Precious Metals

Correlation may not be causation but it seems more than a few funds were using precious metals as collateral for their levered longs in AAPL...

Manhattan: 2770 Broadway NYPD reporting a a Robbery at the Bank Of America same perp that robbed HSBC at 2681 Broadway few. moments ago.

— NY Scanner (@NYScanner) January 23, 2013

Liking the technicals on Gold. 

Gold edged up and Tokyo gold hit a record multiyear high after the Bank of Japan announced a bold, some would say reckless, $117 billion ‘stimulus’ program as expected. The BOJ’ package included doubling its inflation target to 2% and making an open-ended commitment to asset purchases from next year.

This open ended policy surprised some that expected a small rise in the BOJ's $1.1 trillion asset-buying and lending program.

On Wednesday, there is a scheduled vote in the U.S. Congress proposed by Republicans on the U.S. borrowing limit.

It is no secret that one of Zero Hedge's favorite mainstream strategists over the years was SocGen's Dylan Grice, which perhaps in itself was a logical warning sign that his career in the mainstream was doomed to a premature end. Sure enough, several months ago, Grice, whose guiding motto has been sound money uber alles as he dutifully exposed - as much as he could  - crack after crack in the facade of the status quo, announced he was leaving SocGen, and was headed for greener pastures, literally, in this case Zurich-based fund Edelweiss, run by Anthony Deden. And while lateral moves in the financial industry are nothing new, we were quite impressed to learn that unlike most other "capital preservation" managers, Dylan Grice's new home has a rather stunning allocation of AUM to precious metals. How stunning? Decide for yourselves.

I know margins have come down, but are still too high relative to the volatility and price in the contract.

Silver is like gold in many ways; both are precious metals with long histories as currencies. They are malleable, lustrous, ductile, resilient, and rare. However, as Visual Capitalist illustrates in this spectacular infographic, silver investors should be aware of the three main differences between silver and gold. From silver's relative volatility and correlation to industrial demand, track record, diversification benefits, and the three ways to get exposure to silver, this colossal image provides everything you need to know in one place.

As we noted earlier this month, the demand for both gold and silver 'physical' coins has been record-breaking as 2013 began. So much so, that now after selling over 6 million silver coins in 2013 so far, the US Mint has run out of silver eagles and has suspended sales. Furthermore, the Mint is saying that it will not restart sales until January 28th! With all asunder proclaiming victory and crisis averted based on the nominal price of stocks at five-year highs, Swiss interest rates no longer negative, and Spanish bond yields at 5%, it seems there are still a few that demand the wealth-preserving safe-haven of hard assets as the escalation of the currency wars shows no sign of abating.

When one thinks of open-ended, "inflation targeting" one usually thinks of soaring markets, at least in nominal terms, exploding central bank balance sheet, and happy central planners. What one usually does not think of, is, well, inflation targeting. Because while the shadow banking financial system, perfectly devoid of deposits, has for now provided a sufficient buffer from trillions of reserve injections from spreading into the broader economy of the US and Europe, and has primarily impacted stock markets as unsterilized liquidity injections are used by banks to bid stocks, Japan has been far less lucky in this regard. As it turns out, the massive slide in the Japanese Yen in the past 2 months on nothing but ongoing promises of open-ended action, something Europe has perfected, and the US most recently enacted, may have already achieved its goal of pushing inflation. only not to the desired 2% level, but about 50% higher. Luckily, it is for such trivial things that nobody really every needs, such as fuel and consumer products - just ask the BLS.

Just as some do not believe in Santa, Christine Lagarde appeared to comment that she does not believe in currency wars (or competitive devaluation) this morning but sure enough, just a few hours later, Reuters rumors that the BoJ is about to join the Fed and ECB on the open-ended infinite print train. Sure enough, JPY is dumping (breaking recent highs on a stop-run), stocks are responding in their correlated carry way, and precious metals are surging (Silver +4.6% on the week) as fiat floods the world. It appears 2013 is the years of last last resort as the G-20 meme seems to be "if we can't reflate now, then it's all over." What is perhaps remarkable about the equity response is that everyone has known for two months that Japan plans on implementing a 2% inflation target. The only question has been "how" - and that it is only logical that the BOJ would use 'whatever means everyone else has used' - today merely confirmed this - knee-jerk algo response or sell-the-news?

Whether the repatriation of only some 20% of Germany's gold reserves from the Federal Reserve Bank of New York and the Banque of Paris back to Frankfurt manages to allay German concerns remains in question.  Especially given that the transfer from the Federal Reserve is set to take place slowly over a seven year period and will only be completed in 2020. The German Precious Metals Association and Germany's ‘Repatriate Our Gold’ campaign said that the move by the Bundesbank did not negate the need for a full audit of Germany's gold. They want this to take place in order to protect against impairment of the gold reserves through leases and swaps. Indeed, they have called for independent, full, neutral and physical audits of the gold reserves of the world's central banks and the repatriation of all central bank gold - the physical transport of gold reserves back into the respective sovereign ownership countries. It seems likely that we may only have seen another important milestone in the debate about German and global gold reserves.

From last Friday, the S&P 500 had decoupled somewhat (trading in a 10 point range) from credit markets (which had widened notably) while spot VIX had caught up (and over-taken) stocks. Today saw HYG (the high-yield bond ETF) trade sideways to lower all day long, catching down to its credit derivative market cousins, as VXX was the lever of choice to ramp stocks to test the week's highs once again (and scratch a few more stops). However, while AAPL made it up to the lows of the last swing down amid thin volumes, the last hour saw mid-dated volatility being bought which pushed VXX higher and reverted it towards rates and credit un-exuberance. Treasuries ended the day green once again and the USD drifted higher (though most of FX traded in extremely tight ranges). Silver rose further, Gold trod water, and oil played some catch up to the precious metals. Tech outperformed (thanks to AAPL) but financials (apart from some early vol) did nothing - despite Mario Monti's call that "the crisis is over." Another low-range, low volume, mediocre trade size, close-near-the-open day in stocks with bonds bid - and futures fade after-hours.

Sometimes the writing on the wall seems painfully obvious. But occasionally it's a good idea to step back and look at the big picture:

Most of the major currencies are consolidating within yesterday's trading ranges. The main feature has been comments from Japan's Minister of Economic Revival that appeared to declare victory in the government's attempt to weaken the yen. News wires quoted him saying that the yen had corrected its excessive rise and was currently in line with fundamentals. This triggered a wave of short covering yen positions, driving the down form around JPY89.60 to near JPY88.60 in initial reaction that lasted about an hour. It has been consolidating since, mostly below JPY88.90. The sharp recovery of the yen was also felt on the crosses, though a more consolidative tone that was seen in the European morning was fading and the currencies moved back toward the lows as North American traders prepared to return to their screens.

The question many of us had going into today was whether the no follow-through allowed rule would be implemented yet again by The Gold Cartel for the zillionth time in a row.