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Currency wars are set to intensify as the US Senate is considering new sanctions against Iran that would prevent Iran getting paid for its natural resource exports in gold bullion. The new sanctions aimed at reducing global trade with Iran in the energy, shipping and precious metals sectors may soon be considered by the U.S. Senate as part of an annual defense policy bill, senators and aides said on Tuesday, according to Reuters. The sanctions would end "Turkey's game of gold for natural gas," Reuters reported a senior Senate aide as saying, referring to reports that Turkey has been paying for natural gas with gold due to sanctions rules. The legislation "would bring economic sanctions on Iran near de facto trade embargo levels with the hope of speeding up the date by which Iran's economy will collapse," the aide said. Last week Turkish Deputy Prime Minister Ali Babacan has revealed a critical detail about a widely discussed Turkey-Iran gold trade boom, disclosing that the Islamic republic was exporting gas to Turkey in exchange for payment in gold bullion. It is also reported that Iranians are buying Turkish gold with the Turkish Lira, which is deposited into their bank accounts in exchange for Turkey’s natural gas purchases, the deputy prime minister said at midnight Nov. 22 during a parliamentary session. Iran cannot transfer monetary payments to Iran in U.S. dollars due to U.S sanctions against the country’s alleged nuclear weapons program. Iran has been forced to shun the international financial system and the petrodollar as means of payment and turn to the international gold market to ensure it gets paid for its natural resources in order to prevent absolute economic collapse.

The short term direction of the UST market over the next couple days will be a battle.  Reading the market profile should help us know when to be range traders, and when to go with the momentum.

CME Group declared a force majeure at one of its New York precious metals depositories yesterday, run by bullion dealer and major coin dealer Manfra, Tordella and Brooks (MTB), due to “operational limitations” posed by Hurricane Sandy. MTB has “operational limitations” following Hurricane Sandy and can’t load gold bullion, platinum bullion or palladium bullion, CME Group Inc., the parent of the Comex and New York Mercantile Exchange, said today in a statement. MTB must provide holders with metal at Brinks Inc. in New York to meet current outstanding warrants in relevant delivery periods with compensation for costs, Chicago-based CME said. The CME said that MTB will not be able to deliver metal as the lower Manhattan company deals with "operational limitations" almost a month after the arrival of Hurricane Sandy. MTB is one of five depositories licensed to deliver gold against CME's benchmark 100-troy ounce gold contract, held 29,276 troy ounces of gold and 33,000 troy ounces of palladium as of Nov. 23, according to data from CME subsidiary Comex. In a notice to customers on Monday, CME declared force majeure for the facility, a contract clause that frees parties from liability due to an event outside of their control.

In a world where flow is the new QE, this week is an alignment of the stars for long-end US treasury traders.

Gold edged down on a Monday as speculators took their profits as prices rallied on thin volumes on Friday to their highest in a month on technical buying.  A strong fall in the greenback triggered rapid gains in commodities and options-related buying on Friday. Tonight US Congress will meet to attempt to devise a plan to avert the US fiscal cliff which will throw the US into a spiral of tax hikes and budgetary cuts that will lead the US economy deeper into a recession this January. Another short term ‘resolution’ will almost certainly be achieved which will allow the US to keep spending like a broke drunken sailor and which will again store up far greater fiscal and monetary problems. The scale of these deep rooted structural challenges is so great that they are likely to affect the US sooner rather than later. Global investment demand for gold remains robust with the amount in exchange-traded products backed by the metal rising 0.1% to 2,606.3 metric tons.

• Goldman Turns Down Southern Europe Banks as Crisis Lingers (Bloomberg)
• Euro Ministers Take Third Swing at Clearing Greek Payment (Bloomberg)
• Chamber Sidestepped in Obama’s Talks on Avoiding Fiscal Cliff (Bloomberg)
• Republicans and Democrats Differ on Taxes as Fiscal Cliff Looms (Bloomberg)
• Republicans bargain hard over fiscal cliff (FT)
• Catalan Pro-Independence Parties Win Regional Vote (BBG)
• Shirakawa defends BoJ from attack (FT)
• Run-off looms in Italy’s centre-left vote (FT)
• BOJ rift surfaces over easing as political debate heats up (Reuters)
• Barnier seeks ‘political will’ on bank union (FT)
• New BOJ Members Sought More-Expansionary Wording (Bloomberg)
• Osborne May Extend U.K. Austerity to 2018, IFS Says (Bloomberg)

Shoe-throwing has escalated to building burning as demonstrators clash in Egpyt over Muslim Brotherhood-backed Mursi's 'coup-like' decision to make his decisions above judicial review. The self-annointed omnipotence comes after the judiciary were about to undo the Islamist-dominated panel drawing up the country's new constitution. This so-called "coup against legitimacy" has brought back painful memories as opposition leaders (ElBaradei) calls the 'temporary dictator' a "new pharaoh" - the same term of derision used against Mubarak when he was in power. The Muslim Brotherhood offices have been set ablaze as a consequence of this 'decree' and the US (a generous benefactor to Egypt's military) is "very concerned about the possible huge ramifications of this declaration on human rights and the rule of law in Egypt." But protest leaders perhaps summarize the situation best: "The decree is basically a coup on state institutions and the rule of law that is likely to undermine the revolution and the transition to democracy, I worry Mursi will be another dictator like the one before him."

Brazil’s aggressive efforts to weaken its currency by buying dollars – about $132 billion since the beginning of 2008 – have left the country with the sixth biggest international reserves in the world, about 80% of which is denominated in the US currency. However, recent turmoil in currency markets and concerns over the global financial crisis and fiat currencies in general has given Brazil’s authorities even more reason to diversify their holdings.  It has frequently stated its intention to diversify assets and reduce its exposure to currency risk. Recent sharp weakness in Brazil’s real (see table) and systemic risks are leading central banks, including the BCB to diversify into gold. Brazil raised its gold holdings by 17.2 tonnes in October to 52.5 tonnes, the highest level since January 2001. The move comes on the back of Brazil’s 1.7 tonne increase in September, the country’s first significant gold purchase in a decade. However, there are concerns that the increase in the Brazilian central bank gold holdings' and tonnage are not all that they seem.  It appears that the central bank in Brazil has not actually bought London Good Delivery bullion bars but rather fixed term gold deposits with bullion banks. Recently, the Brazilian central bank was asked about their gold reserves and about a section on gold on their website under 'Official Reserve Assets' lists gold as "gold (including gold deposit and, if appropriate, gold swapped)" with a footnote of "Includes available stock of financial gold plus time deposits."

The Austrian central bank keeps most of its 280 metric tons of gold reserves in the United Kingdom, Vice Governor Wolfgang Duchatczek was quoted as saying in the finance committee of the country’s parliament today, according to Bloomberg. Answering lawmakers’ questions, Duchatczek said 80%, or 224.4 metric tons of the metal was stored in the U.K., 17% or 48.7 metric tons in Austria and 3% in Switzerland, according to a summary of a closed-door committee meeting provided by the parliament. The reserve has been unchanged since 2007, Duchatczek was quoted as saying. The central bank has earned 300 million euros ($385 million) over the last ten years by lending the gold, he said.

Massive Social Media War

Not only should we trade the spread between "correlated markets" but we can use the information from changes in the spread to help us trade the individual outright markets.

For those of us that still do not fully understand how bankers have seized absolute power in all governments worldwide and the ploys that they use to keep us dependent upon their largesses, the video "The Story of Your Enslavement" is for you.

The days just prior to the end of the third quarter now appear like a million years away, and a hundred S&P point away, but they were marked by one notable thing: the price of AAPL hit an all time high just days before the quarter ended. Which is why we read with great interest the quarterly Hedge Fund tracker update by David Kostin, which has been aggregating the popularity of the most prominent hedge fund-beloved names, and which as readers are well aware, has for the past two years been primarily one name: AAPL. And yet, even with the stock price hitting a lifetime high of over $700/share, which in turn would have assumed even more momentum chasers should have jumped in, June 30 saw the world's most popular hedge fund hotel in history rise by just one tenant for the entire quarter, as the number of Hedge Funds owning the stock, rose to a new record, but by the tiniest of increments: from 230, as of June 30, to 231, on September 30. It is thus safe to say that with barely any incremental holders jumping in when the stock was rising to its all time highs, the recent weakness is only and purely a function of the rising trajectory in hedge fund tenants at Hotel AAPL-fornia finally having been broken, as first one then more holders quietly slip out of the world's biggest hedge fund hotel in the quiet of the night while the receptionist is still taking a bathroom break. The only question is how many. That is an answer we will have in mid-February when the December 13Fs are released.

Is There a Better Way to Allocate Stocks?

The yellow metal soared 4.9% in euros in one week from the 11 week low set November 2nd and has since fallen 1.3%.  The rebound from the November dip means prices should recover to reach the all-time euro high set last month, before rising to the point-and-figure target at 1,395 euros, said the bank’s research.  Point and figure charts estimate trends in prices without showing time. Gold may then reach a Fibonacci level of about 1,421, the 61.8% extension of the May-to-October rally, projected from the November low, Commerzbank wrote in its report on November 13th which was picked up by Bloomberg. Fibonacci analysis is based on the theory that prices climb or drop by certain percentages after reaching a high or low. “What we are seeing is a correction lower, nothing more,” Axel Rudolph, a technical analyst at Commerzbank in London, said by e-mail Nov. 16, referring to the drop since November 9th.  Rudolph remains bullish as long as prices hold above the November low at about 1,303 euros.  Technical analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.