Gold At $1,950 Within The Month Reaffirm UBS; JP Morgan $2,500 Year End Call Remains
The UBS daily note reports that “the mood among gold investors appears to be to buy the dip rather than chase the market, which is understandable given last week's volatility.” UBS conclude that the “violent sell-off hasn't done any lasting damage to gold, and the reasons investors bought gold in recent months remain valid. Our one-month forecast of $1950 remains in place.” UBS three month price view is $2,100 per ounce. Very significant demand being seen for bullion internationally and especially in Asia means that gold’s correction is likely to again be of short duration. Indeed, the scale of demand suggests that gold may not need a long period of consolidation and could again surprise to the upside. Bank of America-Merrill Lynch said in a research note it was revising its 12-month gold target to $2,000 an ounce. JPMorgan said that gold could reach over $2,500 per ounce prior to year end. The recent sell off has not seen banks and analysts revise down their price forecasts.
Who would think that all it takes for gold to surge by $40 in under an hour is for the Fed to resume the old song and dance. Yet that is precisely what happened: ever since Chicago Fed president Evans sat down with Steve Liesman to discuss that he would be in favor of more easing, and saying he believes in "room for accommodation" and that we "still need to do more on monetary policy", gold soared from under $1790 to over $1830. And confirming that gold will go far higher is his statement that "Fed policy was not a driver of the commodity price surge." In other words, these buffoons have not learned anything, and the commodity price shock is coming. However, as usual, it will be blamed on speculators. Luckily the CME can hold them in their tracks with a relentless series of margin hikes. Or not. When will the CME finally hike margins on printer toner cartridges?
The charts below demonstrate the 6 month change in the 6 month forward looking Consumer Confidence outlook: in other words, this chart measure just how deceived US consumers have been by hopium consumption 6 months ago compared to reality now. In short: 2011 has been the most disappointing year for Americans in history. Whether it is due to excess hopium consumption or not... well, it is not irrelevant.
August consumer confidence plummets from 59.2 to 44.2, far below consensus of 52, dropping to its lowest level since April 2009. But, but, two insolvent Greek banks merged yesterday to make a really big insolvent Greek bank. Oh well: Americans don't care. And even uglier is the 6 month outlook chart which collapsed from 74.9 to 51.9, one of the biggest monthly drops in history. This sets the stage for the ISM, for NFP, for further GDP cuts, and for September 21.
The
much delayed Case Shiller update for June is out, and it is both worse
and better than expectations: year over year, the number printed at a
-4.5% decline, slightly better than consensus of -4.6%, while the month
over month change was -0.1%, on expectations of an unchanged print.
Stripping aside the noise means that the housing market is crawling
along the bottom after double dipping months ago but at least it is not
imploding. And since this report is nearly 3 months old, it does very
little to indicate what is actually happening with the economy.
What's New In "Avoid Debt Destruction By Any Means" European Soap Opera Today? Additional Proof That Bank Failure's Imminent
The UBS daily note reports that “the mood among gold investors appears to be to buy the dip rather than chase the market, which is understandable given last week's volatility.” UBS conclude that the “violent sell-off hasn't done any lasting damage to gold, and the reasons investors bought gold in recent months remain valid. Our one-month forecast of $1950 remains in place.” UBS three month price view is $2,100 per ounce. Very significant demand being seen for bullion internationally and especially in Asia means that gold’s correction is likely to again be of short duration. Indeed, the scale of demand suggests that gold may not need a long period of consolidation and could again surprise to the upside. Bank of America-Merrill Lynch said in a research note it was revising its 12-month gold target to $2,000 an ounce. JPMorgan said that gold could reach over $2,500 per ounce prior to year end. The recent sell off has not seen banks and analysts revise down their price forecasts.
Fed Dove Evans Open Mouth, Demands More QE, Sends Gold Soaring
Who would think that all it takes for gold to surge by $40 in under an hour is for the Fed to resume the old song and dance. Yet that is precisely what happened: ever since Chicago Fed president Evans sat down with Steve Liesman to discuss that he would be in favor of more easing, and saying he believes in "room for accommodation" and that we "still need to do more on monetary policy", gold soared from under $1790 to over $1830. And confirming that gold will go far higher is his statement that "Fed policy was not a driver of the commodity price surge." In other words, these buffoons have not learned anything, and the commodity price shock is coming. However, as usual, it will be blamed on speculators. Luckily the CME can hold them in their tracks with a relentless series of margin hikes. Or not. When will the CME finally hike margins on printer toner cartridges?
The Is The Way The Hopium Ends: Not With A Bang, But With The Biggest Collapse In Future Consumer Expectations... Ever
The charts below demonstrate the 6 month change in the 6 month forward looking Consumer Confidence outlook: in other words, this chart measure just how deceived US consumers have been by hopium consumption 6 months ago compared to reality now. In short: 2011 has been the most disappointing year for Americans in history. Whether it is due to excess hopium consumption or not... well, it is not irrelevant.
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I'm PayPal VerifiedGoldman Presents The Three "Radical" Measures The Fed May Engage In To Turbocharge An Imminent QE3
Goldman is not used to being snubbed when it comes to its policy recommendations. Which is what essentially happened during the Jackson Hole speech in which Bernanke left the QE3 door slightly open... but not enough to appease Bernanke's Goldman alum superior at the New York Fed. As such, since at least a few days have passed without Goldman reminding of who calls the shots, here is probably the most comprehensive summary of the Jackson Hole aftermath, and what the market will now expect to come out of the Fed on September 21. Whether Bernanke will go ahead and listen to Goldman, is unknown - the Fed risks incurring the wrath of Goldman at its own peril. What is perhaps most interesting about self-Q&A are the Goldman proposed "radical" measures that the Fed could consider to employ in addition to LSAP and Twist which so far have proven to be ineffective: "There are three main ways in which the Fed could be more radical: (1) an extension of the QE program into markets other than Treasuries and agency MBS, e.g., private sector securities, (2) a much bigger QE program, up to the extreme version of a promise to buy as many securities as needed to hit a specific yield target (i.e. a "rate cap" further out on the yield curve as then-Governor Bernanke suggested back in 2002), and (3) an explicit or implicit change in the Fed's policy targets." If these are truly hints as to what the Fed should do, then we hope readers have their gold $3000 calls firmlyConsumer Confidence Collapses From 59.2 To 44.2: Lowest Since April 2009, Hopium Ends As Outlook Crushed
August consumer confidence plummets from 59.2 to 44.2, far below consensus of 52, dropping to its lowest level since April 2009. But, but, two insolvent Greek banks merged yesterday to make a really big insolvent Greek bank. Oh well: Americans don't care. And even uglier is the 6 month outlook chart which collapsed from 74.9 to 51.9, one of the biggest monthly drops in history. This sets the stage for the ISM, for NFP, for further GDP cuts, and for September 21.
June Case Shiller Confirms Home Price Declines Continued, Down 4.5% Y/Y, 0.1% Lower In June
The
much delayed Case Shiller update for June is out, and it is both worse
and better than expectations: year over year, the number printed at a
-4.5% decline, slightly better than consensus of -4.6%, while the month
over month change was -0.1%, on expectations of an unchanged print.
Stripping aside the noise means that the housing market is crawling
along the bottom after double dipping months ago but at least it is not
imploding. And since this report is nearly 3 months old, it does very
little to indicate what is actually happening with the economy.Bill Gross On "New Normal" Investing As A Failed Marriage: "What To Do When A Love Affair Goes Bad?"
In his latest letter, Bill Gross takes another flight of fancy, this time comparing the global economic crunch to love stories gone very bad (think divorce lawyers). From Europe's love affair with a monetary union, to America's infatuation with rags to riches, even with the tolerated (and very mercantilist) Chinese concubine, it has all gone horribly wrong. So what happens when the divorce lawyers come calling, doing their best to take not half but all of your capital? "What to do when a love affair goes bad? How should you invest when Euroland is at each other’s throat, when a thinly disguised battle between labor and capital freezes policy action in the United States, when a mercantilistic partnership between developed and developing nations produces more questions than answers, more losers than winners? Increase the odds for a divorce, we’d suggest, which in investment markets means focusing on the return of your capital as opposed to the return on your capital."
Pimco's advice? Run.
Frontrunning: August 30
- IASB criticises Greek debt writedowns (FT)
- ECB to reassess inflation risks (FT)
- Pimco's Gross rues US debt 'mistake' (FT)
- Trichet and Rehn defend Europe’s banks (FT)
- Japan Parliament Confirms Noda as Prime Minister (WSJ)
- Sino-Forest is Second Time Chan Loses Company (Bloomberg)
- US authorities assess hurricane’s aftermath (FT)
- Solar Purge Drives Weakest Into Buyouts (Bloomberg)
- Republicans to Unveil Bill to Force Major Changes at the UN (Bloomberg)
Market Left With Bitter Aftertaste Following Italy €7.74 Billion BTP Auctions
All eyes were on Italy early this morning when the country auctioned off €2.99 billion of 4.25% BTPs due July 2014 and €3.75 billion in 5% bonds due 2022, because the ECB, unlike in the secondary market, is not allowed to buy bonds at primary issuance. While it would have been unrealistic to expect a bond failure, the bond levels were watched very closely for signs of deterioration despite over €40 billion of SMP purchases by the ESB in the past 3 weeks. And judging by the reaction (+11 bps in the Italian Bund spread), the market was not very happy with the yields of 3.87% (4.8% previously) and 5.22% (5.77% previously) or the Bids to Cover of 1.32 and 1.27 on the 3 and 10 years, as both slipped following the auction in a market that was very disappointed to see a 5 handle yield on the 10 year. This has set a negative tone to early European trading, with pronounced weakness across markets, and the EURUSD, which has dropped to under 1.44 overnight after trading in the 1.45's late last night. The concern is that even with the ECB buying debt in the secondary market (effectively monetizing), the tail is unable to wag the dog strongly enough, and if the EFSF is not activated soon enough, and expanded significantly, we expect to see the market test the ECB once again, and SMP purchases to soar very soon.What's New In "Avoid Debt Destruction By Any Means" European Soap Opera Today? Additional Proof That Bank Failure's Imminent
08/30/2011 - 10:17
08/30/2011 - 09:20
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