Friday, June 28, 2013

Gold and Silver Friday Night Report - June 28 , 2013......


UPDATE: Comex Gold Bounces On Short Covering Ahead Of Weekend, Quarter End

By Allen Sykora of Kitco News
Friday June 28, 2013 11:00 AM



http://www.kitco.com/news/2013-06-28/Comex-Gold-Bounces-On-Short-Covering-Ahead-Of-Weekend,-Quarter-End.html

(Kitco News) - Gold futures recovered back above $1,200 an ounce Friday morning on short covering ahead of a weekend and end of the quarter, traders said.
As of 11:09 a.m. EDT, gold for August delivery was 30 cents higher at $1,211.90 an ounce on the Comex division of the New York Mercantile Exchange, having bounced more than $30 from the overnight low. September silver was up 7.27 cents to $19.28 an ounce.
Prices have been on the defensive lately on expectations the Federal Open Market Committee will taper its quantitative easing program yet this year, as well as efforts by key consumer India to restrict imports to deal with the current-account deficit. Technically oriented selling exacerbated the decline as pre-placed sell stops at certain chart points were triggered.
August gold hit a low of $1,179.40 ovennight. On a spot-continuation chart, this was the weakest level since August 2010.
“There was some kind of short covering,” said Afshin Nabavi, head of trading with MKS (Switzerland) SA. This is buying to offset or exit positions in which traders previously sold. This occurred on decent volume in the futures market, Nabavi added.
Some traders were looking to square up ahead of the quarter, said Nabavi and George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures.
“The only thing I see helping gold now is it is the end of the week,” added Sterling Smith, futures specialist with Citi Institutional Client Group. “Prices were quite depressed…We are seeing some (traders) on the short side taking profits. That pushed us above the $1,200 level.”
And, as gold got back above this level, it likely encouraged further covering, he said. Additionally, Gero said some bargain hunting emerged at a time when there were few remaining sellers.


New From Sprott: "Have We Lost Control...Yet?"

Friday, June 28, 2013 at 12:36 pm
Hot off the presses, here is the latest from Sprott Asset Management.
Remember, if you'd like to receive these directly, you can register by clicking here: http://www.industrymailout.com/Industry/Subscribe.aspx?m=28462
Have we lost control yet?
By Eric Sprott & Etienne Bordeleau
Recent comments by the Federal Reserve Chairman Ben Bernanke have shocked the world financial markets. It all started on May 22nd, 2013, at a Testimony to the US Congress Joint Economic Committee, where he first hinted at tapering the Fed’s quantitative easing (QE) program. Then, on Wednesday, June 19th, during the press conference following the FOMC meeting, the Chairman outlined the Fed’s exit strategy from QE.
Since the first allusion to tapering, volatility has been on the rise across the board (stocks, currencies and bonds) (Figure 1A). Moreover, the yield starved, hot money that had flown to emerging markets has been rushing for the exits, triggering significant declines in emerging market (EM) equity and bond markets (Figure 1B). Finally, the prospect of the end of monetary accommodation has triggered rapid and significant decreases (increases) in the price (yield) of longer dated Treasury bonds (also Figure 1B).
 FIGURE 1A: VOLATILITY INCREASING FIGURE 1B: ASSET PRICES DECLINING
It has been clear to us for some time that the Fed was uncomfortable with the relative certainty (i.e. Bernanke Put) that has prevailed in the markets since the introduction of QE-infinity last fall. Officials definitely wanted the market to start thinking about a future without non-conventional monetary policy. However, we seriously doubt that the resulting chaos is what they had anticipated. This was evident in the Chairman’s response to a journalist’s question about the rapid rise in rates, saying the FOMC was “a little puzzled by that”.1 The genie is really out of the bottle now.
Indeed, we believe that the recent “market appeasement rhetoric” by James Bullard and Narayana Kocherlakota (Presidents of the St. Louis and Minneapolis Federal Reserve, respectively)2,3 are further proof that the Federal Reserve has realized it went too far and that it is now in damage control mode. (Update: William Dudley, President of the New York Fed mentioned in a June 27th speech that “asset purchases would continue at a higher pace for longer” if the economy was to grow slower than the FOMC’s estimate)4.
However, as the Bank for International Settlements (BIS) so elegantly put it in its most recent annual report, “[…] central banks continue to borrow time for others to act. But the cost-benefit balance is inexorably becoming less and less favourable.” To this they add: “expectation that monetary policy can solve these problems [deleveraging, financial stability] is a recipe for failure”.5 Clearly, the Federal Reserve knows this and wants to exit their QE program. But can they really?
A large portion of the current economic growth depends on housing. However, mortgage rates are closely tied to long-term treasury rates. While housing affordability is still relatively good because of low house prices, significantly higher mortgage rates might slow the housing market. Furthermore, banks are still very cautious about lending and most borrowers have difficulty accessing credit. While gentle increases in yields are good for banks (who lend long and borrow short), meteoric increases in yields (as in Figure 1B) are damaging because they are hard to hedge and create large losses on the banks securities portfolios (mostly composed of government bonds and mortgage-backed securities) as well as mark-to-market losses on their derivatives portfolios. So, the large and rapid increases in rates the talk of tapering has engendered will damage the economic growth the Fed has been working so hard to engineer, potentially requiring even more stimulus down the line.
The US government itself would also suffer from increases in yields. In its Annual Report, the BIS shows that even a small increase in interest rates would have a large impact on the projected government debt-to-GDP ratio. As shown in Figure 2, under the CBO’s base case scenario (bottom line), the US debt-to- GDP ratio would hover around 110%, whereas a 1% increase in rates would take it to 118% in 10 years (middle line). According to the Chairman’s comments, the fiscal drag that has been partly to blame for the lackluster performance of the economy should subside going forward. But, larger debt servicing costs (because of higher rates) will put more pressure on government finances, forcing it to spend an ever increasing portion of its budget on interest payments. This will have the effect of increasing the fiscal drag, going against the hopes of the Fed.
FIGURE 2: U.S. GENERAL GOVERNMENT DEBT PROJECTIONS UNDER ALTERNATIVE SCENARIOS - AS A PERCENTAGE OF GDP
To add to all this uncertainty, the situation in the Euro Zone’s periphery is far from stabilized. Following the surprise Cyprus bail-in, international bank regulators have made a push for a democratization of this alternative to outright government bail-outs of banks. This idea is quickly gaining traction amongst central planners. We recently discussed the shortcomings of the BIS’s “Template For Recapitalising Too-Big-To- Fail Banks”.6 The BIS, again in its annual report, reiterated that “we need resolution regimes to make it possible for large, complex institutions to fail in an orderly way.” As uninsured depositors and bank bond holders realize that they do not benefit from government guarantee anymore, bank funding costs will rise and funding might dry up for peripheral European banks.
Conclusion: At the last FOMC meeting, by prematurely announcing the timeline and the specifics of an exit from QE, Bernanke might have lost control of rates and volatility. The current US economic growth is still feeble and hinges on housing, which would be slowed down by raising rates. Banks, while better capitalized than pre-crisis, are still not lending to most borrowers and would be dearly affected by too fast increases in rates. Moreover, European woes still threaten the stability of the international financial system and the recent rush to the exit might further exacerbate funding pressures for weak European banks. Finally, the US government (amongst others) debt load, while already unsustainable, would keep on climbing if rates were to increase only by 100bps.
The chaotic reaction by market participants and the corresponding increase in yields now risks destabilizing this very fragile equilibrium. It is yet unclear whether or not the damage control from the other Fed Presidents will put a lid on yields and market volatility, or if the damage to the Fed’s (poorly executed) exit strategy is permanent.
1    http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20130619.pdf
2    http://www.stlouisfed.org/newsroom/displayNews.cfm?article=1829
3    http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=5128
4    http://www.bloomberg.com/news/2013-06-27/dudley-says-qe-may-be-prolonged-if-economy-misses-fed-forecasts.html
5    83rd Annual Report, Bank for International Settlements, Basel, 23 June 2013, pages 4 and 6.
6    We discuss this in the Sprott Thoughts article: “The Dijssel_Bomb”.http://sprottgroup.com/thoughts/articles/the-dijssel-bomb











http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/barrick-may-take-55-billion-charge-on-pascua-lama-delay/article12897780/?cmpid=rss1


Barrick Gold Corp said on Friday it is slowing construction at its Pascua-Lama gold project in South America, as it looks to rein in spending on the severely delayed project, already billions of dollars over budget.
The company said re-sequencing of the project will lead to significant deferral of planned capital spending in 2013 and 2014. Barrick now expects to reduce capital expenditures on the project in 2013 and 2014 by a total of $1.5 to $1.8 billion.
Construction at Pascua-Lama, which straddles the border of Chile and Argentina, was partially halted earlier this year after a Chilean court ordered a suspension to weigh claims by indigenous communities that development work had damaged glaciers and harmed water supplies.
Chile's new environmental regulator later ordered all work to stop, citing severe environmental violations, and demanded the company complete a new water management system before resuming construction. Work on the Argentine side of the project, however was still proceeding.
In light of the delays in Chile, the company now expects to only to be able to mine ore from the Chilean side by mid-2016.
Barrick said in line with this time frame, and in light of challenging market conditions and the slump in metal prices, the company intends to delay construction of the process plant and other facilities in Argentina in order to target first output by mid-2016.
Production from the massive project was earlier set to begin in the second half of 2014.
The company also said it is plans to book impairment charges on the asset in light of the continued significant declines in gold and silver prices, and the delay in first gold production.
Preliminary analysis indicates an after-tax asset impairment charge in the range of about $4.5 billion to $5.5 billion in the second quarter for the Pascua-Lama project, the company said.








http://www.zerohedge.com/news/2013-06-28/golden-sentiment-rule-if-it-isn%E2%80%99t-chart-now-it-will-be-soon


The Golden (Sentiment) Rule: If It Isn’t Off The Chart Now, It Soon Will Be

Tyler Durden's picture
Submitted by Tyler Durden on 06/28/2013 19:49 -0400



Remember: what is unsustainable, can never crash, or so those who can create virtually unlimited naked shorts out of thin air would like everyone to believe.
Gross exposure - new all time record shorts:

Net: lowest longs in a decade:

Comex Registered gold inventory: decade lows:

Total Comex gold inventory: lowest since 2008:

Two final ones, but without the charts:
JPMorgan total gold vault holdings: record low.
Bundesbank gold repatriation: ongoing.



Fed, BIS rig gold more on FX and OTC markets than Comex, Maguire says

Submitted by cpowell on Sat, 2013-06-29 01:08. Section: 
9p ET Friday, June 28, 2013
Dear Friend of GATA and Gold:
Manipulation of the gold market is accomplished by the Federal Reserve and Bank for International Settlements far more in the foreign exchange and over-the-counter markets than on the New York Commodities Exchange, London metals trader Andrew Maguire tells King World News today. Maguire adds that so much metal now is being removed from the physical market in London by Eastern central banks that all of Western central banking is under threat. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.



Curtailing mine supply, gold price suppression becomes self-defeating, Barron says

Submitted by cpowell on Fri, 2013-06-28 18:54. Section: 
2:50p ET Friday, June 28, 2013
Dear Friend of GATA and Gold:
Gold price suppression by Western central banks is becoming self-defeating by shutting down the gold mining industry and curtailing supply, geologist and mining entepreneur Keith Barron tells King World News:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.



Comex will run out of gold soon and go to cash settlement, Sinclair says

Submitted by cpowell on Fri, 2013-06-28 18:05. Section: 
2p ET Friday, June 28, 2013
Dear Friend of GATA and Gold:
Gold mining entrepreneur and educator Jim Sinclair today tells Nathan McDonald of the Sprott Money Blog that the New York Commodities Exchange is likely to run out of real metal for delivery in the next month and convert to cash settlement, at which time manipulation of the gold market will be defeated and a free market in gold will be born. There's much more of interest in the interview, which is 29 minutes long and can be heard at the Sprott Money Blog here:
Sinclair is planning three more seminars on his view of the markets and gold's prospects -- in Chicago on Monday, July 8, in Vancouver on Wednesday, July 10, and in Scottsdale, Arizona, on Friday, July 12. Details can be found at his Internet site, JSMineSet.com, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.



Gold rush 2013 style has Dubai scrambling



Jun 28, 2013 




There is not enough space on airlines flying in to Dubai to meet the rapidly rising demand for physical gold in the emirate since the price plunged to record lows this week.

The price drop led to a rush of buyers for Dubai gold from the Middle East, South East Asia, the Balkans, Turkey and parts of Europe according to Tarek El Mdaka, the managing director of Kaloti Gold in Dubai.

"I cannot find a place for transporting gold on Emirates, on BA on Swiss Airlines this weekend," Mr El Mdaka said. "I am shipping in one-and-a-half to two tonnes of gold every day and it is going straight out."

Mr El Mdaka added that gold is in such short supply in Dubai that he is able to charge a US$3 premium per ounce. "In the last week or so that has gone up from $1.25, $1.50 to $1.75. But now it is $3. We are really squeezed."
Physical gold from Dubai has been selling strongly since the price of the yellow metal first plunged in April. But this week it has taken another historic tumble, creating a buying opportunity for small- time investors looking for gold bars, coins and bullion.

Yesterday the price edged up a little with the spot price rising 0.5 per cent in early trading to $1,232 an ounce. On Wednesday, however, it fell 4 per cent to $1,221.80, the lowest price in three years, capping a 12 per cent decline in the past eight trading sessions.

Some parts of the Dubai market are not so buoyant as those in which Kaloti operates, however.
Gerhard Schubert, the head of precious metals trading at Emirates NBD said that grades of gold known as 995, which would ordinarily be sold into the Indian market, are currently stuck in Dubai.

The Indian government has implemented import restrictions that have been backed up by the All India Gems and Jewellery Trade Federation in an effort to shore up the tumbling rupee.

"A lot of India's gold comes in from Dubai and all of that is stuck here right now," Mr Schubert said.
Mr El Mdaka, who does not sell into the Indian market, agreed. "The squeeze on physical gold in India would have a big effect on Dubai. Luckily though, there is a lot of demand coming from the rest of the world to soak it up," he said.


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