Gold gets crushed...gold equities get demolished!...but CBs get physical

And yet the beat goes on...the beat being the need for QE to continue else economies collapse.

Spain records negative GDP, Japan goes QE full bore and now all the discussions centre around the need to cut back on austerity.

Central banks seeing the "inflation" set out to protect themselves
http://www.bloomberg.com/news/2013-04-24/gold-rout-for-central-banks-buying-most-since-1964-commodities.html

Jim Sinclair explains it here (lets get physical)...If he is a master, and I believe he is...something quite interesting this way comes.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/25_Sinclair_-_This_Is_The_Beginning_Of_The_End_For_The_Gold_Shorts.html


Meanwhile gold equities behave as though gold goes to $900 from here. They are down 50% since November 2012, The SP500 makes new highs...

Just when you think you get things...your pants get pulled down.

Trust is fading

The post GFC world has set off a domino effect. Globally, trust in government is beginning to erode. We first saw it in the "Arab Spring", but it's everywhere if you care to look.

Europe has gone from one disaster to another - the most recent being Cyprus. Now the Japanese will undertake a massive version of their own QE. In the US the job participation rate in the lowest since 1979. Even in Aus we see a government scrambling for cash, looking to make things sustainable.

The markets sill signify a loss of trust and force the govt's hands.

Where is the good news? Like each season, this too shall pass. First comes the pain.

http://www.jsmineset.com/2013/04/06/you-must-act-now/

Gold gets crushed in USD...down to 1545USD today

meanwhile...

Largest Dutch bank defaults on physical gold deliveries to customers April 3, 2013
By: Kenneth Schortgen Jr

Last week, a rubicon was crossed in the precious metals market as one of the largest banks in Europe defaulted on their gold contracts, and informed their customers there was no physical gold available for delivery.

ABN AMRO, the largest Dutch bank in the Eurozone, issued a letter to their gold contract customers of failure of delivery, and instead will pay account holders in a paper currency equivalent to the current spot value of the metal.

ABN AMRO, the biggest Dutch bank, has sent a letter to its clients stating that they will no longer be able to take physical deliveries of the gold they have bought through ABN. Instead they are offered money at the current market rate for gold. Basically, instead of owning a risk free, physical asset (a gold bar or a gold coin), the bank’s clients now own a monetary claim on ABN AMRO, being exposed to the bank’s credit risk. – Voice of Russia
http://www.examiner.com/article/largest-dutch-bank-defaults-on-physical-gold-deliveries-to-customers

They can't deliver?? Can't they just buy what everyone is selling?...shhhhh.... Ponzi Ponzi


meanwhile in Venzeula Gold does it's job!

Japan goes Nuclear

The Bank of Japan has agreed an aggressive fresh programme of quantitative easing (QE) measures to give more momentum to its gradual recovery.

Overnight the bank’s new governor, Haruhiko Kuroda, announced that the bank would buy roughly ¥50trn (£347.6bn) worth of government bonds a year as well as putting another ¥70-80trn into the financial system through “money market operations”.

http://www.ftadviser.com/2013/04/04/investments/japan/japan-launches-aggressive-qe-programme-ODAfVvEZxQzKrx1YC8qt3H/article.html


Fiat currency is on the decline - this is what Japan is doing, this is what must be done OR the debt burden collapses on itself.

The debts must default or be inflated away! 5 years after the GFC...QE continues

Gold market unloved - Gold shares despised

Equity markets have been very upbeat the last 4 months or so. Meanwhile gold has been travelling sideways for nearly 20 months. Sentiment is very low and hedge fund managers are short.
The gold equities have been a very poor investment down close to 40%. Why hold them?

Becasue, nothing has been fixed - global liquidity by the central bankers is the key policy right now. Gold will reflect it soon and in due course the equities will follow. The train has nobody on it!

http://edegrootinsights.blogspot.ca/2013/03/gold-primed-for-unexpected-upside.html

Eric has some very good points in this article. A great analysis, by a very careful and thoughtful watcher of markets.

While Dan Norcini notes,
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/15_Incredibly_Important_Developments_In_Gold_%26_Silver_Markets.html

“Today the hedge funds are short a staggering 68,700 contracts. What makes this number even more amazing is that it represents an astounding 10+% of the entire open interest in the gold market of 667,000 contracts. So this is by far the hedge funds’ largest short position in percentage terms in history.
The bottom line is I don’t recall seeing anything like this since this bull market began 12 years ago. The hedge funds are now essentially battling against Middle-East and Far-East central banks and commercial banks. The problem is these central banks are behemoths compared to the hedge funds. 

Something has to give!

Cypriot depositors learn about "safe" assets, the hard way!

  http://www.ft.com/cms/s/0/33fb34b4-8df8-11e2-9d6b-00144feabdc0.html#ixzz2Nm4QtmvT

International lenders agreed to a €10bn bailout of Cyprus early on Saturday morning after 10 hours of fraught negotiations, which included convincing Nicosia to seize €5.8bn from Cypriot bank deposits to help pay for the rescue, a first for any eurozone bailout.
The cash from Cypriot account holders will come in the form of a one-time 9.9 per cent levy on all deposits over €100,000 that will be slashed from their savings before banks reopen Tuesday, a day after a Cypriot holiday. An additional 6.75 per cent levy will be imposed on deposits below that level.

Those hiding cash or gold under their mattress...are 7% to 10% better off!

Implications: If you live in Italy, Greece or Spain do you take the risk and keep your "safe" assets in a a bank? NFW!

I will leave it to the doyens...express it clearly

the debt explosion has left a massive hole that is being filled via QE...but, nothing has been fixed...

Gold will call out the financial engineers on their grand experiment.
http://www.jsmineset.com/2013/02/05/golds-rise-in-price-cannot-be-stopped/



meanwhile Bill Gross keeps mentioning gold:

http://www.pimco.com/EN/Insights/Pages/Credit-Supernova.aspx

Summary

1) Why is our credit market running out of heat or fuel?

a) As it expands at a rate of trillions per year, real growth in the economy has failed to respond. More credit goes to pay interest than future investment.

b) Zero-based interest rates, which are the result of QE and credit creation, have negative as well as positive effects. Historic business models may be negatively affected and investment spending may be dampened.

c) Look to the Japanese historical example.

2) What options should an investor consider?

a) Seek inflation protection in credit market assets/ shorten durations.

b) Increase real assets/commodities/stable cash flow equities at the margin.

c) Accept lower future returns in portfolio planning.

and Kyle says:

http://kylebassblog.blogspot.com.au/2013/02/why-inflation-could-eat-into-stock.html

Bass suggests that investors "own productive assets," such as apartment complexes, oil wells, or global businesses that sell products in different currency areas.

"If you really want to protect yourself, you put long-term fixed rate debt on these businesses," he said.

People continue to scramble for yield," he said, "the U.S. rate curve is still basically flat and low. The Fed is actually doing the best job it can do, but it's also enabling the fiscal profligacy of Congress."

confidence...that's all that holds things together...

From Paul Singer of Elliot Management:

 

"It is critically important for investors to try to understand what global QE is actually doing, where it may lead, and what will happen when it slows, stops or shifts into reverse. What we urge most strongly is that the current atmosphere of calm and stability, and the lack of virulent inflation, must not be relied upon to continue forever. There are certain words and phrases in official communications that give some hint of the uncertainty that exists about key elements of central-bank policies: confidence, anchored inflationary expectations, and velocity are prime examples. Our takeaway is that when investors lose confidence in ZIRP-soaked, QE-ridden, faith-based paper money, the consequences could be abrupt and catastrophic to societal stability. We do not know exactly what to do about it, except to urge policymakers to STOP substituting QE for sound tax, regulatory, labor, environmental, and fiscal policies."

 

I add: There are no free lunches...unless you are TBTF

IT's been a terrible time in the gold equities the last 12 months...

When nothing seems to help, I go and look at the stonecutter hammering away at his rock, perhaps 100 times without so much as a crack showing in it. Yet at the 101st blow it will split in two, and I know it was not that blow that did it, but all that had gone on before. 

Jacob Riis