Gold shorts covered an enormous 23,518 futures contracts last week – the equivalent of 2,351,800 ounces of gold. With JPMorgan appearing to be calling everyone (here and here) to get their hands on gold to deliver, it seems our concerns over a short-squeeze are starting to solidify. The last time shorts collapsed at this fast a rate was in the 1999/2000 period which saw a considerable 33% squeeze ramp in gold prices over the space of 3 weeks in the fall of 1999. Notably, the gold short position still remains huge compared to historical values – having fallen back only to the previous all-time record high levels (i.e. plenty of room for moar squeeze). In addition to this surge in covering, Gold ETFs saw their first inflows in 2 months.
as Gold ETFs saw their first inflows in 2 months… Read More
It appears Abe and his henchmen had better stop doing things and say something as the huge devaluation of the JPY so far is NOT having the effect he had hoped for. Exports dropped 2.9% – more than expected – and while imports rose less than expected, the currency drop still meant an 11.9% surge in imports. All this means is that on a seasonally-adjusted basis, the Japanese Trade Balance just hit a new all-time record low (negative). USDJPY is strengthening on the news… it seems that well-placed non-news headline at 2am Japan time is well worth it now to cover this debacle… We assume the lesson is – just wait, “if we devalue, they will come.”
Moments ago white smoke emerged from the Sistine Chapel which means that the Cardinals of the Catholic church have elected a new pope on the second day of Conclave. The identity will be revealed shortly. Stocks take this as a bullish signal and hit intraday highs, and for the DJIA, new all time record highs. All is well in the world.
Investors poured near-record amounts of money into European “junk” bond funds last week, brushing off speculation that the asset class may be overvalued as they continue to search for yield.
Some of the 55 largest funds in Europe recorded €413m of inflows into high-yield credit last week, the second largest since records began in 2005 and just short of the all time record of €443m in September, according to JPMorgan.
Only €56m of the total inflows to the asset class came via exchange traded funds, where inflows and outflows can be more volatile, in a positive sign for volatility in the asset class.
This comes on the back of several months of strong inflows into high yield following central banks action late in the summer, which boosted risk appetite. Low interest rates have also encouraged investors to move into higher-yielding “junk” bonds. Read More
Gold has now reached all-time record highs in terms of the Euro, Swiss Franc, and Brazilian Real. Gold in USD is up 90% from the March 2009 equity lows and up 50-65% in the rest of the major fiat currencies.
The previous peak in Gold right after the initial Swiss Franc peg/ceiling is quite clear in the chart below showing performance of Gold priced in various fiat currencies since the March 2009 lows…
The trend of relentless shorting of the Euro currency in the form of non-commercial spec contracts, and as reported by the Commitment of Traders, continues for one more week. As of January 3, EUR shorts rose by another 9%, hitting an unprecedented 138,909 net contracts short – a fresh all time record. What is curious that unlike previously, when an increase in EUR bearishness implicitly meant a increase in USD bullishness, this time that is no longer the case as net spec USD contracts actually declined, and are trading at relatively subdued levels. Overall, this means that FX specs are not playing relative currencies off each other, but are piling into a global European short. Which leads us to the following precautionary observation: just like when a price collapse in gold is required, usually enacted by the reflexive relationship between futures and the underlying, in the form of a margin hike, we wonder how long before Europe, or even the Fed which most certainly does not want a strong dollar, directs the CME to hike EC maintenance margins by some ungodly amount. Because whatever works to keep paper gold weak will most certainly help to keep the dollar even weaker. And with a net drawdown of nearly 250,000 contracts from EUR highs in April to current lows, a EUR margin hike may have as profound an impact as QE, considering the massive amount of shorts currently holed up and demanding the collapse of Europe.
America has closed the books on 2011 with debt at an all time record$15,222,940,045,451.09. And, as was observed here first in all of the press, US debt to GDP is now officially over 100%, or 100.3% to be specific, a fact which the US government decided to delay exposing until the very end of the calendar year. We wonder, rhetorically, just how prominent of a talking point this historic event will be in any upcoming GOP primary debates. And yes, technically this number is greater than the debt ceiling but it excludes various accounting gimmicks. When accounting for those, the US has a debt ceiling buffer of… $14 billion, or one third the size of a typical bond auction.
Uhm, what was that? The Bund-OAT spread just soared by 7 bps to an all time record 129 and widening, which we expect is due to the EFSF bond pull. Expect a 130 handle any second…So Europe now has France to add to the Greek and Italian communicating vessels? Good work.
If that headline is confusing to readers, it simply means, in a polite way, that Germany had a failed Bund auction. The country sold €4.075 billion in 10 Year Bunds after it had attempted to sell €5 billion and got just €4.55 billion in bids. The result made it “technically uncovered” and reflects the fear in the market that Germany will be forced to shoulder the burden of the EFSF expansion. And even with this poor result, the OAT-Bund spread still managed to blow out to another all time record of 115 bps overnight. The contagion at the core is there.
Germany sold 4.075 billion euros in its final reopening of the September 2021 bond, bringing the outstanding amount to 16 billion euros. A new January 2022 benchmark will be launched in November. The bid/cover ratio at the sale was 1.1, below the 1.5 at the previous sale in September and the 2011 average at 10-year Bund sales of 1.61, according to Reuters data. But with a target amount of 5 billion euros — the Bundesbank retained 0.925 billion euros — the 4.55 billion euros of bids drawn did not match the amount on offer.
Good thing the whole debt ceiling fiasco taught Tim Geithner a thing or two about being frugal, or else today’s $28 billion increase in total debt to a new all time high of $14,615,567,348,203.71 may have been far, far worse. At least congress still has $127 billion in dry powder before it has to authorize the extension of the interim debt ceiling cap of $14.694 trillion. At this rate, total debt and US GDP will achieved parity in 4 months, and if the US actually contracts (negative GDP in Q2 and Q3) and enters recession, that will be one divergence spread we will never want to be on the compression side of.