Western central banks have tried to shake off the constraints of gold for a long time, which have created enormous difficulties for them. They have generally succeeded in managing opinion in the developed nations but been demonstrably unsuccessful in the lesser-developed world, particularly in Asia. It is the growing wealth earned by these nations that has fuelled demand for gold since the late 1960s. There is precious little bullion left in the West today to supply rapidly increasing Asian demand, and it is important to understand how little there is and the dangers this poses for financial stability.
Just as Friday ended with a last minute meltup, there continues to be nothing that can stop Bernanke's runaway liquidity train, and the overnight trading session has been one of a continuing slow melt up in risk assets, which as expected merely ape the Fed's balance sheet to their implied fair year end target of roughly 1900. The data in the past 48 hours was hot but not too hot, with China Non-mfg PMI rising from 55.4 to 56.3 a 14 month high (and entirely made up as all other China data) - hot but not too hot to concern the PBOC additionally over cutting additional liquidity - while the Eurozone Mfg PMI came as expected at 51.3 up from 51.1 prior driven by rising German PMI (up from 51.1 to 51.7 on 51.5 expected), declining French PMI (from 49.8 to 49.1, exp. 49.4), declining Italian PMI (from 50.8 to 50.7, exp. 51.0), Spain up (from 50.7 to 50.9, vs 51.0 expected), and finally the UK construction PMI up from 58.9 to 59.4.
- Mediterranean 'Ballistic Targets' Were Part of Israeli Test – Defense Ministry (RIA)
- Microsoft to Buy Nokia’s Devices Unit for $7.2 Billion (BBG)
- Long-Term Jobless Left Out of Recovery (WSJ)
- Swiss banks apologize for assisting tax cheats (Reuters)
- As Obama pushes to punish Syria, lawmakers fear deep U.S. involvement (Reuters)
- India Looking to Expand Rupee-Payment System (WSJ)
- Citigroup Dialing Back Its 'Alternative' Holdings (WSJ)
- Libya Seeks New Solutions to Oil Crisis (WSJ)
- Lenovo Chief Yang Shares Bonus With Workers a Second Year (BBG)
The Buffets and the Gates of the US will be shedding a few tears this week as the United States and Switzerland have reached an agreement that brings the status of the latter as a tax haven for Americans (or will they?).
- Al-Qaeda Links Cloud Syria as U.S. Seeks Clarity on Rebels (BBG)
- Administration Tells Lawmakers of Evidence Linking Assad to Attack (WSJ)
- Director of National Intelligence James R. Clapper to publish numbers of secret spying orders (CBS)
- U.S., Switzerland strike bank deal over tax evasion (Reuters)
- Another Budget Deal Bites the Dust (WSJ)
- Contemplating Summers Drives Investors to Seek Beltway Expertise (BBG)
- Austerity Test Looms in Australia as Abbott Pledges Cuts (BBG)
- Gay Spouses in All States Now Married Under U.S. Tax Law (BBG)
- Shadow banks face limits to securities trading (FT)
- EU's Rehn sees European recovery strengthening in 2014 (Reuters) ... or 2015... or 2022... or never?
Recent dramatic declines in gold prices and strong redemptions from physical ETFs (such as the GLD) have been interpreted by the financial press as indicating the end of the gold bull market. Conversely, our analysis of the supply and demand dynamics underlying the gold market does not support this interpretation. As we have shown in previous articles, the past decade has seen a large discrepancy between the available gold supply and sales. Many recent events suggest that the Central Banks are getting close to the end of their supplies and that the physical market for gold is becoming increasingly tight. The recent sell-off was all orchestrated to increase supply and tame demand. We believe that central planners are now running out of options to suppress the gold price. After taking a pause, the secular gold bull market is set to continue.
The Swiss Parliament basically told the US Department of Justice to fuck off.
There are growing supply issues and a range of gold and silver coins and bars are in short supply internationally and premiums are rising globally. Many smaller dealers have been cleared out of their bullion inventories.
Gold prices are expected to recover in the coming weeks and months according to the Reuters Precious Metals Poll of analysts.
Most of the 29 banking and brokerage analysts and consultants polled expected prices to find support and stay above the $1,400 mark. The majority of analysts, 20 out of 29, expect gold to end 2013 above $1,450 per ounce and 6 analysts, including GoldCore, saw gold above $1,650/oz by the end of 2013.
Interestingly, the majority are bullish at these price levels with average price forecasts for the year of 2013 much higher than today's prices - at a mean of $1596/oz and a median of $1627/oz.
Switzerland is the place that has traditionally stood above all the rest in its reputation for financial stability. Why? Because the currency was well-managed, the banking system was sound, and the country had a long tradition of treating capital well. Over the last few years, however, these advantages have collapsed. Just a small handful of countries inspire confidence in the marketplace. And the most popular seems to be Australia. Now, there’s really no such thing as a “good” fiat currency. But given such fundamentals, it’s easy to see why Australia is replacing Switzerland as a global safe haven.
- Boston bomb probe looking at pressure cooker, backpacks (Reuters), Boston Bomb Clues Surface (WSJ) Forensic Investigators Discover Clues to Boston Bombing (BBG)
- China local authority debt ‘out of control’ (FT)
- Gold Wipes $560 Billion From Central Banks as Equities Rally (BBG)... or the same impact a 2% rise in rates would have on the Fed's balance sheet
- More Wall Street leakage: Stock Surge Linked to Lobbyist (WSJ)
- China's bird flu death toll rises to 16, government warns of spread (Reuters)
- Chinese official endorses monetary easing (FT)
- As global price slumps, "Abenomics" risks drive Japan gold bugs (Reuters)
- North Korea rejects US call for talks (FT)
- IMF Renews Push Against Austerity (WSJ)
- India Gains as Gold Plunge Boosts Scope for Rate Cuts (BBG)
- Germany set to approve Cyprus aid (FT)
- Easing Is an Issue as G-20 Meets (WSJ)
As Cyprus has shown us, when push comes to shove, rule of law goes out the window. I fully expect that when things get really bad in the financial system the money grabs will come fast and furious. Foreign accounts, including possibly even Gold held aboard, will come under attack. Heck, the US got Switzerland to throw its 300-year-old banking secrecy out the window…
In a wide-ranging interview with Casey Research editor Louis James, Doug Casey discusses why it's imperative to start diversifying one's assets today, and provides some guidance in considering countries to diversify into... "I'm sure they'll get 'round to closing all the loopholes. So, the time to act is now. We'll keep monitoring the situation, but when this happens, the Powers that Be won't want anyone to see it coming, so it will zing in from left field. Your only chance to protect your wealth is to start diversifying its exposure to any one particular predatory state as soon as possible."
In all of the tortuous moments that have taken place with the European Union the one thing that has become apparent is a radical change of mindset. In the beginning there was a kind of democratic viewpoint. All nations had a voice and while some were louder than others; all were heard. This is no longer the case. There is but one mindset now and it is decidedly German. It is not that this is good or bad or even someplace in between. That is not the real issue. The Germans will do what is necessary to accomplish their goals. There is nothing inherently bad or evil about this but it is taking its toll on many nations in Europe. It is the occupation of Poland in a very real sense just accomplished without tanks or bloodshed as money is used instead of armaments to dominate and control a nation. Politically you may "Hiss" or you may "Applaud" but there are consequences here for investors that must be understood. First and foremost is that they will not stop.
It was only yesterday that we wrote about comparable problems to those which Russian depositors may (or may not be?) suffering in Cyprus right, this time impacting wealthy Americans and their Swiss bank accounts, where as a result of unprecedented DOJ pressure the local banks will soon breach all client confidentiality and expose all US citizens who still have cash in the former tax haven under the assumption that they are all tax evaders and violators. And in the continuum of creeping wealth taxes which first started in Switzerland, then Cyprus, and soon who knows where else, there was just one question: "The question then is: how many of the oligarchs, Russian or otherwise, who avoided a complete wipe out and total capital controls in Cyprus, will wait to find out if the same fate will befall them in Switzerland? Or Luxembourg? Or Lichtenstein? Or Singapore?" Today we got the answer, and yes it was one of the abovementioned usual suspects. The winner is.... Lichtenstein.
The Cyprus deposit scramble contagion spreads as Reuters reports that "Swiss banks would be required to "motivate" remaining U.S. clients to come clean to U.S. tax officials. If they failed to do so, confidential bank data would be forwarded to U.S. officials. The initial shipment of data from those banks would not include client names but, based on the data, U.S. officials would be able to submit a judicial aid requests to get the names of alleged tax evaders."