The severe drought in global trade is easily explained. Trashed currencies have left a depleted capital base and a higher price level. Unlike just a decade ago, today emerging and developing markets’ consumption dominates the United States. There is no way to contain it or ignore it. When a country like Japan tries to kick in the export J curve via yen trashing, the effect is to instead increase the prices of its imports at the same time its developing market exports collapse. The result is overwhelming twin deficits.
The western parasite guild has moved quickly to install an central banker stooge in the Ukraine and has prepared an economic austerity plan. First, the 11 billion euros that the EU is offering Kiev is not aid but yet another loan. Then, in what has been and will be a familiar pattern, is the putting in place of a pure wage and debt slavery regime complete with Massahs. Ukrainian pensions will be cut from $160 to $80 a month, social services will be cut, government workers will be laid off, and key assets will be looted. The Ukraine is a valuable breadbasket. Western Parasite Guild members that lent money to Ukraine can then be bailed out with IMF and other loans from public sources.
The commitment of traders showed a little more producer hedging to about 43,000 contracts. Who is doing this is an unknown, as Barrick now denies it. Managed money or slinger shorting continued to reduce short exposure which is now 27,184. I rate CoT as C. The banker participation report (BRC) showed a reduction in the US bankster (JP Morgan) longs to about 26,000 net long contracts down from 34,000. Non-US banksters built up an an additional 7,000 contracts hedged or short. I rate BRC B. Activity in Shanghai was erratic this week. I rate B. The bleeding from GLD is over for now, as another 48,000 ounces entered the fund this week. I rate that B.
The disconnect between the real economy and the financial market’s fictitious capital has been evident for some time. Some are attributing U.S. strength as the best of a poor lot. Is that really the case and, if not, when does this false confidence break? When do the phony excuses, such as weather, no longer hold water? Incredibly, this is the climate that has brought bearish investor sentiment to its lowest at 15% since the series started.
Reuters is reporting that India’s trade minister said on Tuesday he had raised the issue of easing some curbs on gold imports with the finance ministry, as they were encouraging smuggling and hurting the gems and jewellery industry, an important export sector. Finance Minister P. Chidambaram said he is expected to review the gold curbs by mid-March ahead of an election expected by May.
On the topic of dead-on-arrival, empty, sanction threats, apparently Obama — the community organizer and golfer extraordinaire — didn’t calibrate the fact that Europe does hundreds of billions in mutual trade and banking with Russia. Just one more sign he is surrounded by political hackery. And it is not just about energy. Russia is also the home of and conduit for some of the biggest kleptocratic money rat lines in the world. It didn’t take long before a story about the UK’s unwillingness to impose sanctions was “leaked.”
Forensics largely point to short covering as the source of Monday’s gold rally. April open interest fell by 8,264 contracts to 224,602. GLD showed no change. Last night, the Shanghai Exchange tested the price of gold at 1,350 and was met with only 287,200 ounces delivered. In overnight trading, gold and the stock market reversed much of yesterday’s move off of a story that Putin has ended war games in northwestern Russia. In other words, nothing has changed. Perhaps algo programmers don’t know the difference between Russia, Crimea and the Ukraine.
Russia and Putin have taken the lemons from Ukraine crisis and made lemonade. His nation has rallied around the concept of fighting the fascists in a re-creation of World War II history that U.S. “experts” apparently overlooked, namely that hundreds of thousands of Ukrainians collaborated with Nazis. Having lost 26.6 million fighting fascists during WWII, it is not in Russia’s political DNA to allow fascists, real or imagined, to rise to power right in the Slavic heartland [see "Ukraine and the Rebirth of Fascism" and thousands of far-right Ukrainian nationalists parade] of Kiev to honor Nazi collaborator and killer of Jews and Poles Stephan Bandara. Here, neo-nationalists abused Soviet Victory Day veterans in Lvov. There is bad blood on all sides. This is not going to be resolved any time soon.
Somebody in the producer complex — and my candidate has been Barrick — decided to accommodate the recent and rapid large-scale shift from the managed money complex to buy gold. The managed money speculator group that had been record short in December has moved like a herd to cover paper shorts and go more long. Managed-money shorts dropped from more than 80,000 to 36,810 contracts this week. POG hit a price wall at 1,340 because producers sold heavily. Producers went from an unprecedented net long to 36,810 (3,681,000 oz) contracts hedged or short. Thus, the potential for a large, slinger short squeeze has mostly passed. Thanks to Barrick an awful lot of firepower was used up in the move from 1,200 to 1,340. I rate the Comex data C plus or neutral.