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FX traders of the world have been forlorn for a week or two as the lack of directional guidance from the anti-guru-du-jour Thomas Stolper of Goldman has been sorely lacking. Worry no more. He is back with with his latest 'Fadance' (/fey-dyns, verb/ - "Advice" which Goldman Sachs provides to "muppets") in that he prefers to be short USDJPY from 82.8 (suggesting JPY strength on the back of seasonal patterns and the recent deterioration in the trade balance as being transitory temporary). Given his recent track record, being long the USD against the JPY would seem appropriate and his stop (and therefore the target) at around 84.5.

All you need to read.

All you need to read.

Jewelers in India are protesting the tax hike on gold imports and plan to keep their shops closed for two more days. This is India’s first nationwide strike in seven years and shows how important the gold industry is in India. The excise duty hike is expected to lead to less demand however Indian demand may again prove to be robust despite tax increases. PDR Gold Trust, the world's largest gold-backed ETF, said its gold holdings remained unchanged at 1,293.268 metric tonnes for the 5th straight session on Monday, despite the drop in prices last week. Gold will have a “sharp” rally as the U.S. boosts monetary stimulus because of a faltering economy in the coming months, Societe Generale said in a report that was picked up by Bloomberg. Data on U.S. gross domestic product in the first and second quarters will “surprise dramatically to the downside,” the bank said today in a report. Meanwhile, ANZ has said that central bank gold buying may lead to a nominal gold record price in 2012 and prices to average $1,744/oz from $1,571/oz in 2011.

With a economic calendar devoid of virtually any events, the only two events worth of note this morning are the Greek CDS auction (where RBS appears to once again be confusing price and discount), and the Apple cash announcement due in just over an hour. The result is Apple stock which in the premarket session has traded as high as a new record high og $606, even as concerns emerge that the growth phase is over as the company transitions into a MSFT-type, post-Steve Jobs existence. Details of the 9 am call can be found here. Aside from that risk is broadly flat as hungover American traders take their seats.

This week brings policy decisions in Taiwan and Thailand. The CBC decision will be very interesting to watch. The December statement at the time was surprisingly hawkish, only to be followed by a large upside surprise in inflation, and the TWD was subsequently allowed to appreciate. Given that the bank continues to view inflation as a major problem, according to quotes from Reuters, it will be very interesting to see how the bank weighs up concerns about hot money inflows vs the need to contain inflation risks. In particular, in the face of imported inflation pressures via higher commodity prices, many central banks may shift towards accepting the need for more currency strength. The week also brings some important central bank commentary. The RBA governor has an opportunity to opine on the recent slew of weak Australian data, as well as developments in the A$. There is quite a bit of commentary from Fed officials on the docket, including from Bernanke, which we will dissect for information on the further direction of policy. More dovish commentary than that of the FOMC last week, would arguably be a surprise and potentially dampen, if not reverse some of the moves of last week.

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South Africa's gold output fell again in January and was down a very large 11.3% in volume terms in January.  Annual gold production is set to be close to 220 tonnes which is a level of gold production not seen since 1922 (see chart below). The falls were seen only in the gold market with production of other minerals holding up with total mineral production down only 2.5% compared with the same month last year. South Africa as recently as two decades ago was the world's largest producer of gold by a huge margin. Only 40 years ago South Africa produced more than 1,000 tonnes of gold per annum but will only produce some 220 tonnes in 2012. Production peaked in 1970 and has been falling steadily and sharply since. The nearly 80% fall in South African gold production has led to it being recently overtaken by China, Australia and the U.S.  It is now even at risk of being overtaken by Russia. The massive 11.3% decline in South Africa was more than even that seen in December when gold output fell by 8.2%. The continuing output decline is due to many of the country's biggest gold mining operations having reached the ends of their lives and having closed down.

Relatively quiet overnight session in the markets, where Europe has seen several bond auctions, most notably in France and Spain, whose good results has in turn sent the German 30 Year Bund yield to the highest since December 12, all courtesy of the recently printed (and collateralized with second and third-hand Trojans) $1.3 trillion. Per BBG, Spain sold 976 million euros of 3.25 percent notes due April 2016 at an average yield of 3.37 percent. The bid-to-cover ratio was 4.13, compared with 2.21 when the notes were sold in January, the Bank of Spain said in Madrid today. It also auctioned 2015 and 2018 securities. France sold 3.26 billion euros of benchmark five-year debt at an average yield of 1.78 percent. The borrowing cost for the 1.75 percent note due in February 2017 was less than the yield of 1.93 percent at the previous sale of the securities on Feb. 16. Elsewhere, we got confirmation of the collapse in Greece, where Q4 unemployment rose to 20.7%, up from 17.7% in the prior quarter. China weighed on Asian market action again following ongoing concerns about domestic property curbs, and a slide in the Chinese Foreign Direct Investment of -0.9% on Exp of +14.6%. ECB deposit facility usage, primarily by German banks, was flattish at €686.4 billion, while in Keynesian news, Italian debt rose to a new record in January of €1.936 trillion. Watch this space, once inflection point occurs and vigilantes realize that not only has nothing been fixed in Italy, but the current account situation in Italy, and Spain, is getting progressively worse as shown yesterday, all at the expense of Germany.

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"Rationalising away the imminent risk of inflation, the Fed leaves the door wide open for a QE3 announcement in April."

While hardly an opinion that would be questioned around these parts, it is still good to see that even some of the smart money shares our views about the Schrodinger Economy ('alive' and 'dead' at the same time, depending if the BLS or anyone else is observing it) and we are not totally insane vis-a-vis one-time, non recurring government bailouts, which just incidentally have become perpetual and endless: "The Federal government has manfully stepped up to fill the gap left by consumers who have been forced to retrench and who are trying to repair their finances by paying down debt and increasing their savings.  So the next question has to be:  Is this recovery self-sustaining or is the economy still on life support, held together by periodic massive liquidity injections and ultra low interest rates, and accompanied by a dangerous, if not reckless, expansion of government debt?  We think that if government programs were canceled, the economy would collapse back into severe recession." And here Balestra's Chris Gorgone explains quite astutely why anyone betting on a decoupling or perpetual USD reserve status may want to reconsider: "the U.S. is no longer in complete control of its own destiny.  We exist now in a world of increasing correlation in the arenas of economics, finance, trade, politics, etc.  What happens in Europe, China, the Middle East, etc. will have major impacts on American economic, political, and social outcomes.  The world is changing  rapidly.  The old rules that so many investors rely upon may no longer apply the way they did during the great growth years after World War II." Alas, this too is spot on.

While hardly expecting anything quite as dramatic as the default of a Eurozone member, an epic collapse in world trade, or a central banker telling the world that "he has no Plan B as having a Plan B means admitting failure" in the next several days, there are quite a few events in the coming week. Here is Goldman's summary of what to expect in the next 168 hours.

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Following a busy overnight session, which saw a surprise announcement out of the Brazilian Central Bank cutting rates more than expected, and confirmation of the deterioration in the Japanese economy where January saw a record current account deficit, today we have already seen the Bank of England proceed as expected keeping its key interest rate unchanged (at 0.50%) and QE fixed at GBP325 billion. The ECB is next with its rate announcement, expected to keep things on hold. Yet the mood of the morning is set by speculation that the Greek debt swap may see a sufficient participation rate for the PSI to go through, even if that means CAC activation, as somehow a Greek default is good, and only an "out of control" bankruptcy would be bad. That coupled with renewed expectations of more QE, sterilized or not, and hopes that tomorrow's NFP will be better than expected, as somehow the Fed will pump money even if the economy is "improving", is all that is needed to send the post-roll ES contract to session highs nearly 1% higher than yesterday's close.