“Anti-government extremists opposed to taxes and regulations pose a growing threat to local law enforcement officers in the United States, the FBI warned on Monday. These extremists, sometimes known as “sovereign citizens,” believe they can live outside any type of government authority, FBI agents said at a news conference.” And the most epic line ever written: “The extremists may refuse to pay taxes, defy government environmental regulations and believe the United States went bankrupt by going off the gold standard.”
Debkafile reports that India (and probably China) will pay for Iranian oil in gold. “India and China take about one million barrels per day, or 40 percent of Iran’s total exports of 2.5 million bpd. Both are superpowers in terms of gold assets.
By trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its central bank’s assets and the oil embargo which the European Union’s foreign ministers agreed to impose Monday, Jan. 23. The EU currently buys around 20 percent of Iran’s oil exports.”
Xinhua, the official press agency of the government of the People’s Republic of China reports that a “gold rush” swept through China during the week-long Lunar New Year holiday this year, with demand for precious metals and jewelry surging since the Year of the Dragon began. Data released by China’s Beijing Municipal Commission of Commerce shows a 49.7% increase in sales volume for precious metals jewelry and bullion during the week-long holiday (over last year), which lasted from January 22 to 28 over that of last year’s Spring Festival. One of Beijing’s best-known gold retailers, Caibai, saw sales of gold and silver jewelry and bullion rose 57.6% during the week long New Years holiday according to data released by the Ministry of Commerce (MOC) on Saturd
Is this then, the beginning of the next surge in gold and silver to record highs? It remains to be seen, but one entity, the Duet Commodities Fund which was one of last year’s best performers, has already made up its mind. ‘Our central forecast in gold remains constructive as our long term view targets $2,500 in 2012. Our core view is that gold will head higher to the $2,500 range driven by consequential USD weakness once the EU crisis dissipates and the US steps into the limelight.
The interest rate for lending gold in exchange for dollars plunged to the lowest on record this week…
The bullion banks use this leased gold as collateral for more fractional paper short sales, breaking the price trend and forcing liquidation.
“…central banks stand ready to lease gold in increasing quantities should the price rise.”
-Alan Greenspan, Congressional Testimony on Regulation of OTC Derivatives, 24 July 1998
The CME (JPM & GS) has its claws in the SGE, so margin manipulation is to be expected. Nevertheless, on balance the SGE is still going to increase metal demand.
“The bark in the Euro zone and the spat between Germany and France is pulling gold down,” Credit Agricole analyst Robin Bhar said. “It is a bit surprising that gold continues to act like a risk asset rather than as a safe haven but in the short-term there is more need for dollars rather than need to hold profitable positions in gold.”
LONDON—Total central-bank gold purchases in the third quarter were more than double the level reported just one quarter earlier, and came in almost seven times higher than the year-earlier period as countries continued to diversify their official reserves, according to World Gold Council data Thursday that surprised gold traders and analysts.
Although the shares have been lagging behind, there are a number of developments that suggest that the mining companies might be ready to catch up and outperform physical gold and silver. First, margins between the gold price and cash costs of production per ounce have been growing steadily. This has led to vastly increased profitability. The increase in margins has been a result of higher gold prices as production cost has been increasing at a much lower rate. This chart below shows the average industry margins between the gold price and cash costs of production per ounce.
This past Wednesday, most Italian bonds traded above the dangerous 7% level, causing a sharp spike lower in equities. One would think that investors would flock to gold, since Italy is a much larger economy than Greece and should cause a much bigger problem. But gold actually closed negative. It was the U.S. dollar that rallied.
So do most investors believe a better flight to safety is in the U.S dollar rather than gold? That is hard to answer since nothing like this has happened before. The likely answer would be yes, since the European Central Bank has not loosened its monetary policy by pumping more money into the system. When that happens, it is almost certain gold will rise. Until then, Europe remains in a deflationary scenario.
With the price of gold up nearly 30 percent for the year and climbing back toward the $1,800 level, it’s hard to imagine any stock outpacing the gains gold has made in 2011. But that’s exactly what renowned hedge-fund manager David Einhorn is forecasting.
Einhorn predicts that gold mining companies will outperform the underlying commodity in the coming months. That could translate into a big bump for gold stocks.
“With gold at today’s price, the mining companies have the potential to generate double-digit free cash flow returns and offer attractive risk-adjusted returns even if gold does not advance further,” Einhorn said. “Since we believe gold will continue to rise, we expect gold stocks to do even better.”
These are the established companies for the most part. One can speculate endlessly for the reasons, but it looks to me that there is a paired trade going on, of long bullion and short miners. That is similar to one of my favorite paired trades this year, long bullion and short a broad stock index or the financial sector.
If this is true, if gold breaks out and the stock market recovers somewhat, the miners will play catch up. But if the stock market falls apart, the miners are much more vulnerable to a selloff than bullion. That is the reason for the paired trade I believe.
MELBOURNE (Commodity Online) : World’s second largest gold producer Australia’s output dropped by 7 percent in the first quarter this year, mainly due to widespread cyclonic rains during those period.
London has seen a flurry of activity where some physical players refuse to forward any of their gold contracts at the LBMA and instead take the physical totally out of London vaults. This causes the Bank of England to muster up supplies so it calls upon our illustrious hoodlums, JPMorgan, Goldman Sachs, to deliver gold to our buyers. They raid the GLD by taking shares and cashing them for gold and deliver upon the anxious investor. The problem is thus two fold:
the shareholders of GLD are losing “their gold”
the bank of England is also losing their gold.
Immediately after GLD was formed, we could not balance demand vs supply of gold. However
Catherine Fitts determined that the GLD got their original gold through a swap arrangement with the Bank of England. The Bank moved its gold over to the cubby hole of the GLD. The GLD deposited money into the Bank’s account. The Bank of England can reswap at any time they wish. If you remove the GLD inventory then all BIS data balances perfectly. There is a further problem here in that the gold on deposit to the Bank of England is not really the Banks but depositors like the Arabs or other sovereign folk who desire to deposit gold for safekeeping. The Bank of England is a foreign depository for gold just like the Federal Bank of New York with one distinction. The gold at the Bank of New York is ear-marked gold and cannot be used by the Bank in lending activities etc. The gold at the Bank of England is not ear marked and they can use the gold for lending purposes just like you depositing cash into your bank. The bank can loan out your money and that is what they are doing with the gold. This is why a default here will be a much bigger bang and a default over at the comex.