China Gold Demand Voracious - Chinese Yuan Gold Standard?

Submitted by Tyler Durden on 03/03/2011 09:05 -0500

The lack of animal spirits in the gold and silver bullion markets is also seen in the decline of the gold ETF holdings (see chart above) and the Commitment of Traders open interest (see below). Neither show any signs of speculative fever whatsoever. This would suggest that the recent record prices are due to short covering on the COMEX (possibly by Wall Street banks with concentrated short positions as alleged by the Gold Anti-Trust Action Committee or GATA and being investigated by the CFTC) and buying of bullion in the Middle East and Asia, particularly in China. While all the focus is on the geopolitical risk in the Mediterranean, the not insignificant risks posed by the European sovereign crisis, the possibility of a US municipal and sovereign debt crisis and continuing currency debasement internationally are the prime drivers of gold today. Quantitative easing, debt monetisation and competitive currency devaluations have not gone away and are leading to deepening inflation which will likely result in much higher prices in 2011 and 2012. 

 

 

 

China "Attacks The Dollar" - Moves To Further Cement Renminbi Reserve Currency Status

Submitted by Tyler Durden on 03/02/2011 20:24 -0500

In a surprising turn of events, today's biggest piece of news received a mere two paragraph blurb on Reuters, and was thoroughly ignored by the broader media. An announcement appeared shortly after midnight on the website of the People's Bank of China. Reuters provides a simple translation and summary of the announcement: "China hopes to allow all exporters and importers to settle their cross-border trades in the yuan by this year, the central bank said on Wednesday, as part of plans to grow the currency's international role. In a statement on its website www.pbc.gov.cn, the central bank said it would respond to overseas demand for the yuan to be used as a reserve currency. It added it would also allow the yuan to flow back into China more easily." To all those who claim that China is perfectly happy with the status quo, in which it is willing to peg the Renmibni to the Dollar in perpetuity, this may come as a rather unpleasant surprise, as it indicates that suddenly China is far more vocal about its intention to convert its currency to reserve status, and in the process make the dollar even more insignificant.

 

 

 

Dollar Plummets, Market Surges, Rinse, Repeat

Submitted by Tyler Durden on 03/03/2011 09:47 -0500

Is today day three of the Bernanke testimony? Because the dollar just plunged as if the Chairsatan was out there somewhere, lurking, once again, guaranteeing the death of the US currency any minute now. In the meantime stocks are going absolutely insane, even though with oil over $100, GDP estimates and EPS forecasts will have no choice but to be whacked. That said, news of any nature are irrelevant: all that matters is momentum. Remember: momentum inducing "market bandits" are vital to efficient markets. Lastly, the USS Enterprise is slowly making its way to Libya. 

 

 

 

EUR Surges After ECB Raises 2011 Inflation Outlook, Trichet Implies Only Unercapitalized Banks Prevent Rate Hike, May Raise Rates At Next Meeting

Submitted by Tyler Durden on 03/03/2011 08:48 -0500

At least one central bank refuses to drink the Kool Aid: following today's announcement by the ECB which kept its interest rate as expected at 1%, JC Trichet is now making waves in the FX market after announcing, or rather not announcing, that "rates are appropriate" in his opening statement line, a traditional opener to the press conference that follows. Just as notable is that the ECB staff has now hiked the low-end of its inflation expectations for 2011 by about 40%, from a range of 1.3% -2.3% to 2.0%-2.6%, and 2012 from 0.7%-2.3% to 1%-2.4%. Trichet also adds that now very strong vigilance is now warranted and it is paramount to avoid second round effects. Most troubling is Trichet's admission that the latest staff forecasts exclude the impact of the most recent oil jump. And while it is very clear that Trichet is dying to hike rates, the reason he won't is, that's right, Europe's insolvent banks, about which he said that they "should retain earnings, turn to market to strengthened capital bases, and take full advantage of govt. support measures." In other words, it is once again the banks fault that in the inflationary cycle people will be forced to pay more, as the alternative would see the bankruptcy of numerous financial institutions.

Food Prices Hit New All Time Record In February

Submitted by Tyler Durden on 03/03/2011 07:37 -0500

When two months ago, in the first week of January, we observed that the U.N. Food and Agriculture Organisation's Food Price Index had hit a record we said: "The last time food prices hit ridiculous levels, the immediate outcome was global food riots in places such as Haiti and Bangladesh. Which is why distributors of riot equipment in the world's poorest countries may be in for a bumper crop as the Food and Agriculture Organization has just announced that world food prices have just surpassed the previous record last seen in 2007-2008." Little did we know just how prophetic this statement would turn out to be. Well, the FAO has just released its latest food price update and as expected, it is a new all time high. The U.N. Food and Agriculture Organisation's Food Price Index hit its second straight record last month, further passing peaks seen in 2008 when prices sparked riots in several countries, driven by rising grain costs and tighter supply." And with oil now joining food, which means that the inflationary vicious spiral is now on, it is only a matter of time before ever more hungry countries join the wave of revolutions, now that Tunisia and Egypt have shown it can be done. On the other hand, our expectation is that the IMF will promptly seek to put out any fires before they become infernos, with the US taxpayer reeling from the double whammy of Bernanke's inflationary policy consequences: once at home, and once by subsidizing foreigners.

Initial Claims Drop From 388K To 368K, Beat Expectations Of 395K, Lowest Since May 2008

Submitted by Tyler Durden on 03/03/2011 08:37 -

The BLS has announced a surprising drop in initial claims, which plunged from a downward revised 388K to 368K, on expectations of 395K. This was the lowest number since May of 2008. "In the week ending Feb. 26, the advance figure for seasonally adjusted initial claims was 368,000, a decrease of 20,000 from the previous week's revised figure of 388,000. The 4-week moving average was 388,500, a decrease of 12,750 from the previous week's revised average of 401,250. The advance seasonally adjusted insured unemployment rate was 3.0 percent for the week ending Feb. 19, a decrease of 0.1 percentage point from the prior week's revised rate of 3.1 percent." The non-seasonally adjusted number came at 351K, a number which if contained means that the so called slack in the economy is evaporating, and that the inflationary picture is far worse than the Chairman expects. These numbers further conform to rumors for a blowout NFP tomorrow, spread yesterday, which says that based on Birth-Death adjustments, the NFP could be well over 300,000. In other news, continuing claims hit 3,774K on expectations of 3,815K, compared to 3,833K previously, and those added to EUC and extended claims were roughly 55K.