Thursday, February 11, 2016
This is the best quarterly performance for Gold in 30 years...
First, let’s look at the improved fundamentals. Gold bugs will exasperatingly proclaim that fundamentals have been great for the past four years yet the price plunged anyway, so who cares about fundamentals? To this I would respond with two observations. First, large institutional investors and sovereign wealth funds have been anticipating a rate hike cycle for a very long time now. They didn’t know when, but they expected it. The fact that the gold bugs never believed this is irrelevant; what matters is that big money believed it, and it was perceived to be very gold negative. In their minds, this anticipated rate hike cycle would confirm that things were getting back to normal, and if things are normal you don’t need to own gold, right?The problem is that this assumption is quickly being called into question. Sure the Fed hiked rates once, but it is starting to look more and more like a policy error. Meanwhile, other major central banks around the world are going in the opposite direction, toward negative rates. I am a huge believer in market psychology, and the psychology dominating the minds of most institutional investors over the past few years has been that things were slowly getting back to normal. This has weighed on institutional demand for gold in a big way, and been a meaningful factor in the bear market (manipulation aside). If this psychology shifts, the shift back into gold could be very meaningful.While that backdrop is interesting in its own right, what may make the move into gold that much more explosive is the lack of alternative investments…– From the February 3, 2016 post: GOLD – It’s Time to Pay Attention
What a difference a couple of weeks can make. The Telegraph is reporting the following:
BullionByPost, Britain’s biggest online gold dealer, said it has already taken record-day sales of £5.6m as traders pile into gold following fears the world is on the brink of another financial crisis.Rob Halliday-Stein, founder and managing director of the Birmingham-based company, said takings today had already surpassed the firm’s previous one-day record of £4.4m in October 2014.BullionByPost, which takes orders of up to £25,000 on the website but takes higher amounts over the phone, explained it had received a few hundred orders overnight and frantic numbers of phone calls this morning.“The bullion market has been building with interest since the end of last year but this morning things have gone bananas,” said Mr Halliday-Stein. “Some London banks are placing unusually large orders for physical gold.”London-based ATS Bullion added it had been inundated with orders for the past week. The firm has sold 4,000 gold bars and coins since February 1, a 40pc rise on the same period a year ago when it sold 1,500.“It’s been crazy – it’s been the best week since 2012. We’ve had people queuing round the block,” said Michael Cooper of ATS Bullion, a family run firm that trades online and also from an outlet in the West End.
But that’s just part of the story. As reported by the World Gold Council, the buying really started to pick up in the fourth quarter, courtesy of the Chinese and central banks. Reuters notes:
Buying by central banks as well as Chinese investors seeking protection from a weakening currency helped lift demand for gold in the final quarter of last year and the trend looks set to continue, the World Gold Council said on Thursday.Chinese demand for gold coins surged 25 percent in the fourth quarter from a year earlier as consumers sought to protect their wealth after Beijing devalued the yuan currency. But stock market turmoil and a slowing economy knocked consumer sentiment and Chinese demand for gold for jewelry fell 3 percent from a year earlier, WGC said.Central banks have been buying gold to diversify their reserves away from the U.S. dollar and their purchases edged up to 588.4 tonnes last year, second only to a record high 625.5 tonnes in 2013, the report showed.Central bank buying accelerated sharply in the second half of last year and jumped 25 percent in the fourth quarter, from a year earlier, as the need to diversify was reinforced by falling oil prices and reduced confidence in the global economy, WGC said.Chinese demand for gold totaled 985 tonnes last year, followed by India on 849 tonnes. They accounted for nearly 45 percent of total global demand, with consumer demand up 2 percent and 1 percent respectively in those countries.
Think about the lack of gold buying from the U.S. relative to its global wealth and it becomes quite easy to see where the fuel for the next bull market will come from.
Meanwhile, on the supply side…
Global supply of gold fell 4 percent last year to 4,258 tonnes, partly because of slower mine production.Mining companies have scaled back since 2013 in a bid to slash costs and mine production shrank in the fourth quarter of 2015, the first quarterly contraction since 2008, WGC said.
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Keep in mind, all of the above is nothing compared to what may happen in China once gold fever returns to the mainland like in 2013, as Caixin profiled before:
Credit to Zero Hedge
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As you might have heard, the opposition in Syria is in serious trouble.
Last summer, Bashar al-Assad’s army was on the ropes, as the SAA fought a multi-front war against a dizzying array of rebel forces including ISIS. Then Quds commander Qassem Soleimani went to Russia. After that, everything changed.
As of September 30 the Russian air force began flying combat missions from Latakia, rolling back rebel gains and paving the way for a Hezbollah ground offensive. Once Moscow had stopped the bleeding for the SAA (both figuratively and literally), Iran called up Shiite militias from Iraq who, alongside Hassan Nasrallah’s forces, pushed north towards Aleppo.
Now, the city is surrounded and the rebels are cut off from their supply line to Turkey. In short: it’s just a matter of time before the opposition is routed.
So much for President Obama’s “Russia will get itself into a quagmire” line.
The only thing that can save the rebels at this juncture is a direct intervention by the groups’ Sunni benefactors including Saudi Arabia, the UAE, Qatar, and Turkey.
That, or an intervention by the US.
Both the Saudis and the Turkey have hinted at ground invasions over the past two weeks and just this morning, a sokesman said Riyadh's decision to send in troops was "final."
But direct interventions are tricky. Russia has never denied it intends to bolster Syrian government forces against the rebels, all of whom Moscow deems “terrorists.” On the other hand, Washington, Riyadh, Doha, and Ankara cling to the notion that while they don’t support Assad, they’re primary goal is to fight ISIS. Well ISIS is in Raqqa, which is nowhere near Aleppo, meaning there’s no way to help the rebels out in their fight against the Russians, Iranians, and Hezbollah under the guise of battling Islamic State.
Against that backdrop we found it interesting that Moscow and Washington are now delivering conflicting accounts of airstrikes in Aleppo on Wednesday. The Pentagon, without specifying what time the strikes allegedly took place, says Russia destroyed the city’s two main hospitals.
Defence Ministry spokesman Igor Konashenkov notes that Warren didn’t provide either hospitals’ coordinates, or the time of the airstrikes, or sources of information. “Absolutely nothing,” he said, describing Warren’s report.
The Kremlin, on the other hand, says US warplanes conducted strikes at 1355 Moscow time. “Two U.S. Air Force A-10 attack aircraft entered Syrian airspace from Turkish territory,” Konashenkov said in a statement. “Reaching Aleppo by the most direct path, they made strikes against objects in the city.”
“Only aviation of the anti-ISIS coalition flew over the city yesterday,” he added.
“When asked on Wednesday whether the U.S.-led coalition could do more to help rebels in Aleppo or improve access for humanitarian aid to the city, Pentagon spokesman Colonel Steve Warren said that the coalition's focus remained on fighting Islamic State,” Reuters wrote on Thursday. The group is "virtually non-existent in that part of Syria,” Warren said.
Right. Which makes you wonder what two US Air Force A-10 attack planes were doing bombing in and around Aleppo. Is the US set to conduct airstrikes in support of the rebels, thus marking a fresh and exceptionally dangerous escalation of hostilities in the country?
As for what exactly it was that the US warplanes struck, Konashenkov will have to get back to us. He’s too busy winning a war to care right now:
“I’m going to be honest with you: we did not have enough time to clarify what exactly those nine objects bombed out by US planes in Aleppo yesterday were. We will look more carefully."
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Below, find excerpts from “Will Russian Victories In Syria Spark A Regional War?” by Yaroslav Trofimov as originally published in WSJ
Defying U.S. predictions of a quagmire in Syria, Russia is achieving strategic victories there with this month’s Aleppo offensive. The question now is whether this is a turning point that hastens the five-year war’s end or the trigger for a counter-escalation that will drag other regional countries into the conflict.
Few expect that Moscow’s main target—the moderate rebels backed by Turkey, Saudi Arabia and the U.S.—would now be forced settle the conflict on the Kremlin’s, and Syrian President Bashar al-Assad’s, terms.
“Their victory in Aleppo is not the end of the war. It’s the beginning of a new war,” said Moncef Marzouki, who served in 2011-14 as the president of Tunisia, the nation that kicked off the Arab Spring, and who recently visited the Turkish-Syrian border. “Now, everybody would intervene.”
To be sure, Turkey and Saudi Arabia have few easy options to counter Russian military might in Syria. But because of national pride—and internal politics—neither can really afford to have the rebel cause in which they have invested so much wiped out by Moscow and its Iranian allies.
While the Obama administration has long been determined to minimize U.S. involvement there, for Turkey and Saudi Arabia the prospect of Syria falling under the sway of Russia and Iran would be a national-security catastrophe.
“The whole situation, not just for Turkey but for the entire Middle East, would be reshaped. The Western influence will fade away. The question is: Can we accept Russia, and the Iranians, calling the tune in the region?” said Umit Pamir, a former Turkish ambassador to NATO and the United Nations.
Credit to Zero Hedge