fail to remember is that during the last housing bubble, people were supplementing a lack of income growth with easy access to debt to add fuel to the housing market. This time, the easy money is being supplied to banks and hedge funds that are simply chasing higher yields. Anyone that has a hand in the housing business, especially in the grind it out rental business understands that it is no hands off endeavor. This is why it is surprising to see how much money is now being funneled into the market by brand new small time investors, especially in places like California. You know things are getting frothy when new money is willing to chase the rental business.
- The deeper agenda behind "Abenomics" (Reuters)
- BoJ governor Haruhiko Kuroda promises to stabilise bond market (FT)
- Obama Sees Sunset on Sept. 11 War Powers in Drone Limits (BBG)
- Lower CPMs for everyone: FTC Begins Probe of Google's Display-Ad Business (WSJ)
- Apple’s Tax Magic Leaves Irish Bondholders Unmoved (BBG)
- Asia Goes on a Debt Binge as Much of World Sobers Up (WSJ)
- All hail Gazpromia: UK gas supply six hours from running out in March (FT)
- Spain’s banks face €10bn more provisions (FT) ... and then more, and more, and more
- Truck strike may have caused Washington state bridge collapse, officials says (Reuters)
- P&G Says A.G. Lafley Rejoins as Chairman, CEO (BBG)
- Five Key Things About the SAC Insider Case (BBG)