Wednesday, March 2, 2011
Fed Printing Enough Money to Buy the World's Silver
By: Richard_Daughty
I thought I had heard all the good arguments to buy silver, mostly from me asking myself two important questions.
First, "Why am I not buying silver when it is so obviously going to go much, much higher in price because of the absurd Federal Reserve insanely creating so much money, which causes inflation, which always makes the prices of precious metals soar?"
A lot of the "soaring prices," a phrase that rings with a certain pleasant musical quality to investors everywhere, will come as other, loss-ridden investors frantically selling out of stocks, bonds, and real estate to stem their mounting losses plow headlong into gold and silver which will, by that time, be soaring in price, thus attracting the nervous investor, and the greedy investor, and the performance-driven investor, all jamming their trillions and trillions of dollars into a silver market that produces a lousy 900 billion ounces of silver per year, and uses most of it up just to keep industrial things going!
My second question is always, "Is everyone else a moron?" I ask that because, right now, there are so few buyers of silver when silver's price is a lousy $30 an ounce, which is Too, Too Low (TTL) by a Long, Long Shot (LLS), which is caused by corrupt, manipulative dealings in and around the commodities futures market.
To test the hypothesis "Is everyone else a moron?" whenever I am out and about, running errands or something, I always end up in a line of some kind.
So, to pass the time, I ask the nearest people in line with me, "Hey! Are you buying silver to capitalize on the horrific inflation that is being caused by the satanic Federal Reserve creating so much money, or are you a moron?"
Like the other day when, at the bank, I was in a line. So I asked my Mogambo Silver Poll (MSP) question of the others similarly idled. And being a modern, multi-tasking pollster kind of guy, I also ask follow-up questions about other topics, too, like, "If you are, indeed, a moron, which would explain why you are not buying silver, what are the chances that your children are morons, too? Do you have a photo of them so I can see if your stupidity shows up in the faces of your children, sort of a 'Portrait of Dorian Gray' kind of thing?"
I thought at least ONE of them would be delighted with my reference to the famous book by Oscar Wilde, showing, as it does, a certain erudition and culture that allows me to look down with disdain on those of lesser station, especially when proof of their incompetence is made so miserably manifest by their not buying silver.
And in speaking of "buying silver as an indicator of intelligence," the famous Eric Sprott's latest essay is titled "Asian demand for physical gold and silver is akin to a tsunami."
He says, "In 2005, the Chinese exported just over 100 million oz. of silver. In 2010, they imported just over 120 million oz."
I had to pause as I mentally tried to compute the difference between exporting 100 million ounces (a negative number) and importing 120 million ounces (a positive number).
Perhaps growing impatient as I struggled with the problem, he graciously supplies the answer, which is that it's "a swing of 200 million+ oz. in a market that supplied a total of 889 million oz. in 2009 - a truly tectonic shift in demand!"
If it were I writing that, I would have gone on to say something like, "So start buying gold and silver with both hands, you lowlife morons!"
Mr. Sprott, on the other hand, is much more refined and classy to say such terrible things about people who are, as far as I am concerned, stupid. And he is clever, too, as he says, "the USDA forecast that global production of corn, soybeans and wheat would total 1.717 billion metric tons, which means that almost twice as many tons of these grains are produced as there are silver ounces produced."
Again, I am befuddled, as my brain is swirling with lying government agencies, and global production of some meaningless metric of "1.717 billion metric tons," and pretty soon I am not sure what we were talking about and my head hurts.
Again, I am rescued by the generous Mr. Sprott, who explains that this is "two metric tons of corn, soybeans and wheat are produced for each ounce of silver produced. Tons!"
I am aware of the significance of his use of "Tons!" and I know that I should be impressed, but I have seen Superman pick up the three pyramids of Egypt and juggle them in the air, and so a billion tons of grains seems, you know, kind of, ummm, what?
"Perhaps," I thought to myself, perplexed, "if I converted it to bushels!"
Let's see: To convert tons of grain to bushels of grain, I seem to remember that the formula is to divide tons by 3.1416, subtract half of Line 37 on Form 3004 from Line 26 on Form 2114, and multiply by any accelerated depletion allowances or deductions not reported elsewhere.
Suddenly, my head snapped back, and I asked myself, "Huh? Does this sound right to YOU?"
Of course, this is not about the Chinese buying a lot of silver, or that only someone truly mental defective would consider it even possible to convert tons into bushels using a formula involving pi and taxes, a tragic brain handicap which could come in handy, one of these days, if need to plead "not guilty by reason of insanity" for some reason or another.
Instead, I think it is about the fact that the Entire Freaking Global Supply (EFGS) of silver is less than a billion ounces per year, which would mean, at today's paltry $30 per ounce, that a measly $30 billion could buy all the silver that the world produces in One Freaking Year (OFY)!
And thus a piddly $600 billion could buy all the silver that the world could produce for the next 20 years!!
The use of two exclamation points means, to Junior Mogambo Rangers (JMRs) and other paranoid people who notice such things, that there is something very significant afoot!
And there is!
To wit: Not only is silver a Screaming Mogambo Bargain (SMB), but also that $600 billion is the exact amount of money that the foul Federal Reserve has promised to, by virtue of their idiotic Quantitative Easing 2, create in the next six months!
The next Six Freaking Months (SFM)! The Federal Reserve can buy all the silver the world can produce in the next 20 years with just the money the Fed will create in the next Six Freaking Months (SFM)!
And it is significant, too, to say that the federal government's current $1.3 trillion budget-deficit - for this year! - is enough freaking money to buy all the freaking silver produced in the Whole Freaking World (WFW) for the next Forty Freaking Years (FFY)!!
Look at me! I am frothing at the mouth at this!
While I take a moment to wipe my chin with my sleeve and breathe in ragged gasps, let's listen to Jim Willie CB, of GoldenJackass.com, who is, like me, fearlessly bullish on silver, and who says, "My long held belief has been that on the Supply side argument, silver beats gold, and on the Demand side argument, silver beats gold."
At first, you wonder, "Huh? Am I reading that right?" as if maybe there is a typo, or perhaps it is an insightful Zen moment.
But all hopes for satori evaporate into Mindless Mogambo Greed (MMG) when he goes on, "My forecast has been and will continue to be that the gains in Silver price will be around triple to the gains in the Gold price, due to tremendous shortages and colossal demand."
I am happy that he put a number on this, because all I can do, as far as forecasting and number-crunching is concerned, is nothing, which I do because I must, which is because I am, I am sorry to say, lazy and stupid.
Fortunately, the Infallible Mogambo Portfolio Theory (IMPT) was developed specifically for us lazy, stupid people, a woefully-ignored population segment so long overlooked by Wall Street sharpies.
The introduction of Infallible Mogambo Portfolio Theory (IMPT) corrects that outrageous injustice, and simply says to "Mindlessly buy gold, silver and oil stocks when the Federal Reserve is creating excess money." That's it!
And that salubrious, successful, surprising simplicity is why us lazy, stupid people are so grateful that it works, and works so well, without any thinking at all, and with truly minimal effort!
And, best of all, with 100% of the last 4,500 years as proof of its efficacy, we Happy, Happy Dullards (HHDs) buy gold, silver and oil stocks, and then we say, "Whee! This investing stuff is easy!"
Should the U.S. Move Against Qaddafi?
by Kori Schake
What are the dangers for the U.S. and the international community in intervening in Libya?
High Risks for Acting Now
Secretary Clinton is right to emphasize that military options are under consideration for limiting Col. Muammar el-Qaddafi's ability to continue terrorizing Libyans, and our military can be helpful in visibly moving strike assets into range to ensure that President Obama has a wide range of choices. Colonel Qaddafi's erratic behavior strongly argues for keeping our options open.
Four reasons to exercise caution toward Libya.
We absolutely should try to convince the Libyan leader to stop fighting, that the consequences of continuing on his current course will be more detrimental than fleeing the country. And we should encourage his supporters to abandon him. Although other forms of pressure -- even the draconian U.N. Security Council sanctions spearheaded by Britain and France and the Treasury Department freezing $30 billion in Libyan assets -- have not resonated with Colonel Qaddafi, given the Reagan administration's attacks on Tripoli in 1986, the threat of American military power should carry some weight.
That said, we ought to be very cautious about actually using American military force to affect the rebellion in Libya, for four reasons.
First, it is difficult to see what practical measures, short of removing Colonel Gaddafi ourselves or sending military teams into Libya to assist rebel forces, would affect the fight. Defection of military units and tribes seems to have given rebels the necessary weapons; most of the fighting is urban operations not much involving air power.
Second, we have not had an ambassador in Libya for months, and we have evacuated our diplomats; we ought not overestimate how much we understand what is occurring in the country or the shape Libya's rebellion will take. Arming rebels or undertaking military operations on their behalf makes us parties to the conflict, the inchoate nature of Libya's rebels argues for caution.
Third, debate over the Security Council resolution suggests it is unlikely the Chinese and Russians would authorize the use of force (they had to be assured the resolution that passed would not), and NATO would not be an alternative without a U.N. mandate. Countries in the region are not likely to be supportive. While international pressure seems to be having little effect on Colonel Qaddafi, international institutions and support are central to the Obama administration's approach. Military force would have to be a unilateral or by coalition of the willing, which is at odds with the White House's political strategy.
Fourth, military force is sticky -- once the president commits American military forces to involvement, even tangentially, he commits the nation. It is difficult to disengage if the limited force committed doesn't achieve the president's objectives, as President Bill Clinton learned in both Somalia and Kosovo, and President George W. Bush realized, leading him to authorize a surge of forces in Iraq in 2006. While symbolic strikes on Colonel Qaddafi's palaces or no-flight zones would be a show of force, they raise the question of how far we are willing to go to achieve our objectives.
The administration has given no indication of serious commitment. Colonel Qaddafi is likely to bet rightly on the limits of President Obama's willingness to force him from power, which could lead to several bad outcomes for us: ineffectual shows of force, the president pulled in further than our interests dictate, or alienation of countries whose support we need to manage other important national security problems.
2011 Profit Potential Favors Corn Over Soybeans
by
Midwestern farmers will likely generate higher incomes in 2011 from growing corn compared to soybeans, says Gary Schnitkey, University of Illinois (U of I) agricultural economist. Schnitkey’s profit predictions follow from having projected corn and soybean budgets for December and then updating them again in late February.
“The big thing that has changed since December is that we’ve increased both the corn and soybean prices significantly,” he says. “Right now we’re projecting corn prices to average $5.50/bu. and soybean prices to average $13.40/bu. for the 2011 marketing year.”
Fertilizer prices and most other agricultural input costs have remained nearly the same as projected in December, says Schnitkey. “Anhydrous ammonia prices have gone up somewhat recently, but not like they did when heading into the 2009 cropping season,” he points out. “We’re projecting anhydrous ammonia costs to average about $780/ton in 2011, which is a lot less than the $1,000/ton farmers encountered in the fall of 2008.”
If crop prices continue trending significantly higher than production costs, farmers will likely profit well from either crop, he adds. “Projected returns for both corn and soybeans look to be very promising right now,” says Schnitkey. “It’s kind of like choosing between a Snickers Bar and a Milky Way – each has its own appeal. However, the returns from corn production are projected to be almost two times as high as the returns from soybean production this year – and that’s the case throughout the Midwest on all types of soils.”
Nearly double-money-incentiveto grow corn over soybeans could tempt some to switch their crop rotations to more corn-after-corn production, he points out. Yet, others may be hesitant to do so if basing their decision mainly on corn and soybean performance in 2010, Schnitkey adds.
In Illinois last year, many farmers had very good yields from soybeans and somewhat substandard yields for corn, points out Schnitkey. “2010 was sort of a breakout year for soybean production here,” he says. “I don’t know if that will happen again, but yields were pretty high with some of the new varieties that came out last year.”
Soybean growers truly had “phenomenal yields” here in 2010, confirms Vince Davis, U of I Extension soybean specialist. “It was a record year for Illinois soybean production and yields.”
Norway: an oasis of calm amidst the oil price storm
By Kathleen Brooks
This chart below doesn't need much explaining. The Norwegian Krone is moving in in-line with the oil price, which is heading north, while EURNOK is on its way south.
Norway is the world's tenth largest oil producer, and, crucially, it has a deeply stable political system. Thus, while the political crisis in the Middle East continues to rage and burn this should spur further Krone appreciation for two reasons:
Norway is the world's tenth largest oil producer, and, crucially, it has a deeply stable political system. Thus, while the political crisis in the Middle East continues to rage and burn this should spur further Krone appreciation for two reasons:
1, The Mid East tension is pushing up the oil price, good news for Norway's terms of trade and economic fundamentals.
2, It also makers Norway an attractive place to rely on for your oil supplies, which should boost flows into the Nokkie for the medium to long term.
EURNOK (orange line) and Brent crude oil (generic contract)
Yield could also turn supportive for the NOK:
Norway is one of the chief beneficiaries of the Middle East crisis, and the positive economic impact should ensure monetary policy tightening in the coming months from the Bank of Norway - another positive for the NOK.
Norway's trade balance surged in 2008 when oil prices reached $140 per barrel, back then the Bank of Norway was on a tightening cycle. The trade balance and rates tend to peak together albeit with a slight lag. Recently we have seen Norway's trade balance surge, but rates have been static since May last year.
With history as a guide, a further increase in Norway's trade surplus could precipitate a rate hike in the near future. This is NOK supportive, and we think, bar a collapse in the price of crude, the NOK should continue to be a top performer out of the G10 currencies.
The Dollar's Impact on Stocks So Far in 2011
by Bespoke Investment Group
After starting out the year on a positive note by rising five days in a row, the US Dollar index has reversed course and is now down 2.93% year to date. We wanted to see what impact, if any, the move lower in the dollar this year has had on stocks. When the dollar is rising, US companies that do most or all of their business within our borders stand to benefit, while US companies with large amounts of revenues outside of the country lose out. The opposite occurs when the dollar is declining -- companies with large amounts of international revenues benefit at the expense of the domestics.
With the dollar down so far this year, we used our International Revenues Database that tracks the percentage of international revenues for US companies to see if the names with large amounts of international exposure have been outperforming. To do this, we broke the S&P 500 into deciles (10 groups of 50 stocks) based on a stock's percentage of international sales and then calculated the average YTD % change of stocks in each decile.
As shown in the second chart below, the average YTD performance of stocks in the decile with the largest percentage of international revenues is 7.68%, which is by far the best performing decile. The average YTD performance for stocks with no international revenues is 3.09%. This performance is inline with what one would expect given the dollar's decline.
Going forward, if you expect the dollar to continue its decline, the stocks with large amounts of international revenues should continue to outperform. If you expect the dollar to reverse course and head higher, the stocks with little or no international revenues should start to pick up. Either way, you'll need our International Revenues Database to run the screens! This product is available to yearly Bespoke Premium and Bespoke Premium Plus members. Click here to sign up today.
Saudi Stocks Down 13 Days in a Row
by Bespoke Investment Group
While the Saudi government would have us believe that everything is fine and dandy in their country, recent action in the Saudi stock market suggests otherwise. As shown in the chart below, the Saudi Tadawul All Share Index has declined for 13 straight days, and it is now down more than 20% since peaking in January.
Back in late January, the TASI saw a one-day decline of over 6% on 1/29 when tensions began to escalate in Egypt. When things settled down in Cairo, the TASI rebounded back above its 50-day moving average, but it then began to roll over again when tensions moved to Libya. Watching the charts must be a popular past time in Saudi Arabia, because once the index broke below its January lows, the bottom literally fell out of the index. With the March 11th Day of Rage coming up in Saudi Arabia next week, are traders in this market anticipating a replay of Egypt or Libya?
Continue reading this article >>
Great Day Yesterday For Our Survivor Trading System!
I trades di Survivor System del 1 Marzo. I risultati storici di Survivor System small version sono disponibili ai seguenti link: http://www.box.net/shared/static/giq7mp90fq.xls, http://www.box.net/shared/6koqmtmnsb I risultati storici e MTM di alcuni altri nostri trading systems e portfolio systems sono a disposizione al seguente link: http://www.box.net/shared/5vajnzc4cp
Trades of Survivor System on 1 Marzo. Historical results of Survivor System small version are available at the following links: http://www.box.net/shared/static/giq7mp90fq.xls,, http://www.box.net/shared/6koqmtmnsb. Historical and MTM results of our some other trading systems and portfolio systems are available at the following link: http://www.box.net/shared/5vajnzc4cp
Material in this post does not constitute investment advice or a recommendation and do not constitute solicitation to public savings. Operate with any financial instrument is safe, even higher if working on derivatives. Be sure to operate only with capital that you can lose. Past performance of the methods described on this blog do not constitute any guarantee for future earnings. The reader should be held responsible for the risks of their investments and for making use of the information contained in the pages of this blog. Trading Weeks should not be considered in any way responsible for any financial losses suffered by the user of the information contained on this blog.
Trades of Survivor System on 1 Marzo. Historical results of Survivor System small version are available at the following links: http://www.box.net/shared/static/giq7mp90fq.xls,, http://www.box.net/shared/6koqmtmnsb. Historical and MTM results of our some other trading systems and portfolio systems are available at the following link: http://www.box.net/shared/5vajnzc4cp
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Material in this post does not constitute investment advice or a recommendation and do not constitute solicitation to public savings. Operate with any financial instrument is safe, even higher if working on derivatives. Be sure to operate only with capital that you can lose. Past performance of the methods described on this blog do not constitute any guarantee for future earnings. The reader should be held responsible for the risks of their investments and for making use of the information contained in the pages of this blog. Trading Weeks should not be considered in any way responsible for any financial losses suffered by the user of the information contained on this blog.
Food Crisis Less Severe Than 2008 on Rice Price, OECD Says
By Rudy Ruitenberg
(Bloomberg) -- A global food crisis on the scale of what happened three years ago isn’t recurring because an increase in the cost of rice, a staple for half the world, has lagged behind a jump for other grains, according to the OECD.
Rice futures traded on the Chicago Board of Trade rose 3.4 percent in the past 12 months, compared with 60 percent for wheat and 93 percent for corn. World milled-rice output will rise 2.4 percent to a record 451.7 million metric tons in 2010-2011, the U.S. Department of Agriculture forecasts, helping keep stockpiles near the highest in seven years.
Rice prices almost tripled in the 20 months to April 2008, contributing to a worsening in world hunger that meant a record 1.02 billion people were deemed by the United Nations to be undernourished in 2009. That figure fell to 925 million people last year, the first decline in 15 years, as food costs dropped and economic growth lifted incomes.
“The scale of the problem is not as bad for large parts of the world as it was in 2008,” said Ken Ash, the trade and agriculture director at the Organization for Economic Cooperation and Development in Paris. “With two-thirds of the world’s hungry largely reliant on rice as a staple, rice prices have not increased and supplies are relatively strong.”
Rice added to the previous peak in food costs in 2008, with prices climbing 33 percent in 2007 and another 11 percent the next year, after export bans by producers including Cambodia, Vietnam, India and Egypt. Rice, which jumped as high as $25.07 for 100 pounds in Chicago in April 2008, traded at $14.315 on the Chicago Board of Trade at 12:38 p.m. Paris time.
Asian Benchmark
Thai grade-B white rice, the Asian benchmark, has dropped almost 3 percent from a year ago to $533 a ton this week, according to the Thai Rice Exporters Association. The price of rice from Thailand, the world’s largest exporter of the grain, reached $1,038 a ton in May 2008.
Global food prices rose 28 percent in the past 12 months and reached a record in January, according to the UN’s Food and Agriculture Organization. That’s fueled riots across North Africa and the Middle East that have already toppled leaders in Tunisia and Egypt. More than 60 food riots occurred worldwide from 2007 to 2009, according to the U.S. State Department.
World prices for rice “are well below what they were back then,” Ash said Feb. 24 in his office at the OECD headquarters in Paris. “In developing countries the impact should not be as negative. That’s not to say there’s no problem.”
‘Low Levels’
The price of rice has risen in some local markets, Ash said. In Bangladesh, the biggest South Asian rice buyer, prices rose to a record in January because of “low levels” of public stocks after the government cut purchases in the previous crop season, the UN reported last month.
Global food prices are expected to rise in the first half of the 21st century after falling in the second half of the previous century because of a rising population and higher incomes, slower crop-yield growth and the effect of climate change, Ross Garnaut, the Australian government’s climate-change adviser, said today.
Rice planting in the U.S., the world’s third-largest exporter, may drop 25 percent this year because growers can earn more from corn and soybeans, according to the median in a Bloomberg survey of nine analysts and farmers in January.
“Good seasons” in parts of Africa and Asia have helped build up grain supplies there to levels above those of 2007-08, reducing the impact of rising world prices, Ash said. “Local grain supplies in parts of Africa and Asia are very good.”
‘Extreme’ Poverty
Higher food prices have pushed 44 million people into “extreme” poverty in developing countries since June, the World Bank said Feb. 15.
Wheat prices climbed in the past six months after Russia banned grain exports in August following a crop-damaging drought, while rising U.S. ethanol production has lifted demand for the feedstock corn.
Rice is the most important food crop in the developing world and a staple for more than half of the global population, according to the International Rice Research Institute.
World rice stocks are forecast to slip 0.7 percent to 93.9 million tons at the end of 2010-2011, after climbing in the previous three years on rising production in China and Thailand, USDA data shows.
OECD countries may see more inflation from food compared with 2007-08 because of rising meat prices, a “significant” part of the diet in developed economies, Ash said.
Higher Food Costs
The effect of higher food costs on OECD inflation “was relatively modest and relatively short-lived” in 2007-08, Ash said. For consumers in developed economies, “the fact that wheat is a bit more expensive is not a life or death matter.”
The OECD expects the supply response to higher grain prices to mainly come from developed countries, with planting up “quite significantly,” Ash said. That could “quickly” push grain prices down “by the summer, early fall” in the Northern Hemisphere, he said.
While public focus is on the impact of expensive food on poor consumers, the OECD is trying to focus attention on the “fundamental” problem that “the international community may tend to forget a little bit about,” Ash said.
“The problem is poverty,” Ash said. “At relatively low prices a decade ago there were still 800 million people hungry. What high prices, economic crises and various natural disasters do is, for some period of time, increase that number.”
Policy makers should focus on helping developing countries raise crop output and their purchasing power, he said.
‘Stable and Secure’
“There’s a self interest in a world that’s stable and secure, and where growth is more inclusive,” Ash said. “People who are well-fed are more productive.”
To address food security, the OECD is studying the idea of food stocks in regions prone to supply shortages, Ash said. The alternative is to “pre-position” cash, he said.
“There is no costless way to do this,” Ash said. “One of the advantages of cash as opposed to physical food aid is that you don’t have the same kind of negative disruption on local markets. You get the food, plus the producer benefits.”
Ivory Coast’s political crisis may lead to food shortages in the country and neighboring states as imports of staples including rice have been cut off and movement of food is hampered by the conflict, the U.S.-funded Famine Early Warning Systems Network said yesterday.
“When a country is in conflict, you’ve got a problem,” Ash said. For sub-Saharan Africa, “if you take out of those countries the ones characterized as in conflict, in the rest there’s been significant improvement in food security.”
Commodity Futures trading jumps by 38% in China
by Commodity Online
It looks 2011 is going to be a bright year for commodity futures trading in China. Trading in the four commodity futures exchanges in China has shot up a record 38.44% in January and February, according to the China Futures Association.
According to a report in People's Daily Online, the value of China's futures transactions in the first two months of this year rose 38.44 percent year on year to 19.16 trillion yuan (about 2.92 trillion U.S. dollars).
The report quoting figures from the China Futures Association said that the volume of the futures transactions in February dropped 13.93 percent to 62 million lots, but the transaction value was up 62.14 percent to 8.54 trillion yuan, down 12.78 percent and 19.53 percent from January, respectively.
China has four futures exchanges, with agricultural commodities mainly traded on the Dalian and Zhengzhou commodity exchanges, while metals are mainly traded on the Shanghai Futures Exchange, and stock index futures contracts are traded on the China Financial Futures Exchange.
The Shanghai Futures Exchange saw its transaction volume in February drop 46.69 percent to 15.84 million lots and its transaction value down 26.5 percent to 2.25 trillion yuan.
Transaction volume on the Zhengzhou Commodity Exchange in February was down 1.48 percent to 25.48 million lots but the value of transactions surged 71.76 percent to 2.42 trillion yuan.
Transaction volume on the Dalian Commodity Exchange in February rose 7.45 percent to 17.73 million lots with the transaction value up 27.08 percent to 1.01 trillion yuan.
On the China Financial Futures Exchange, transaction volume and value were to 2.99 million lots and 2.86 trillion yuan, down 31.14 percent and 28.36 percent from January, respectively.
Open interest by the end of February on the Shanghai Futures Exchange, Zhengzhou Commodity Exchange, Dalian Commodity Exchange was up 9.57 percent, 17.27 percent and 11.25 percent in February when compared with January, but the China Financial Futures Exchange suffered a drop of 1.51 percent in this regard.
Chen Hong, operation director of the Beijing division of Nanhua futures, attributed the decline in the quantity of transactions to a range of moves by the futures market authorities to deter speculation since late November, including scrapping preferential transaction fees, restricting opening contracts and raising deposit standards.
According to a report in People's Daily Online, the value of China's futures transactions in the first two months of this year rose 38.44 percent year on year to 19.16 trillion yuan (about 2.92 trillion U.S. dollars).
The report quoting figures from the China Futures Association said that the volume of the futures transactions in February dropped 13.93 percent to 62 million lots, but the transaction value was up 62.14 percent to 8.54 trillion yuan, down 12.78 percent and 19.53 percent from January, respectively.
China has four futures exchanges, with agricultural commodities mainly traded on the Dalian and Zhengzhou commodity exchanges, while metals are mainly traded on the Shanghai Futures Exchange, and stock index futures contracts are traded on the China Financial Futures Exchange.
The Shanghai Futures Exchange saw its transaction volume in February drop 46.69 percent to 15.84 million lots and its transaction value down 26.5 percent to 2.25 trillion yuan.
Transaction volume on the Zhengzhou Commodity Exchange in February was down 1.48 percent to 25.48 million lots but the value of transactions surged 71.76 percent to 2.42 trillion yuan.
Transaction volume on the Dalian Commodity Exchange in February rose 7.45 percent to 17.73 million lots with the transaction value up 27.08 percent to 1.01 trillion yuan.
On the China Financial Futures Exchange, transaction volume and value were to 2.99 million lots and 2.86 trillion yuan, down 31.14 percent and 28.36 percent from January, respectively.
Open interest by the end of February on the Shanghai Futures Exchange, Zhengzhou Commodity Exchange, Dalian Commodity Exchange was up 9.57 percent, 17.27 percent and 11.25 percent in February when compared with January, but the China Financial Futures Exchange suffered a drop of 1.51 percent in this regard.
Chen Hong, operation director of the Beijing division of Nanhua futures, attributed the decline in the quantity of transactions to a range of moves by the futures market authorities to deter speculation since late November, including scrapping preferential transaction fees, restricting opening contracts and raising deposit standards.
Three Paths to a Prosperous Future
by Jeffrey Feldman and Andrew Hyman
The first decade of the twenty-first century has not been kind to investors. On average, stocks lost about 1% per year over the ten-year period or more than 10% for the entire decade. During the decade we saw the collapse of three bubbles: the dot-com boom came to an end in 2000, the meteoric rise in housing prices in the middle years of the decade reversed sharply in 2007, and then in 2008 the massive over-leveraging of the banking system came home to roost, very nearly destroying the economy.
The decade saw the emergence of vibrant economies and stock markets in the developing world, particularly in China but also in places such as Russia, Brazil, and India, among others. Investors hungry for the returns they had experienced during the roaring ’90s sought to capitalize on the economic opportunity created by these emerging markets. Recognizing that growth requires access to commodities, precious metals, energy, and capital, investors sought to ride those new opportunities for investment gains. At the same time, Wall Street recognized this demand and rushed to create investment vehicles that would give investors the access they desired. Mostly these came in the form of exchange traded vehicles, primarily exchange traded funds (ETFs). ETFs, in addition to allowing investors to buy virtually any subset of stocks (by size, style, sector, or geographical division), for the first time ever also allowed for individuals to own foreign currencies, oil and gas, precious metals, and commodities. Previously only institutional investors could access these markets.
While all of this was going on, the United States was engaged in a war in Iraq that has since morphed into two wars, and in early 2010 we had 130,000 troops in Afghanistan. The expense of these wars, coupled with the decline in tax revenues as a result of the recession, has caused our national debt to swell past $10 trillion. The combination of a weakening U.S. economy and strengthening emerging markets caused the U.S. trade deficit to balloon to historic highs. This resulted in a weakening dollar. The political havoc in the Middle East, coupled with increased demand for energy worldwide, drove up the price of oil and gas. We have seen this scenario in the markets before, notably in 1973 after the Arab Oil Embargo drove up the price of oil and eventually the price of gold. But, in 1973, most investors could not access those asset classes. In the past five years, investors have poured tens of billions of dollars into macroeconomic bets on oil, precious metals, interest rates and sub-prime mortgages, currencies, and commodities. At the same time, investors have made huge bets against the dollar, which have become something of a self-fulfilling prophecy. A weaker dollar has some virtue in terms of making U.S. goods more attractive to foreign buyers, but never in history has it been a foundation for a strong economy. So a cycle that was once virtuous has become vicious: We invest more in foreign markets, less in our own, and invest in oil and gold, which essentially are bets that we can make money at the expense of our own economy. It is simply irrational. These investments create no sustainable industry, no jobs, and no permanent wealth. The investor who is buying oil in the belief that it will rise to a level where nobody can afford to buy it is delusional. Expensive oil retards economic growth. The investor buying gold believing that gold will go to $3,000 an ounce (from its $1,100 price in early 2010) will earn profits in gravely weakened dollars whose purchasing power will be seriously diminished. And because all this investment frenzy plays out very publicly on the Internet, on television, and in the newspapers, we eventually draw in too many investors and another bubble will develop and burst. Individual investors who chased the previous bubbles of this decade for the most part lost money when all was said and done.
We need to get back to basics and fund sustainable businesses that will create jobs, drive productivity, and increase our standard of living. It is this type of investment that is and always has been the only source of permanent wealth.
The bad news is that this type of investing does not appeal to those who have become enamored of “casino capitalism.” They will continue to make bets against the American economy so long as it is working.
The good news is that there is a technology-based revolution occurring that rivals, and probably will surpass, the 1982 to 2000 bull market led by the information age and telecommunications companies. In medicine and biotechnology, green technologies and alternative energy, and the rebuilding of the U.S. infrastructure lay the greatest investment opportunities in history. Over the next 25 years, medicine will be revolutionized as we completely change the way we diagnose and treat disease. During that same period, we will break free of our dependence on imported fossil fuels by developing alternatives such as solar, wind, and nuclear. We will utilize new technologies first to reduce carbon emissions and eventually to eliminate them. And we will rebuild our roads and bridges, commercial structures, and transportation and shipping systems and retrofit all our real estate to be energy efficient.
The wealth that will be created in the next 25 years will dwarf that of the Internet era. Thirty years ago, one could have made the statement that most of the companies that would be industry leaders in the ensuing 30 years either did not yet exist or were too small to be known by the public. Microsoft, Cisco, Google, Dell, and Amazon all fit that description. In 1980, nobody had heard of any of them. In 2010, the same statement can be made. The companies that will drive us to prosperity in the next 30 years are busy at work right now, but most of us have never heard of them. The best news is that investors can own these companies today. Using the ETF structure, we do not have to figure out which will succeed and which will fail. We can own all the solar companies in one ETF and all the wind companies in another.
The purpose of this book is to describe the path to prosperity, to demonstrate that we must get out of the casino and back to fundamentals. We must create millions of jobs, drive the productivity of workers, deploy new technologies, and ultimately increase the standard of living for all. ETFs have been created that give investors total access to pharmaceutical, biotechnology, alternative energy, green technology, and infrastructure companies. We describe in detail each of the ETFs in these areas and some of their component companies. Many of these companies are small- to mid-cap in size but have the potential to become large and dominant players in their fields in the years to come. Investors should see this as an opportunity akin to investing in Internet companies in the early 1980s.
Three major forces are shaping an environment that will foster this prosperity:
- The first is a demographic wave of new investors—the Baby Boom Echo generation born between 1974 and 1989—who are now starting to invest heavily in the stock market and whose money has great potential to move the markets just as Baby Boomer money in the early ’80s ignited the longest bull market of all time.
- The second force comes in the form of the new and innovative technologies being developed in all these areas—biotechnology, saving the environment, and rebuilding infrastructure—that will solve pressing needs for society.
- The third major factor is the development of ETFs, which allow investors to buy into the biotechnology, environment, and infrastructure fields in a diversified, low-cost manner. ETFs increase an investor’s ability to gain exposure to innovative new companies while mitigating the risk of that investment.
If we are to be a prosperous nation, we must invest in activities that create real economic utility and promote social welfare. The right investments cannot be discovered sitting at a computer terminal in a windowless room. In fact, they are easily revealed if we simply look out the window. We are dependent on fossil fuels, much of which we get from hostile states. We use that fuel inefficiently and waste a great deal of it. Our healthcare system is collapsing just as the Baby Boom generation (78 million people) is reaching its senior years. Healthcare has gone from 8% of gross domestic product (GDP) in 1980 to 17% of GDP ($2.5 trillion) in 2010 and is expected to rise to 25% of GDP by 2020. Finally our infrastructure is in dire need of repair. From the electrical grid to water mains to the rails, roads, and bridges, we need to make a massive investment in the foundations on which our economy runs.
Fortunately, there is a comprehensive set of ETFs that allow us to invest in these three critical areas of our economy. In each case, the required investment is hundreds of billions of dollars. In each industry—alternative energy and clean technology, healthcare, and infrastructure—we can create thousands of new companies and tens of millions of jobs. The technology in each case is ripe and ready for commercialization. In the 1980s, when we saw an economic boom based in the telecom and computer industries, Wall Street made its money by providing capital to these industries. Today, Wall Street has forsaken its capital formation role for a seat in the casino. But we can and must take matters into our own hands. You can travel these three paths to wealth without Wall Street’s involvement. You can buy ETFs as easily as buying any publicly traded stock and build a portfolio that works for you.
Our goal here is to explain the various ETFs that invest in these critical areas. There is no question that the country cannot prosper if we do not create sustainable industries, and these three sectors represent our most pressing needs. No doubt there will be other sectors that flourish in the coming years, but none can thrive if we do not solve the fundamental issues. On the other hand, the businesses that tackle and overcome these problems will create substantial and permanent wealth. With a few clicks of a mouse, you can own these companies right now.
Investing in healthcare, the environment, and infrastructure through ETFs allows you to buy into the next major wave of investment and to help create a better society at the same time. For the investors willing to take control of their investments, the combination of demographic changes, new investment tools, and major societal needs make this a great time to seize investment opportunities. Assigning blame for financial misdeeds helps us feel better but locks us into arguing about the past, which will not rebuild the economy or make you money. Which do you want to do? If you want to make money in a sustainable economy, start reading. If not, return this book. It isn’t for you.
Cotton price to remain firm despite record harvest
by Agrimoney.com
Cotton prices are remain relatively high next season despite a record crop, the International Cotton Advisory Committee said, even as it raised further its hopes for the harvest.
The intergovernmental group raised by 200,000 tonnes to 27.6m tonnes (127m bales) its forecast for world cotton output in 2011-12, putting the crop nearly 1m tonnes ahead of the current record, hit four seasons ago.
"Farmers are expected to expand cotton area in all producing countries," the committee said, forecasting sowings at a seven-year high of 36m hectares.
And it restated caution over consumption, which the ICAC forecast will grow by 2.6% to 25,4m tonnes, a little over half the economic growth expected by International Monetary Fund.
Historically, demand for cotton - which as the raw material for clothing rather than food is more sensitive to consumer sentiment – has grown step by step alongside world economic expansion.
Price implications
However, "competition from chemical fibres" will "limit growth in mill use during 2011-12", the committee said, forecasting the best growth in China, Pakistan and Turkey.
Nonetheless, prices will remain firm – if appearing unlikely to continue their run of all-time highs.
"Although prices are expected to decline from current record levels, it is likely that prices will stay substantially higher than the average of 60 cents per pound that prevailed during the past decade," the ICAC said.
The committee's estimates imply a stocks-to-use ratio for cotton of 44% in 2011-12 a figure which, while higher this season's 37%, a level which has driven the jump in prices, is still below levels of more than 50% for most of the previous 15 years.
The stocks-to-use ratio is a much-used measure of the availability of a commodity's supplies, and therefore of the price it may achieve.
ICAC vs USDA
The ICAC's 2011-12 forecasts are marginally more downbeat that those released by the US Department of Agriculture last week, forecasting production of 127.5m tonnes of cotton and consumption of 120m tonnes.
Indeed, the USDA pegged world inventories at 50m tonnes at the close of the season, implying a stocks-to-use ratio of less than 42%.
Cotton for March delivery stood 6.13 cents higher at 202.0 cents a pound in New York at 10:00 GMT, with the better-traded May lot up 7.0 cents, the exchange maximum, at 200.6 cents a pound
Continue reading this article >>
Palladium Seen Rising 15% in 2011 as Russian Cargoes Drop: Freight Markets
By Nicholas Larkins
Russia, the world’s biggest palladium producer, is shipping the smallest amount of metal to Switzerland in 15 years, a sign of declining state stockpiles that may drive prices as much as 15 percent higher by December.
Cargoes to Switzerland, one of Europe’s two main hubs for storing and trading precious metals, fell 12 percent to about 500,000 ounces last year and compare with the two-decade average of 1.3 million ounces, Swiss customs data show. Fewer shipments of the metal used in almost every catalytic converter may mean shortages. The five analysts ranked by Bloomberg as the most accurate over the past two years forecast prices as high as $940 an ounce in 2011, based on the median of their estimates.
While Russian stockpiles are a state secret, Johnson Matthey Plc, the London-based trader, says they were the fourth- largest source of supply in 2010. OAO GMK Norilsk Nickel, the biggest producer, said in December it expects “insignificant” amounts from reserves and Standard Bank Group Ltd. forecasts stocks will be depleted as early as this year.
“The palladium market, excluding any Russian stockpiles coming in, is going into an ever-increasing deficit,” said David Davis, a mining investment analyst at Standard Bank’s SBG Securities (Pty) Ltd. in Sandton, near Johannesburg. “It’ll put upward pressure on the price.”
The metal traded at $817.25 at about 7 p.m. yesterday in London. Prices hit a record $1,125 in 2001 when shipments were disrupted.
Mine Production
Mine output will fall 5.4 percent to 6.8 million ounces and demand from carmakers will climb 6.7 percent to about 5.5 million ounces in 2011, Barclays Capital estimates. Demand rose 15 percent last year to the highest in a decade while supply, excluding recycling, was steady, and without Russian reserve sales there would have been a shortage, Johnson Matthey said.
Palladium accounts for 90 percent to 95 percent of precious metals used in gasoline catalytic converters and about 25 percent in diesel devices, according to Johnson Matthey, which has supplied one in three of the world’s autocatalysts.
Catalytic converters each use about 4 grams (0.13 troy ounces) of precious metals, according to Mark Bedford, the director of precious-metals marketing at Johnson Matthey. Four grams of palladium cost about $105 and $237 for platinum.
Palladium jumped more than fourfold since the end of 2008, reaching a 10-year high of $862.25 on Feb. 21. Platinum doubled in that period. The Standard & Poor’s GSCI Total Return Index of 24 commodities rose 34 percent, the MSCI World Index of equities climbed 46 percent and Treasuries returned 1.9 percent, a Bank of America Merrill Lynch index shows.
Energy Prices
Prices have declined on concern that protests across North Africa and the Middle East will drive energy prices higher and weaken economic growth.
Russia mined 2.7 million ounces of palladium in 2010, worth $1.4 billion at last year’s average price, Johnson Matthey data show. South Africa produced 2.49 million ounces, for $1.3 billion, and mine output totaled about $3.2 billion. Recyclers recovered 1.32 million ounces from spent autocatalysts.
Sales of Russian stockpiles dropped to 1.01 million ounces in 2010 from as much as 1.49 million in 2007, the data show. Inventories were built up from excess output in the 1970s and 1980s and may have declined to less than 1 million ounces last year, SBG’s Davis said.
Customs Data
“We don’t know how many years it took to build them up and how they big they were, but at some time they must empty out,” said Thorsten Proettel, an analyst at Landesbank Baden- Wurttemberg in Stuttgart, Germany, and one of the members in the Bloomberg survey. “At that time it might be a problem for the market.”
Swiss customs data includes ingots, powder and half- processed material, mostly brought in by air freight. Bars are stacked on pallets, according to Afshin Nabavi, a senior vice president in Geneva at bullion refiner MKS Finance SA, which trades the metal. It is transported in plastic pots when in powder form, said Johnson Matthey’s Bedford.
Any rise in car sales and palladium may be curbed by energy prices after oil in New York jumped 27 percent from a year ago. Protests across North Africa and the Middle East have disrupted supply, sending gasoline prices to a record in the U.K., according to the Automobile Association, the nation’s largest motoring organization.
“Everybody’s suddenly nervous about high oil prices reducing the amount of distance that people are driving and pushing back the likelihood of people buying cars, and therefore it could impact on palladium consumption in the short term,” said David Wilson, an analyst at Societe Generale SA in London and another participant in the Bloomberg survey.
Auto Sales
Investor demand may overcome a drop related to auto sales. Palladium held in exchange-traded products reached a record 73.08 metric tons on Feb. 28, about 26 percent of annual gross demand, according to data compiled by Bloomberg.
Norilsk Nickel, based in Moscow, will report earnings per share rose 22 percent to $33.09 this year, based on the mean of seven analysts’ estimates compiled by Bloomberg.
Palladium slumped 87 percent over two years after reaching a record in 2001 as manufacturers switched to using more platinum. Ford Motor Co., the second-largest U.S. carmaker, wrote down the value of its precious metals by $1 billion that year, contributing to the Dearborn, Michigan-based company’s first annual loss since 1992.
An ounce of platinum bought 2.16 ounces of palladium on Feb. 18. The ratio was last that low in 2002, after which platinum climbed 29 percent and palladium fell 31 percent in the following year. While sustained prices above $1,000 may spur autocatalyst makers to use more platinum, the process “won’t happen overnight,” SBG’s Davis said.
Vehicle Sales
Asia is leading the increase in auto demand, with personal vehicle sales likely to increase 7.3 percent to 24 million this year, according to Oxford, England-based J.D. Power Automotive Forecasting.
China’s economy will grow 9.5 percent this year, according to the median in a Bloomberg survey of eight economists. While that’s down from 10.3 percent in 2010, it’s almost three times predicted growth in the U.S. and almost sixfold the forecast for the euro region.
The U.S. in 1975 introduced legislation leading to vehicles being fitted with catalysts to cut pollution, and about 95 percent of all new vehicles sold globally are fitted with the devices, according to Johnson Matthey. Ceramic or metal is formed into a honeycomb and coated with chemicals and metals, and is installed in the exhaust line in vehicles.
Even after last week’s drop, “palladium is likely to be the star performer of precious metals again in 2011,” said Anne-Laure Tremblay, a London-based analyst at BNP Paribas SA and another participant in the Bloomberg survey.
Ninja Systems Takes $ 6800 Per Contracts On Gold!
Ancora un ottimo trade del nostro Ninja Trading Systems su Gold con un guadagno di $ 6800/contratto! Il system sta inoltre gestendo due posizioni aperte a ribasso rispettivamente su eMini S&P e eMini Russell. Qui sotto i relativi screenshot dei suddetti trades. I risultati storici di Ninja System sono disponibili ai seguenti link: http://www.box.net/shared/static/oam4a02b4m.xls, http://www.box.net/shared/c22rgem896. I risultati di alcuni altri nostri trading systems sono a disposizione al seguente link: http://www.box.net/shared/5vajnzc4cp
Our Ninja Trading System yesterday closed a good trade on Gold with a gain of $ 6,800 per contracts! The system also managing two sell open positions respectively on eMini S&P and eMini Russell. Below the screenshots. Historical results of Ninja System are available at the following links: http://www.box.net/shared/static/oam4a02b4m.xls, http://www.box.net/shared/c22rgem896. Historical results of our some other trading systems are available at the following link: http://www.box.net/shared/5vajnzc4cp
Material in this post does not constitute investment advice or a recommendation and do not constitute solicitation to public savings. Operate with any financial instrument is safe, even higher if working on derivatives. Be sure to operate only with capital that you can lose. Past performance of the methods described on this blog do not constitute any guarantee for future earnings. The reader should be held responsible for the risks of their investments and for making use of the information contained in the pages of this blog. Trading Weeks should not be considered in any way responsible for any financial losses suffered by the user of the information contained on this blog.
Our Ninja Trading System yesterday closed a good trade on Gold with a gain of $ 6,800 per contracts! The system also managing two sell open positions respectively on eMini S&P and eMini Russell. Below the screenshots. Historical results of Ninja System are available at the following links: http://www.box.net/shared/static/oam4a02b4m.xls, http://www.box.net/shared/c22rgem896. Historical results of our some other trading systems are available at the following link: http://www.box.net/shared/5vajnzc4cp
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Material in this post does not constitute investment advice or a recommendation and do not constitute solicitation to public savings. Operate with any financial instrument is safe, even higher if working on derivatives. Be sure to operate only with capital that you can lose. Past performance of the methods described on this blog do not constitute any guarantee for future earnings. The reader should be held responsible for the risks of their investments and for making use of the information contained in the pages of this blog. Trading Weeks should not be considered in any way responsible for any financial losses suffered by the user of the information contained on this blog.
Is the U.S. Dollar on the Brink?
Just take a look at the chart of the U.S. dollar Index and you see a frightening sight. If it sinks any further its support will have evaporated. We have watched all this week the gold price rise and look good in the dollar. But in the euro it has barely moved. Against the Swiss Franc the dollar looks so weak. With the Technical picture looking so poor, one turns to the fundamentals to see if they conflict or support a downturn for the dollar.
The U.S. dollar Fundamentals
Can government govern finances?
The United States, right now, is on the brink of having used up all its legislated credit capacity. At $14.3 trillion there is a desperate need for a higher credit limit. Unless, by Friday, they have passed legislation to raise this, the government cannot issue checks or pay staff. Yes, they can use various tricks to delay this to accommodate political brinkmanship, but the outside world will be alarmed that the government is unable to tend to such basics or allows politics to overrule finances. Here there is a clash of systems, the need for financial correctness against the games politicians play. With President Obama's administration without sufficient power to legislate as they want at a critical time when government should be strong, there is little to inspire confidence in the U.S. government. Global confidence in the U.S. dollar will be shaken if such a financial mess were to happen. We would most likely see the ratings agencies downgrade U.S. debt before that happens. From outside it looks as though the U.S. is oblivious to foreign investor's opinions at a time when the U.S. is reliant on foreign investors buying U.S. debt.
Moving down the ladder we have seen so much in the press that individual States are on the brink of bankruptcy and some already there and little seems to be being done to rectify matters to date. Or should foreigners just presume that the Fed will rescue them with bailouts? If that is to be the path followed that again will undermine foreign investors confidence in the dollar.
What needs to be understood is that government finances at all levels have to be sound to inspire confidence? It seems to be a simple obvious statement, so why is it not being applied? Even Fed Chairman Mr. Ben Bernanke is calling for government to sort out the Federal deficit but all we see is a partisan battle that seems oblivious to their countries crying needs. Or do we misunderstand the scene. Are politics more important than good order? Today saw the revelation that China owns more than $360 billion of Treasuries than was thought to be the case. Does the government not worry about this dependence? Or does the government want to ensure that the dollar weakens? This is a strong impression pervading so many foreign exchanges now.
And the inflation coming from the food and energy worlds is globally pervasive and capable of threatening what little economic growth there is in the developed world. It will affect many, many countries and could reach into the U.S.A. We do expect the U.K to experience a shrinking of its GDP in the first quarter of 2011 announcing the arrival of a double-dip recession, so shrinking growth could also affect the U.S. still with its lackluster economy. What will this somewhat emasculated government do then?
The Trade Deficit
For so many years now the U.S. has run a Trade deficit balanced by a surplus on the Capital account. This inflow of capital is the flow of power from the U.S. to foreign creditors. Already we are seeing a tendency to try to diversify away from the U.S. dollar. If this trend gathers momentum then the overall picture on the Balance of Payments could sink to a deficit. How close is it now? Or is it happening as foreign investors diversify into other currencies to stave off or reduce the impact on their surpluses of a falling dollar and overweight natures of their dollar holdings. It's bound to happen if only because of prudence. And yet the U.S. is doing nothing to address the situation, why not? We see that the main beneficiary of a weak dollar would be the U.S. on the trade front as well as on the debt front. So one question that needs an answer is, does the U.S. government want a weak dollar? Or is the U.S. government unconcerned at the U.S. dollar's exchange rate.
Inevitable weakness
It seems that Europe and other nations are more worried about the U.S. dollar exchange rate than the U.S. is. This laissez-faire attitude appears to confirm that the U.S. has no intention of protecting the U.S. dollar's exchange rate. For that reason we have to conclude that the U.S. dollar is inevitably headed to more weakness. In the past the 'top dog' nature of the U.S. currency meant that the rest of the world had to suck it up. Now, it's only a matter of time before the U.S. is second to China's economy in the world. By 202 the Chinese economy will have doubled and we have no doubt that the Yuan will be the world's 'top dog' currency, eclipsing the dollar. When that happens and it may be well before 2020, the dollar like all other global currencies will have to pay its own bills with goods not simply freshly printed dollars.
The $ and the € Gold Price
Is it any wonder then that the gold price is rising in the U.S. dollar. The euro is, the Swiss Franc, the Pound and other currencies are rising in the dollar too. It's not the gold price rising in the dollar it's the dollar falling in terms of gold. Likewise other currencies are not rising against the dollar, the dollar is falling against them.
To get a clearer picture of what is really happening in the gold price one has to look at the gold price in the euro or the Swiss Franc. That will reflect demand and supply better. We have and will see the gold price rise in the euro for fundamental reasons but for accuracy's sake we have to relegate the dollar price of gold to second or third place, because that's more about the dollar than about gold.
Gold as part of the global monetary system
Today we read that the shareholders of the Bank of Italy, the Italian banks want to use the gold held by the central bank to shore up their balance sheets. The Bank of Italy has gold reserves of 2451.8 metric tonnes (68.6% of their foreign exchange reserves) at the moment. As shareholders assets, by including these reserves at market value, Italian banks look a lot healthier.
Yes, this is a touch of 'cooking' the books, but it recognizes the fact that gold has a monetary value, recognized in the monetary world. In inter-nation currency transactions gold is being used to secure loans. It has a de facto role in the monetary system that is getting harder and harder to avoid.
Could gold be confiscated?
Of course gold will never be confiscated for the same reasons it was in 1933 [money supply expansion]. Its role today can be as collateral for international transactions, as we see it being used now. In a global world it is the only real monetary asset that bypasses nations to be global money that is truly mobile. Should a nation find itself in trouble, much like these Italian banks, then gold sits there waiting to shore up balance sheets and serve as collateral for international currency swaps for nations with questionable creditworthiness. Will the dollar fall into that category once the Yuan is a truly international currency? Certainly holding gold will bypass that eventuality. Even in the hands of the U.S. government its citizen's gold could give the dollar a golden hue.
In China it is understood by all that all assets of the nation including citizen's gold is the property of the state. In the U.S. citizens are allowed the privilege of owning gold and don't have the right. How small a step to confiscating the huge tonnage of citizen's gold wherever it is.
Top in Stocks and Silver?
High volatility seen in commodities market in the past week attributes toward ongoing social and economical developments in the Middle East. There are ominous reports of thousands of people killed in Tripoli as anti-government protests reached the Libyan capital for the first time. The Libyan government attacked protesters, and rebels claimed control of the second-biggest city, Benghazi. Tens of thousands of Bahraini protesters marched in the capital demanding democracy.
Commodity markets react to the changed outlook for the region and the global economy. Higher commodity prices will be seen along with greater risk aversion in the equity and credit markets. The latest rumors on attacking oil pipelines induce massive speculations in energy commodity markets. These, coupled with the currency market uncertainties impact current gold and silver market sentiment.
At this juncture of commodities markets react to the social and economic disturbances heavily, let’s have some talk on the relationship between general stock market and precious metals. Backed by the strong historical correlation between silver and stock market, forecasts in stock market would be a gauge to measure the strength in silver moves. Let’s start this week’s technical part with the analysis of the S&P 500 Index (charts courtesy by http://stockcharts.com.)
On the above chart we see some volatility; however it is important to note that the downturn has not moved to levels below the mid-2008 highs. It seems at this point to be nothing more than a form of verification of the breakout above these highs.
The RSI is not severely overbought any longer. It’s still relatively high compared to its historical average, but it’s definitely not above the 70 level. This is one of the positive results of the recent slight decline and a few more days of sideways price action could cause further reduction in the RSI. This could be a gathering of strength for a subsequent rally.
Overall, the situation in the general stock market still appears bullish even though some declines have been seen last week. It is quite probable that we have simply seen a slight correction – a verification of the breakout above the mid-2008 highs.
Amid the short-term volatile stock market fluctuations, let’s have a look into inter- as well as intra market correlation exhibited by precious metals in the recent past.
The implications continue to show stocks moving more or less in tune with silver. Note the high correlation coefficients in the medium-term columns. The general stock market is still above mid-2008 highs and this is bullish for silver and thus also indirectly for the rest of the precious metals sector.
Mining stocks have moved above their mid-2008 highs and are verifying this breakout. The same situation also applies to the white metal. No other significant correlations of the US dollar or stocks are seen here in the short run. Both gold and silver have been highly negatively correlated with the dollar but only in the 10-day column. This is simply a situation to watch at this point, not to draw significant conclusions based on that column.
Let’s leave silver for a few seconds and have a look at the ratio between the price of gold and corporate bonds. This will allow us to keep the proper perspective.
Let’s leave silver for a few seconds and have a look at the ratio between the price of gold and corporate bonds. This will allow us to keep the proper perspective.
The recent breakout has been verified and the rally continues. Notice that the Gold: Corporate Bonds ratio moved sharply higher after reaching a local bottom a few weeks ago. It now appears about ready to take out its previous highs and it seems this is likely to happen soon. If so, a significant upswing throughout the precious metals sector is likely to follow - just like it was the case in 2005/6 and 2007/8.
Although there is always a possibility that such a trend could be invalidated, it seems more likely that the ratio will continue to move upwards. For this reason, we believe the medium-term outlook for gold, silver and mining stocks is bullish at this time. So, now let’s take a look at the very long-term chart for gold
On the above chart we clearly see that the price of gold is once again moving close to the rising resistance line (upper border of the very long-term trading channel). Several months ago, the upper border of the rising trend channel was approached but not broken.
In the October 1st, 2010 Premium Update, we wrote the following:
Before the lower, less steep line is surpassed, it is likely that gold will first reach a local top and then go through a quick consolidation. This will most likely result in a greater strength and increase the odds of a further rally being sustained.
Since that time gold moved considerably lower and bounced. This action is clearly visible from the very long-term perspective, so the gold market appears ready to move above the aforementioned resistance level. The higher light blue line will then likely become the next resistance level. It seems that this is the most probable outcome going forward and target level of $1,600 or higher would then be valid.
Before summarizing, let’s take a look at the recent developments in gold stocks.
In the HUI Index (HUI index indicates a portfolio of 14 major un-hedged gold mining companies), chart we see the index level is above both resistance levels marked with black lines and the breakout is in the process of being verified. The head-and-shoulders pattern which was under development last week has nearly been invalidated. This would of course be a bullish development.
It is our opinion that the breakout will likely be verified and it is therefore probable that the head-and-shoulders pattern will not be completed.
Summing up, the general stock market is verifying a breakout above previous highs and the same situation is also seen for silver. We mentioned the possibility of small consolidation periods in the precious metals markets our recent commentary, so seeing this now leads to us to refrain from any serious bearish sentiment. Conversely, the situation remains bullish.
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