Ainslie Bullion - Daily news, Weekly Radio and Discussions

Abandoning the ship?
Something very interesting is happening right now Overnight we learned that October saw the largest dumping of US shares by foreigners ($27b!) since the GFC flash crash of August 2007. We also learned that China's threat of reducing its US Treasuries holdings is very real as they dumped $14b of UST's in October taking their holdings down to barely above the 2nd largest foreign creditor, Japan (but still at a whopping $1.25t). No surprises that Russia also featured in the October rout with a $10b reduction of their UST holdings and has brought forward final testing of its (non USD) alternative to the SWIFT international clearing system to now rather than May. Additionally we learn that Austria is now joining the list of countries wanting to repatriate their gold, concern is rising over debt servicing of US shale oil ventures at $60 oil, the US passed a $1.1t spending bill that saw their equivalent to our deposit guarantee scheme (FDIC) now cover over $300t of derivatives in addition to the $6t for deposits (all with a total cash reserves of $54b), and COMEX introduces a precious metals price movement 'collar' that ceases trading should gold move more than $100 and silver $3. Maybe, just maybe, foreigners are reading these and other moves in the US as signs of fracturing and reducing their exposure. No coincidence either maybe that China and Russia are 2 of the bigger buyers of gold at the moment
 
But you can't eat gold!?

So hand me that big bowl of fiat notes to munch on and watch me wash them down with a refreshing glass of crude oil. :-)
 
Russian to buy gold
Markets were a flutter the other night as rumours spread of Russia selling its gold to counter its falling Rouble. It now appears this was complete rubbish and you can read why here:
http://www.caseyresearch.com/articles/russian-bear-or-gold-bull

In fact Russia has been one of the bigger purchasers of gold since the GFC, as the 1st graph below attests, and now has the 6th largest holding in the world. If you missed yesterday's news they are also getting out of US paper. Russia has a raft of problems of late, lead by sanctions and now a falling oil price for the world's biggest producer. The Venezuelan President said what everyone is thinking this week that the Saudis are trying to cruel Russia (many believe it is also designed to cruel the high cost, highly leveraged shale oil industry in the US leading some to say US oil loans will be the GFC1 US subprime housing equivalent for GFC2). Tensions of war rose this week too as the US passed, very quietly, an act which authorizes "providing lethal assistance to Ukraine's military"as well as sweeping sanctions on Russia's energy sector. Their Rouble has the honour of being the world's worst performing currency, literally halving in value which lead them to make the shock announcement yesterday of increasing their interest rate from 10.5% to 17% in one hit to try and salvage it. The second graph below depicts clearly the wealth preserving benefits of gold against a falling currency; something Aussie investors should take close note of. Finally, I am midway through reading "The Colder War" by Marin Katusa and can highly recommend it (so far) as an entertaining and educational read on Putin's great plan and, between the lines, why holding physical gold is a good move. It puts a lot of what is happening right now into clear context and it is clear only a fool would write Russia off. Just note I'm reading the iBook version and could not find a book shop in Brisbane that hadn't already sold out (restocking in Jan apparently).

RussiaonaGoldBuyingSpreefor9YearsStraight.png


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Patience with the Patient
The world seemingly hung on the words of the US Fed last night to see what would replace the ageing "considerable time" guidance on raising US interest rates. Despite having ended QE3, all eyes are on how the US Fed will exit its loosest monetary policy in its 100 year history with a balance sheet of $4.49t of bonds for printed money. Listeners to the Ainslie weekly wrap know they are still a long way from a real recovery despite the mainstream rhetoric. Whilst they talk of jobs growth the reality is they are mainly low paying part times jobs, and the real US indicator of recovery, housing, is languishing badly. Throw in the threat of an oil price induced credit crisis and it gets a little scary. But that same oil price plunge has reduced their inflation rate markedly, and well below the Fed's 2% target. So they kick the can down the road and continue with their ZIRP (zero interest rate policy) for some time yet and not worry about how they service their $18t debt at higher rates when they are already in perpetual deficits (listen to last week's weekly wrap for more). So the new words? Well its one really, and it gives complete flexibility to them as they have a market expecting the ultimate sign of recovery (raising rates) when they know themselves that's not the case. "Patient". And on that single word shares rallied strongly. Some argue they are reading into the words that 'everything is awesome' and buying the future, some buy because we continue in this free money game and they use that to go get yield. Both are arguably flawed of course as yield counts for naught when shares crash to cents in the dollar when this game ends and the patient dies.
 
Talk about Kicking the can down the road!

Yellen told reporters following a two-day meeting that the Fed is likely to hold rates near zero at least through the first quarter. She also laid out the economic parameters that would need to be met for liftoff to begin later in the year and said that rates probably would be raised gradually thereafter. They may not return to more normal levels until 2017, she added. :rolleyes:

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http://www.businessweek.com/news/20...clear-that-fed-s-patience-on-rates-has-limits
 
Quotes of the week

Alan Greenspan was the US Federal Reserve chairman from 1987 to 2006. Whilst many blame him for allowing, indeed facilitating, the GFC crash, the following quotes, nearly 50 years apart demonstrate he always 'got it' despite building the fiat Ponzi mess we have now..

"In the absence of the gold standard, there is no way to protectsavings from confiscation through inflation. ... This is the shabbysecret of the welfare statists' tirades against gold. Deficit spendingis simply a scheme for the confiscation of wealth. Gold stands in theway of this insidious process. It stands as a protector of propertyrights. If one grasps this, one has no difficulty in understanding thestatists' antagonism toward the gold standard." - 1967

"At some point in the future, the price of gold will trade "materially" higher than it is now---and also by the fact that certain entities are buying massive amounts of physical silver in all forms, which will ensure that someday, silver will certainly become the new gold." Oct 2014
 
No free lunch
We've reported previously that the ECB introduced negative interest rates to dissuade banks from parking their money with the central bank to both get some velocity into their monetary supply (try and get people to spend the printed money) and stop other countries investing in the Euro and forcing it up. Late last week the Swiss National Bank resorted to same with -0.25% rates as the Franc hit its ceiling against the Euro in response to the falling Rouble. The US Fed gave the market comfort it's near zero interest rates would 'patiently' be around for a fair while yet and now many expect Australia too will need to reduce our 2.5% to 2% next year.Not only do such moves erode the wealth of savers (return below inflation) but it promotes unsustainable bubbles (ala huge rally on Wall St just on the word 'patient') when the fundamentals aren't there. This quote from Greg Canavan puts it succinctly from a macro view:
". abolishing the rate of interest causes massive distortions. It stops us from saving and encourages us to consumeeventually we will consume our capital stock (by borrowing against it), then find we can't service the debtsand then we'll be in all sorts.
That's the dangerous path we're heading down. No one really sees it right now because we're deep in the forest. But from a bird's eye view, we're going the wrong way."
By all means carefully play this game and probably make money for a little while longer, but do so knowing the crash will likely be sudden and severe and so have your insurance back up in place now or before you dophysical gold and silver.

PS - last orders with Ainslie Bullion, we're taking a brief break from 2pm 23rd December - 12th January.
Jump into our website for quick orders and at the best price.
 
Farewell 2014
In this our last daily news of 2014 we look back at the year that was. 2014 didn't see the big hit of 2013 but apart from reaching $1530 in March gold bounced between $1350 and $1400 for most of the year finishing a respectable 6.7% up at $1443. Silver wasn't so kind and basically saw a downward trend all year finishing at $19.23 or 11% down on the year, and the Gold Silver Ratio going from 62 to 75. Palladium was the star performer being 25% up. By comparison the All Ords was up just 0.8% for the year.
It was a year that saw the US end QE3 (Quantitative Easing) but not before they took the Fed's balance sheet to $4.5t, their total debt over $18t (after the debt ceiling debacle at $17.3t), and lose its place as the world's largest economy (in real terms) to China. China printed more money than anyone, saw the emergence of real credit bubble symptoms and a slowing economy but at least bought real assets in looking like surpassing even the record 1200t of gold of 2013 again this year. Japan slumped into recession again despite (stimulus on steroids) "Abenomics", so acted on changing that. by re-electing AbeThe EU was the star underperformer next to Japan and in desperation looks set to start full scale Abenomics/QE style monetisation because, well, it worked so well there(?). Russia, under attack from both sanctions and the year end plummeting oil price managed to buy no less than 152t of gold and pull off the biggest non USD petro deal with China on its $400b gas deal, a non USD hegemony trend China was perpetuating around the world this year. The world hit some awesome new records including $100t in global debt (far in excess of the GFC), and (according to Bank of America) 56% of global GDP currently supported by zero interest rates, as well as 83% of the free-floating equities, and half of all government bonds in the world yielding less than 1%. Awesome huh? Who needs gold?
India re-emerged as a global giant in gold consumption as government restrictions were eased, looking to reach nearly 900t, as well as emerging as one of the biggest silver consumers too (over 7,400t!). Speaking of silver, the US Mint surpassed last year's record with over 43m silver eagles sold. All this despite banks and the usual suspects talking down gold and silver as irrelevant in a recovering economy, as you may well do when we saw open interest on COMEX sky high, against these low prices and a mere fraction available for delivery.
As for 2015? Suffice to say all the reasons you probably bought gold and silver are still in place, and then some. Predictions are pointless in this unprecedented global economic experiment and black swans are flocking. Balance (as always) is key to success and security. The beauty is, thanks to said COMEX games, you have the opportunity to pick up gold and silver to balance your wealth at still bargain prices!
The team here at Ainslie Bullion thank you for your business in 2014, wish you a wonderful festive season, a fruitful 2015 and look forward to seeing you then.
 
Our webstore is back open!
Live pricing and purchasing is available.

You can make purchases through our website now - and our showroom is back open for purchases and pickup Monday 12th Jan.
 
While we were away and hello 2015!
Happy New Year from the Team at Ainslie Bullion! We hope you are well rested and ready for what is set to be a very interesting year ahead.
So what happened while we were away? Well for a start, as we alluded was likely, Greece has been forced into a general election and the front runner to win is the anti Euro party of Syriza who want to exit the union and default on their EUR400b of EU debt. Get ready for plenty of "Grexit" talk and don't believe the spin that Germany is "OK" with them exiting. Germany more than anyone needs this Euro mess to stay together and letting Greece exit would breach the precious 'contagion firewall'. The impacts this presents the Euro, and the world as a whole, should not be underestimated and to make matters worse the Euro zone is now officially on the brink of outright stalling. Markets are already betting (rising shares, crashing Euro, and lowest Euro bond yields since the 14th century) on the ECB finally starting its much telegraphed QE bond buying (money printing) program to try and kick start the economy (because that worked so well for the US and Japan not). Set your diaries for 22 Jan as that is their next meeting.
Oil fell to new lows below $48 which contributed to a decent correction in global sharemarkets, the worst start of a year in the US since 2008, but all of which was regained late last week on news from the US Fed that interest rates won't rise at least until after April (we say way beyond that) and the Fed weighing in on the need for ECB stimulus as the rest of the world economy languishes. i.e. in short the free money game continues so let's buy more overpriced shares!
On that point, consider the following table courtesy of The Daily Reckoning on the US sharemarket and ask yourself if this particular market is due to a reversion to (and usually well beyond) the mean?

AB-12-1-2014-table.jpg


Again may we remind you of the 4 most expensive words in investing "Its different this time"
Are you ready for a crash in 2015?
Finally as an interesting and telling titbit, on the very last day of 2014 the US Treasury added $100b to the US's over $18t in debt. The significance? That equates quite closely to the value of all gold produced globally in all of 2014, and China and India alone consumed that same total of metal in its entirety
 
Gold & Silver Buck the Trend
The USD has just breached 92 (the highest since 2005), Oil dropped to just $45.70, and commodities (more broadly than oil) have hit a 12 year low. Normally a stronger USD means weaker gold price, but gold broke through USD1235 (AUD1513) overnight in stubborn defiance. While much of the fear of a dropping gold price is based on expectations the US Fed will raise interest rates (because everything is awesome), the above events (and lets face it servicing $18t in debt) means the likelihood of that happening is getting less by the day. Bonds, the other "safe haven", are seeing yields drop to farcically low levels meaning the 'yield' excuse for taking them over gold is almost gone. Factor in the risk of holding bonds in the world's largest Ponzi Scheme (https://www.ainsliebullion.com.au/g...debt-ponzi-scheme/tabid/88/a/800/default.aspx and the small, taxable, yield looks more and more like a bad reason to choose bonds over gold and silver. Remember too that bonds are priced at high highs and precious metals prices (especially silver) at lows and the capital gain stories look potentially very different. Finally, just a little more on that commodities crash the only other times the commodities index fell like this were 1999 and 2008. Both just before the 2 largest stockmarket crashes in the last few decades. Do you have your 'safe haven'?
 
Bonds v Gold
Yesterday we outlined a few important things happening in markets right now, one of which is sovereign bonds around the world seeing record or near record low yields as demand soars for these traditional safe haven 'assets' (for those new to bonds, see our article here that explains very simply). Many were calling for bonds to fall (and inversely related yields rising) last year because the economy was supposedly improving and QE (where the US Fed bought them to print more money) ended. The reality was indeed the opposite and the most prominent analyst (Steven Major of HSBC) that picked it right says it will continue into 2015. Here's a bit more of what Bloomberg reported on this:
"So far, 2015 is already shaping up to be a historic year. Yields on 10-year [US] Treasuries tumbled more than at the start of any year since 1998, ending at 1.95 percent last week. Benchmarkratesin the U.S.,GermanyandJapanfell below 1 percent on average for the first time as deflation emerged in Europe, oil sank below $50 and American wages fell.
Major says borrowing costs can stay low for years because debt loads incurred by the largest economies after the financial crisis will drag on growth and constrain their ability to spend.
The globalbond markethas ballooned more than 40 percent to $100 trillion as governments bailed out the banking industry and plunging tax receipts deepened deficits.
Public debt reached 108 percent of gross domestic product in 2012, a level not seen since World War II ended, according to theInternational Monetary Fund. Even after some nations adopted austerity measures to restore fiscal discipline, the ratio will be 106 percent this year."
What does this mean for gold and silver? Well they are the 'other' safe haven in which to put your wealth. The difference is they have been so for thousands of years and are not exposed to default should any of these debt burdened strung out countries default, or weaken further to the point that there is a 'run' on bonds/treasuries and the house of cards collapses. Indeed on this scenario gold and silver will skyrocket. Importantly too, bonds are at historic high prices whilst gold and silver, for now, remain at relatively low prices. Finally whilst bond yields are low, so are interest rates which means the lack of yield on gold and silver becomes almost irrelevant, especially against the capital gain potential of buying low and selling high.
Whilst on bonds, the former head of the world's largest bond dealer had this to say recently..
"When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over."
Bill GrossFounder & former CEO, PIMCO
 
A warning from Dr Copper
Copper has earned the title of world's best economist "Dr Copper" through its historic knack of predicting market performance. It has just plunged to its lowest price in nearly 6 years as slowing global growth leads to lack of demand and oversupply, as it has already done for oil, coal and iron ore. Until this year, US stock markets largely defied the good doctor of late, due in large part to being artificially inflated by money printing and zero interest rates (ZIRP) stimulus. But copper sees through that and the message isn't good. The World Bank just cut its global growth forecast again and warned it was too reliant on the (supposed) US recovery. The key indicators of this supposed recovery are share prices (which are at historically pre-crash price / earnings highs) and jobs growth. Whilst 2014 ended on a supposed high in this regards with 252,000 new jobs, it was accompanied by the lowest participation rate in 38 years (i.e. after people quitting / giving up on trying driving down the employment rate) and a drop in wages (which against increased numbers means the new jobs are lower paying). The other elephant in the room is the mystical birth / death adjustment, a guess (and you can bet they guess high) of those that leave the work force and start a new small business. For 2014 the US averaged 249,000 new jobs per month. The birth / death adjustment accounted for 87,000 or 35% of that and the majority of the remainder lower paying and part time jobs. Our bet is with Dr Copper
 
Hedging the Aussie Dollar
On Friday the world's largest asset manager, BlackRock, predicted the Aussie dollar could drop below 70c in the first half of this year. We've discussed before what a great currency hedge gold and silver are. There is an inverse relationship between our currency against the USD and the Aussie price of gold. And it's not just ours of course, it applies to any currency against the USD. That is why any Russian holding gold last year saw a staggering 73% gain for 2014 as their Rouble fell. So whilst most focus on gold's performance as the spot price rises on increased demand when there is a flight to safe havens (as we clearly saw last week), Aussie's get the potential double whammy of a falling AUD as well, as many predict our dollar to decline in the post resource boom conundrum we now face. For example, at the time of writing the spot price for gold is USD1280 and the Aussie is at 82.2c. If the AUD falls to 70c, the current AUD1557 gold price goes to AUD1829 without the US spot price changing at all, a 17.4% capital gain. Most other currency plays are purely that. Right now you have the chance of a currency play using an asset priced at a cyclical low and amid a range of bullish factors. Whilst the SNB drama looks to have subsided, just remember the full repercussions of the Lehamns collapse took a week to flush through the system as we live in an increasingly interlinked and 'derivativised' financial system.
 
AinslieBullion said:
Hedging the Aussie Dollar
On Friday the world's largest asset manager, BlackRock, predicted the Aussie dollar could drop below 70c in the first half of this year. We've discussed before what a great currency hedge gold and silver are. There is an inverse relationship between our currency against the USD and the Aussie price of gold. And it's not just ours of course, it applies to any currency against the USD. That is why any Russian holding gold last year saw a staggering 73% gain for 2014 as their Rouble fell. So whilst most focus on gold's performance as the spot price rises on increased demand when there is a flight to safe havens (as we clearly saw last week), Aussie's get the potential double whammy of a falling AUD as well, as many predict our dollar to decline in the post resource boom conundrum we now face. For example, at the time of writing the spot price for gold is USD1280 and the Aussie is at 82.2c. If the AUD falls to 70c, the current AUD1557 gold price goes to AUD1829 without the US spot price changing at all, a 17.4% capital gain. Most other currency plays are purely that. Right now you have the chance of a currency play using an asset priced at a cyclical low and amid a range of bullish factors. Whilst the SNB drama looks to have subsided, just remember the full repercussions of the Lehamns collapse took a week to flush through the system as we live in an increasingly interlinked and 'derivativised' financial system.
Click to expand...


Hello Mr A Bullion :)

Thankyou very much for your very infornmative posts,I have really been enjoying them and gleaning plenty.

Question Please - what would be your best "guesstimate" if the above scenario happened in reference to Silver,with absolutley no obligation to you Sir :cool:

Enjoy your week.

Thanks in advance.

CGS :D
 
AinslieBullion said:
Hedging the Aussie Dollar

...Aussie's get the potential double whammy of a falling AUD as well, as many predict our dollar to decline in the post resource boom conundrum we now face. For example, at the time of writing the spot price for gold is USD1280 and the Aussie is at 82.2c. If the AUD falls to 70c, the current AUD1557 gold price goes to AUD1829 without the US spot price changing at all, a 17.4% capital gain.
Click to expand...
This is a critical point. The AUD has nowhere to go but down over the longer term.
 
Where's the gold gone?
It is now well documented that just China and India alone accounted for all the global gold production in 2014, excluding Government purchases. That means the rest of the world is drawing down on reserves and recycling, and when you consider the likes of Russia (160t) and other central banks were big buyers plus investors around the world that is a big number. In 2015 we are already seeing that demand continue unabated, indeed if anything ramping up with an incredible 61t of gold consumed in China in just the first week of 2015! So where is it all coming from? Historically the biggest 'vault' sources are London and New York. Eurostat reported net exports from the UK last year (excluding Dec) of 1,871t so that gives a measure on London. New York is less clear but we had confirmation that the Dutch were successful in repatriating 122t and Germany (despite demanding 300t 2 years ago) still only received a trickle. The $100b elephant in the room however is the Chinese central bank who haven't told us their inventory since 2009 and not whisper since on purchases. That said the graph below (courtesy of the excellent Tocqueville newsletter we've posted for you today here - https://www.ainsliebullion.com.au/g...d-2014-newsletter/tabid/88/a/827/default.aspx gives a likely insight as their reduced purchase of US Treasuries with cash reserves will almost certainly have been replaced with gold purchases. The Chinese are very clever. They are quietly buying up big time at bargain prices in readiness for the collapse of the current global economic central bank stimulus experiment. Are you?
 
We gunna get another Weekly Radio Round-up soon? I love those.. I'm too lazy to read.... or finish senten
 
Gold Repatriation Repercussions
Further to yesterday's article, 2014 saw 2 more countries (Netherlands and Belgium) join Germany in asking for their gold back, the Swiss voted on same and France's opposition have called for it too. Germany first asked the US for about 350t of its gold held in New York back in early 2013 (we explained that here - https://www.ainsliebullion.com.au/g...ur-gold-e2-80-a6/tabid/88/a/495/default.aspx). That year they got a measly 37t and now claim they got 85t last year. The graph below (released with a 3 month lag) shows withdrawals last year to end of November totalling 166t. When you subtract the confirmed Dutch withdrawal of 122.5t there must have been 42t removed in December 2014. Looking at the graph below (showing gold withdrawals from NY) you can note a couple of things.
First the obvious with supposedly 6000t of gold why is the US telling Germany they have to wait 7 years to get just 300t back? (and it's not logistics as suggested as the Swiss managed to export 2,777t in that year of 2013!)
Note how withdrawals coincide with the big crashes of 2000 and 2008 More importantly, note the withdrawals started BEFORE the actual (mid 2000 and mid 2007) crashes? Does this portend something imminent that central banks know about?
 
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