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The Russians Are Laughing All The Way To The Bank (With This Gold Price)
The Russian currency is still in a bad shape as the Russian Central Bank still has to aggressively intervene in the currency market as its currency was depreciating at an extremely fast rate. In just two months time, the Ruble lost more than 20% of its value versus the dollar because huge capital outflows are killing the already struggling economy.
The Central Bank has continuously intervened in the markets to try to stabilize the value of the Ruble, but to no avail. The Western sanctions haven’t missed their impact as Big Money is leaving the country and flows into Euro’s and Dollars. In what seems to be a desperate move, the Central Bank has recently raised the key interest rate from 8% to 9.5%. This is an extremely aggressive interest rate increase which should reduce the cash outflows a bit as the inflation rate is ‘just’ 8%. This means that from Monday on, Russian savers will have a ‘real’ return on their savings accounts of 1.5% instead of 0.4%, which could lure some more citizens to stop converting Rubles into Dollars. However, we fail to see why this would stop the larger companies from withdrawing money.
The USD/RUB Exchange Rate Source: Yahoo Finance
One of Russia’s main sources of dollar-generating income was its oil and gas production. However, the oil prices have come down fast, and this will not only result in a (much) lower inflow of US Dollars, but also in an expected budget deficit. As Saudi Arabia has publicly stated that it doesn’t really have an intention to reduce its output in order to get the oil price back up again, it doesn’t look like the Russian situation will be solved anytime soon. As Saudi Arabia has always been one of the strongest partners of the USA, it shouldn’t surprise anyone that an ally of the United States is driving the oil price down further just by making a simple statement.
As Russia produced almost 4 billion barrels of oil last year, every dollar the oil price drops decreases the revenue by $4B. So the recent $17 dollar drop per barrel of oil reduces the dollar revenue for the entire country by a stunning $68. And then people are wondering why Russia needs to increase the gas price for Ukraine.
The Ruble is crashing, the interest rates are increasing as is the inflation rate (some goods which were previously imported now have to be sourced domestically at a higher cost). But there’s one thing Russia isn’t holding back on, and that’s spending money on gold. In an earlier column we indicated that Russia’s gold holdings were increasing month after month, and in the most recent filings at the International Monetary Fund, Russia seems to be stepping up the pace.
Source: Trading Economics
Whereas the central bank only bought a few hundred thousand ounces per month, it bought 1.2 million (!) ounces of gold in September, spending $1.5B on the yellow metal. And now the gold price has been trending lower in October, we wouldn’t be surprised at all if Russia bought even more gold. It will also be interesting to see if its satellite states like Kazakhstan also added to their gold holdings, as the latter added 16% more gold to its position in August and is on its way to have 30% of its reserve assets being backed by gold.
And it’s not just Russia and China you need to consider, as you can’t forget about Japan. Japan announced late last week that it was effectively expanding its quantitative easing program by accelerating it by 15-30% per year. Right now, the central bank of Japan is prepared to pump in excess of $700B per year in the economy. This doesn’t sound like much, but if you put it in perspective, Japan will increase its monetary base by almost 12% of its GDP. At the highest point of the QE program initiated by the Fed, the repurchase rate was $1.02 trillion dollars per year, but as the USA had a much larger GDP, its monetary base expanded by just 6.28% of the GDP per year.
We would have loved to show you some charts picturing the demand for gold in Japan, but after a huge increase in the gold consumption in the first quarter of this year – per Bloomberg: ‘sales for the quarter through March 27 were 249 percent higher than the same in three months in 2013.’ – no more data can be found. This is very interesting as it looks like Japan doesn’t want to draw any attention to the gold consumption pattern of its citizens.
We would have loved to show you some charts picturing the demand for
gold in Japan, but after a huge increase in the gold consumption in the first quarter of this year - per Bloomberg: ‘sales for the quarter through March 27 were 249 percent higher than the same in three months in 2013.’ - no more data can be found. This is very interesting as it looks like Japan doesn’t want to draw any attention to the gold consumption pattern of its citizens.
The Federal Reserve is ending its quantitative easing program, but the ECB is printing money, the Japanese central bank is printing money and the Russians and the Chinese are buying physical gold. The world economy is NOT doing better, it’s actually doing worse than expected, and this is hidden behind the smoke screen of printing money.
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I see 118 Billion worth of Treasuries that I hope hit the market all at once.
http://www.treasury.gov/ticdata/Publish/mfh.txt
That actually makes sense, I too always try to sell my holdings as cheap as I can!
What's up with this gold fetish anyway?
Is Putin fondling his gold member?
Don't forget to buy some lead too.
Anybody that bought phyz with money that they need to live on is an idiot. You don't buy stocks with that money, why would investing in metals be any different? It's an investment, not your emergency fund, or play fund, or car fund.
When NEM hits 5 bucks, and gold $700/oz, that's the time to buy, not sell.
i take a slightly different view. although i dont fit into your "idiot" definition, i see buying pms as saving, and do allocate a good deal of my income towards purchasing them. i dont want to hold rapidly devaluing dollars in a criminal bank's checking account which could be robbed to bail in the banks at any time. the time to buy for me is always, contingent upon the existence of central bank manipulation and fractional reserve banking. i keep a few thousand FRNs laying around in addition to a credit card in the event of an emergency.
i doubt there are many people who spent money they needed for necessities on buying pms. that said, anyone that did needs a simple class in budgeting.
I never bought any stocks in my life.
Most of the money I needed to live on was soon going to be gone anyway no matter what I did or didn't do, due to circumstances outside my control.
Already desperate, I listened to the wrong people, who all said that stocks would soon be worthless.
So I thought I could salvage a little something from the general wreck by putting it into PMs, never dreaming that they, not stocks, or cash, would quickly be made nearly worthless.
I don't even know what NEM is.
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They probably play fantasy football with the markets daily.
Gold is in the process (or very nearly so) of a multi-month, bear market rally that probably began last week. Gold bulls should profit from the advance which will carry prices higher into 2015.
http://www.globaldeflationnews.com/gold-elliott-waves-forecast-a-multi-m...
At the same time, the USD will give back some its gains since last May...
http://www.globaldeflationnews.com/u-s-dollar-indexelliott-wave-update-f...
http://stockcharts.com/def/servlet/SC.pnf?chart=$gold,PGPLDANRBR[PA!B13][D][F1!3!1.0!!2!20]&pref=G
Elliott waves are for whole market not single stock or commodities, they require huge random buy sell numbers.
Energy costs reduced for miners since oil got the rug pulled -- > miners stay in business longer.
Miners in business longer --> watch for behemoth smack downs in miner price and paper AU to get a rollin'
Traders... set those shorts
Phys holders... you better not need to cash out of your holdings anytime soon
That's just it -- many phys holders definitely *do* need to cash out their holdings sometime soon, very soon, like by the end of the year at the latest. Many phys holders simply do not have the giant luxury of being able to sit for many years or decades (or indefinitely) on their stacks while bills and debts pile higher and deeper.
I wish some people could get it out of their heads that people who cash out are "panic sellers," selling out of panicked fear that the price might dip even lower. That's only the case with the big paper traders, not the little phys holders, who sell out of fear that their utilities may be shut off, or that they may be evicted. This concept seems to be next to impossible for some people to get their heads around.
Im sorry but if you stacked to that limit you deserve what you get...
I make 1 purchase a month that fits my budget and forget about it... this shit with the metals could go on and on and on so if you stacked so much you can't pay your bills thats your own dumbass fault.
Oh, I can still pay my bills (which are probably more heavenly than you imagine). I just have to sell PMs -- at a horrific financial loss -- to do it. I have no other income stream, now.
It sounds like you feel pretty confident you know what I stacked, how much, when I started, and why.
I might speculate about you as well. Maybe you started stacking back when beer was still served and delivered in buckets, when PMs were basically free. I didn't.
If you did then maybe by now you weigh your Au stack in kilos, and your Ag stack in hundreds of kilos, I don't know.
Or maybe you started stacking more recently, during all the run up to the big "Y2K" non-event. I wasn't interested in PMs then either.
Back when Au was like $200 or less an ounce and Ag was ... whatever an ounce, I had other spending priorities. I was prepping for other things. I didn't see how some coins would be much help to me in the chaotic scenario I envisioned.
So I spent on other things. Finally, by around 2006-2007, I had enough of those. But what I did NOT have was any good place to keep them in, or a secure (or even minimally decent) place to live.
What I needed was some real estate -- NOT to "flip" for a quick buck, but to live in, or on. But I had nowhere near the kind of money needed for that, and no immediate prospect of getting that kind of money.
In 2008 things began to get real interesting for me real fast, but NOT chiefly because of anything going on with the national or world economy. It was more of a personal or family thing.
About then, I did begin to take slightly more interest in PMs, but still bought none. The people I then relied upon for financial advice advised me against buying PMs.
It was not until 2010, the fall of 2010, that I began to stack PMs.
But, I had better say no more. Too many Nice Government Men are probably reading this
You've told this story before and you're consistent...so I do feel sorry for your timing. Just saying, keep your timeline focus on a longer range. Find a way to muddle through for now. Deliver pizzas or something. Spending the principal is a sure bet to rent to own lifestyle.
Obviously your mistake was not being diversified but you know that now. Doubt you'll make that mistake again. Been there done tthat...
Yes JJ, cashflow is a curse for those without direct (or indirect) radar love to the fed discount window.
I logged in to call myself an idiot for the double-post.
I logged in to upvote you for "radar love."
I'm making a considerable bet on minders as well. I'm doing this because I'm young and I can afford to lose some money. Anyone close to retirement should probably stay away from miners. Gold itself is a safe investment, but mining is an extremely high risk investment. It's basically gambling.
DON'T that’s the mistake I made a few years ago, same thinking "I am young I can afford to lose a bit" again DON'T, losing money while young is the last thing you want, just when you want a car, a house, a wife etc.
You might think that a stock that was 10$ a few months ago and now is 2$ is a "good buy" well just wait till it drops below a 1$ than a few cents, you won't think it was a good buy then.
And even if you do buy something never go long without going short(buying a put) and having tight "stop losses", but better yet don't buy.
Check HL's (Hecla) timeline.
I bought at 3.20 in 2010/1, it hit 12, I sold at 9 and it is 2.50 again now.
Am very tempted to have another punt....
It is gambling. But buying low on mining companies right now is a good bet. The rest of it is so artificially bloated it simply won't last, but if it starts crashing hard you can guarantee the feds will print more money to prop it up, for a while anyway.
Can you imagine being a Japanese citizen and have most/all of your life savings in Yen denominated bonds and Yen denominated equities? Holy crap, how can there NOT be a run on gold/silver in Japan? What the hell else would you do to protect a lifetime of savings? Dollars? Rubles? Japanese Stocks? U.S. Bonds?
Kyle Bass has said for years that Japan goes first. At that point, the dominoes are ALL lined up.
Gold, it's what's for tail risk.
You'd better buy soon because the miners are trading like they will be going out of business very soon. I mean companies like ABX, GG, AUY etc are down anywhere from 60-80%. This is either the best buying oppurtunity for gold miners or the industry will be gone in a few years. I'm going down swinging. physical and miners stocks until everything is either worthless and i'm out of my misery or it all works out and i'm somewhat out of my misery
The mines may go broke, but they will not go out of business. Buyers like Chinese will step in and pay pennies on the dollar, then build up those mines, then ship the gold to China, where it will be off the market for fifty decades. So, if you are correct about mines, then you had better own the physical gold, and even moreso, silver.
And for the opposing view: I'm shorting the crap out of a lot of miners because I expect them to go bankrupt - or at least have thier stock continue decaying. Chinese are not going to pay pennies on the dollar to the useless common stock holders. Let the company go bankrupt then buy the assets without the dead weight of a bunch of common stock holders to worry about. That's pretty much how the whole Chinese small-cap scams played out (for any companies with real assets, anyway).
I'm surprised the article didn't bring up all the other players that could bury COMEX. Russia - sure. China? India? The Swiss? Hell, the Mexicans could destroy the futures markets if they wanted. They all see some benefit in keeping it going for all their diffrerent reasons. Keep in mind that demanding delivery for so much gold is only going to make the markets collapse. Nobody can actually deliver so there's no chance of anyone actually getting 1500 tonnes of gold delivered. If you cause the collapse by demanding delivery of an extraordinary amount, YOUR contracts will become worthless when the counterparties go bankrupt. The lawyers will do pretty good with all the lawsuits later on, but they're happy with cash.
Yup, read the MG Rover story. Tragic.
Chinese investment rumour, hyped, then crashed as the Chinese pulled out. Stock price crashed, company goes bankrupt, closes gates. Then another Chinese firm comes in to save the day, pays pennies and ships the machinery from Longbridge Birmingham to China. And get this.... they are now selling MG's made in China, in England. Cheeky fuckers no doubt. Only surprise is that the Brits are buying them! Stupid fuckers.
https://en.wikipedia.org/wiki/MG_Rover_Group#Aborted_deal_with_SAIC_of_C...
Common Stocks are a scam by definition, you own a paper saying IOU Nothing, might as well be buying some Tulip Bulbs at least you will have something to show for it later.
For those that don't believe in the existence of the Rothschild bankster elites and Zionism, the past year and a half should be a wake up call.
Isn't this massive, huge scale and scope, and coordinated attack on the entire nation of Russia for Israel's drive for the acquisition of Syria so as to become Greater Israel proof enough?!
An American, not US subject.
"In 1941, western Russia, the Ukraine, was considered the "breadbasket" of Europe. In 2014, Syria is considered the "breadbasket" of the Middle East."
The "Greater Israel" Project is a smoke screen, they don't care about Israel they want total GLOBAL domination, Israel is just the Trojan Horse in this, and it might/will get burned down if it serves their purpose.
And for those who don't believe or need an explanation...
https://www.youtube.com/watch?v=lNIcAcrvi2M
The more important question is *where* are Russia's gold holdings being held? At the IMF? Hahahahahaha. Might as well not have them.
Seen the pix of Vlad and gold? He keeps it in his bedroom. Fat chance he'd let Liberty Street or The City hold his gold. But there is something he might do. He might put ten billion on a Comex futures contract, using any Wall Street proxy buyer, and then ask for delivery. The shock waves would destroy the US economy overnight, put the dollar on life support, empty the supermarkets and the gun shops, and send the price of gold (incl Vald's) up ten times per day for months. It would be even easier bankrupting the silver market. The guy has the tools to destroy this nation overnight. Without a shot fired. Current US leadership has no tools to respond and no balls to respond. I haven't figured out why Vlad hasn't done that yet.
Meanwhile, let's just keep pissing him off with toothlesss sanctions and name calling. I like living on the edge.
Read CME CLEAR rules no one since last month can write that deliver contract so cant happen.
True. MFG, PFG. Here's how this money-magic trick works. When the PTB don't want to be bothered with delivery, they crush the order taker by looting it via overpriced stuffing with bad trades. Jon Corzine's associates make a killing, MF Gobal's client accounts are tapped and all the orders are essentially lost ungil further notice. In case anyone didn't get the messsge, they pulled the same financial-mafia stunt a few months later on PFG. It will take grewter forces than the Comex to resolve this.
When your government declared it will print till you drop what is a Japanese to do but to buy gold for protectioin ?
You forgot to mention Indian gold demand
what about the talk of oil fracking? allied with arabia?
http://www.covert.co.nr
India is interesting. They have a long love affair with gold, see it as real wealth. Much of it is being worn by their women, and much of THAT is in the rural areas. So a significant amount of stored wealth is in the hands of dirt farmers and small villages. If the world economy implodes, these folks may actually come out way ahead.
Compare that to OUR 'dirt farmers and small villages'...how much wealth do THEY have stored? Maybe a lot, but nearly all of it paper, which will implode with the economy. And that 'gold' necklace Mrs. Farmer is wearing? It's merely gold plate...she won't be getting any 'gold loans' for HER jewelry.
Our big farmers are all just credt junkies, who own neither farms, machinery, or livestock.
It all belongs to the bank
Same with all the UK and US "Homeowners"
Biggest con out there. UK Gov started a "help to Buy" scheme (a nearly free mortgage deposit) and now you see all manner of frikkin dim-wits saying:
"Yeah, it's great only 5% down and no interest for 5 years! I always wanted to own my own home"
blu, right on and that is with backdrop of crappy prices this year. squeeze the small farms to corp. hand or stronger hands. but, neighbor has 3 farms on 700 acres and seem to making a go of it with sons. many tractors, frontloaders, ect. heavy and light machinery, but most bought at auctions. smart business farmer, but still subject to all these radical swings/manipulation.
not to mention the weather, ha...
the indians will do well because they do not have far to fall. most of the emerging markets are the same. even china is only a generation removed from destitution. the west and japan will have the worst time of it. it is tough to go from 5 bedrooms in 5000 square feet to cardboard boxes under the overpass.
I'd imagine 20-30% of people (in the West) would commit suicide on the spot if they realized they would be living in conditions like the Slum-dwellers in India for the rest of their lives.
The 'farmers' may still be ok...as long as they are still farming and not being paid not to farm, hence forgetting their skills.
It's the other 'ruralites' and 'urbanites' that have now stored their wealth in electronic currency (ie, bits and bytes on a bank statement), electronic gadgets and trinkets that will be fucked.
That US 'farmer' is more than likely some big agribusiness... the few 'family' farmers left are subject to huge costs for fuel to run all the VERY costly equipment (which they are paying off loans on). Many are also dependent on others who come in seasonally perform vital tasks like harvesting - those combines are REALLY expensive (to own and run). Not too many US 'farmers' actually 'farming' in the traditional sense these days.