Turkey

It's all about the central banks this week.

“Humanitarian” War Contradicts 200 Years of Liberal Thought

• Gunman kills 14 in Denver shooting at "Batman" movie (Reuters)
• Full retard meets Math for Retards: Spain Insists $15 Billion Aid Need for Regions Won’t Swell Debt (Bloomberg)
• World braced for new food crisis (FT)
• Banks in Libor probe consider group settlement (Reuters)
• U.S. banks haunted by mortgage demons that won't go away (Reuters)
• Ireland Bulldozes Ghost Estate in Life After Real Estate Bubble (Bloomberg)
• China will not relax property control policies (China Daily)
• Russia, China veto U.N. Security Council resolution on Syria (Reuters)
• Kim to reform North Korean economy after purge (Reuters)

To understand modern Greece one must understand it’s ancient history and it’s Geography. The Golden era of ancient Greece was rarely Pan Hellenic, with the legendary exception of King Menelaus’ expedition and siege of Troy, the brief cooperation during the war against King Xerxes of Persia, and perhaps Alexander the Great’s domination of what is now Greece, it has predominantly been the glorious histories of city states. And it’s geography is crucial, it has always been thought to stand as the boundary between East and West, whether you consider the ‘East’ to be Persia, the Ottoman Empire, or Communist eastern Europe it is best to understand that Greece’s eastern frontiers have never been an impassable barrier, infact Greece’s porous frontiers have ebbed and flowed with fickle fate and capricious fortune. As a consequence Greece is one of the most polarised nations on the planet.

Possibly a matter of weeks...

And so it begins...Last Friday the Spanish government published a proposal to cut government expenditure and raise taxes to reduce the fiscal deficit by 56.4billion euros by 2015.  I have outlined why austerity will not work in Europe, but it looks like this is a lesson Europeans will have to learn for themselves--for a second time.  The writing is on the wall in Ireland, who ailed in the same ways that Spain is currently ailing, but what Lord Merkel wants, Lord Merkel gets.  The immediate malaise from these austerity measures will be large-scale social unrest, which is already being planned by many of the 50% of the country's unemployed young people.  Regardless of one's stance on the economic merit of austerity, what is indisputable is that riots are real and riots do not end well.  With nothing to lose, this round of Spanish austerity protesting has the potential to end in catastrophe.

Central banks have added a net of 1,290 tonnes since the fourth quarter of 2008. This total excludes China and other nations that don't regularly report their activity, as well as countries that have been surreptitiously buying their own production. That's a lot of gold buying. One has to wonder whether so much buying may in fact signal a top for gold. After all, a number of prominent analysts have claimed for some time that gold is in a bubble and that it's all downhill from here. Not so fast. Like many mainstream reports, looking at the short-term picture usually leads to erroneous conclusions. Let's put central-bank purchases into historical perspective.

A lack of transparency, a lack of enforcement of law and a compliant media which failed to ask the hard questions and do basic investigative journalism led to the price fixing continuing and the manipulation continuing unchecked on such a wide scale for so long - until it was exposed recently. Similarly, the gold market has the appearance of a market that is a victim of “financial repression”. Given the degree of risk in the world – it is arguable that gold prices should have surged in recent months and should be at much higher levels today. The gold market has all the hallmarks of Libor manipulation but as usual all evidence is ignored until official sources acknowlege the truth. However, like LIBOR the gold manipulation 'conspiracy theory' is likely to soon become conspiracy fact.  It will then – belatedly - become accepted wisdom among 'experts.'  Experts who had never acknowledged it, failed to research and comment on it or had simply dismissed it as a “goldbug accusation.”  Financial repression means that most markets are manipulated today - especially bond and foreign exchange markets.

• San Bernadino: Another Calif. city goes bankrupt (247)... It appears Hell's Angels don't pay municipal taxes after all
• Rajoy announces 65 Billion Euros Of Cuts To Fight Crisis (Bloomberg)... And Spaniards prepare to not pay taxes
• Spain pressed to inflict losses on savers (FT)... And Spaniards prepare to sue
• Spain to Cede Bank Control (WSJ)... And Spaniards prepare to protest
• Rate Scandal Stirs Scramble for Damages (NYT)... but who do you sue: the Fed?
• Paulson Ex-Lieutenant Caught in Fund's Slide (WSJ)
• ILO warns 4.5m jobs at risk in eurozone (FT)
• Global economic crunch confirmed every day: Airbus Scraps Target of 30 A380 Sales as Demand Dwindles (BBG)
• Same old: Finland says requires collateral from Spain for bank aid (Reuters)
• Cameron and Hollande clash on tax (FT)
• Wen Says Boosting Investment Now Key to Stabilizing China Growth (Bloomberg)

There are those who say gold may go to $10,000 or to $0, or somewhere in between; in a different universe, they would be the people furiously staring at the trees. For a quick look at the forest, we suggest readers have a glance at the chart below. It shows that just in the first five months of 2012 alone, China has imported more gold, a total of 315 tons, than all the official gold holdings of the UK, at 310.3 according to the WGC/IMF (a country which infamously sold 400 tons of gold by Gordon Brown at ~$275/ounce).

The last time the US navy sent three aircraft carriers into the Arabian Sea/Persian Gulf was just a few short weeks before WTI broke above $110, and aggressive military tensions, coupled with concerns of an imminent invasion of Iran by Israel and/or 'others', were running  high. Then summer arrived, as did the need to lower the price of gas and crude ahead of a veritable cornucopia of central banks easing into June and July, not to mention the need to keep gas as low as possible into the July 4th holiday. Now that the peak summer months are behind us this is all changing, and 4 months ahead of the presidential election, the need to have the "Wag the Dog" put option to round up the troops, not to mention votes, has arrived, as has the need to return to an outright aggressive military stance where Iran is concerned. Which is why we were not very surprised to learn that that Middle East veteran aircraft carrier, the CVN-74 Stennis, is going right back into Mordor, a few short months after it came back from its long stint in the Fifth Fleet, and will shortly complete the trio of aircraft carriers stationed within miles of Iran.

• Euro zone fragmenting faster than EU can act (Reuters)
• Wall Streeters Lose $2 Billion in 401(k) Bet on Own Firms (Bloomberg)
• Eurozone crisis will last for 20 years (FT)
• Chuckie Evans: "Please suh, can I have some moah" (Reuters)
• Quote stuffing and book sales: Amazon ‘robo-pricing’ sparks fears (FT)
• Situation in Egypt getting worse by the minute: Egypt parliament set to meet, defying army (Reuters)
• Chinese goalseek-o-tron speaks: China’s inflation eased to a 29-month low (Bloomberg)
• A contrarian view: "Barclays and the BoE have probably saved the financial system" (FT)
• Flawed analysis: Dealers Declining Bernanke Twist Invitation (BBG) - Actually as shown here, ST Bond holdings have soared as dealers buy what Fed sells: more here
• Obama team targets Romney over taxes, Republicans cry foul (Reuters)
• And all shall be well: Brussels to act over Libor scandal (FT)
• Bank of England's Tucker to testify on rate rigging row (Reuters)

A preview of the key events in the coming week (which will see more Central Banks jumping on the loose bandwagon and ease, because well, that is the only ammo the academic econ Ph.D's who run the world have left) courtesy of Goldman Sachs whose Jan Hatzius is once again calling for GDP targetting, as he did back in 2011, just so Bill Dudley can at least let him have his $750 million MBS LSAP. But more on that tomorrow.

Negative interest rates continue to penalise pensioners and savers in European countries and this will lead to further diversification into gold. Financial markets are already starting to wonder about the solidity of last week's summit measures to tackle the euro zone crisis and soon they may question whether even looser monetary policies will help prevent recessions and sovereign defaults. With Independence Day today (Happy July 4th to all our American followers, clients and friends), the ECB decision tomorrow and NFP on Friday, trading should be quite today but as we know illiquid markets can lead to outsized market moves. We tend to try and avoid predictions in GoldCore as the future is largely unknowable and there are so many variables that drive market action that it is nigh impossible to predict the future price of any asset class. However, our opinion has long been that over the long term all fiat currencies will depreciate and devalue against the finite currency that is gold. For this reason we have long held that gold would reach its inflation adjusted high of $2,400/oz and silver its inflation adjusted high at $140/oz and the equivalent in euros, pounds and other fiat currencies. Gold at just over $1,600/oz today remains 33% below its record nominal high in 1980. Silver at just over $28/oz today remains 80% below its record nominal high in 1980. However, we have tended to focus on the important diversification, store of value and safe haven benefits of owning physical gold (and silver) bullion.

US military "surge" is back in the Persian Gulf + Iran fires medium-range missiles + Turkey scrambles jets for third day in a row = $100+ Brent