Go for the gold :eek: 
Seasonal tendency so far not playing out in gold
- Thread starter blakpacman
- Start date
G8 opportunity to BTFD in gold. More liquidity from QE will make its way into gold, while only preventing stocks from crashing, thus stocks trade in a high level, but narrow range. The Fed will continually try to taper and then untaper, thus lowering confidence in the Dollar. It's game over in the stock market because stocks are overvalued and dot com 2.0 is peaking. People looking back years from now will wish they sold their Facebook, Linkedin, and Tesla, whereas gold is now reaching its best seasonal Nov, Dec, Jan time period.
GLD etf shares have hit new lows of 866 tonnes in trust, but this is a lagging indicator more reflective of weak hands dumping gold and capitulating.
This represents a -36% decline from the peak in December 2012.
This represents a -36% decline from the peak in December 2012.
After the ECB's widely expected rate cut next week, the ECB will also be approaching the zero interest rate policy dilemma, which means that their only possible course of action to stimulate the moribund economies of the Southern Periphery is pure quantitative easing, like the Federal Reserve, BOJ, and BOE.
The ECB already knows it's own the path to QE. LTRO was just the test run. Austerity and deflation in periphery countries are ongoing. The powers that be in Europe want to see the Eurozone project succeed, and the German elite want to continue exporting, so all defaults are to be avoided at all costs. Economies must be reflated, debts must be debased.
The ECB already knows it's own the path to QE. LTRO was just the test run. Austerity and deflation in periphery countries are ongoing. The powers that be in Europe want to see the Eurozone project succeed, and the German elite want to continue exporting, so all defaults are to be avoided at all costs. Economies must be reflated, debts must be debased.
I'm not merely looking at one week time frame, but rather many months and even years. It seems a fairly obvious conclusion that ECB is reaching ZIRP following in footsteps of other Central Banks. Draghi, the former Goldmanite, will "do whatever it takes" do preserve the Eurozone. German banking and industrial interests will be protected. Bail-in and austerity in Cyprus is being used as a model, and the resulting deflationary effects will need vastly more QE to counteract the effects, esp. with the inflation rate falling to new lows. I think Gold will adapt to the new reality of impending Eurozone ZIRP + QE, as well as US FOMC's repetitive process of tapering and untapering because the US economy cannot ever stand on its own feet amidst a period of consumer deleveraging. 2 episodes of taper/untaper resulted in US Dollar falling to 12 month lows in the space of several months. What will another several episodes of taper/untaper do? The Fed has no taper credibility now, and their lack of "sobriety" will be felt most keenly in the USD Index' s fall and Gold's rise.
The USD index is worth watching. It hit a downtrend line in July, then immediately turned down coincident with Fed's non-tapering decision, and continued almost to 12 month lows on further non-tapering. I think it's read to break down in the months ahead from its deformed head and shoulders pattern. That would be very good for gold. Catalyst for the break would be a combination of worse than expected economic data and another instance of taper talk that is followed by untapering, which would lower confidence and value in the Dollar from ongoing debt monetization. Also notice lower and lower highs on successive crisis. Greek crisis in 2010 was on lower highs, then the 2011 and 2012 European Sovereign crisis, which was of greater severity since in included Italy and Spain, saw even lower highs in the Dollar. A possible inference is the Dollar losing status as a safe haven. This conclusion supports the view of an imminent break to the downside on Fed's inability to taper QE and decreased confidence in the Dollar as a a result.
http://www.ft.com/intl/cms/s/0/9a79fa0c-460a-11e3-b495-00144feabdc0.html#axzz2kKHzpmfT
ECB must act to prevent euro aping strong yen
11.11.13, By Mansoor Mohi-uddin, FT
The euro is at risk of resembling the yen of the 1990s and 2000s â a strong currency with weak economic fundamentals â if the eurozone keeps following Japanâs post-bubble path of slow bank deleveraging and poor credit expansion.
Prolonged financial sector weakness in Japan eventually led to sustained deflation, faltering economic growth, subdued imports and substantial trade surpluses. That caused the yen to be overvalued for much of the past two decades. To prevent the euro suffering the same fate, the European Central Bank must not follow the Bank of Japanâs historic record of easing monetary policy too little too late.
This year the ECBâs policy makers have rightly urged eurozone governments to strengthen the regionâs banks. But until a full banking union is up and running â with the ECB as its single supervisor, a separate resolution authority able to close down or recapitalise weak institutions, and fiscal guarantees for bank deposit holders across the single currency area â local banks are unlikely to be in a position to provide new credit vigorously.
During Japanâs two lost decades domestic banks were too weak to cut non-performing loans and absorb the losses. That prevented them from supplying fresh credit to the economy. Only when Tokyo began substantially recapitalising the financial sector â a full 13 years after the countryâs bubble burst in 1990 â were Japanese banks able to start expanding their loan books.
Deflation risk
The eurozoneâs banks are in a similar position to Japanâs in the 1990s. Six years after the credit crunch began in the western economies, eurozone banks have onlyhesitantly shrunk their balance sheets. Loans-to-deposit ratios remain around 110 per cent, at levels comparable to Japanâs ratios during its first lost decade. In contrast, US banks, forcefully recapitalised by the US Treasury in 2008, have been able to reduce bad credits and now only have loans accounting for 75 per cent of deposits. That rapid deleveraging has allowed the financial sector to provide stronger credit growth to the US economy.
Tokyoâs inability to strengthen quickly its banking sector led to Japanâs economy falling into recession frequently throughout the 1990s and 2000s. In addition, the country suffered entrenched deflation for most of the past decade.
Likewise, the eurozone has already endured two recessions since the credit crunch started in 2007, with the second downturn lasting six consecutive quarters until this year. Furthermore, the eurozoneâs latest inflation data show consumer prices are only increasing by 0.7 per cent year on year, increasing fears that the region will also fall into deflation.
Paradoxically, such economic weakness has been accompanied by persistent exchange rate strength. In both economies faltering GDP growth has constrained demand for imports. Until the 2011 earthquake, Japan ran consistently large trade surpluses. That year the yen hit an all-time high of Y75 against the dollar. Similarly, the eurozoneâs trade balance has become strongly positive over the past couple of years, pushing the euro up to a two-year high of $1.38 last month.
Proactive easing
The ECB now faces a crucial test. The overvaluation of the euro risks tipping the eurozone into deflation much as the yenâs strength helped force consumer prices lower in Japan. But in contrast to the BoJ, the ECB has always had a formal mandate to keep consumer prices rising at close to 2 per cent a year. If the ECB is to successfully pursue its inflation target and avoid deflation, it will need to be far more proactive in easing monetary policy than the BoJ historically has been.
The ECBâs decision last week to cut its refinance interest rate from 0.5 per cent was an essential first step. The warning from Mario Draghi, ECB president, that the ECB was willing to lower its deposit rate below zero in future if the eurozone heads closer towards deflation was also a critical signal. The prospect of negative interest rates will buy the eurozone time by helping cap rallies in the single currency until the Federal Reserve starts to taper its asset purchases in the next few months.
Reduced bond buying by the Fed would help take the pressure off the euro in the longer term as it would probably lead to a broad-based rally in the dollar against the rest of the major currencies. But if the ECB prematurely reconsiders its dovish stance before the Fed begins cutting its asset purchases, the eurozone is likely to suffer from renewed appreciation of the euro. That would increase the risks of the region falling into a deflationary trap.
As Japanâs experience shows, the ECB may then have to undertake massive quantitative easing in future :eek: to revive growth and inflation while still aiming to curb excessive exchange rate strength.
Mansoor Mohi-uddin is managing director of foreign exchange strategy at UBS
ECB must act to prevent euro aping strong yen
11.11.13, By Mansoor Mohi-uddin, FT
The euro is at risk of resembling the yen of the 1990s and 2000s â a strong currency with weak economic fundamentals â if the eurozone keeps following Japanâs post-bubble path of slow bank deleveraging and poor credit expansion.
Prolonged financial sector weakness in Japan eventually led to sustained deflation, faltering economic growth, subdued imports and substantial trade surpluses. That caused the yen to be overvalued for much of the past two decades. To prevent the euro suffering the same fate, the European Central Bank must not follow the Bank of Japanâs historic record of easing monetary policy too little too late.
This year the ECBâs policy makers have rightly urged eurozone governments to strengthen the regionâs banks. But until a full banking union is up and running â with the ECB as its single supervisor, a separate resolution authority able to close down or recapitalise weak institutions, and fiscal guarantees for bank deposit holders across the single currency area â local banks are unlikely to be in a position to provide new credit vigorously.
During Japanâs two lost decades domestic banks were too weak to cut non-performing loans and absorb the losses. That prevented them from supplying fresh credit to the economy. Only when Tokyo began substantially recapitalising the financial sector â a full 13 years after the countryâs bubble burst in 1990 â were Japanese banks able to start expanding their loan books.
Deflation risk
The eurozoneâs banks are in a similar position to Japanâs in the 1990s. Six years after the credit crunch began in the western economies, eurozone banks have onlyhesitantly shrunk their balance sheets. Loans-to-deposit ratios remain around 110 per cent, at levels comparable to Japanâs ratios during its first lost decade. In contrast, US banks, forcefully recapitalised by the US Treasury in 2008, have been able to reduce bad credits and now only have loans accounting for 75 per cent of deposits. That rapid deleveraging has allowed the financial sector to provide stronger credit growth to the US economy.
Tokyoâs inability to strengthen quickly its banking sector led to Japanâs economy falling into recession frequently throughout the 1990s and 2000s. In addition, the country suffered entrenched deflation for most of the past decade.
Likewise, the eurozone has already endured two recessions since the credit crunch started in 2007, with the second downturn lasting six consecutive quarters until this year. Furthermore, the eurozoneâs latest inflation data show consumer prices are only increasing by 0.7 per cent year on year, increasing fears that the region will also fall into deflation.
Paradoxically, such economic weakness has been accompanied by persistent exchange rate strength. In both economies faltering GDP growth has constrained demand for imports. Until the 2011 earthquake, Japan ran consistently large trade surpluses. That year the yen hit an all-time high of Y75 against the dollar. Similarly, the eurozoneâs trade balance has become strongly positive over the past couple of years, pushing the euro up to a two-year high of $1.38 last month.
Proactive easing
The ECB now faces a crucial test. The overvaluation of the euro risks tipping the eurozone into deflation much as the yenâs strength helped force consumer prices lower in Japan. But in contrast to the BoJ, the ECB has always had a formal mandate to keep consumer prices rising at close to 2 per cent a year. If the ECB is to successfully pursue its inflation target and avoid deflation, it will need to be far more proactive in easing monetary policy than the BoJ historically has been.
The ECBâs decision last week to cut its refinance interest rate from 0.5 per cent was an essential first step. The warning from Mario Draghi, ECB president, that the ECB was willing to lower its deposit rate below zero in future if the eurozone heads closer towards deflation was also a critical signal. The prospect of negative interest rates will buy the eurozone time by helping cap rallies in the single currency until the Federal Reserve starts to taper its asset purchases in the next few months.
Reduced bond buying by the Fed would help take the pressure off the euro in the longer term as it would probably lead to a broad-based rally in the dollar against the rest of the major currencies. But if the ECB prematurely reconsiders its dovish stance before the Fed begins cutting its asset purchases, the eurozone is likely to suffer from renewed appreciation of the euro. That would increase the risks of the region falling into a deflationary trap.
As Japanâs experience shows, the ECB may then have to undertake massive quantitative easing in future :eek: to revive growth and inflation while still aiming to curb excessive exchange rate strength.
Mansoor Mohi-uddin is managing director of foreign exchange strategy at UBS
http://www.theglobeandmail.com/repo...oming-it-may-already-be-here/article15373402/
Is a currency war coming? It may already be here
ERIC REGULY
ROME â The Globe and Mail
Published Monday, Nov. 11 2013
A new currency war may be on the verge of breaking out, if one hasnât already.
Last Thursday, European Central Bank boss Mario Draghi reduced the benchmark interest rate by a quarter point, taking it to a record low of 0.25 per cent (meaning he has only one cut left in his arsenal). He did so not to weaken the euro â he was more worried about fighting an alarming disinflation trend. But he and Europeâs struggling economies were pleased that the cut removed the currencyâs forward momentum.
âAs you know, the exchange rate is not a policy target for the ECB,â he said at a press conference last month. âThe target for the ECB is medium-term price stability. However, the exchange rate is important for growth and for price stability. And we are certainly attentive to these developments.â
Before the rate cut, the euro had been on a four-month roll, gaining about 5 per cent against the dollar. The ECBâs move dropped its value by about 1.5 per cent, though it has clawed back some of its losses. On Monday, it gained almost 0.4 per cent to $1.34.
Attempting to push currencies down seems all the rage among central banks. On the same day that Mr. Draghi made his move, the Czech Republic intervened in the currency market to weaken the koruna. It worked; the currency fell more than 4 per cent. New Zealand and Australia have warned that their currencies are too high and China is trying to keep the renminbi down to protect its exporters. The U.S. dollar, while up a bit, is still weak.
In Europe, there is no doubt that a high euro is incompatible with a compelling economic recovery. The euro zoneâs bounce back is more alleged that real. The 17-country region is out of recession, though barely, but growth forecasts are being scaled back as unemployment remains at record high levels â 12.2 per cent â and debt keeps piling up because of budged deficits. The climbing euro does not help. It rose to $1.60 just before the 2008 financial crisis, making the European recession all the worse. The lower it is, the better as long as he recovery remains anemic.
In theory, currency devaluations work. Historically, countries like Italy, Spain and Greece used periodic devaluations to pump up their otherwise uncompetitive economies. With the euro in place, that option is no longer available. Instead, the weak euro zone countries are pinning their recovery hopes on internal devaluations â falling unit labour costs â and a weaker euro to juice up their economies.
Two problems arise in this scenario. All of the weak euro zone countries naturally want to export their way to recovery. But if everyone adopts that strategy, it wonât work â all countries cannot be export machines.
The other problem is Germany, whose current account surplus is already at record or near record levels. A weaker euro would allow it to export more. If the higher exports are not rebalanced with higher domestic consumption, all bets are off for the European recovery. Germany is already benefiting from a euro that is weak compared to old Deutschmark standards. According to a recent article in the Financial Times, Germany is using a currency that is 10 per cent weaker now than it was in 1999, when the euro was launched, when the currency is adjusted for price inflation.
While currency wars can backfire, there is little doubt that the euro zone will pray for a weaker currency. If it loses enough value, there will be competitive devaluations elsewhere. This could get ugly.
Is a currency war coming? It may already be here
ERIC REGULY
ROME â The Globe and Mail
Published Monday, Nov. 11 2013
A new currency war may be on the verge of breaking out, if one hasnât already.
Last Thursday, European Central Bank boss Mario Draghi reduced the benchmark interest rate by a quarter point, taking it to a record low of 0.25 per cent (meaning he has only one cut left in his arsenal). He did so not to weaken the euro â he was more worried about fighting an alarming disinflation trend. But he and Europeâs struggling economies were pleased that the cut removed the currencyâs forward momentum.
âAs you know, the exchange rate is not a policy target for the ECB,â he said at a press conference last month. âThe target for the ECB is medium-term price stability. However, the exchange rate is important for growth and for price stability. And we are certainly attentive to these developments.â
Before the rate cut, the euro had been on a four-month roll, gaining about 5 per cent against the dollar. The ECBâs move dropped its value by about 1.5 per cent, though it has clawed back some of its losses. On Monday, it gained almost 0.4 per cent to $1.34.
Attempting to push currencies down seems all the rage among central banks. On the same day that Mr. Draghi made his move, the Czech Republic intervened in the currency market to weaken the koruna. It worked; the currency fell more than 4 per cent. New Zealand and Australia have warned that their currencies are too high and China is trying to keep the renminbi down to protect its exporters. The U.S. dollar, while up a bit, is still weak.
In Europe, there is no doubt that a high euro is incompatible with a compelling economic recovery. The euro zoneâs bounce back is more alleged that real. The 17-country region is out of recession, though barely, but growth forecasts are being scaled back as unemployment remains at record high levels â 12.2 per cent â and debt keeps piling up because of budged deficits. The climbing euro does not help. It rose to $1.60 just before the 2008 financial crisis, making the European recession all the worse. The lower it is, the better as long as he recovery remains anemic.
In theory, currency devaluations work. Historically, countries like Italy, Spain and Greece used periodic devaluations to pump up their otherwise uncompetitive economies. With the euro in place, that option is no longer available. Instead, the weak euro zone countries are pinning their recovery hopes on internal devaluations â falling unit labour costs â and a weaker euro to juice up their economies.
Two problems arise in this scenario. All of the weak euro zone countries naturally want to export their way to recovery. But if everyone adopts that strategy, it wonât work â all countries cannot be export machines.
The other problem is Germany, whose current account surplus is already at record or near record levels. A weaker euro would allow it to export more. If the higher exports are not rebalanced with higher domestic consumption, all bets are off for the European recovery. Germany is already benefiting from a euro that is weak compared to old Deutschmark standards. According to a recent article in the Financial Times, Germany is using a currency that is 10 per cent weaker now than it was in 1999, when the euro was launched, when the currency is adjusted for price inflation.
While currency wars can backfire, there is little doubt that the euro zone will pray for a weaker currency. If it loses enough value, there will be competitive devaluations elsewhere. This could get ugly.
might turn out to be an interesting day today: http://localsfoolsgold.blogspot.be