World Gold Council
Dear World Gold Council Executives;
As you very well know, the business environment for gold producers has been extremely challenging over the past few years. While demand for physical gold remains extremely strong, prices on the COMEX have fallen precipitously. This contradictory situation is the single most important obstacle to a healthy gold mining industry.
In my opinion, the massive imbalance between supply and demand is not reflected in prices because available statistics are misleading...
Historical data tells us that the unemployment falls when the confidence ratio is high. Now, there are three ways for a government to increase that confidence ratio: 1) increase debt; 2) sell off gold; and/or 3) pray for the price of gold to fall (obviously in a non-manipulative manner that doesn't direct profits to favoured entities). The fall in confidence that we observed in the latter half of the last decade was entirely due to the rising price of gold. Look at what that did to the unemployment rate! Clearly the fault of gold-bugs and conspiracy theorists. The rising price of gold completely overrode the excellent work of the Government in driving up the country's debt.
The U.S. is engaged in fiscal and monetary policies that are akin to a Banana Republic.
In addition to electronically creating out of nothing $85 billion every month to buy its own debt in the form of bonds, the U.S. is also borrowing more money than it is authorized to borrow, from itself again.
As we noted two days ago, this story is just further proof of the complete and total mess that has been made of the Indian gold market over of the course of this year due to government intervention. The other part of the problem is that when you are dealing in physical supplies you can’t just deliver paper contracts. Somehow we don’t think that would cut it for Indians on festival days or their daughters’ weddings.
U.S. Debt Limit To Be Raised For 18th Time In 20 Years - Gold Vulnerable Short Term But Real Record High LikelySubmitted by GoldCore on 10/11/2013 11:05 -0500
The dangerous habit of politicians and governments continually ‘kicking the can down the road’ cannot go on indefinitely. Eventually, the ramifications of this profligacy will be clear to all.
Yet another increase in the debt ceiling and the increasingly parabolic nature of the rise in U.S. government debt will be very supportive of gold in the medium and long term.
U.S Government would rather default than lose their bullion.
As reported previously, the latest meme surrounding the D.C. impasse is that Obama is suddenly willing to compromise on a short-term, supposedly six-week funding and debt ceiling extension, on the verge of his latest talks with republicans at the White House scheduled for this morning, as previously floated by the GOP. Throw some additional headlines such as "Ryan steps up to shape a deal" (in line with what we predicted yesterday) and "The ice breaks; fiscal talks set", by The Hill, and "GOP quietly backing away from Obamacare" from Politico, and one can see why futures are in breakneck soaring mode this morning, driven as usual by the two main JPY cross (USD and AUD), the first of which is less than 100 pips now away from being Stolpered out. So will a compromise deal finally emerge 7 days ahead of the first X-Date, or will a last minute snag once again derail the (non)-negotiations? We will know quite soon.
Compared with Japan, the United States national debt is a mere $17 trillion or so. But if you convert that number into yen, it comes to about 1.6 quadrillion.
We laugh at children when they talk about bazillions and gazillions but a quadrillion is no laughing matter. Measuring any currency in quadrillions brings to mind the many hyperinflations seen in the 20th and 21st centuries. For example, the powerful and very wealthy Germany in the early 1920s and wealthy Zimbabwe, the breadbasket of Africa in 2008.
Japan's soaring national debt is already more than twice the size of its economy.
Equity futures stormed out of the gate on initial relief that a Syria attack may be avoided, which sent oil and the PM complex flash crashing lower. However, overnight, sentiment shifted that the Syrian escalation is at best delayed and as a result Brent regained all losses, with the precious metals also largely unchanged from Friday's close. Futures on the other hand, were perfectly happy to rise on the transitory Syrian risk moderation reduction, and then continue rising when Syria returned to the forefront, this time prodded higher by PMI exuberance out of China and Europe. How credible such manufacturing data remains to be seen. A surging USDJPY was also rather helpful, with the pair breaching 99.00 stops to the upside shortly after the European PMI data printed. And with the cash US market closed, and electronic equity trade halted at 10:30 Central, it is unlikely that concerns about all those "other" things that will define September, will seep in and it is likely the HFTs will push equities to session highs before reopening for the Tuesday trading.
“Indians want to maintain a store of value, so they go to gold.”
‘Gold is the last man standing as rupee fuels inflation’ was not published on Bloomberg.com but the story was published on Live Mint.
What is happening in India is a prelude to what will be seen in other economies in the coming years as currencies depreciate.
One of the most published academics on gold in the world is Dr Brian Lucey of Trinity College Dublin (TCD) and he and another academic who has frequently covered the gold market, Dr Constantin Gurdgiev have just this week had an excellent research paper on gold published.
They have researched the gold market, along with Dr Cetin Ciner of the University of North Carolina and their paper, ‘Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates’ finds that gold is a hedge against US dollar and British pound risk due to “its monetary asset role.”
Premiums on the Shanghai Gold Exchange rose from $21 yesterday to $22.40 (0800 GMT) over London spot showing robust physical demand in China. Demand from the over 2 billion people, rich and poor, in China and India alone this year alone is set to be 1,000 metric tonnes which is worth over $87 billion or roughly what the Federal Reserve is printing every single month.
Following the market's shocking realization that the taper is coming prompting a kneejerk to the kneejerk reaction after the FOMC minutes, and yet another painful session in Asia, stocks were desperate for some good news from somewhere, which they got thanks to a Goldilocks PMI from China printing by the smallest possible expansionary quantum, or 50.1, and well above expectations, as well as a continuation of better than expected European PMI data with the August composite rising from 50.5 to 51.7 vs. Exp. 50.9, based pm a Services PMI rising into expansion to 51.0 from 49.8, (Exp. 50.2), and Manufacturing at 51.3 vs. Exp. 50.8 up from 50.3, the highest since June 2011. It is perhaps stunning just how conflicting this "improving" data is with private sector industrial and manufacturing company metrics, but with the credit creation situation in Europe (read: all that matters) at record lows, and with banks retrenching and needing to delever by trillions, it is only a matter of time before this latest propaganda wave is exposed for what it is. The net effect of the overnight data is to push the USDJPY to nearly 99.00 which thanks to the ubiquitous correlation algos has dragged US equity futures higher, if only briefly (the 10 Year is at 2.91% - under 10bps from redline territory), while slamming the offsetting EURUSD despite the "better" than expected European data.
Gold analysts are the most bullish in five months according to Bloomberg. Thirteen analysts surveyed by Bloomberg expect prices to rise next week, four were bearish and five neutral, the highest proportion of bulls since March 8.
With the ongoing musical chairs at the COMEX (focused on JPMorgan's volatile holdings), the bank's precious metals team now sees a number of reasons to be long gold. Noting the market's shrugging off of Paulson's unwind ("delivering an exclamation mark to define the end of the fall in gold stocks"), JPMorgan (ironically) suggests the questionable price action in the paper markets in light of unprecedented physical demand combined with the seasonal positives (and physical supply restrictions) all points to "getting long the gold space," with gold and silver miners offering value. The question remains, given that none of these are 'new' facts, why the change of heart now (especially as JPM is also buying)?