If you think gold is flying now, wait for QE3, Turk tells King World News

 

Gold Up $41, Hits Record $1761

While the massive drubbing across risk assets has modestly subsided, the global investing herd has finally realized that in the absence of shifting money into bonds (or even in addition to), there is a certain shiny yellow metal that may be just as good a store of value (granted, inedible) that despite a lack of cash flows (and who needs cash flow in a fiat based exchange system which will soon be wiped out anyway), is probably just a good substitue and as of this night is providing 1761 reasons as to why it is becoming increasingly obvious that if anybody listened to Hugh Hendry's presentation from last year in which he suggested people panic, it is the central planners. Should the Fed proceed with announcing QE3 tomorrow in the form of Operation Twist 2, gold will likely resume it vertical ascent to $2,000 which may be breached as soon as Friday. Alternatively, should Bernanke keep mum and disappoint everybody, all bets are off, across every single asset class.

 

 

Guest Post: Gold Surging - Buy Mining Stocks? Not So Fast, Says Frank Barbera

Frank Barbera, respected precious metal mining stock expert and editor of the Gold Stock Technician newsletter, has a viewpoint that will likely surprise many. While extremely bullish in the longer term, Frank sees too many risks in the near term and advises smart money to wait. He cautions: "I’ve been watching the mining stocks since 1983 so a fair amount of time that I spent watching the group. I have a wide variety of unique technical indicators on the sector and as I started to see the stock market topping out over the last two to three weeks I wrote my readers a note to say the mining stocks are also very overbought. Mid July we saw one of the second most overbought readings on the XAU, on the arms index in five years. And that kind of reading is a big warning and so I’m not surprised to see them going down. The last letter I put out I told subscribers that I thought the mining stocks could get cut in half in here and I’m going to stick with that. I think we’re looking at a 30 to 50 percent decline over the next six months. The XAU, which recently peaked out at around 220, I think you could see that close to 110 before this decline is complete."

 

Futures Rout Accelerates: Emergency Fed Announcement Possible

The last time we had a modestly comparable collapse in overnight trading, a certain futures trader from SocGen whose gimmickry had been uncovered, caused the Fed to lower its Fed Funds rate in an emergency meeting first thing in the morning. Which is why we wonder, should the ongoing rout accelerate, to an extent driven by the decimation in the Korean Kospi, down -9.5% at last check, but also due to increasing worries the Fed may not announce QE3 tomorrow (or if it does, it will be OT2-like and won't have any actual LSAP component to it), whether Bernanke will be forced to have an emergency address with market in the morning, around 7 am, in order to prevent what is shaping up to be a market collapse of epic proportions. And certainly not helping matters is either Chinese inflation coming in hotter than expected, (see prior post), nor the fact that in the People's Daily, PBoC advisor Xia Bin said that China doesn't rule out "normal market operations" to promotes is own interested when necessary amid the US debt turmoil. "China should set up an overseas investment committee to accelerate the strategic use of foreign exchange, Xia said, according to the report. This committee should organize storage of strategic materials, Xia said, according to the report. The country should allow and encourage companies to purchase foreign exchanges with the yuan, the report said, cited Xia as saying." Wait a minute, you may ask, how does that work without China floating the Yuan? The answer: precisely. So while we wonder just what punitive measures China will take to make sure America behaves, here are the futures. We will update this chart if anything insane occurs.





South Korea May Ban Short-Selling as Market Slumps 9%

 

 

Things Will Get Worse

August 8, 2011, at 7:14 pm
by Jim Sinclair 

Dear Friends,

CIGA John Williams notes the following:

- Dollar Debasement Accelerates Dangerously

- U .S. Rating Downgrade Will Have Unhappy Ripple Effects

- QE3 Likely Will Be Indicated This Week

- Payroll and Unemployment Improvements Were Not Statistically Meaningful

- July Unemployment Rates: 9.1% (U.3), 16.1% (U.6), 22.7% (SGS)

- Broad Money Supply Increased in July

Notes From the Underground

August 8, 2011, at 7:08 pm
by Yra Harris in the category General Editorial |  Print This Post |  Email This Post

Dear Friends,

Remember the key number is $1,764

Today the ECB launched Quantitative Easing as we all know will go to infinity. Gold got a second kick up from the combination of Moody’s recognition that an A rating has little to do with municipalities that issued structured debt and QE to Infinity via the ECB. My former partner Yra gives us an excellent review of what really is going on.
Jim


Notes From Underground: ALAS, THE ECB STEPPED INTO THE VOID
By Yra

As expected, the ECB began buying Spanish and Italian bonds. The ECB actions brought about a drop in yields of 82 basis points on the Italian and 92 points on the Spanish. Today was one of the few days in recent memory when the Italian and German Bond Futures both staged significant rallies, meaning this was just not a rotation out of one and into another. The collapse in equity prices obviously caused a flight into DEBT as global investors ran to safety. GOLD, of course, was the greatest recipient of the search for safe havens. BUT THE BID FOR GOLD WAS HELPED BY THE ACTIONS OF THE ECB, FOR TODAY WAS THE FIRST DAY OF QE1 FOR EUROPE. Further proof for this was that the EURO FX failed to rally in conjunction with the ITALIAN BTP rally. Italian bonds up; EURO down as the ECB was creating short-term liquidity.

More…

Brace for Impact

August 8, 2011, at 7:02 pm
by Greg Hunter 

Dear Friends,

Please take time to read Greg Hunter’s latest posting on usawatchdog.com titled “Brace for Impact.”

Jim Sinclair

By Greg Hunter’s USAWatchdog.com

“Brace for Impact.”  I have thought about this economic collapse title for months.  I held onto it and figured I would know when the right time was to put it out there.  Today is the day.  Watching mainstream media (MSM) this weekend, you would think a one notch downgrade to America’s debt doesn’t really matter.  For example, former CNBC anchor Erin Burnett said Friday night on CNN the downgrade was “already priced into the market.”  The panel spoke as if the first U.S. debt downgrade in history was no big deal.  To that I say, positively absurd!
More…

Bond Market shrugs off S&P downgrade – Equities reel and Commodities get sold

August 8, 2011, at 7:29 pm
by Dan Norcini 

The bond market has voted and given its assessment of the S&P downgrade of US long term debt – investors are not only willing to buy and hold US Treasury debt but they are willing to buy and hold that debt at even lower rates of interest than going into the downgrade. Risk is trumping all right now and investors are running out of nearly everything out there except for gold and Treasuries. Even silver has been feeling the impact of risk aversion trades as it has surrendered a large part of its gains as the collapsing copper and equity markets are pulling the grey metal from its highs while safe haven bids are bringing it support.
One normally expects to see interest rates rise after a downgrade but such is the current environment that investors are rushing into cash and into gold. It would seem that gold is finally getting the due respect it deserves after being constantly harangued as “no safe haven” by far too many talking heads who confuse liquidity driven issues with fundamentals. I marvel at the obtuseness of some who just last week were trashing the metal for being “no safe haven” on a day in which equities were getting hit hard and investors were rushing to get liquid and meet margin calls. Never mind the fact that gold had been making one record high after another across a wide variety of currencies. Never mind that as the sovereign debt crisis in Euroland escalated, more and more buying of gold was occuring. All that mattered was we had a huge selloff in stocks last Thursday so out were trotted CNBC‘s “experts” on the gold market who pronounced it as “no safe haven” because it was being sold to meet margin calls.
Today, those nitwits are looking very stupid indeed because now the talk is that “gold might be the last safe haven available”. Gee, what a surprise – 6,000 years as a currency finally does matter. My oh my what a difference a day or two can make. Let me guess – these same “experts” will now be trotted back out to tell us why gold is such a great safe haven – and they can do this without blushing!
Gold gapped higher from the get go last evening as it opened above strong resistance at $1,680 and never looked back. Anytime you see a “gap and go” above a strong chart resistance level, you know you have something impressive occuring. That is exactly what has happened in the gold market as it has left $1680 resistance in the dust and blown right through psychologically significant resistance at $1,700. As I write this, it has set a new record high of $1,721.90 and is up over $66. If global equity markets do not soon stop the bleeding, these $60 up days could soon become $100.
Further aiding the metal’s upside progress is the long awaited divorce of the mining shares from the broader US equity markets. The HUI in particular is having a strong day, up 4.6% at 551 as I write this while the XAU is up 2.82% at 201.59. The HUI must get through last week’s high up near 570 to have a shot at taking on critical chart resistance at 580 once again. If we get some further short covering from the hedge fund ratio spread trade, that should occur rather easily. That trade makes increasingly less sense as gold powers on towards one record high after another, especially given the already severe undervaluation of the gold shares in comparison to the metal itself. If they insist on doing a spread trade, why not buy the miners and short the broader equity markets. That was has been a winner for more than a month now. If the hedge fund managers could wrap their mind around this trade, the miners would make new all time highs in short order.

I think it is important to note the price action in the Continuous Commodity Index ( CCI ). Now that we have a few months of price action to observe we can get a sense of the shift in investor sentiment towards the overall sector. Back in March, when the earthquake and tsunami struck Japan, commodities were sold down as investors rushed out of risk. The thinking was that the blow would result in slower overall growth globally. Traders then reassessed that view and pushed prices back right up to the old high. Later in April, once the index was unable to push through the former peak in price and go on to make another high, technicians sold and fundamentalists built the case that the slowdown in global growth would lessen prospects for further gains for the sector. Since that time, price has been on a rather slow grind to the downside. Based on this chart, the case can be made from a technical standpoint that unless or until the sector pushes past 660, inflation fears are no longer foremost in traders’ minds. The current thinking is that RECESSION is more likely than INFLATION. That view in commodities is being reinforced from the bond pits as well.

Gold is now in an acceleration phase as it continues moving with a new and steeper uptrending channel. Given the huge speculative flows into this market, it will remain quite volatile as traders pay increasing attention to any market moving news and react according to their interpretation of that news. What that means for those who hold the metal, is that they should expect large price swings on a day to day basis. Also look for a margin hike increase very soon coming out of the CME Group for the metal as it is precisely this sort of volatility that triggers such increases.
We have several levels of downside support should we get any sort of pullback or retracement in price. The first is $1,680, followed by $1,650 – $1,644 and then by $1,620.

Silver needs to get above $40 and stay there. It just cannot hold that level as it is unable to shrug off its industrial metal hat to the point where safe haven or monetary related flows can keep it elevated. Downside support in silver is last week’s low near $37.50 and then $36.

SocGen, Unicredit On "Brink Of Disaster"?

Submitted by Tyler Durden on 08/08/2011 02:57 -0400

Over the past 48 hours we had heard pervasive rumors that at least one, maybe more, banks in Europe are on the verge of collapse. Our thought was, naturally, Dexia, which is the modern equivalent of AIG, not to mention the bank most rescued by none other than the Federal Reserve. Well, we were wrong. And if the Daily Mail is correct, the two banks about to kick the bucket are French SocGen and Italy's UniCredit. While the fact that these two banks are in trouble has not been lost on the market, which has been sending their CDS to near record highs, the speculation that they are far closer to implosion likely means that the equity value of the European banking sector is about to be decimated. As the News reports: "The merest hint a major bank might fall is likely to reignite panic tomorrow in the stock market, which is already feared to react badly to the credit downgrade of the U.S. by rating agency Standard & Poor’s." Well, it's now tomorrow.

More from the UK mag:

Fears are growing this weekend that two of Europe’s largest banks may require a bailout, having been hugely damaged by the worsening crisis across the eurozone.

In France, President Nicolas Sarkozy is having to confront the possibility that the country’s second-biggest bank, Societe Generale -commonly known as SocGen - is on the brink of disaster after huge losses over loans made to Greece.

The chilling possibility of the largest bank in Italy, UniCredit Banca, suffering a similar collapse if a bailout is not implemented comes as Silvio Berlusconi already faces an increasingly dangerous national economic situation.

Next up: bank runs.

In Britain, a senior Government source described the position of the two banks as ‘perilous’, although an official Treasury spokesman declined to comment. Should either bank collapse, British customers with deposits of up to about £85,000 would be protected by the Financial Services Compensation Scheme.

Naturally, no depositors will wait for this to happen, or for these news to be confirmed or denied. They will merely walk up to the teller window, submit a withdrawal ticket and proceed to close their accounts.

And here is where the story gets downright surreal:

David Cameron last night broke off from his holiday in Tuscany to talk to President Sarkozy about the crisis in the markets.

News of the planned talks emerged as Business Secretary Vince Cable appeared to back calls from China for the dollar to be eventually replaced as the main global reserve currency by a new international currency unit to be based around the IMF.

He said: ‘It would be a sensible way for the world to move but it’s not something to do overnight.’

But Mr Cable added: ‘In the short run, the U.S. dollar is the key international currency and although, frankly, the American legislators made a terrible mess of things a few weeks ago, they have now got back on track. They have undertaken to manage their debt in a prudent way.’

Remember where we said that the last thing left is for China to float the CNY? Well, pushing for the SDR is pretty much the same thing.

In the meantime, keep an eye on the price of Unicredit and SocGen tomorrow. Despite SocGen's and UniCredit's repeated statements that the article in Mail on Sunday was “false, irresponsible” the damage may have already been done. And something tells us the downside limits will be hit very quickly, leading to a Lehman-like self-fulfilling prophecy.

We wonder if in addition to PIIGS bonds, the ECB is ready and prepared to buy stocks of insolvent European banks...

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