26 January 2012
Bernanke: More Q.E. Possible, Perhaps Even if Infl Over 2%
By Steven K. Beckner
Wednesday, January 25, 2012 - 17:52
WASHINGTON (MNI) - Federal Reserve Chairman Ben Bernanke left no doubt Wednesday that he and a majority of his fellow policymakers are prepared to resort to more quantitative easing under certain circumstances -- possibly even if inflation is running above the Fed's newly announced 2% target.
Bernanke defended the Federal Open Market Committee's decision to extend until at least late 2014 the period of "exceptionally low" short-term interest rates and went further in a post-FOMC press conference to assert that the Fed is prepared to do more asset purchases to hold down long-term rates if the pace of economic growth and job gains is deemed unsatisfactory and inflation remains low.
Bernanke said that, unlike the European Central Bank and other central banks with an inflation target, the Fed will give equal weight to the two aspects of its statutory dual mandate -- price stability and maximum employment.
But the Fed chief didn't rule out further stimulus measures in a situation where inflation was running above target, but unemployment was still too high, suggesting the Fed could afford to take its time bringing inflation back to target if unemployment was running well above what the Fed regards as its "longer run" level of 5.2% to 6.0%.
Wednesday, January 25, 2012 - 17:52
WASHINGTON (MNI) - Federal Reserve Chairman Ben Bernanke left no doubt Wednesday that he and a majority of his fellow policymakers are prepared to resort to more quantitative easing under certain circumstances -- possibly even if inflation is running above the Fed's newly announced 2% target.
Bernanke defended the Federal Open Market Committee's decision to extend until at least late 2014 the period of "exceptionally low" short-term interest rates and went further in a post-FOMC press conference to assert that the Fed is prepared to do more asset purchases to hold down long-term rates if the pace of economic growth and job gains is deemed unsatisfactory and inflation remains low.
Bernanke said that, unlike the European Central Bank and other central banks with an inflation target, the Fed will give equal weight to the two aspects of its statutory dual mandate -- price stability and maximum employment.
But the Fed chief didn't rule out further stimulus measures in a situation where inflation was running above target, but unemployment was still too high, suggesting the Fed could afford to take its time bringing inflation back to target if unemployment was running well above what the Fed regards as its "longer run" level of 5.2% to 6.0%.
All Eyes Turning to Portugal as Greek Default a Reality/FOMC report: ZIRP until 2014
Good evening Ladies and Gentlemen;
Gold closed up today by a rather large $33.60 to $1699.80. Silver also responded in kind rising by $1.16 to $33.09. Gold and silver responded with the FOMC announcement that zero rate interest policy (ZIRP)
will be with us for at least until 2013 and 2014. Gold and silver were down before the announcement, but then jubilation erupted with the news sending all bourses and commodities higher including the Dow. We will go into the FOMC announcement in the body of my commentary but first let us head over to the comex and assess trading, inventory movements and delivery notices.
Here are the prices of gold and silver at 5 pm from the access market:
Gold; $1710.30
silver: $33.28
The total gold comex OI fell by 9610 contracts to 427,032 from yesterday's level of 436,642. The raid certainly had an effect on some of our gold longs. You will see in the silver section, the raid had no effect as silver is in extremely strong hands. The front options expiry month of gold saw its OI fall from 14 to 11 for a loss of 3 contracts. We had two delivery notices yesterday so we lost only 1 contract to cash settlements.
We are rapidly approaching the delivery month of February. The open interest for this month fell from 139,274 to 121,002 which is very low. Many rolled into the next delivery month of April. We will have to wait and see how many of February will stand for delivery.
The total silver comex OI hardly budged in total contrast to gold. It fell a measly 5 contracts to 103,025.
The front options expiry month of January saw its OI fall from 99 to 41 for a loss of 58 contracts. We had 97 delivery notices yesterday so we gained 39 contracts of additional silver oz. standing.
The next delivery month for silver is March and here the OI again hardly budged falling by less than 100 contracts to 51,522. The estimated volume today at the silver comex was tame in comparison to gold coming in at 41,164. The confirmed volume at the silver comex yesterday was extremely meek at 32,614.
It seems only the strong willed and determined investors are willing to play with the crooked bankers.
Gold for Iran oil? Govt declines any comment
TNN | Jan 26, 2012, 02.28AM IST
NEW DELHI: A reputed Israeli intelligence website has claimed that India is opting for gold to repay crude oil supplies from Iran. Given the US and EU embargo on Iran, payment in hard currency, such as the US dollar or euro, is very difficult; hence, this barter.
The website, Debkafile, said the transaction will be routed through UCO Bank, the Kolkata-based public sector lender. However, when contacted, a senior bank executive said he had not heard of any plans to settle oil payments in gold. A senior finance ministry official said he did not wish to comment on the issue. When reached over the phone, economic affairs secretary R Gopalan, who has been leading the talks with Iran, said he was busy in a meeting and did not respond to a text message.
The report on the Israeli website coincides with the visit of an Indian official delegation to Tehran last week to find ways to continue the bilateral trade between Iran and India in spite of the sanctions imposed for forcing Iran to forsake its alleged plans for developing nuclear weapons.
While the use of gold as currency may help India get around the proposed freeze on Iranian central bank's assets and the oil embargo that the EU foreign ministers have agreed to impose on Monday, any outflow of sovereign gold will not go undetected, bringing in the political consequences of flouting the West-imposed embargo.
NEW DELHI: A reputed Israeli intelligence website has claimed that India is opting for gold to repay crude oil supplies from Iran. Given the US and EU embargo on Iran, payment in hard currency, such as the US dollar or euro, is very difficult; hence, this barter.
The website, Debkafile, said the transaction will be routed through UCO Bank, the Kolkata-based public sector lender. However, when contacted, a senior bank executive said he had not heard of any plans to settle oil payments in gold. A senior finance ministry official said he did not wish to comment on the issue. When reached over the phone, economic affairs secretary R Gopalan, who has been leading the talks with Iran, said he was busy in a meeting and did not respond to a text message.
The report on the Israeli website coincides with the visit of an Indian official delegation to Tehran last week to find ways to continue the bilateral trade between Iran and India in spite of the sanctions imposed for forcing Iran to forsake its alleged plans for developing nuclear weapons.
While the use of gold as currency may help India get around the proposed freeze on Iranian central bank's assets and the oil embargo that the EU foreign ministers have agreed to impose on Monday, any outflow of sovereign gold will not go undetected, bringing in the political consequences of flouting the West-imposed embargo.
Gold jumps on broad slip of confidence
Gold and silver are expected to have a stronger bias in US trade today after the Fed's announcement yesterday saw gold higher in both Asia and Europe
Author: Julian D. W. Phillips
Posted: Thursday , 26 Jan 2012
BENONI -
When the Fed threw a bucket of cold water on the blithe attitude of the last week [see below] the gold price took off like a shot from a gun and hit $1,710 by New York's close. Asia and London kept the price the same and the euro rose only slightly to 1€: $1.3110 ahead of the gold Fix. At the Fix gold was set higher at $1,713.00 and in the euro at €1,300.585. The euro stood at €1: $1.3171. Ahead of New York's opening the gold price went higher to $1,720.00 $65 higher with the euro at €1: $1.3163, 2 cents higher, leaving the euro price of gold at €1,306.69 up €31.
Silver was sent soaring by the gold price to shoot through resistance to open in London at $33.11. Ahead of New York's opening silver stood at $33.48 nearly $2 higher.
Gold (very short-term)
Again, the gold price should have a stronger bias in New York today.
Silver (very short-term)
Again, the silver price should have a stronger bias in New York today.
Author: Julian D. W. Phillips
Posted: Thursday , 26 Jan 2012
BENONI -
When the Fed threw a bucket of cold water on the blithe attitude of the last week [see below] the gold price took off like a shot from a gun and hit $1,710 by New York's close. Asia and London kept the price the same and the euro rose only slightly to 1€: $1.3110 ahead of the gold Fix. At the Fix gold was set higher at $1,713.00 and in the euro at €1,300.585. The euro stood at €1: $1.3171. Ahead of New York's opening the gold price went higher to $1,720.00 $65 higher with the euro at €1: $1.3163, 2 cents higher, leaving the euro price of gold at €1,306.69 up €31.
Silver was sent soaring by the gold price to shoot through resistance to open in London at $33.11. Ahead of New York's opening silver stood at $33.48 nearly $2 higher.
Gold (very short-term)
Again, the gold price should have a stronger bias in New York today.
Silver (very short-term)
Again, the silver price should have a stronger bias in New York today.
Roubini: Europe Needs 'Massive Monetary Easing'
By: Antonia Oprita
Europe needs "massive monetary easing" to get out of its debt crisis, otherwise Greece will likely abandon the euro in a year and a half, famous economist Nouriel Roubini told CNBC on Wednesday.
Private creditors who lent Greece money, such as banks and investment funds, are meeting in Paris after talks on a debt swap that would change shorter maturity Greek bonds for longer maturity ones to give the country more chances to reduce its debt were inconclusive last week and earlier this week.
"Greece is going to be the first country to restructure its debt, I don't think it's going to be the last one," Roubini told CNBC in an interview at the World Economic Forum in Davos.
Without swift measures, Greece may be the first country to leave the euro zone, the economist, who has the reputation of correctly predicting the financial crisis that hit in 2007, said.
The European Central Bank needs to act swiftly with "massive monetary easing" to prevent the crisis from deepening and austerity measures must be reined in, according to Roubini, in whose opinion the euro needs to be 20 percent or even 30 percent weaker to help the euro zone economies.
Europe needs "massive monetary easing" to get out of its debt crisis, otherwise Greece will likely abandon the euro in a year and a half, famous economist Nouriel Roubini told CNBC on Wednesday.
Private creditors who lent Greece money, such as banks and investment funds, are meeting in Paris after talks on a debt swap that would change shorter maturity Greek bonds for longer maturity ones to give the country more chances to reduce its debt were inconclusive last week and earlier this week.
"Greece is going to be the first country to restructure its debt, I don't think it's going to be the last one," Roubini told CNBC in an interview at the World Economic Forum in Davos.
Without swift measures, Greece may be the first country to leave the euro zone, the economist, who has the reputation of correctly predicting the financial crisis that hit in 2007, said.
The European Central Bank needs to act swiftly with "massive monetary easing" to prevent the crisis from deepening and austerity measures must be reined in, according to Roubini, in whose opinion the euro needs to be 20 percent or even 30 percent weaker to help the euro zone economies.
How long can the Fed pump up the US bond bubble? Time to shift into hard assets?
By: Peter Cooper, Arabian Money
The most obvious bubble in the global financial system is the US bond market and by far the biggest today. Holding interest rates until late 2014 as the Fed announced yesterday should hold it stable for another three years.
In theory holding rates low ought to encourage bond holders to exit this market. The return on this investment is negative after inflation, a guaranteed loser for capital holdings not a preserver of wealth unless you think the other options have even more downside.
Fear trade
It is a fear trade. Equities rallied very modestly on this news. In previous years stocks might have surged as the yield on equities is far higher than the yield on bonds, or at least still in positive territory.
But then stock markets around the world have lost their momentum and volumes. Famous market timer Jo Granville thinks the game is up and the Dow Jones will plunge 4,000 points this year (click here).
It is an extreme forecast but these are extreme times with the eurozone on the brink of tipping the world into a second global financial crisis and the Iranian dispute threatening $140 oil this summer according to the IMF.
Reason enough to be cautious. But as Dr Marc Faber continues to warn investors the US T-bond just has to be a long-term loser at these levels of interest rates. How long is the long-term? Is it beyond three years or within that timetable?
Certainly the Fed is preparing the market for QE3, a second round of electronic money printing which it is desperately keen to keep as a policy response to the imminent eurozone crisis.
But investors must surely scratch their heads. How much money can be pumped into the global economy before you get much higher inflation? Which asset classes will benefit from inflation and which lose? Bonds definitely look a loser, for how long can the Fed actually keep rates at these levels?
The Central Bank of Italy would love to keep its rates near zero but the market has long taken over, and low ECB rates mean nothing for Italian bonds. The ECB still has Germany as its benchmark and financial bulwark. The Fed has the heavily indebted United States.
The most obvious bubble in the global financial system is the US bond market and by far the biggest today. Holding interest rates until late 2014 as the Fed announced yesterday should hold it stable for another three years.
In theory holding rates low ought to encourage bond holders to exit this market. The return on this investment is negative after inflation, a guaranteed loser for capital holdings not a preserver of wealth unless you think the other options have even more downside.
Fear trade
It is a fear trade. Equities rallied very modestly on this news. In previous years stocks might have surged as the yield on equities is far higher than the yield on bonds, or at least still in positive territory.
But then stock markets around the world have lost their momentum and volumes. Famous market timer Jo Granville thinks the game is up and the Dow Jones will plunge 4,000 points this year (click here).
It is an extreme forecast but these are extreme times with the eurozone on the brink of tipping the world into a second global financial crisis and the Iranian dispute threatening $140 oil this summer according to the IMF.
Reason enough to be cautious. But as Dr Marc Faber continues to warn investors the US T-bond just has to be a long-term loser at these levels of interest rates. How long is the long-term? Is it beyond three years or within that timetable?
Certainly the Fed is preparing the market for QE3, a second round of electronic money printing which it is desperately keen to keep as a policy response to the imminent eurozone crisis.
But investors must surely scratch their heads. How much money can be pumped into the global economy before you get much higher inflation? Which asset classes will benefit from inflation and which lose? Bonds definitely look a loser, for how long can the Fed actually keep rates at these levels?
The Central Bank of Italy would love to keep its rates near zero but the market has long taken over, and low ECB rates mean nothing for Italian bonds. The ECB still has Germany as its benchmark and financial bulwark. The Fed has the heavily indebted United States.
Gold reclaims $1,700 after FOMC statement signals Fed more dovish than thought
By Allen Sykora and Debbie Carlson
Gold rocketed above $1,700 an ounce Wednesday for the first time since mid-December when a statement from the Federal Open Market Committee suggested that policy-makers may be even more dovish than financial markets had expected.
Furthermore, Gold generated upward technical momentum with a so-called “outside day” reversal higher on the charts and also by closing the pit session above a number of moving averages.
The FOMC indicated that it intends to keep interest rates at “exceptionally low levels” until late 2014, compared to guidance of mid-2013 previously. Additionally, the FOMC signaled that further accommodation would likely come from adjustments to the balance sheet, said Nomura Global Economics.
February gold futures, trading at $1,658 an ounce on the Comex division of the New York Mercantile Exchange just minutes before the FOMC statement, have since shot as high as $1,704.50. This was their first time above $1,700 since Dec. 12. As of 2:32 p.m. EST, the February contract was up $35.30, or 2.2% to $1,699.80. Other precious metals also rose, with March Silver up $1.035, or 3.3%, to $33.01 an ounce. It hit a $33.32 high that was its most muscular level since Dec. 2.
Gold rocketed above $1,700 an ounce Wednesday for the first time since mid-December when a statement from the Federal Open Market Committee suggested that policy-makers may be even more dovish than financial markets had expected.
Furthermore, Gold generated upward technical momentum with a so-called “outside day” reversal higher on the charts and also by closing the pit session above a number of moving averages.
The FOMC indicated that it intends to keep interest rates at “exceptionally low levels” until late 2014, compared to guidance of mid-2013 previously. Additionally, the FOMC signaled that further accommodation would likely come from adjustments to the balance sheet, said Nomura Global Economics.
February gold futures, trading at $1,658 an ounce on the Comex division of the New York Mercantile Exchange just minutes before the FOMC statement, have since shot as high as $1,704.50. This was their first time above $1,700 since Dec. 12. As of 2:32 p.m. EST, the February contract was up $35.30, or 2.2% to $1,699.80. Other precious metals also rose, with March Silver up $1.035, or 3.3%, to $33.01 an ounce. It hit a $33.32 high that was its most muscular level since Dec. 2.
Bullish technical signals support silver and gold prices
By Dr Jeffrey Lewis
Several closely watched technical factors played a substantial role in precious metals trading last week as traders noted that increasingly bullish signals of an impending rally accumulated strength.
It is our conviction that ultimately the physical market will trump paper and drive technical traders, which in term will set-off the algorithm-funds, leading to significant moves higher or as we like to frame: a return to real equilibrium.
Technical analysts pointed to a bullish potential chart pattern in silver’s price combined with a down trend line break, as well as gold’s price breaking above a key long term moving average, as supportive technical signs for the precious metals.
Furthermore, both of the recent corrective upwards trends in Silver and Gold prices have been reinforced by gradually increasing levels observed in their respective Relative Strength Index or RSI readings, without the rallies yet having pushed the key momentusm indicator into overbought territory above the 70 level for either metal.
These observations indicate that the most recent technical rally seen in these metals since their late December lows may well have further to go.
Several closely watched technical factors played a substantial role in precious metals trading last week as traders noted that increasingly bullish signals of an impending rally accumulated strength.
It is our conviction that ultimately the physical market will trump paper and drive technical traders, which in term will set-off the algorithm-funds, leading to significant moves higher or as we like to frame: a return to real equilibrium.
Technical analysts pointed to a bullish potential chart pattern in silver’s price combined with a down trend line break, as well as gold’s price breaking above a key long term moving average, as supportive technical signs for the precious metals.
Furthermore, both of the recent corrective upwards trends in Silver and Gold prices have been reinforced by gradually increasing levels observed in their respective Relative Strength Index or RSI readings, without the rallies yet having pushed the key momentusm indicator into overbought territory above the 70 level for either metal.
These observations indicate that the most recent technical rally seen in these metals since their late December lows may well have further to go.
Merkel Casts Doubt on Saving Greece, Insists ECJ be Empowered to Police Nannyzone; ECB insists on Profits on Greek Bonds; IMF Takes Tougher Stance; Greek Socialists Reject EU Mandates
MISH'S
Global Economic
Trend Analysis
Amazingly, smack in the midst of deal to save Greece from bankruptcy, the ECB not only insists on taking no losses on Greek bonds its holds, it wants a profit on them because it bought them at what seemed at the time to be a substantial discount. The discount was imaginary. The bonds were trading at 7% at the time.
Uncomfortable Days for ECB
The Financial Times reports Uncomfortable days for ECB
The ECB started buying Greek bonds in May 2010, when the eurozone debt crisis first erupted. The objective of Jean-Claude Trichet, president, was to stabilise financial markets. The assumption was that bonds bought at market prices would be held until maturity, when the ECB would book a tidy profit.
Having taken action when the private sector held back, it justifiably feels it should not have to pay a price now, said Erik Nielsen, chief economist at UniCredit. “In an emergency, the fire brigade goes in – but the deal is that it is protected.”
Economists estimate that a 70 per cent “haircut” on the face value of the ECB holdings could leave a loss of more than €20bn – a significant but not disastrous sum given the size of the reserves held by the ECB and eurozone national central banks. But the ECB’s resistance to accepting losses is not just principled. Agreeing to take a loss could be viewed as providing financial assistance to Greece – and in violation of the European Union’s ban on central banks funding governments.
Global Economic
Trend Analysis
Amazingly, smack in the midst of deal to save Greece from bankruptcy, the ECB not only insists on taking no losses on Greek bonds its holds, it wants a profit on them because it bought them at what seemed at the time to be a substantial discount. The discount was imaginary. The bonds were trading at 7% at the time.
Uncomfortable Days for ECB
The Financial Times reports Uncomfortable days for ECB
The ECB started buying Greek bonds in May 2010, when the eurozone debt crisis first erupted. The objective of Jean-Claude Trichet, president, was to stabilise financial markets. The assumption was that bonds bought at market prices would be held until maturity, when the ECB would book a tidy profit.
Having taken action when the private sector held back, it justifiably feels it should not have to pay a price now, said Erik Nielsen, chief economist at UniCredit. “In an emergency, the fire brigade goes in – but the deal is that it is protected.”
Economists estimate that a 70 per cent “haircut” on the face value of the ECB holdings could leave a loss of more than €20bn – a significant but not disastrous sum given the size of the reserves held by the ECB and eurozone national central banks. But the ECB’s resistance to accepting losses is not just principled. Agreeing to take a loss could be viewed as providing financial assistance to Greece – and in violation of the European Union’s ban on central banks funding governments.
Gold, Silver, $HUI React to Bernanke Pledge to Hold Rates near Zero "At Least" through Late 2014; Hello Stephanie, Ben Promises More of the Same
MISH'S
Global Economic
Trend Analysis
In a press statement regarding today's FOMC meeting, the Fed announced that economic conditions would "likely warrant exceptionally low levels for the federal funds rate at least through late 2014".
If It Doesn't Work, Keep Doing It
As noted in Premature Dollar Obituaries and Mainstream Economists' Monetary Insanity; Keynes-Inspired Great Depression; Lessons Not Learned, this policy decision is highly unlikely to accomplish what Bernanke wants.
Bernanke's policy now boils down to "if it doesn't work, we'll keep doing it until it does". Those on fixed incomes have been crucified by the Fed's policies and will continue to be crucified by the Fed's policies until low interest rates work.
Reaction of Gold, Silver, $HUI to FOMC Statement
Global Economic
Trend Analysis
In a press statement regarding today's FOMC meeting, the Fed announced that economic conditions would "likely warrant exceptionally low levels for the federal funds rate at least through late 2014".
If It Doesn't Work, Keep Doing It
As noted in Premature Dollar Obituaries and Mainstream Economists' Monetary Insanity; Keynes-Inspired Great Depression; Lessons Not Learned, this policy decision is highly unlikely to accomplish what Bernanke wants.
Bernanke's policy now boils down to "if it doesn't work, we'll keep doing it until it does". Those on fixed incomes have been crucified by the Fed's policies and will continue to be crucified by the Fed's policies until low interest rates work.
Reaction of Gold, Silver, $HUI to FOMC Statement
JP Morgan: "Operation Silver Slam"
I must admit that I've been watching JP Morgan pull the same manipulation stunts over and over again for years. And it's not just in the silver markets. On November 18, 2005 when natural gas prices were skyrocketing to near $15 due to the ravaging of hurricanes Katrina and Rita the Federal Reserve announced that they had approved JP Morgan to trade in natural gas. That announcement can still be found on the Federal Reserve website here:
http://www.federalreserve.gov/boarddocs/press/orders/2005/20051118/default.htm
At the time I told all my subscribers invested in natural gas to "run for the hills" as it felt like there was something afoot. In less than 1 year JPM had trashed natural gas down to what everyone thought was a floor of around $6 and the "smart money" had loaded up for what they thought was going to be a nice ride up...But JPM was not done and went for the final "Choke Out" driving the price down below $5 and holding it there destroying Amaranth in their wake then buying up the pieces to make at least $750M but many suspect over $2B.
Here's the price graph to see what happened after Nov 2005.
http://www.federalreserve.gov/boarddocs/press/orders/2005/20051118/default.htm
At the time I told all my subscribers invested in natural gas to "run for the hills" as it felt like there was something afoot. In less than 1 year JPM had trashed natural gas down to what everyone thought was a floor of around $6 and the "smart money" had loaded up for what they thought was going to be a nice ride up...But JPM was not done and went for the final "Choke Out" driving the price down below $5 and holding it there destroying Amaranth in their wake then buying up the pieces to make at least $750M but many suspect over $2B.
Here's the price graph to see what happened after Nov 2005.
Silver Price Forecast 2012:I Stand By $140 Silver Price In 2012
Silver Price Forecast 2012:
There is a well-established relationship between how silver and gold trade. They often trade similar in the same time period, but also at similar milestones, although those milestones are sometimes reached at different times. This can cause silver or gold to be the leading indicator, depending on the particular milestone.
I have previously used this relationship to predict how silver will trade. Below, is an extract of that update:
There is a well-established relationship between how silver and gold trade. They often trade similar in the same time period, but also at similar milestones, although those milestones are sometimes reached at different times. This can cause silver or gold to be the leading indicator, depending on the particular milestone.
I have previously used this relationship to predict how silver will trade. Below, is an extract of that update:
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SilverDoctors: "Fed Euphoria" Sees Gold Touch 7-Week High as 0% R...: INVESTMENT DEMAND to buy gold continued to push wholesale prices higher Thursday morning in London, after the US Federal Reserve vowed to...
SilverDoctors: Portuguese 10 Year Yield Passes 15%!
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