Competition for the IMF’s Gold?
by ilene - March 10th, 2010 5:24 pm
In contrast to our friends at Elliott Wave Int., Casey Reserch remains bullish on gold…
Competition for the IMF’s Gold?
By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report
On February 24, Reuters reported that the Reserve Bank of India was “set to be a buyer” of the 191.3 tonnes (6.74 million ounces) of gold the IMF is selling. Although the bank wouldn’t comment directly on the possibility, they did say, “We are closely looking at the gold market… gold is a safe bet.”
The article then quoted an unidentified official from the China Gold Association as saying, "It is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility.”
But the next day, Finmarket news agency in Russia reported that China “confirmed its intention” to buy the IMF gold. "Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market.”
While they’ve been silent since, both India and China have publicly hinted they want this latest batch of yellow bars from the IMF. There’s no way to know if a competitive bid would spring up between these two countries, but…can you imagine the ramifications if one did?
When India bought 200 tonnes of IMF gold last November 3, it set off a buying spree that saw gold rise 14.2% in 4 weeks. What if this time around, a couple central banks both want the gold for sale? What if China says to India, “Not so fast, guys. We’d like to bid on that, too…” and word of that clash leaked out?
Pure speculation, of course, but competing for gold purchases isn’t a far-fetched idea. This sale is not pre-arranged; it’s an open market sale. Also, there’s only so much to go around. These two countries have only a tiny amount of their reserves in gold. Throw in the fact that central banks worldwide are already net buyers.
A pretty delicious thought, wouldn’t you say?
The gold price dropped a tad on the IMF announcement, but is up 1.1% since then. It’s pretty hard to make a case that IMF sales will hurt the gold price. As I said a few weeks ago in my dirty jokes column, IMF sales tend to mark bottoms in the price and not tops. The World Gold Council reported that floor traders now consider $1,054 as a floor in the market. Why?…
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Are Traders Demanding US Credit Default Swaps Payable in Gold?
by ilene - March 8th, 2010 5:00 pm
Are Traders Demanding US Credit Default Swaps Payable in Gold?
Courtesy of JESSE’S CAFÉ AMÉRICAIN
If another author had said this I might not pay it so much attention. Lately some have been given over to a tabloid approach to overstatement and sensational headlines to attract attention. This is a strong temptation as the blogosphere expands, similar to the development and evolution of newspapers as a popular medium in Victorian London for example.
But as you know, I have a great deal of respect and admiration for Janet Tavakoli and her knowledge in this area. If she is seeing a new demand for Credit Default Swaps on the US payable in gold I would credit it since this is her area of expertise and industry connections, but would ask for some particulars, which I have done. This would match up with some other data I have seen from other sources, and desire to continue to put the puzzle pieces together without traveling false trails.
It does make sense, of course, to price a US default in something other than dollars. The question that comes to mind though, is not the suggested method of payment, but the nature and quality of the counter-party who could stand reliably behind such a claim without it being a fraudulent contract by its very nature.
If the US should default, what major financial institutions will be in a position to have written and then uphold the terms of these CDS, payable in anything at all? Surely only a sovereign bank like the US Fed, the Treasury, or the IMF, or some other central bank could be so capable. But what possible motivation could a non-profit-seeking official institution have in writing CDS on a US sovereign default? Perhaps more likely a private bank or GSE, with the buyers thinking it has some sovereign guarantees that would be upheld in extremis.
Truly, remember AIG? It was insolvent when payment was demanded, and acted improperly in paying collateral to Goldman ahead of its inevitable insolvency, and then receiving the support of the Treasury to pay obligations in full, above all others. It ought to have been placed in a receivership and its assets allocated with the previously disposed collateral clawed back. This kind of private arrangement between parties involving the sovereign wealth of nations may be indicative of things to come. The recent example of Iceland comes to mind.
I agree with her that credit default swaps…
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More Denials on the IMF Gold Purchase by China
by ilene - February 26th, 2010 11:30 am
More Denials on the IMF Gold Purchase by China
Courtesy of JESSE’S CAFÉ AMÉRICAIN
No official denial, but lots of doubts.
The whole thing seems odd, from the story to the doubts to the blatant bear raids and price manipulation being conducted almost every day with the New York open around these option expirations on the futures contracts.
Just yesterday we saw rumours floated in the SP futures pits that triggered a striking turnaround in the US stock indices, shortly after Goldman bought a large number of SP futures contracts. When the rumours were proved false, the forced buying continued.
Gold and financial assets in general are becoming even more political than usual. Expect this to intensify as the recomposition of the SDR and the international reserve currency are negotiated this year. The Anglo-Americans are the status quo on this one, and the integrity of their motivations and reports and transactions are definitely on the table.
We may be seeing the next stage of the currency wars that are so many things to different people. But in the end, it involves the artificial control of wealth and transactional flows, as they conflict with public policy and national and private interests.
Reuters
"China buying IMF gold" story unfounded: author
By Tom Miles and Zhou Xin
Thu Feb 25, 2010 11:24pm
BEIJING (Reuters) - The author of an article that said China had confirmed it would buy 191.3 tons of gold from the International Monetary Fund said on Friday she didn’t have official sources for her story.
Nobody was available to comment on Friday at China’s State Administration of Foreign Exchange, the arm of the central bank overseeing gold reserves.
The unverified report helped push up gold prices by 1 percent on Thursday, though other commodities fell, under pressure from a stronger dollar. Traders cited the talk about China as a significant factor why gold prices clawed higher.
China has not said anything officially about plans to buy the IMF gold, but there has been strong speculation because of China’s $2 trillion reserves and its announcement last year that it had increased its gold holdings by 454 tons since 2003
Rough & Polished, a Moscow-based industry website, reported China had "confirmed its decision to acquire 191.3 tons of gold auctioned by the International Monetary Fund," which helped push prices up on Friday.
Contacted by Reuters, the author of the Rough and Polished story, Nadezhda Shagrova, who works as a tour guide and journalist in Shanghai, said she did not have any official information…
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China Said to Purchase Remainder of IMF Gold Sale
by ilene - February 25th, 2010 5:52 pm
China Said to Purchase Remainder of IMF Gold Sale
Courtesy of JESSE’S CAFÉ AMÉRICAIN
This is being reported by Finmarket, a Russian news agency.
I would like this to be confirmed by an official Chinese news agency.
There are recent stories to the contrary from the region: IMF Purchases Not Feasible for China Says China Gold Association The CGA thinks it is more appropriate for China to buy actual foreign mining properties rather than refined bullion, except of course from local sources I’m sure.
I think it is highly unlikely that China would pre-announce any deal or their intentions until the price was firmly set. They are not like the Bank of England which announces its intentions first, and then works against itself in the market.
Having said that, this is credible story, because the Chinese Central Bank is a known buyer of gold, from a variety of sources both foreign and domestic. Further, they were said to very disappointed that India was able to purchase the entire 200 tons initially offered by the IMF at a private pricing of $1050 per ounce.
China would like to increase gold as a percentage of their official reserves closer to the international average which is about 10 percent. Right now their holdings are only 1.2% as I recall.
The bullion banks can use paper gold to manipulate pricing around key events like this week’s options expiration in the short term. They are powerful, and have many friends, their demimonde, who will help them to spin the facts, place opinion pieces, and resurrect old studies, to convince a gullible public once again that their promises are good, that their paper riches are wealth. This is the essence of the shaping of public opinion, the hidden persuaders, the not always subtle propaganda campaigns that so often pass for news these days.
But the international currency regime is changing, and the developing countries are choosing to protect their reserves in traditional ways. For the first time in over twenty years the central banks have become net buyers of gold.
The wealthy are buying physical silver and gold in anticipation of a dislocation in the structure of the existing international currency regime, no matter what they might say publicly to reassure the markets. This we know. Whether this is the most prudent thing to have done only time will tell, since there are a range of possible outcomes, and probabilities. But change is in the wind; the time of reckoning approaches…
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Gold Tumbles As IMF Reaffirms Plan To Sell 191.3 Metric Tons Of Gold Over Time in Phased “On-Market” Gold Sales
by ilene - February 17th, 2010 4:43 pm
Gold Tumbles As IMF Reaffirms Plan To Sell 191.3 Metric Tons Of Gold Over Time in Phased "On-Market" Gold Sales
Courtesy of Tyler Durden at Zero Hedge
The IMF just announced it would resume selling the balance of its preapproved for sale gold, of which 191.3 tons remains. The sales would be in a phased manner over time to avoid disrupting the gold markets. This is not major news as this is inline with the IMF’s September 2009 announcement to sell 403.3 metric tons of gold. As is well known the IMF has already sold 212 metric tons. Nonetheless, gold is selling off after hours. As gold was bought via dollar shorts, the current unwind is sending the dollar proportionately higher.
From Dow Jones:
WASHINGTON (Dow Jones)–The International Monetary Fund said Wednesday it will soon begin selling to the market the remaining 191.3 metric tons of gold it has slated for release, though the sales will be conducted in phases to avoid disrupting markets.
The sale of gold, currently worth nearly $6.9 billion, will begin "shortly," the fund said in a brief statement.
"In accordance with the priority of avoiding disruption of the gold market, the on-market sales will be conducted in a phased manner over time," the IMF said.
The IMF noted that central banks in Europe have said they can accommodate the fund’s gold as part of their scheduled sales in the Central Bank Gold Agreement.
The IMF board approved sales of 403.3 metric tons of gold in September to create a more stable income model and boost support for low-income countries. About 212 metric tons have already been sold off-market to central banks of India, Mauritius and Sri Lanka.
The IMF didn’t rule out further off-market sales, which would reduce the amount sold to the market.
Full press release text:
IMF to Begin On-Market Sales of Gold
Press Release No. 10/44
February 17, 2010
The International Monetary Fund (IMF) today announced that it will shortly initiate the on-market phase of its gold sales program. This is the second phase of the total sale of 403.3 metric tons approved by the Executive Board in September 2009 (see Press Release No. 09/310). The first phase was set aside exclusively for off-market sales to official holders. A total of 212 metric tons was sold during this phase, comprising sales to the Reserve Bank of India see Press Release No. 09/381), the Bank of Mauritius (see Press Release No. 09/413), and the Central Bank of Sri Lanka (see…
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Collapse Of The Euro Is ‘Inevitable’: Bailing Out Greece Is Futile, Says French Banking Chief
by ilene - February 13th, 2010 7:49 pm
SHOCK: Collapse Of The Euro Is ‘Inevitable’: Bailing Out Greece Is Futile, Says French Banking Chief
Courtesy of The Daily Bail, citing the Daily Mail
Finally some good sense from the Euro Block. With an economy 1/14th the size of Germany’s, Greece shouldn’t be a part of the ECU. Do not bail. Bring in the IMF, force some actual austerity on the free-spending Greeks and kick them out of the currency union, so they have some flexibility with monetary policy.
—–
The European single currency is facing an ‘inevitable break-up’ a leading French bank claimed yesterday.
Strategists at Paris-based Société Générale said that any bailout of the stricken Greek economy would only provide ’sticking plasters’ to cover the deep- seated flaws in the eurozone bloc.
The stark warning came as the euro slipped further on the currency markets and dire growth figures raised the prospect of a ‘double-dip’ recession in the embattled zone.
In a note to investors, SocGen strategist Albert Edwards said: ‘My own view is that there is little "help" that can be offered by the other eurozone nations other than temporary, confidence-giving "sticking plasters" before the ultimate denouement: the break-up of the eurozone.’
The alarming claim came a day after European Union leaders promised ‘determined and co-ordinated’ action to shore up Greece’s tattered public finances, but disappointed traders by failing to provide specifics.
The European single currency is facing an ‘inevitable break-up’ a leading French bank claimed yesterday.
Strategists at Paris-based Société Générale said that any bailout of the stricken Greek economy would only provide ’sticking plasters’ to cover the deep- seated flaws in the eurozone bloc.
The stark warning came as the euro slipped further on the currency markets and dire growth figures raised the prospect of a ‘double-dip’ recession in the embattled zone.
—
Continue reading at the Daily Mail >>
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IMF: RECOVERY IS SURPRISING TO THE UPSIDE
by ilene - January 18th, 2010 4:53 pm
IMF: RECOVERY IS SURPRISING TO THE UPSIDE
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Courtesy of The Pragmatic Capitalist
European stocks rallied on the day after bullish comments by IMF chief Strauss-Kahn. At a speech in Japan, Dominque Strauss-Kahn noted that the global economy is recovering faster than expected, but remains largely dependent on government stimulus. In his speech the IMF leader noted 4 key risks to the recovery:
- Unemployment is still growing, posing the threat of social unrest and even conflict if not tackled.
- The risk appetite of investors is on the rise. While investors are still not putting capital into advanced economies, large sums are flowing into emerging economies, including Russia, Brazil, and emerging Asia, creating the risk both of asset bubbles or of a damaging abrupt halt in inflows.
- The financial system remains damaged. Japan’s experience with its own financial crisis since the late 1990s shows that recovery begins only when companies and banks have cleaned up their balance
sheets . - The timing of unwinding of government stimulus measures is crucial. Although governments are now saddled with high debts from the anti-crisis measures, trying to remove the stimulus measures too quickly could result in a “double dip” recession, with advanced economies in particular falling back into negative growth.
“Our forecast at the IMF is not a forecast of a double dip. But you never know. It may happen and especially if countries exit too early. If they exit too early and we have a new downturn in growth, then really I don’t know what we can do. A lot of our toolkit in terms of fiscal and monetary policy has been used. If we fall back into negative territory for growth it will be very, very difficult to solve the problem, So, our advice is to be very careful.”
The implications here are clear. Expect governments to maintain their accommodative stances for some time to come.
You can see more from Strauss-Kahn here:
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So It’s Official: IMF / Carry Trades
by ilene - November 10th, 2009 7:43 am
So It’s Official: IMF / Carry Trades
Courtesy of Karl Denninger at The Market Ticker
You can put a fork in us down the road….
The U.S. currency dropped against 12 of its 16 major counterparts as the International Monetary Fund said traders are probably using the dollar to fund so-called carry trades around the world and it may still be overvalued.
I hope everyone here in The United States takes a moment to understand what this means. Let me lay it out for you:
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When the global economy truly recovers oil will skyrocket up to or beyond the $150 where it was in late 2008. If the dollar is indeed still "overvalued" and going to 40 as many technicians predict, oil will likely reach $300 a barrel. This will in turn drive gasoline prices north of $6, heating oil will reach $7-8/gallon, and diesel will be commensurate with heating oil.
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This will in turn decimate the trucking industry. Now you know why Buffett bought BNI. Many things he may be, but dumb isn’t one of them. Trucks will of course remain for terminal-to-door deliveries but for long-haul they will simply be uneconomic. Those who currently are employed in this business will lose their jobs. All of them.
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The middle class will be decimated. Those who live in suburbia, who are primarily middle-class Americans, will find themselves faced with commute costs that are double or more what they pay now. Those in the middle class who live in the Northeast where heating oil is the primary fuel for winter, where natural gas infrastructure does not exist to replace heating oil, will find themselves choosing between heat and food in large numbers.
What’s far worse is that all carry trades eventually unwind and in the history of the markets I have never seen it happen in an "orderly" fashion. Japan witnessed the destruction of the Yen Carry last year and it was horrific. We will see it in the future - exactly when cannot be predicted with certainty, but that it will happen in an uncontrolled fashion will be. While this "unwind" will bring relief from sky-high commodity prices it will do so at the expense of asset prices, which will collapse.
Our government has, quite simply, refused to take the steps necessary to stem this ridiculous and self-destructive course of action. Part of the problem does indeed lie with the yuan and China’s mercantilist policies, but this is similar…
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THE IMF CATAPULTS FROM SHUNNED AGENCY TO GLOBAL CENTRAL BANK
by ilene - October 7th, 2009 9:15 pm
THE IMF CATAPULTS FROM SHUNNED AGENCY TO GLOBAL CENTRAL BANK
Courtesy of Ellen Brown, http://www.webofdebt.com/articles/imf.php
“A year ago,” said law professor Ross Buckley on Australia’s ABC News last week, “nobody wanted to know the International Monetary Fund. Now it’s the organiser for the international stimulus package which has been sold as a stimulus package for poor countries.”
The IMF may have catapulted to a more exalted status than that. According to Jim Rickards, director of market intelligence for scientific consulting firm Omnis, the unannounced purpose of last week’s G20 Summit in Pittsburgh was that “the IMF is being anointed as the global central bank.” In a CNBC interview on September 25, Rickards said, “They’ve issued debt for the first time in history. They’re issuing SDRs. The last SDRs came out around 1980 or ’81, $30 billion. Now they’re issuing $300 billion. When I say issuing, it’s printing money; there’s nothing behind these SDRs.”
SDRs, or Special Drawing Rights, are a synthetic currency originally created by the IMF to replace gold and silver in large international transactions. But they have been little used until now. Why does the world suddenly need a new global fiat currency and global central bank? Rickards says it because of “Triffin’s Dilemma,” a problem first noted by economist Robert Triffin in the 1960s. When the world went off the gold standard, a reserve currency had to be provided by some large-currency country to service global trade. But leaving its currency out there for international purposes meant that the country would have to continually run large deficits, and that meant it would eventually go broke. The U.S. has fueled the world economy for the last 50 years, but now it is going broke. The U.S. can settle its debts and get its own house in order, but that would cause world trade to contract. A substitute global reserve currency is needed to fuel the global economy while the U.S. solves its debt problems, and that new currency is to be the IMF’s SDRs.
That’s the solution to Triffin’s dilemma, says Rickards, but it leaves the U.S. in a vulnerable position. If we face a war or other global catastrophe, we no longer have the privilege of printing money. The dollar becomes just another currency. To avoid that, the Federal Reserve is hinting that it is prepared to raise interest rates, even though that would mean further squeezing the real estate market and the…
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Wednesday - End of Quarter, End of Pump?
by Phil - September 30th, 2009 8:29 am
Yesterday could not have gone better!
I titled the morning post "Confidence is Key" and decided that, since my targets were dead on Monday, that we should stick to our bear plan into the Consumer Confidence report which was, as we expected, a huge disappointment. My 9:50 Alert to members suggested the DIA 9/30 $99 puts for $1 into the report and then we got a nice 100-point drop for the rest of the day that ran those puts up to $1.60 (up 60%). Also, in that same alert, we went back into SRS (now dubbed "The Widow-Maker") at $9 and those finished the day at $9.50 (up 5.5%) and the Nov $8 puts we sold for .75 dropped to .60 (up 20%). These are not bad trades to make while we wait around for the market to pick a real direction.
In addition to a poor Consumer Confidence report (53.1 vs 57 expected), we also got a very poor Investor Confidence reading at 118.1, down from 122.8 in August, which was a 5-year high. "There is a recognition that a portion of the recent rise in global equity prices can be attributed to liquidity expansion rather than fundamental opportunities. Institutional investors are pausing to assess this balance," study says.
Speaking of investors who are not confident, GE’s own Jeff Immelt, unlike his army of pump-jocks on CNBC, isn’t willing to sully his own reputation by mindlessly cheerleading the economy. He was in Singapore yesterday and said that: "high unemployment and slower lending will drag on U.S. economic growth, likely resulting in the weakest recovery in decades… Easing up money has always been the elixir to keep the economy in recovery mode," Immelt said. "But once you get interest rates to zero percent, you can’t go much below that, which is kind of where we are right now. A lot of the jobs lost in financial services and construction are never coming back."
If you don’t think Immelt is in touch with the economy despite GE’s Global footprint and $180Bn in sales, perhaps we can listen to WMT CEO Robson Walton (yes, nepotism), who oversees $400Bn in annual sales and he said at yesterday’s CEO conference: "The World recovery is going to be led by Asia although it’s going to be very challenging. I think this recovery is going to be a slow one - sales have been tough."
As noted in David Fry’s Daily S&P chart, volume the last two days fell off a cliff…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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