By www.CentralBankNews.info Brazil’s central bank held its benchmark Selic rate steady at 7.25 percent, as widely expected, repeating that stable monetary conditions for “a prolonged period” was the most appropriate strategy to ensure that inflation returns to the bank’s target.
Banco Central do Brasil’s policy committee, which at its last meeting in November froze rates for the first time after 10 consecutive rate cuts, said it kept rates unchanged in light of the balance of risks to inflation, which worsened in the short-term, while the recovery of domestic economic activity was less intense than expected and the international environment was still complex.
The bank added in a statement that all members of the Copom committee voted to keep rates unchanged and there was no bias indicated.
Brazil’s headline inflation rate rose to 5.84 percent in December, the sixth month in a row of higher inflation and the highest rate in 2012. The central bank targets annual inflation of 4.5 percent, plus/minus 2 percentage points.
Brazil’s Gross Domestic Product rose 0.6 percent in the third quarter from the second, raising the annual growth rate to 0.9 percent, up from 0.5 percent in the second quarter
Your Kids are Screwed
Money is rushing into stock funds at a rate higher than at any point over the last five years. And yet the Dow barely budged yesterday.
Japanese stocks, on the other hand, are moving up. Apparently, other investors are coming to think that our “Trade of the Decade” was not such a bad idea after all.
Who knows?
Bernanke, Draghi, Carney, Shirakawa… and all the others… are pumping as much money into the system as they can. They say they need more money to keep the system from falling back into recession.
They don’t mention it, but without central banks’ EZ money, zombie industries — including health, education, Wall Street, defense — would be in big trouble.
As central banks pump, the private sector is trying to wring the debt out as fast as
possible. And Gary Shilling says there will be “another five years of painful deleveraging.”
What will happen? We’ll come back to that tomorrow…
The War on Youth
Today, let’s look again at the sad plight of the young in America. They get whacked coming and going. They have few jobs and little money, thanks largely to deleveraging. But they have plenty of debt and high living costs, thanks largely to the feds’ vigorous pumping.
It’s no accident, we’ve been saying. They’re victims of dirty dealing by their parents and grandparents.
Here’s Bryan Goldberg at PandoDaily.com:
[Y]oung people need to understand how
much their grandparents’ generation has ruined things for them. The
average American retires with less than $70,000 of savings, but an
elderly man and woman receive about $275,000 in medical care during that
time — and you kids are paying for it by inheriting trillions upon
trillions in Medicare bills that granny and grandpa never intended to
pay and will be too dead to worry about soon.
You kids are beyond screwed.
It’s not hard to see how it works. Healthcare has become very, very expensive… with spending reaching over $7,000 for every single American. Who spends the money? Overwhelmingly, it is done by or for old people. Who foots the bill? Mostly younger people.
Why are the costs so high? Because healthcare costs have been collectivized. Through insurance and government, old people found they could get healthcare benefits — and that someone else would pay for them. Only 1 out of 10 dollars of healthcare spending is paid by the person who gets the service; the rest is paid by someone else, usually someone younger.
And it gets worse and worse. The baby boomer generation is big. And it expects extravagant healthcare services. But it won’t pay the costs. Someone else will have to pick up the tab. Who? Younger people.
Rotten Wood
Of course, the story is deeper and more nuanced… which is to say there’s a lot of rotten wood in this pile. Costs went up because the feds created an almost unlimited demand for healthcare, financed by an almost unlimited line of credit.
For the old-timer, it’s “use it or lose it.” If he doesn’t get the pills and the tests, it’s like a free vacation he didn’t take: lost forever.
And now, for every person who is providing something that might be described as useful healthcare… there are three others who are creating expensive new drugs, filing insurance claims, shuffling papers, defrauding the system, giving tests and threatening lawsuits.
The zombies have taken over the healthcare system.
They’ve taken over the education system too…
Here’s Goldberg again, with some advice:
If you can get into an ultra-top-tier
college, then go ahead and do it. An Ivy League degree is worth getting,
at least for undergrad. The value of a law or business degree is
becoming more and more questionable each year. But for the rest of you,
it may be worth skipping college altogether.
The world doesn’t need any more girls
with Spanish degrees from California State, Long Beach. Sorry, but it
just doesn’t. We need you gals to learn how to build software in equal
number with your male peers. They are no smarter than you, and they are
definitely way less organized and far less attentive to detail. So go
show them what you are made of.
But won’t a college degree pay for
itself? It probably won’t. According to UC Berkeley’s website, a
four-year education will cost you $210,000 in tuition and living
expenses, and a private education could run you way more. A part-time
job at Starbucks will eat into very little of that sum, and you will be
forgoing a real job during that same time. And — if I can convey just
one point in this whole article, let it be this… saving money takes
forever. Even if you do get that coveted six-figure job, you will find
that it takes forever to save $210,000. Decades even.
Yes, dear reader, education
has become another scammy rip-off. Kids are enticed to spend money, in
the hope that credentials will help them get work. They are loaded up
with debt. And then, they discover that the promised jobs don’t exist.
Would You Pay $143 for a College Lecture?
You might also wonder why it costs so much to go to college. The estimate above comes to $52,000 a year. This is $6,000 more than the average household income of $46,000.
Let’s say it costs about $1,000 a month to house a student in a dorm for the school year and give him regular cafeteria meals. That leaves $43,000 for tuition.
Maybe something big has happened since we were in college in the late 1960s. Maybe not. But from what we recall, college wasn’t worth $43,000. Not even close.
Look, let’s say you take five classes. Each class gives you two lectures a week. This is a total of 10 lectures a week. (We’re keeping the math simple in case you weren’t a math major.) There are about 15 weeks a semester… and two semesters. So, we’ll say 30 weeks x 10
lectures = 300 hours of lectures a year. At $43,000, that means each
lecture at $143.
Who would pay $143 for a college lecture by a drowsy, second-rate
professor of economics? Or a seminar with a teaching assistant? Hey, go
to the Teaching Company. You can get 30 lectures from the best
professors in the country for just $10 each… or less. And you don’t
have to park.
Or go to the Khan Academy… Or to one of the many places where you can get all the lectures you want for free.
From our own limited experience, we wouldn’t pay $143 for any of the many lectures we attended in college. None were worth it.
We had one professor who taught a course in political science.
Apparently, he couldn’t spot the fraud in his own subject. Politics has
nothing to do with science. They’re not even on speaking terms.
But the professor insisted that he was a scientist. So we stopped attending class.
Another professor led us on a deep exploration of philosophy. But he
had been so moved by Wittgenstein that he didn’t feel you could say
anything meaningful about it.
“Am I here? Are you here? What does being here mean? Who the hell knows?”
We were invited to sit around and meditate for much of the lecture.
We kept going to class to see what he would do next. Worth attending?
Maybe. Worth paying for? Nah…
A Waste of Time
Looking back on it, we see he was right. But it was an insight that
takes years of reading, thinking and reflection to understand. Like the
gallows and the grave, you have to be ready to appreciate it.
You get much more information… more ideas… better reasoning… more history… and better organization… in a $29 book.
Don’t like the idea of learning on your own? Try this: Get a
collection of 10 people together who all want to study philosophy. Hire
an out-of-work Ph.D. philosopher for $50,000 a year.
That’s eight hours a day… in a small class… for just $5,000 each.
The following year, hire an unemployed lawyer. Then an unemployed
economist. Etc. After four years you will have spent only $20,000… and
you will still be unemployed.
What happened to the education industry? Was it spoiled by too much
easy money? Students learned that they could avoid the rigors of the
real world by staying in school, at someone else’s expense. First, at
the expense of parents. Later, at the expense of taxpayers. And
finally… when the debt bubble blows up… at the expense of almost
everyone.
But the students are the biggest victims. They waste their most
glorious years — the years when Alexander conquered the world and
Chopin composed a Nocturne and three Polonaises — sitting in stifling
classes with boring professors.
After years of beer parties and trivial pursuits they come out with
such great debts they can scarcely be paid… and such dull brains they
can scarcely think.
More coming…
Regards,
Bill
Market Review 16.01.2013
Source: ForexYard
The USD/JPY fell an additional 88 pips during the Asian session last night, as recent comments from the Japanese Economics Minister, who warned that an excessively bearish yen would be bad for Japanese imports, helped the JPY recover some of its recent losses.
The EUR/USD saw minor losses during the overnight session, following comments from a euro-zone official who warned that the common-currency was gaining too much, too quickly. The pair, which is currently trading at 1.3270, lost close to 40 pips since last night.
Main News for Today
US Core CPI-13:30 GMT
• Forecasted to come in at 0.2%, slightly higher than last month’s 0.1%
• Better than expected news today could lead to dollar gains during afternoon trading
US Crude Oil Inventories- 15:30 GMT
• Forecasted to come in at 2.0M, significantly higher than last week’s 1.3M
• A higher than expected figure today could lead to a drop in crude oil prices during afternoon trading
Read more forex news on our forex blog
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
What Happens if Hugo Chavez Croaks?
It may sound like a harsh question. But the man is seriously ill with cancer, and he has had no public appearances in over a month. Rumors abound that he is near death…or may already be dead. As he is reported to be in Havana, some have even speculated that the Cuban government is essentially holding him hostage to secure its own future.
Love him or hate him, the authoritarian Venezuelan president has quite a few mouths to feed across Latin America, and his death could send shockwaves across the region. Let’s take a look at who is most likely to be affected…and what it might mean for the financial markets.
At the top of the list is the Castro regime in Cuba. Cuba gets about two-thirds of its oil from Venezuela, and most is either given to the island free or via loans that everyone involved knows will never be repaid. By Wall Street Journal estimates, Venezuela accounts for 40% of Cuba’s overall trade…and Venezuelan aid and trade is worth about 22% of Cuba’s entire economy.
For all intents and purposes, Chavez is the patrón of Cuba, and the Castro regime continues to exist at his pleasure. And if Chavez dies, his radical movement will probably die with him, or at the very least it will be significantly weaker without his cult of personality.
Without Chavez’s patronage, Cuba will have to seek a lifeline elsewhere…which means it will likely have to open its economy further to foreign investment. Perhaps the best way to get exposure to an investment boom in Cuba and its neighbors would be via the shares of the Herzfeld Caribbean Basin Fund (Nasdaq:$CUBA).
It is by no means a pure play on Cuba (remember, we’re talking about a communist country here…), but it is a nice collection of companies in the tourism, banking, and consumer products companies of the Caribbean and Latin American regions that should benefit from Cuban liberalization.
The Castro brothers are not the only radical regime at risk from the demise of Chavez. Bolivia and Nicaragua both depend on Venezuelan generosity, and Syria and Iran have benefitted from political and diplomatic support. None of these are really investable themes, however, and it’s probably better that way.
One major question mark is the price of crude oil (NYSE:$USO). Venezuela has the largest oil reserves in the world—yes, even larger than Russia or Saudi Arabia—yet its annual production places it in 11th place globally. Venezuelan crude oil production has been in steady decline since Chavez took power and for obvious reasons. Professional managers were replaced with political hatchet men, and no foreign investor in their right mind would invest in the country even if Chavez allowed them.
The death of Chavez and the fall of his regime would likely mean massive foreign investment in the Venezuelan oil industry and could lead to a surge of new production…which would be incredibly bearish for the price of oil.
Alas, all of this is premature. Chavez is still alive—as far as we know—and his death will not automatically bring free trade, peace, and prosperity to his country. A far more likely outcome will be years of political infighting and…in the worst case…civil war.
In the meantime, all eyes are on Havana.
SUBSCRIBE to Sizemore Insights via e-mail today. This article first appeared on InvestorPlace.
The post What Happens if Hugo Chavez Croaks? appeared first on Sizemore Insights.
Gold Cycle “Could Turn This Year” Says Goldman, Washington Politicians “Will Keep Markets Nervous”
London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 16 January 2013, 07:15 EST
THE DOLLAR gold price eased back below $1680 an ounce Wednesday morning, though it remained well within its trading range for the past month, while stock markets extended their losses for this week and US Treasuries gained.
Silver hovered around $31.30 an ounce for most of this morning, also in line with its recent trading range, while other commodities were similarly flat.
“In the short term, the combination of weaker growth and the run up to the debt ceiling and potential budget sequestration should prove supportive to gold prices,” says a note from Goldman Sachs this morning.
“[However] improving US growth will outweigh further Fed[eral Reserve] balance sheet expansion…the cycle in gold prices will likely turn in 2013.”
Federal Reserve Bank of Kansas president Esther George warned last week that the Fed’s accommodative policies could make it difficult to hit the Fed’s 2% inflation target, while St Louis Fed president James Bullard argued against linking asset purchases to economic variables such as unemployment.
Yesterday however, Minneapolis Fed president Narayana Kocherlokata said the Fed “should provide more monetary accommodation” and argued for an unemployment rate target of 5.5% – one percentage point lower than the 6.5% target announced last month.
“Continued monetary accommodation is absolutely appropriate,” added Boston Fed president Eric Rosengren Tuesday, “and indeed needed as long as we are projected to miss on both elements of the Fed’s dual mandate, inflation and employment.”
Bullard, George and Rosengren are all voting members of the Federal Open Market Committee this year while Kocherlakota is not.
Fed chairman Ben Bernanke warned Monday of “critical watersheds” for US fiscal policy in the weeks ahead. US politicians are yet to reach an agreement to prevent spending cuts postponed to the start of March as part of the deal on the so-called fiscal cliff earlier this month. Negotiations are also expected on the federal budget and the debt ceiling.
“Washington’s activities will keep gold nervous in the next few weeks,” writes Rhona O’Connell, senior analyst at Thomson Reuters GFMS, in the metals consultancy’squarterly newsletter.
“As well as frequently being sold in times of short-term distress, gold has often experienced longer periods when it has suffered in line with a bearish commodities sector as investors have become risk averse; the much longer-term view, however, still points to gold maintaining a role as a hedge against risk. Its short-term characteristics often, therefore, appear to be in conflict with its longer-term role.”
Britain’s banking system meantime “is in a stretched position”, Bank of England governor Mervyn King warned yesterday.
“A combination of a weak [economic] recovery and…people searching for yield in ways that suggest that risk isn’t fully priced is a disturbing position,” King told members of parliament on the House of Commons Treasury Committee.
“In the context of the UK,” says a note from Standard Bank analyst Steve Barrow, “one such ‘risk’ would seem to be a ratings downgrade, which we feel is likely to occur some time this year. But while King might have been referring to the UK, the question is just as valid on a global level.”
The Euro meantime is “dangerously high”, according Jean-Claude Juncker, chairman of the Eurogroup of single currency finance ministers.
The Euro has fallen back a little this week after touching an eleven-month high against the Dollar on Monday, although it rallied this morning following the publication of data showing so-called ‘core’ consumer inflation rose slightly last month.
“Those comments from Juncker suggests that euro zone politicians are gearing up for some rearguard action and responding to the rhetoric we have had from Japan,” says Neil Mellor, currency strategist at Bank of New York Mellon, referring to comments from Japan’s prime minister Shinzo Abe, who has urged the Bank of Japan to be more aggressive in fighting deflation.
In South Africa, workers at Anglo American Platinum’s Rustenburg mine refused to go underground last night, following news that AmPlats plans to cut 14,000 jobs from a total of 60,000 employees.
Shares in the London-listed platinum miner, the world’s biggest producer, were the heaviest fallers on the FTSE 100 this morning, dropping more than 3% by lunchtime.
South Africa’s platinum industry saw a series of strike actions last year, which also affected the gold mining sector. The country’s gold output fell 32.2% in November compared to the same point a year earlier, data published Tuesday by Statistics South Africa show.
Gold value calculator | Buy gold online at live prices
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+
(c) BullionVault 2013
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Risk Aversion Leads to Euro Losses
Source: ForexYard
The euro, along with other higher-yielding currencies, turned bearish yesterday, as fears regarding the slow pace of the US economic recovery encouraged investors to shift their funds to safe-haven assets. Meanwhile, the JPY was able to recoup some of its recent losses, following comments from the Japanese economic minister which led to doubts about how aggressive a policy of monetary easing the Bank of Japan is willing to take. Today, CPI data out of both the euro-zone and US is expected to impact the marketplace. If any of the data comes in above expectations, risk taking could boost the euro.
Economic News
USD – US CPI Data Set to Impact Markets Today
The US dollar saw a mixed trading day yesterday, as risk aversion due to a recent speech from Fed Chairman Bernanke boosted safe-haven currencies, while comments from Japanese officials caused the USD/JPY to take losses. Bernanke’s speech, in which he commented on the slow pace of the US economic recovery, resulted in gains for the safe-haven dollar against the Swiss franc. The USD/CHF gained more than 80 pips during European trading to reach as high as 0.9307. Meanwhile, signs that the Bank of Japan will not initiate as aggressive a policy of monetary easing as once thought caused the USD/JPY to fall more than 120 pips during the first part of the day.
Today, dollar traders will want to pay attention to the US CPI and Core CPI figures, both scheduled to be released at 13:30 GMT. Both indicators are expected to come in above last month’s end results. If true, investors may interpret the news as a sign that the US economy is improving, which could result in risk taking and losses for the safe-haven USD. Later in the week, traders will not want to forget to note the results of this month’s Philly Fed Manufacturing Index and Prelim UoM Consumer Sentiment figures for additional clues regarding the current state of the US economy.
EUR – Bernanke Comments Result in Euro Losses
The euro took losses against its safe-haven currency rivals yesterday, as comments from the Fed Chairman earlier in the week about the slow pace of the US economic recovery caused investors to shift their funds to less volatile assets. The EUR/USD, which after a brief rally during early morning trading that brought prices as high as 1.3387, fell more than 70 pips to reach 1.3308. By the end of the European session, the pair was trading at 1.3350. The EUR/JPY fell more than 200 pips during the first part of the day, largely due to comments from Japanese officials, to trade as low as 117.62.
The euro-zone CPI and Core CPI figures, both scheduled to be released at 10:00 GMT, are forecasted to generate euro volatility today. Should either of the indicators come in above their forecasted levels, risk taking among investors will likely help the common-currency recover some of yesterday’s losses. That being said, if the CPI data out of the US comes in below expectations, concerns regarding the pace of the global economic recovery could lead to risk aversion and losses for the euro.
Gold – High Demand for Gold Boosts Prices
An increase in demand for safe-haven assets boosted gold prices yesterday. Analysts attributed the high demand to recent comments from Fed Chairman Bernanke, regarding the slow pace of the US economic recovery, which caused investors to shift their funds to precious metals. Gold advanced more than $12 an ounce during mid-day trading to reach as high as $1684.17.
Today, gold traders will want to pay attention to the US CPI and Core CPI figures, scheduled for 13:30 GMT. If either of the indicators comes in above expectations, fears regarding the US economy may be eased, which would result in gold giving up some of its recent gains.
Crude Oil – US Inventories Data Set to Impact Oil Prices
Concerns regarding the lack of progress in negotiations among US lawmakers to raise the debt ceiling caused the price of crude oil to come off its recent four-month high yesterday. After trading as high as $94.41 a barrel during mid-day trading, prices fell more than $0.80 to reach as low as $93.57.
Today, traders will want to pay attention to the US Crude Oil Inventories figure, set to be released at 15:30 GMT. Analysts are predicting that US stockpiles will increase to 2.0M, which if true, would signal reduced demand for oil and may result in a further decrease in prices.
Technical News
EUR/USD
A bearish cross has recently formed on the weekly chart’s Slow Stochastic, indicating that a downward correction could occur in the coming days. This theory is supported by the Williams Percent Range on the same chart, which is currently in overbought territory. Opening short positions may be the smart choice for this pair.
GBP/USD
While the Bollinger Bands on the weekly chart are narrowing, indicating that a shift in price could occur in the near future, most other long-term technical indicators are in neutral territory. Traders may want to take a wait and see approach for this pair, as a clearer picture is likely to present itself soon.
USD/JPY
The Relative Strength Index on the weekly chart is in overbought territory, indicating that a downward correction may occur in the coming days. Furthermore, a bearish cross has formed on the same chart’s Slow Stochastic. Traders may want to open short positions for this pair.
USD/CHF
The Bollinger Bands on the weekly chart are narrowing, indicating that a price shift is likely to occur in the near future. Additionally, the Williams Percent Rang on the same chart has dropped into oversold territory, signaling that the price shift could be bullish. Opening long positions may be the smart choice for this pair.
The Wild Card
EUR/CAD
The Slow Stochastic on the daily chart has formed a bearish cross, indicating that downward movement could occur in the near future. This theory is supported by the Williams Percent Range on the same chart, which has crossed into overbought territory. Opening short positions may be the smart choice for forex traders today.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
Market Review 16.01.2013
Source: ForexYard
The USD/JPY fell an additional 88 pips during the Asian session last night, as recent comments from the Japanese Economics Minister, who warned that an excessively bearish yen would be bad for Japanese imports, helped the JPY recover some of its recent losses.
The EUR/USD saw minor losses during the overnight session, following comments from a euro-zone official who warned that the common-currency was gaining too much, too quickly. The pair, which is currently trading at 1.3270, lost close to 40 pips since last night.
Main News for Today
US Core CPI-13:30 GMT
• Forecasted to come in at 0.2%, slightly higher than last month’s 0.1%
• Better than expected news today could lead to dollar gains during afternoon trading
US Crude Oil Inventories- 15:30 GMT
• Forecasted to come in at 2.0M, significantly higher than last week’s 1.3M
• A higher than expected figure today could lead to a drop in crude oil prices during afternoon trading
Read more forex news on our forex blog
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
Will Germany’s ‘Gold Grab’ Send the Gold Price Higher?
Mark this day in your diary. This is the day that the central bankers showed their hands. Germany looks set to announce that they want all of their gold back…thank you very much.
I assure you this is big news. Although it will probably be swept under the carpet by the mainstream media. But this news shows you that the German central bank would prefer to have its gold in its own vaults rather than risk leaving it in American, French and British vaults.
Why is Germany doing this? Are they acting now because they know there is trouble coming down the road? Probably.
As an article in Der Spiegel noted recently:
‘Germany moved some of its gold reserves abroad during the Cold War to protect them from a possible Soviet attack. Some of the gold was moved back to Frankfurt after the collapse of communism. But the Bundesbank argues that it still makes sense to store some gold in major financial centers so that it can be sold quickly if necessary. Although the Bundesbank does not provide exact details about the distribution, it has revealed that the largest share of Germany’s gold is held in New York, followed by Frankfurt, London and Paris.’
German’s Wish to Bring the Gold Back Home
Germany’s Handesblatt newspaper said on Monday that the Bundesbank has developed a new strategy that involves bringing their gold bars home from abroad. And Marketwatch said the Bundesbank’s press office has organised a news conference for Wednesday morning, and the topic will be gold reserves…
The gold price has had a nice little kick higher in recent days. This could be based on the speculation that an announcement about the German repatriation of gold reserves is on the cards. I’ll explain the very interesting set up in the gold price below.
But first I’d like you to think about the repercussions of the world’s second largest owner of gold preferring to have its gold on its own soil rather than in foreign vaults.
As Marketwatch notes, quoting Thorsten Polleit, chief economist at precious metals firm, Degussa:
‘The [German] public has been long demanding an audit of the German gold reserves and repatriation of those reserves, Degussa’s Polleit said. Some fuel was thrown on that fire in the last year by the financial crisis.‘But the Bundesbank traditionally keeps a veil of secrecy around gold. It hasn’t had its worldwide reserves audited down to the last bar for decades, if ever, Polleit noted. So it may be a bit of a mystery just what is in the vaults of the New York Federal Reserve, which holds a 45% chunk of Germany’s gold reserves. The Bank of England and the Bank of France hold 13% and 11% each. The Bundesbank itself holds 31% of those reserves.’
So is there deterioration in the trust between central banks? Are they finally suspicious as to whether the gold they have stored in each other’s vaults is actually there?
Obviously there is first mover advantage in being the first to repatriate your gold if you’re suspicious about what is actually there. Do other central banks start to put their hands up for their gold once they realise the last in line may end up empty handed?
Of course these scenarios will be seen by the mainstream as conspiracy theories.
But the actions of central banks are the only show in town at the moment. The financial markets are now obsessed by the money printing shenanigans of the central banks. So they should be even more concerned by what central banks do with real money, i.e. Gold.
Has Germany Shown it’s Hand on Gold?
Hugo Chavez repatriated Venezuela’s gold in 2011 from the Bank of England. That news didn’t cause much of a stir because as Zerohedge noted it’s ‘one thing for a “crazy, lunatic” dictator such as Hugo Chavez to pull his gold out of the Bank of England, it is something entirely different, and far less dismissible, when the bank with the second most official gold reserves in the world proceeds to formally pull some of its gold from the bank with the most.’
The gold has sat there unaudited for years. So why pull it out now? There would have to be a very good reason for it. Because this could be seen as a red flag to so many in the markets, Germany would need a good reason for showing their hand in this manner.
Of course we may be barking up the wrong tree and they may announce something else entirely later today. But this news is something to take very seriously and the reaction of the gold market will be telling.
A Long Term Uptrend for the Gold Price
Gold Price Daily Chart
Source: Slipstream Trader
The current set up in the gold price is the most interesting I’ve seen for many months. I don’t have any gold stocks in my trading portfolios at the moment but I think the time is fast approaching to pick up a few beaten-down gold stocks.
There is a confluence of indicators pointing to a strong resumption of the uptrend in gold above US$1700.
My long term trending indicator is the 35 day/200 day and that shows gold is still in long-term uptrend although the trend is weak at the moment. A close in the gold price back above the 35 day moving average while in long term uptrend will be a long term trending buy signal now that the price has retested the 200 day moving average.
Also there is an ABC set up pointing at a buy signal above US$1700 when the price overlaps above ‘A’ in the chart.
The Point of control for the past year and a half’s trading is also around US$1700. So a close back above the point of control is another sign that the gold market is strengthening.
What does this all mean? From here there is a good chance of a chain reaction above US$1700 in the short term. It just needs a catalyst to make that happen. Could the announcement from the Bundesbank about repatriating their gold be the catalyst to ignite the fuse?
I can’t say for sure, but it’s worth paying close attention to what’s happening in Germany and the plans for its gold.
Murray Dawes
Editor, Slipstream Trader
From the Port Phillip Publishing Library
Special Report: The Big Money Secret of Ironstone Mountain
Daily Reckoning: A North Korean Investment Opportunity
Money Morning: How Central Banks Are Letting Inflation Get Out of Control
Pursuit of Happiness: Are You Brave Enough to Break From Technology?
Diggers and Drillers:
Five Reasons Why Gold Stocks Are Set to Rebound
Central Bank News Link List – Jan. 16: Fed bond buying could end near 7.25% jobless rate
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.
- Fed bond buying could end near 7.25% jobless rate (dow jones)
- World Bank cuts growth outlook as advanced nations drag (Reuters)
- Bundesbank to retrieve $200bn of gold reserves (the guardian)
- India growth rebound faces inflation crimping rate cuts (Bloomberg)
- Fed should ease policy further: Kocherlakota (Reuters)
- Chief of Boston Fed optimistic on jobs (Boston Globe)
- www.CentralBankNews.info
What Will Happen to Oil and Gas Prices in 2013?
The US energy sector is undergoing a rapid change. It’s no exaggeration to describe it as a revolution.
The nation’s ability to get at once-inaccessible shale oil and gas has sent energy production soaring.
The US Energy Information Administration expects oil production to rise by 25% this year. And in less than a decade, America could overtake Saudi Arabia as the world’s top oil producer.
This could have a major impact on everything from US industry to the strength of the dollar. It’s all very exciting.
But it’s easy to get a little too carried away, particularly now that everyone knows about the ‘shale gas revolution’. Those expecting a future of cheap energy and collapsing oil prices are heading for a disappointment.
Here’s why – and what it means for your money.
Saudi Arabia Now Wants to Put a Floor Under the Oil Price
Natural gas prices in the US (if not elsewhere) have collapsed as production of shale gas has surged.
With all these predictions of soaring US oil shale production, you might have expected oil prices to have dropped significantly by now.
So why haven’t they?
For a start, it’s worth remembering that oil is a global market, unlike natural gas, which is still split into distinct regional markets. Rising production in one area can be offset by falling production elsewhere.
So one culprit for the firm oil price is Saudi Arabia. Up until very recently, it has been trying to keep a lid on oil prices. In the longer term, the Saudis understand only too well that if oil becomes too expensive, it only boosts efforts to find new sources of energy.
And in the shorter term, fears over a conflict in Iran last year saw Saudi Arabia acting as a safety valve – keeping production high and capping prices at around $100 a barrel. This also had the useful side effect (for the Saudis) of damaging their rivals in Iran.
But this has now started to change. The latest figures show that Saudi production in December fell to its lowest level since early 2011.
There are various reasons for this. With immediate concerns over Iran dying down, now that the US election has passed without an Israeli attack, there are concerns that there is already too much oil on the market.
That’s not good news for Saudi Arabia. It might not want prices to go too high, but it can’t have them fall too far either. The country needs increasing amounts of money to bribe its population with bread and circuses to buy off growing pressure for reform.
But there are also physical limits to the amount of oil that Saudi Arabia can produce. As I already pointed out, much of the recent production boost was driven by bringing old wells back online. Clearly, this is not sustainable.
Don’t Get Carried Away by Reports of Soaring US Oil Production
So even as US production is growing, we can’t necessarily expect the same from the rest of the world.
It’s also important not to get too carried away by the hype over US production. Even if the Energy Information Administration is right to forecast a jump in production over the next two years, output in 2014 will still be below that of 1988, and nearly a fifth below the peak in 1970.
And America is not yet properly equipped for the business of being the world’s great oil power. As Capital Economics points out, the domestic infrastructure is poor. There aren’t enough pipelines. And existing refineries work best with light imported crude, rather than the heavier oil found in Oklahoma, North Dakota and Texas.
More importantly – at least as far as energy prices go – investment in drilling and exploration has started to fall, even as more oil and gas is pumped. That’s because the plunge in natural gas prices has made many fields – which produce both oil and gas – unprofitable to run.
You can see the impact this has had by looking at the number of rigs being used to drill for oil and gas. Oilfield services company Baker Hughes estimates that the number of oil rigs has fallen by just under 8% from August last year.
The drop in gas rigs has been even bigger. There are just 434 operating at the moment, compared with 1,606 at the peak just before the financial crash. Along with strong demand for consumption, this has helped to reduce the glut of gas, which had been pushing prices down. While natural gas prices remain low, they have recovered somewhat from their lowest levels over the past year or so.
One Way to Play the Rising Natural Gas Price
So what does this mean in practical terms? The price of crude oil still looks more likely to fall than to rise. But we wouldn’t bet on a crash – and we certainly wouldn’t bet on petrol prices for your average British driver falling significantly this year.
Meanwhile, the price of natural gas is likely to rise, as demand continues to increase while production drops off. This should be good news for companies that are involved in shale gas production.
One interesting – if risky play – is Chesapeake Oil (NYSE: CHK). While continued low natural gas prices meant that it made a loss this year, the company has taken the bold decision to double down on the price of gas going up. It has increased its reserves and decided not to hedge its exposure to natural gas prices.
Having been the target of regulators over a dubious loan, Chesapeake’s maverick chairman Aubrey McClendon has made his peace with shareholders, forgoing his annual bonus and agreeing to cut the company’s debt levels. This should help investor confidence and ensure that his attention is focused on maximising revenue.
Matthew Partridge
Contributing Writer, Money Morning
Publisher’s Note: This article first appeared in MoneyWeek
From the Archives…
Why the Australian Stock Market Will Climb in 2013
11-1-2013 – Kris Sayce
What Lower Interest Rates Mean for Australian Stocks in 2013
10-1-2013 – Kris Sayce
Downside in the Yen: Shinzo Abe and the Three Bears
9-1-2013 – Murray Dawes
How the ‘China Money’ Could Push Silver 58% Higher in 2013
8-1-2013 – Dr Alex Cowie
Brightest Comet in 333 Years to Signal a Major Rally in Gold?
7-1-2013 – Dr Alex Cowie
