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The Apple trade works until it doesn't. The exit door may get quite crowded!

The Eurozone could break up and trigger a “full-blown panic in financial markets and depositor flight” and a global economic slump to rival the Great Depression, the IMF warned yesterday. In its World Economic Outlook report, the International Monetary Fund said the collapse of the crisis-torn single currency could not be ruled out. It warned that a disorderly exit of one member country would have untold knock-on effects. "The potential consequences of a disorderly default and exit by a euro area member are unpredictable... If such an event occurs, it is possible that other euro area economies perceived to have similar risk characteristics would come under severe pressure as well, with full-blown panic in financial markets and depositor flight from several banking systems," said the report.  "Under these circumstances, a break-up of the euro area could not be ruled out."  “This could cause major political shocks that could aggravate economic stress to levels well above those after the Lehman collapse," said the report. The risks outlined by the IMF are real and are being taken seriously by central banks who are becoming more favourable towards diversifying foreign exchange reserves into gold. Central bank reserve managers responsible for trillions of dollars of investments are shunning euro assets and questioning the currency’s haven status because of the region’s sovereign debt crisis, research has found, according to the FT.... Elsewhere, gold demand in India, the world’s biggest importer, may climb as much as 25 percent during a Hindu festival next week, according to Rajesh Exports Ltd., reviving jewelry buying that was curtailed by a nationwide shutdown.

Matthew Bishop, the US Editor of The Economist, has been interviewed by the Wall Street Journal TV about gold and why “people have lost faith in the 20th century religion of government backed fiat money." He says that he has become an agnostic or an atheist with regard to his belief in government-backed money as he fears that governments are in a position whereby they are going to debase currencies such as the “paper dollar and “paper euro” “in a big way.” Gold becomes one of the “alternative religions” in that environment. History shows that a deleveraging downturn takes a long time and can take 7 or 8 years. Inflationary pressures are building and will be seen in the second half of the cycle, according to Bishop. Bishop says he would put some of his money into gold but is prohibited from this due to the investment policies of The Economist.  He advocates owning gold as a “portfolio of money” and diversification and advocates having 5% to 10% of one’s money in gold.  The Economist magazine has a strong Keynesian bias and has been one of the most anti-gold publications in the world with many simplistic, unbalanced and ill-informed articles.  The publication has suggested on many occasions since 2008 that gold is a bubble. Clients of GoldCore have told us that they were prompted to sell their gold bullion as long ago as 2009 after reading such articles in The Economist. 

Based on supply, demand and even after taking into account the geopolitical factor, we believe oil could experience a correction later this year and in the next three years or so.

There is the slow realisation that the complacency of recent months was again misplaced. It remains obvious that the euro zone debt crisis is far from over and this will support gold in the coming months – especially in euro terms. 

Gold in euro terms has been consolidating above €1,200/oz for six months now. With the eurozone crisis set to deepen and the continuing risk of contagion, we could see gold break out in euro terms prior to doing so in dollars, pounds and other currencies.

It is about time for a vote on this antiquated, outdated, and obviously absurd DST policy by the American Public.

Another CEO made the news headline for alledgedly having "inappropriate relationship" with a female employee.

Gold bullion remains supported, mostly due to a pickup in physical Indian and Chinese gold demand this week. There are expectations of sustained Indian consumption next week in the lead up to the Akshaya Tritiya festival later this month.  Western physical buying remains unusually anaemic - for now. In recent years, April and May have been positive months for gold in terms of returns (see table above). April has returned 1.4% per annum in the course of the current bull market since 2000.  May has returned 1.75% per annum in the course of the current bull market since 2000. Interestingly, the last month of Q1 and Q2, March and June, have been negative in terms of returns. March in particular has seen the poorest returns for any month in the last 11 years with average falls of 0.6%.  Therefore the very poor performance of gold in March 2012 (-6.4%) may represent another buying opportunity as it did last year (see chart below) and in previous years.

The Apple trade, it works very well... util it doesn't. What happens when ALL of those funds change course???

Further confirmation of gold’s continuing but gradual renaissance as a safe haven asset was given by the IMF yesterday who warned that a “growing shortage of safe assets” poses a threat to “global financial stability.”  The IMF identified $74.4 trillion of potentially safe assets today, including gold, investment grade government and corporate debt, and covered bonds. Sovereign debt crises are reducing the number of governments that investors trust to issue "risk-free" bonds just as new financial regulations are increasing demand for safe securities from banks. Importantly, the IMF’s latest Global Financial Stability Report’s introduction finds that  "In the future there will be rising demand for safe assets, but fewer of them will be available, increasing the price for safety in global markets.” “Both the lack of political will to reshape fiscal policies at times of rising concern over debt sustainability and an overly rapid reduction of fiscal deficits limit governments’ capacity to produce assets with low credit risk.” The IMF has warned regarding illiquidity in “safe haven” markets. Gold remains one of the most liquid markets in the world and the illiquidity in bond markets would see increased safe haven demand for gold.  The IMF is warning regarding deteriorating public finances. As many governments see themselves being downgraded - safe haven bonds may become less safe.

And we thought the 25:1 WTI to Henry Hub ratio reached in August 2009 was parabolic...

Chinese gold demand remains very strong as seen in the importation of 40 metric tonnes or nearly 40,000 kilos of gold bullion from Hong Kong alone in February. Hong Kong’s gold exports to China in February were nearly 13 times higher than the 3,115 kilograms in the same month last year, the data shows.  Shipments were 72,617 kilograms in the first two months, compared with 10,564 kilograms a year ago or nearly a seven fold increase from the record levels seen last year. China’s appetite for gold remains strong and Chinese demand alone is likely to put a floor under the gold market.

Chesapeake Energy took the road less traveled by entering 2012 "naked" with none of its gas volumes hedged.

China reported strong copper and copper product imports in February. However, rather than a sign of strong end user demand, a lot of the stockpile copper will never get shipped out to end-users.