Monday, September 22, 2014

sept 22/record level of Open Interest on silver (176,501 contracts)/Gold rises/silver falls/ GLD falls by 1.79 tonnes to 774.65 tonnes/Shanghai brings in another huge 41 tonnes/silver still in backwardation

Gold closed up 1.50  at $1216.80 (comex to comex closing time ). Silver was down 8 cents at $17.70

In the access market tonight at 5:15 pm
gold: $1215.00
silver:  $17.75

GLD :  we lost 1.79 tonnes of gold at  the GLD (inventory now at 774.65 tonnes)

SLV  : no change in silver inventory/note the difference between gold  and silver. Physical gold that arrives from the Bank of England is sent down to Shanghai who lately has been receiving greater than 40 tonnes per week with the lower gold prices. In silver, there is no reason to raid the SLV because there is no physical silver to provide India or China.  

Shanghai brings in a massive 41 tonnes of gold this week

Shanghai silver still in complete backwardation


We will discuss these and other stories 

So without further ado..................

Let's head immediately to see the data has in store for us today.

First:  GOFO rates/

All months basically moved  towards the negative needle as they must have found a few bars to lease. On the 22nd of September the LBMA stated that they will not publish GOFO rates.  However we still received today's GOFO rates 

 London good delivery bars are still quite scarce. 

Sept 22 2014

1 Month Rate:  2 Month Rate   3 Month Rate   6 month rate  1 yr rate

+.106000%        +.1060000%         +.110000%         +.11800%    +  .224000%

Sept 19 .2014:

1 Month Rate  2 Month Rate   3 Month Rate  6 month Rate      1 yr rate

+1300%         +.128000%         +.132000%             +.1400%       +.22400%


Let us now head over to the comex and assess trading over there today,

Here are today's comex results: 

The total gold comex open interest surprisingly rose  today by 928 contracts from 384,296 up to 385,224  with gold down by $10.40 on Friday . The OI for gold is still net rising despite the constant attacks by our banker friends.  The next non active delivery month is September and here  we see that the open interest fell by 0 contracts remaining at 24. We had 0  notices filed on Friday, so we neither  lost nor gained any gold contracts  standing for delivery in the September contract month.  The next active delivery month is October and generally this is a very poor for deliveries. The October contract month actually fell by 397 contracts down to 18,576.  Most players who are still willing to tackle the crooked comex rolled to December. The estimated volume today was poor at  132,902 contracts. The confirmed volume on Friday was fair to good at 180,201.  

The total silver Comex OI astonishingly rose again by  a monstrous 2,988 contracts despite the fact that  silver was down on Friday  to the tune of 64 cents.  Tonight the silver OI complex rests  at 176,501 contracts.  In ounces, this represents 882 million oz or 126% of silver annual production.  In commodity law generally the OI is represented by 3 to 5% of annual production. These silver contracts are in very strong hands and as I have indicated to you on countless occasions, this will continue to bring nightmares to our bankers. Probably this is as good a reason as ever for the bankers to raid on a continual basis trying to force those longs to puke their interests.   We are now in the next big delivery month of September and here, the  OI  for September surprisingly rose by 23 contracts up to 403 contracts.  We had 6 notices filed on Friday so we  gained another 29 silver contracts or 145,000 additional silver oz  will stand for the September contract month.
 The December silver contract tonight rests at an unbelievably high 130,678 contracts for a gain of  1680 contracts. No doubt the December contract month may provide all the fireworks if our major entity tries to take delivery of much of the comex silver. In ounces, the December contract equates to 653 million oz or 93% of annual global production. This is totally unprecedented. The estimated volume today was huge at 75,836.  The confirmed volume on Friday was just as strong at 69,175 contracts. Both Bill Holter and I strongly believe that only one entity could possibly behind the majority of these longs and that entity is the sovereign Chinese government.

data for the  September delivery month.

Sept 22.2014  

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
 3407.90 (Scotia)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
No of oz served (contracts) today
5 contracts( 500 oz)
No of oz to be served (notices)
19  (1900 oz)
Total monthly oz gold served (contracts) so far this month
 771 (77,100 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month                       

43,521.3 oz
Total accumulative withdrawal of gold from the Customer inventory this month

 370,156.0 oz

Today, we had zero dealer transactions today

total dealer withdrawal:   nil oz
total dealer deposit:  nil oz 

We had 0 customer deposits:

total customer deposit:  nil oz

We had 1 customer withdrawals:

i) out of Scotia:  3,407.90 oz

At the comex on a sale of kilobars, the seller is credited with a fineness of .995.
Kilobars are the big ticket item for China. However kilobars cannot head over to Shanghai unless they are remelted with a fineness of .9999.
Why on earth is the comex showing deposits and withdrawals in exact weight kilobars???

We had 0 adjustments:

Total Dealer inventory:  1,010,940.995 oz   31.447 tonnes
Total gold inventory (dealer and customer) =  9.581 million oz. (298.0) tonnes)

Today, 0 notices was issued from  JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 5 contracts  of which 0 notices were stopped (received) by JPMorgan dealer and 0  notices stopped by JPMorgan customer account.

 We had 5 notices served upon our longs for 500  oz of gold.  In order to calculate what will be  standing for delivery in September, I take the number of contracts served so far  this month at 776 x 100 oz  = 77,600 oz, and then add the difference between the open interest for the front month of September (24) - the number of notices served upon today (5) x 100 oz  = 79,000 oz or  2.46 tonnes 

Thus:   September  standings:

771 contracts x 100 oz =  77,100 oz  +  (24-5)  =

79,000 oz/ no change from Friday. 





Sept 22/2014:   



  September silver:  initial standings



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 165,152.64(Scotia,HSBC)
Deposits to the Dealer Inventory 575,557.600 oz (CNT)
Deposits to the Customer Inventory 2,080,736.09 oz (Brinks, Scotia)
No of oz served (contracts)149 contracts  (745,000 oz)
No of oz to be served (notices)254 contracts (1,270,000)
Total monthly oz silver served (contracts)3272 contracts (16.360,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month1,807,940.6 oz
Total accumulative withdrawal  of silver from the Customer inventory this month6,479,950.5 oz

Today, we had 1 deposits into the dealer account:
 i) Into CNT:  575,557.600 oz  (another high 500,000 deposit)

 total dealer deposit:575,557.600 oz

we had 0 dealer withdrawal:

total  dealer withdrawal: nil oz

We had 2 customer withdrawals:
I) Out of HSBC: 104,251.59 oz
ii) Out of Scotia:  60,901.05 oz

total customer withdrawal:  165,152.64  oz

We had 2 customer deposits:

i) Into Brinks:  600,880.31 oz (another 600,000 oz deposit)
ii) Into Scotia:  1,479,855.78 oz

total customer deposits:  2,080,736.09 oz

we had 1 adjustment:

i) Out of Scotia:  10,531.07 oz was adjusted out of the customer and this landed into the dealer account.

Total dealer inventory:  65.425 million oz
Total of all silver inventory (dealer and customer) =  183.144 million oz.

The CME reported that we had 149 notices filed for 745,000 oz today. To calculate what will stand for this  active delivery month of September, I take the number of contracts served for the entire  month at 3272 x 5,000 oz per contract or 16.360,000 ounces to which I add the difference between the OI for the front month of (403 ) - the number of notices served upon today (149) x 5,000 oz per contract.

Thus initial  standings for silver:  3272 notices x 5,000 oz per notice or 16.360,000 oz + (403- 149) x 5000 oz   =  17,630,000 oz

We gained 145,000 additional silver standing for the September contract month.

It looks like China is still in a holding pattern ready to pounce when needed.
The open interest on silver is  still highly elevated.  Gold has a low OI with a low gold price.  Silver has a high OI with a low silver price.  Something has got to give!!

As far as the silver inventory, it looks compromised as well.  Shanghai is in complete silver backwardation and yet comex seems to import huge amounts of silver. Note that every day we say either 500'000 or low 600,000 entry as a deposit or withdrawal.  The odds of this happening  3 out of 5 days on the comex on a continual basis is suspect.

These look like a paper deposit/withdrawal where no real metal enters or leaves.  Only when silver metal leaves an official vault does real metal leave.  


The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold.  I can visualize demand coming to the buyers side:

i) demand from paper gold shareholders
ii) demand from the bankers who then redeem for gold to send this gold onto China

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

Sept 22.2014:  another 1.79 tonnes of gold leaves the GLD heading for China:

inventory: 774.65 tonnes 

Sept 20.2014: a whopping 7.78 tonnes of gold left the GLD heading to China.
Inventory tonight:  776.44

sept 18.2014: no change in inventory/784.22

sept 17.2014 no change 874.22 tonnes
Sept 16.2014:  we lost a massive 4.18 tonnes of gold from the GLD/Inventory 784.22  

Sept 15.2014  no change in gold inventory at the GLD/788.40

Sept 11.2014: a slight decrease of .32 tonnes and this will be used to pay for fees , storage and insurance/Inventory 788.40

Sept 10.2014: we finally had an addition of  exactly 3.000 tonnes of gold/
new inventory:  788.72 tonnes.
As I have stated in the past I do not think the inventory will go below the 780 tonne mark as it is now all paper.  In order to satisfy China, the crooks will need to rob gold stationed at the FRBNY

Sept 9.2014: no change in gold inventory/785.72 tonnes

Sept 8.2014: no change in gold inventory/785.72 tonnes
Sept 5: no change in gold inventory/785.72 tonnes of gold.

Sept 4: wow!! a huge loss of  4.79 tonnes of gold/this gold is off to Shanghai
tonnage tonight:  785.72

Sept 3.2014: tonnage 790.51/ a loss of 2.69 tonnes of gold.
This gold is heading to the shores of Shanghai.  Remember that Shanghai takes in roughly 33 tonnes per week.

Sept 2.2014: tonnage 793.20 tonnes/a loss of 1.8 tonnes of gold.

August 29.2014/tonnage 795.00 a loss of .6 tonnes  (probably to pay insurance and storage fees)

August 28.2014: a loss from last week of 4.48 tonnes of gold.

 Today we lost 1.79 tonnes of  gold inventory  ( Inventory:  774.65 tonnes).  


The registered  vaults at the GLD will eventually become a crime scene as real physical gold  departs for eastern shores leaving behind paper obligations to the remaining shareholders.   There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat  (same banks). 

GLD gold:  774.65 tonnes.


And now for silver:   SOMETHING BIG IS GOING ON HERE!!!!
As many of you know, I believe that the silver inventory is basically gone through hypothecation and  other means.  It looks like the increase in the inventory at the SLV is nothing but a paper addition.  I doubt very much if any real silver entered their vaults.

sept 22.2014:  strange again/inventory remains the same:  340.449 million oz

Sept 19.2014:  inventory remains constant at 340.449 million oz

Sept 18.2014: late last night we picked up another 960,000 oz/inventory now 340.449 million oz

sept 17.2014: no change in silver inventory 339.489  million oz
Sept 16.2014: no change in silver inventory at the slv/339.489 million oz

 Sept 15.2014   today a massive 3.354 million oz increase  (inventory 339.489

Sept 12.2014: another gain of 1.486 million oz (inventory 336.132 million oz)


Net Assets
as of 11-Sep-2014
Ounces in Trust
as of 11-Sep-2014

Sept 11.2014:  no change in silver inventory at the SLV


Net Assets
as of 10-Sep-2014
Ounces in Trust
as of 10-Sep-2014
Tonnes in Trust  
as of 10-Sep-2014

sept 10.2014: an increase of 1.439 million oz.  (334.646 million oz)


Net Assets
as of 09-Sep-2014
Ounces in Trust
as of 09-Sep-2014
Tonnes in Trust  
as of 09-Sep-2014

Sept 9.2014: no change in inventory  333.207 million oz


Net Assets
as of 08-Sep-2014
Ounces in Trust
as of 08-Sep-2014
Tonnes in Trust  
as of 08-Sep-2014

Sept 8.2014: no change in inventory  (333.207 million oz)


Net Assets
as of 05-Sep-2014
Ounces in Trust
as of 05-Sep-2014
Tonnes in Trust  
as of 05-Sep-2014

sept 5.2014  a small loss of 239,000 oz /probably to pay for fees/(inventory 333.207 million oz)


Net Assets
as of 04-Sep-2014
Ounces in Trust
as of 04-Sep-2014
Tonnes in Trust  
as of 04-Sep-2014

Sept 4.2014: no change in inventory at the SLV/Inventory 333.446


Net Assets
as of 03-Sep-2014
Ounces in Trust
as of 03-Sep-2014
Tonnes in Trust  
as of 03-Sep-2014

Sept 3.2014: an increase in silver inventory of   1.918 oz  (333.446 million oz)


Net Assets
as of 02-Sep-2014
Ounces in Trust
as of 02-Sep-2014
Tonnes in Trust  
as of 02-Sep-2014

Today, Sept 22.2014   no change in inventory /340.449 million oz.

And now for our premiums to NAV for the funds I follow:

Note:  Sprott silver fund now deeply into the positive to NAV

Sprott and Central Fund of Canada. 

(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded  at Negative 6.6% percent to NAV in usa funds and Negative 6.4%  to NAV for Cdn funds
Percentage of fund in gold 59.70%
Percentage of fund in silver:39.6%
cash .7%

.( Sept 22/2014)   

2. Sprott silver fund (PSLV): Premium to NAV falls to positive 4.55% NAV (Sept 19/2014)   
3. Sprott gold fund (PHYS): premium to NAV  falls to negative -0.60% to NAV(Sept 17/2014) 
Note: Sprott silver trust back hugely into positive territory at 4.55%. 

Sprott physical gold trust is back in negative territory at  -0.60%

Central fund of Canada's is still in jail.


Now  your more important physical stories today:

(courtesy Mark O/Byrne)

huge demand for gold this week:  41 tonnes of gold or 5.85 tonnes per day on a 7 day week.  The world produces 6.02 tonnes per day or a 7 day week or 2200 tonnes per year.  Silver remains in total backwardation in Shanghai.

(courtesy Koos Jansen)

Chinese Gold Demand 41t in week 37, 1331t YTD

The Shanghai International Gold Exchange Is Launched!
Published: 20-09-2014 07:40
Where to begin. Much has happened this week in the Chinese gold market; on wednesday the Shanghai Gold Exchange (SGE) released multiple rule books written in English describing every detail on the workings of the SGE and its brand new subsidiary the Shanghai International Gold Exchange (SGEI). Finally the world can read everything about the Chinese exchange that is strongest force in the physical gold market, but was widely misunderstood because of the language barrier. Though having channeled unprecedented amounts of physical gold into China mainland the SGE has been enjoying little coverage in the mainstream media. 
Thursday September 18, at 8 pm GMT+8, in the Chinese night trading session, the SGEI was officially launched and started trading three physical gold contracts. On the next screen dump below we can see the first activities of the SGEI; iAu100g, iAu995, iAu9999 are SGEI physical gold contracts.  
The SGEI in the Shanghai Free Trade Zone facilitates physical gold trading in renminbi for international traders. This is a major step forward for the internationalization of the renminbi and its influence on the price of gold. But, while I'm still digging through all rule books and digesting them, I will write a separate post on the exact details of the SGEI and all that has changed in the (Chinese) gold market.
In its first trading session 121.72 Kg of gold changed hands on the SGEI - volume is calculated bilaterally in Shanghai.
One of the speakers at the opening ceremony of the SGEI was the governor of the central bank of China, Zhou Xiaochuan. Zhou stated:
This event is a major milestone in China’s opening of its financial market to foreign investors.
...Our Premier Li Keqiang came to the Free Trade Zone this afternoon as a show of encouragement for the unveiling and launch of the International Board. He also invited Mayor Yang Xiong and I to attend the launch ceremony this evening to offer his congratulations, as well as to express his hope that the International Board be shaped into a marketplace with global influence
...Gold market is an important and integral part of China’s financial market. We are now the largest gold producer, as well as the biggest gold importer and consumer in the world. In recent years, the People’s Bank of China has taken to heart the national policies and guidelines on greater reform and opening-up of our entire financial sector, and made steady improvement to laws and regulations of the gold market, promoted its well-regulated growth and development, and was the main driver in transforming China’s gold market from a market for commodities into a market for financial products; from a market for purely spot trading to a market offering both spot and derivatives trading; and from a domestic market into an international one.
... the International Board will bolster China’s gold market toward greater trading volume and centralization, further highlight the price discovery function of the gold market...
...People’s Bank of China will continue to support the sustainable growth and sound development of the China’s gold market.
Can you imagine Mario Draghi or Janet Yellen attending the opening ceremony of a gold exchange in Frankfurt or New York, let alone speaking about the importance of gold? Fact is, the SGE and the SGEI are both created by the PBOC.
PBOC governor Zhou Xiaochuan speaking at the opening ceremony of the SGEI.
SGE chairman Xu Luode spoke
As a RMB-denominated exchange, with broader participants, larger trading volume, and with the sound integration of onshore and offshore investors and funds, the trading pricing of this Exchange will be promoted gradually to its internationalization, and eventually build a RMB-denominated gold price benchmark with big international influence. We call this pricing mechanism and its corresponding products and physical delivery standard "Shanghai gold". The introduction of the "Shanghai gold" in the gold market will help to improve the price discovery function of the RMB, strengthen the effective linkage between Chinese and international markets, and effectively exert the due role of China in the international market as a number one physical gold consumer, producer, importer.
...Today, the official launch of the International Board has put us on a new historical starting point. Carrying the golden dream of the Chinese people, we will uphold the concepts of innovative development, opening-up and win-win, in our enduring efforts of producing innovative products, improving service and making the Exchange a platform with greater international influence, and ultimately, making due contributions to the construction of Shanghai International Financial Center, to the development of China's gold market, and to the prosperity in the world gold market.
SGE Chairman Xu Luode speaking at the opening ceremony of the SGEI.
The launch of the Shanghai International Gold Exchange. 
Additionally, saturday night the SGE launched a new website. On the English version international visitors are offered to open an SGEI account.   

Chinese Gold Demand

Let us go through the latest data from the SGE. In week 37 (September 8 -12) the amount of physical gold withdrawn from the SGE vaults in the mainland accounted for 41 tonnes, up 4.88 % from a weak earlier. 
As I expected last week the Chinese were happy to buy gold on the dips in week 37 as the price has been tumbling down since July 10. The West has forgotten about gold all together, the Chinese are buying. Year to date there has been 1331 tonnes withdrawn from the SGE vaults (- 16.2 % y/y), annualized 1870 tonnes. My research has indicated SGE withdrawals equal Chinese wholesale demand. I would like to add I use another metric than for example the World Gold Council, as SGE withdrawals contain large quantities of recycled gold. My estimates for 2014 YTD are (based on SGE withdrawals):
net import = 848 tonnes
domestically mined = 321 tonnes
recycled through the SGE = 162 tonnes
total = 1331 tonnes = SGE withdrawals
In my opinion all gold that is withdrawn from the SGE vaults isn't purchased by the PBOC. 
Fast forward one week to September 19; the SGE 1 Kg Au9999 physical contract closed at 0.52 % above London spot; premiums are in an uptrend since July. This underlines strong demand for gold in China, in contrast to what western media report based on gold export from Hong Kong to the mainland, data that has lost its significance as China imports more gold directly, bypassing Hong Kong, since April.    

The Chinese Silver Market

The silver DISCOUNT in China has diminished to 3.24 % compared to London spot. 
Silver at the Shanghai Futures Exchange is trading in backwardation since August 6. 
A couple of weeks ago I started publishing the price of silver in China being actually lower than in London, because prices on all Chinese commodity exchanges include VAT (if a commodity enjoys VAT), which has to be subtracted from the quoted price to calculate discounts or premiums. Since then I got many emails from investors that are confused by this. Why does Bloomberg data suggests Chinese silver is trading at a premium? This is simply because Bloomberg uses the price quoted on the exchanges which includes 17 % VAT.  
September 19, 2014, Bloomberg data showing Shanghai silver is 11.11 % more expensive in China than London.
In a sense Bloomberg is right because if you would import silver bullion from China you are required to pay 17 % VAT, no restitution. However, in the mainland companies, of course, do get VAT restitution. Effectively the State Council designed the Chinese silver market to make its people benefit from lower prices, silver can be mined for $ 9 Oz in China, and protect silver from being exported. Additionally Chinese citizens are being stimulated to buy silver (and gold) as part of their savings. The next pictures show how China's largest bank, ICBC, offers clients to save in precious metals.
ICBC pictures sent to me by my friend Oskar Helling, China Correspondent & Chief Analyst @ Asia8 Group
Koos Jansen


Established rivals may keep Shanghai trade zone's gold exchange in check

By Enoch Yiu
South China Morning Post, Hong Kong
Monday, September 22, 2014
China's launch of an international gold exchange in the Shanghai Free-Trade Zone 11 days ahead of schedule last week may not be much help as it seeks to compete with established gold markets such as New York, London, and Singapore.
While China is the largest physical gold consumer in the world, the financial infrastructure may lag that of Singapore and Hong Kong in handling a gold market.
Gold traders believe the gold market in the free-trade zone would attract domestic and foreign investors to trade, but catching up with the major international players will not come quickly.
There would be a lot of demand for gold trading in the new market," said Andrew Fung, executive director of Hang Seng Bank, with traders keenly interested in arbitrage opportunities between Hong Kong and Shanghai to make money.
"But it would take a long time for Shanghai to catch with other international big players such as New York, London, or Singapore, as these markets are long-established. In addition, the yuan is not yet fully convertible which makes it hard for the Shanghai gold market to become international. It may, however, be able to fight for a role in Asia," Fung said.
Ben Kwong Man-bun, a director of KGI Asia, said the Shanghai international gold exchange would attract mainland and international investors.
"The gold board is supported by the central government in China and this is the first international exchange in the Shanghai Free-Trade Zone. With support from the government, many big mainland companies will trade in the new market, while international investors will also tap this opportunity," Kwong said.
"However, it won't be a successful international market in the near term as it will take time to build up volume. It needs time to catch up with other markets."
Singapore used to be a leading centre for handling gold in the region given its ability to serve both the Chinese and Indian markets. The city-state's position in Southeast Asia was eroded when Dubai emerged and took the Indian business away from Singapore owing to its proximity to India.
Hong Kong's experience also shows it is not easy to launch a gold exchange.
The ill-fated Hong Kong Mercantile Exchange suspended trading in May last year after operating for two years, hounded by a lack of volume in its gold and silver contracts. Its founder, Barry Cheung Chun-yuen, is facing bankruptcy orders applied by his creditors and former employees.
The High Court in April ordered the exchange to be wound up after it failed to repay four creditors rent and salaries totalling nearly HK$100 million.
A gold contract in Hong Kong Exchanges and Clearing has also been plagued by light or no volume since last year.
The most actively exchange-traded gold contracts are on the 103-year-old Chinese Gold & Silver Exchange Society. Many of its end users are jewellery manufacturers or retailers such as Chow Tai Fook or Chow Sang Sang. Its president, Haywood Cheung Tak-hay, believes the Shanghai exchange would give fresh opportunities for the local gold bourse.
"We are in discussions to establish an alliance with the Shanghai Gold Exchange in a bid to achieve cross-border gold trading between Hong Kong and the new international gold market in the Shanghai Free Trade zone," he said.
The gold contracts traded on the international gold board are denominated in yuan and overseas investors can settle with offshore yuan funds. This is because the international gold exchange is located in the free-trade zone where the Chinese government has approved more flexible use of the yuan in the area. The new market will also allow gold imported from overseas to be warehoused in the zone and used for physical delivery of the metal.
The international gold exchange was launched one year after the zone was set up. It had been scheduled to launch on September 29 but was brought forward to Thursday last week, a move some industry players said was due in part to the visit of Premier Li Keqiang to the area.
Helen Wong, deputy chairman of HSBC (China) said the international gold board opened China's gold market to global investors, underscoring the Shanghai free-trade zone's role in bridging onshore and offshore markets, while pricing in yuan would enhance the currency's use in cross-border investment.


UK's Royal Mint begins Internet marketing of gold and silver coins

Royal Mint's Tip for Investors: Go for Gold
By Hannah Furness
The Telegraph, Lonon
Sunday, September 21, 2014
It has provided gold coins for kings, queens, and governments for hundreds of years, but the Royal Mint is opening its services to the public with a new trading website.
It is encouraging members of the public to become gold investors, claiming that the precious metal is now "relatively affordable."
It is hoped that the website will convince everyday investors to buy bullion coins struck in gold or silver directly from the Royal Mint, after previously being put off by the complexity of investing.
A spokesman for the Royal Mint said it wanted to expand the British market.
The website,, aims to constantly updates live prices for gold and silver to help investors pick the best moment to buy.
Customers can have the coins delivered to their home.
They can also opt to store them in "the vault," the Royal Mint's on-site storage facility, which is protected by the Ministry of Defence.
Shane Bissett, its director of commemorative coin and bullion, said: "Where the average consumer may have shunned gold due to perceived complexities, the Royal Mint can help make this option a much more accessible opportunity.
"We want to help expand the bullion market in the UK, particularly as coins offer a relatively affordable introduction, and believe we are well placed to do so.
“The quality of our bullion coins is of an extremely high standard that cannot be rivalled.
"We have been a highly respected and trusted source of coins for kings, queens, and governments for more than a thousand years, and this proud heritage means that we are globally recognised as a reliable source for bullion coins."


Chris Powell talks with Larry Parks on the gold/suppression scheme

very important..

(courtesy GATA/Chris Powell)

Gold price suppression covered fully by GATA secretary on 'The Larry Parks Show'

10:39p ET Sunday, September 21, 2014
Dear Friend of GATA and Gold:
Thanks to the interviewer's knowledge of the issue and willingness to spend time on it, your secretary/treasurer got to cover many aspects of the Western gold price suppression scheme last week on "The Larry Parks Show," broadcast on the Manhattan Neighborhood Network in New York. Parks was so adept because he is executive director of the Foundation for the Advancement of Monetary Education:
Among the aspects discussed were the U.S. government's having authorized itself to rig all markets secretly, the U.S. government documents recently disclosed showing that central banks are trading secretly in all major U.S. futures markets, the other documents GATA has compiled proving the gold price suppression scheme, why the gold mining industry refuses to do anything about it, why the scheme will keep succeeding until gold investors shun "paper gold," and the treason of the central bankers in developing countries.
The interview being so comprehensive, it would be an especially good one for gold investors and anti-imperialists to recommend to government officials, financial journalists, and gold and silver company executives.
The interview is a half hour long and can be viewed at the Vimeo Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Hugo Salinas Price: The tribute the world pays to the empire

2:10p ET Sunday, September 21, 2014
Dear Friend of GATA and Gold:
In his latest commentary Hugo Salinas Price, president of the Mexican Civic Association for Silver, explains how foreign exchange surpluses kept in the bonds of countries that issue reserve currencies are actually the tax or tribute lesser countries pay to the empires that dominate them. Countries that hold such bonds in exchange for their exports have not really been paid and never will be paid, Salinas Price writes. In the old days, he adds, exporting nations could be paid by exchanging fiat currencies for gold. His commentary is headlined "The Tribute the World Pays to the Empire" and it's posted at the civic association's Internet site,, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Money printing will overwhelm any debt deflation, Embry tells KWN

Submitted by cpowell on 11:13AM ET Monday, September 22, 2014. Section: Daily Dispatches
2:12p ET Monday, September 22, 2014
Dear Friend of GATA and Gold:

There won't be any debt deflation in the United States, Sprott Asset Management's John Embry tells King World News today, because the central bank will print money to infinity to avoid it and end up instead with hyperinflation. Embry also remarks about the pounding gold and silver keep getting at illiquid moments in the markets. His interview is excerpted at the KWN blog here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

You do not want to miss reading the latest Bill Holter commentary:

(courtesy Bill Holter/Miles Franklin)

Cjinese Checkmate

I had planned to write a piece entitled "Gold and silver can never go up" but will defer that until tomorrow.  Don't worry, it's not what you are thinking I assure you.  Instead, I will expand on my "Kill Switch" theory a bit and for a lack of better term call it "checkmate!".
  Before getting into this I want you to understand the relationship between the U.S. and China... from China's point of view.  They view us as an adversary, they always have and always will.  Sure they will smile and do business with us but to what end?  The answer of course is "theirs".  I have posited in the past that China has been absolutely brilliant in playing our "debt game" over the last 10-15+ years.  They used the American consumer as end sales for their production of goods.  This created cash flow and allowed them to build out their production and manufacturing base at a rate much faster than any civilization in history.
They also built "ghost cities" and all of the infrastructure that goes with it.  Had they not played the "debt game" this could never have been done.  Remember, earlier this year China made crystal clear their stance on derivatives.  They announced that should they choose, they will default on any derivative at their prerogative... because they know.  They know the derivatives game is a naked sham and "product" does not for the most part exist behind many contracts.  I believed and now believe more strongly than ever, China played the game knowing full well the debt would collapse.  They also created new infrastructure and manufacturing capacity while ours is old and in decay.  They looked 100+ years into the future while we were still looking at the past.
  That said, I believe China has set up via incredible chess management a trap that even the best fictional writers would envy.  First, they have purchased and amassed well over $3 trillion worth of U.S. dollar reserves and Treasury securities.  This position alone makes them our largest banker and puts them in a position of power over us.  It has been speculated the Chinese could just start dumping Treasuries and dollars to short circuit our financial system and thus the economy.  I don't think so ...all by itself.  Yes this would probably put a serious wrench in our system but what if it didn't completely do the job?  What if the Fed stepped up (they will) and magically bought everything China sold?  The Fed has already quadrupled their balance sheet in 6 years, what would another doubling be?  What would stop the Fed from simply bidding for anything and everything being sold?  They've pretty much already done this with the various "QE's" so what is another $3 trillion or so?  My point is this, it could be done by the Fed and China knows this.
  China has also accumulated an absolute minimum of 6,000 tons of gold since 2008 and more than likely have 10,000+ tons which would make them the largest holder in the world even if our 8,133 tons exists...which it does not.  This speculation does not even include "legacy gold" which was mined and accumulated over 100's if not several thousand years.  Their total very well could be in the 15-20,000 ton range but let's assume they only have 6,000 tons.  This amount makes them number one in the world no matter what the Fed, the Treasury or the Wizard of Oz has to say.
  Next is the silver side of it.  I have told you my theory on why open interest would rise as the price fell.  Some are saying that each time the open interest rose the price then followed and got killed.  This is true but "it's different this time".  I know "scary words" but it really is different this time because in the past, open interest rose ...along with price...and sentiment ...into what we'll call "peaking action".  Now, open interest has steadily risen while price and sentiment were ground into the dirt, there is no "froth" whatsoever.  In fact, a better description would be "despair".  So it really is different and the longs must also be very different entities because they have stood tall and increased their positions while taking $ billions in losses, who could or would do this? 
  The answer of course are the Chinese.  They "could" withstand major losses because they have the money to do so.  They also look very very long term down the road and couldn't care less if some margin clerk hits them over the head with daily calls, they just fund them and know the Sun will rise tomorrow.  The situation in COMEX silver has gotten very lopsided as the open interest for Dec. silver is a staggering 700 million ounces while the registered inventory is only 60 million.  Obviously this is a very big potential problem.
  The Chinese also just opened their physical exchange Friday only to see gold hit for another few dollars and silver attacked for .50 cents.  The gold community is scared witless because the usual suspects have all turned up as traders on the Shanghai exchange.  I would like to point out that the Chinese do not put up with "fraud" very well.  In fact, they just executed a billionaire 2 months or so back because he was involved in fraud.  How many Americans other than Stanford and Madoff got jail time not to mention being executed over the fraud involved leading up to 2007 and '08?  None.  Nobody.  Can you say "Jon Corzine"? 
  Also of note is the inventory of silver now held in Shanghai.  What was nearly 1,200 tons a year ago is now a measly 92 tons.  This for round numbers works out to only $50 million.  $50 million?  I know several individuals personally who could write a check of this amount.  Unless we see metal entering their vault very shortly an arbitrage is going to begin in earnest.  Maybe I should just call it a transfer but what will happen logically is a search at other vaults will begin.  The LBMA, COMEX, and SLV are obviously the most visible and logical places.  If demand from Shanghai, Singapore, Hong Kong or even Dubai cleans out THEIR inventories then "no worries", it can be sourced at these locations...or can it?  And if it can, for how long?
  As I started out with, China maybe could put some pretty serious hurt on us by dumping Treasuries but as in the "Art of War" by Sun Tzu, they will not go off half cocked and everything must be fully planned down to the minute details.  Putting this all together I believe China has engineered a masterpiece.  They are our banker and we owe them $ trillions.  China has built out their manufacturing base and productive capacity unlike any civilization ever.  They have accumulated massive amounts of gold which could have ONLY come from Western vaults "their imports" were "our depletion" and came at our expense.  I believe they also have their finger on the trigger of the silver market by cornering the December contract which will now be followed by their own "pricing mechanism" of a physical exchange.  What will be the "real price" of silver if a physical exchange runs out of silver?  I believe COMEX will ultimately be embarrassed by non delivery and the exposure of massive fraud, this will be just one of the punishments China send West.
  While I'm at it I might as well add a "cherry on top" for appearance sakes.  What just happened this pastFriday?  Well, Alibaba of course.  Alibaba raised nearly $22 billion in capital which valued the entire company at $168 billion.  It has since risen in value to that equal to Walmart ...only a handful of U.S. companies are larger.  Is Alibaba really worth this much?  No matter opinion, the Chinese "sold" at what they believed to be a good price and sucked up $22 billion worth of capital in the process.
  You can say what you want, say "it'll never happen" or whatever.  The chess pieces are on the table and our "opponent" is not in this for bragging rights or loose change, they are in it for all the marbles!  China is our biggest banker and supplier of capital, our biggest supplier of consumer goods, they have been the biggest hoarder of gold and I hypothesize the "mystery owner" of huge positions in Dec. silver.  Every move they have publicly made for over 2 years has been dollar negative and yuan/trade positive.  They have built cities, infrastructure, plant and equipment which is clearly beyond current needs for capacity.  China has done deals with our friends and foes alike, they have supported geopolitically nearly anything and everything contrary to public U.S. views and policy.  They are supporting Mr. Putin financially while the U.S. tries in vain to punish him financially.  Would, could, the U.S. place "sanctions" on China for breaking the "sanctions" on Russia?  I know, that was a bad joke but it's a real question. 
  Before finishing let's not forget about the "cherry on top", did China just dump the largest IPO in U.S. history at the top of the market?  A market, financial system and economy that I believe they are now in a position to destroy at the flip of a switch and the timing of their desire?  Like I said, laugh at this, laugh at me, do whatever you'd like, all I am doing is pointing out the very obvious.  No country or nation should or would ever put their adversary in a position to destroy them, we have allowed it and even encouraged it.  We are broke, we depend on our adversary for funding, trade, we have given them all of our real money, what's next?  Trading them Manhattan for a few trinkets?  The danger to their plan in my opinion is this, just as it is dangerous to corner a wild animal it is more dangerous to bankrupt and financially corner a nuclear power.  Regards,  Bill Holter

 Early Friday morning trading from Europe/Asia

1. Stocks lower  on  Asian bourses with the higher yen values   to 109.03

Nikkei down 115 points or 0.71%
3. Europe stocks down /Euro down USA dollar index up at 84.72.  Chinese bourse Shanghai  down as  the yen strengthens  in value  to 6.14108 per usa dollar/yuan.
3b Japan 10 year yield at .54%/Japanese yen vs usa cross now at 109.03/
3c  Nikkei still above 14,000
3d  UK/Scottish vote no  markets all in the green
3fOil:  WTI  92.10 and Brent: 97.70 
3g/ Gold down/yen  up;;  yen above 109 to the dollar/
3h  All European 2 yr bond yields break below zero!!!
3i/ Themes are the low LTRO uptake in Europe and therefore need for full QE
3k Worries on global deflation/China slowing/G20 states financial risks on global economy.


3k Gold at $1214.00 dollars/ Silver: $17.73

4.  USA 10 yr treasury bond at 2.57% early this morning.

5. Details Ransquawk/Bloomberg/Deutche bank/Jim Reid

(courtesy zero hedge)

US Equity Futures Slide Under 2000, Recover Losses After USDJPY Tractor Beam Reactivated

Tyler Durden's picture

While some were wondering if last night's sudden, commodity-liquidation driven selloff would last, most were not, expecting that the perfectly predictable levitation in the USDJPY around a round "tractor beam" number would provide a floor under the market .Sure enough, starting around midnight eastern, the USDJPY BTFDers emerged, oblivious to comments from former BOJ deputy governor Iwata who late last night said the obvious, and what we have been saying since January 2013, namely that a weak yen puts Japan at recession risk, and that a USDJPY in the 90-100 range reflects Japan fundamentals. And, as expected, the 109 level is where the algos have hone in today as a strange FX attractor, which also means that ES has reverse sharper overnight losses and was down just 7 points at last check even as the poundage in the commodity sector continues over rising fears of a sharp Chinese slowdown driven by its imploding housing sector (most recently observed here) without an offsetting stimulus program, following several comments by high-ranked Chinese individuals who poured cold water on any hopes of an imminent Chinese mega-QE or even modest rate cut.
And speaking of pouring cold water on easing plans, the ECB did just that, when several of its governing council members, but most notably Ignazio Visco, said that the ECB may notdo further easing after all because it had managed to punk the market once again, and the EURUSD is low enough to where the whole point of QE is now moot. In other words, the market once again discounted action by the ECB... which now will never come. It remains to be seen if the central bank FX traders (which as we now know are openly trading via the CME) will allow the EURUSD to return to its pre "discounting" levels as the ECB returns to full "jawbone Off" mode.
European, Asian stocks fall with oil, metals after China declines to make policy changes in response to slower growth. Miners among largest underperformers, iron ore prices lower. U.S. equity index futures decline. Yields on 10-year U.K. gilts, German bunds fall. Tesco leads FTSE 100 declines after saying it overstated 1H profit by GBP250m.
Australian stocks (-1.3%) erased all YTD gains and fell over 1.5% in their sharpest decline since mid-March as the USD strength and subsequent iron ore and gold weakness has weighed heavily on Australian mining stocks. Over in China, the renewed growth concerns sent the Hang Seng Index (-1.4%) lower, hitting its lowest level since late July at the midday break.  Asian stocks fall with Shanghai Composite underperforming and Sensex, NZX outperforming. MSCI Asia Pacific down 0.8% to 143.35. Nikkei 225 down 0.7%, Hang Seng down 1.4%, Kospi down 0.7%, Shanghai Composite down 1.7%, ASX down 1.3%, Sensex up 0.2%. 0 out of 10 sectors rise with telecom, infotech, materials underperforming.
European equity markets trade softer, with the FTSE-100 underperforming as Tesco shares slumped as much as 12% after finding accounting irregularities on Friday that have trimmed their H1 profit guidance by GBP 250mln. As such, the UK’s largest retailer has erased the entirety of the gains seen over the past eleven years. Elsewhere, mining stocks fell sharply from the open, as the slide in commodities prices overnight hit profit margin expectations. Looking ahead, US stock futures are indicating a lower open, with the e-Mini S&P below the 2,000 mark as attention shifts to Alibaba’s second day of trading and preliminary sales figures for Apple’s newest iPhone 6 and 6+. 6 out of 19 Stoxx 600 sectors rise; basic resources, retail underperform; utilities, insurance outperform. 32.5% of Stoxx 600 members gain, 64.2% decline. Eurostoxx 50 -0.1%, FTSE 100 -0.5%, CAC 40 +0%, DAX -0.2%,
Looking at the day ahead and beyond, US existing home sales and eurp-area consumer confidence for September are the main release for today although we’ll also pay some attention to any soundbites from the Fed’s Dudley at a Bloomberg summit today. Draghi will also speak before the EU parliament in Brussels at 3pm local time. Then we have PMI Tuesday with the release of the Markit/HSBC PMI manufacturing September readings for China and the Eurozone. The former should provide us with further clues in light of the recent downward momentum in China data flow. On Wednesday, we’ll get US new home sales, Italian consumer confidence, and the German IFO report. The US durable goods data in August will be a highlight on Thursday on top of the usual weekly jobless claims report. We will wrap up the week on Friday with the third revision to the Q2 US GDP data where consensus is looking for a small upward revision. On top of all, this week also sees a handful of Fedspeak (Kocherlakota, Bullard, Powell, George, Mester, Evans and Lockhart) right on the heels of the FOMC meeting last week so we should get more Fed-related news flow in the coming days.
Market Wrap
  • S&P 500 futures down 0.4% to 1994.9
  • Stoxx 600 down 0.3% to 347.6
  • US 10Yr yield down 1bps to 2.57%
  • German 10Yr yield down 1bps to 1.04%
  • MSCI Asia Pacific down 0.7% to 143.4
  • Gold spot down 0% to $1215.3/oz
Bulletin Headline Summary from RanSquawk and Bloomberg:
  • Commodities slide as markets nervously look ahead to tomorrow’s preliminary Chinese HSBC Manufacturing PMI after the country’s finance minister warned growth risks remain to the downside
  • EUR regains some poise after ECB’s Visco, Noyer and Coeure downplayed the prospect of QE at the weekend’s G20 summit in Cairns, Australia
  • Focus shifts to an appearance from ECB’s Draghi at EU Parliament today at 1400BST/0800CDT
  • Treasury yields drop overnight as investors prepare for $106b in U.S. auctions this week; 2Y closed Friday at highest yield since May 2011, 30Y at its lowest level in a week after FOMC meeting offered a dovish statement and more hawkish “dots.”
  • Shares fell around the world and commodities tumbled to a five-year low amid speculation China will accept slower growth after Finance Minister Lou Jiwei said there won’t be major changes in policy in response to individual economic indicators
  • U.S. dollar has climbed to its highest level since 2010 against a broad range of currencies, transforming losses into gains for most foreign holders, who own $6t Treasuries
  • Alibaba Group Holding Ltd.’s initial public offering became the biggest ever at $25b, after bankers exercised an option to boost the deal size by 15% on strong demand, a person familiar with the matter said
  • Hedge funds extended this year’s longest exit from bullish gold bets as slumping prices and investor outflows since June erased $7.16b from the value of exchange-traded funds backed by the metal
  • G-20 finance chiefs and central bankers said low interest  rates could lead to a potential increase in financial-market risk, as major economies rely on monetary stimulus to bolster uneven growth
  • The World Bank warned that the economic costs of the Ebola outbreak in West Africa will escalate to “catastrophic” proportions if the virus spreads
  • Sovereign yields mostly lower except for Greece and Spain. Asian, European stocks drop, U.S. equity-index futures fall. WTI crude, gold and copper fall
US Economic Data
  • 8:30am: Chicago Fed National Activity Index, Aug., est. 33 (prior 0.39)
  • 10:00am: Existing Home Sales, Aug., est. 5.20m (prior 5.15m)
  • Existing Home Sales m/m, Aug., est. 1% (prior 2.4%) Central Banks
  • 9:00am: ECB’s Draghi speaks in Brussels
  • 10:05am: Fed’s Dudley speaks in New York
  • 7:30pm: Fed’s Kocherlakota speaks in Marquette, Mich.
Australian stocks (-1.3%) erased all YTD gains and fell over 1.5% in their sharpest decline since mid-March as the USD strength and subsequent iron ore and gold weakness has weighed heavily on Australian mining stocks. Over in China, the renewed growth concerns sent the Hang Seng Index (-1.4%) lower, hitting its lowest level since late July at the midday break.
Bund futures gapped higher at the open, taking the lead from T-notes overnight, who rallied alongside softer Asia-Pacific stocks and lower US equity futures. The French/German spread has tightened by approx. 1.5bps (4.5% equivalent) after the French sovereign rating was affirmed at Aa1 at Moody’s on Friday, despite speculation that the government could suffer a downgrade. The Spanish bond market is the worst performer of the day as reports of domestic accounts selling lift Spain’s 10yr yields towards 2.25%.
European equity markets trade softer, with the FTSE-100 underperforming as Tesco shares slumped as much as 12% after finding accounting irregularities on Friday that have trimmed their H1 profit guidance by GBP 250mln. As such, the UK’s largest retailer has erased the entirety of the gains seen over the past eleven years. Elsewhere, mining stocks fell sharply from the open, as the slide in commodities prices overnight hit profit margin expectations. Looking ahead, US stock futures are indicating a lower open, with the e-Mini S&P below the 2,000 mark as attention shifts to Alibaba’s second day of trading and preliminary sales figures for Apple’s newest iPhone 6 and 6+.
AUD and CAD underperform as the downside in commodities strikes currencies, however NZD slightly outperforms as NZ PM Key has secured the first government parliamentary majority in just under two decades at the weekend’s elections. His pro-fiscal prudence stance and history of infrastructure rejuvenation has buoyed the currency today, with NZD/AUD now targeting the 100DMA at 0.9158. Elsewhere, EUR trades stronger against the USD as various ECB members including Noyer, Visco and Coeure highlighted the weak efficacy of outright QE at the weekend’s G20 conference.
Commodities fell from the open, as renewed issues surrounding Chinese growth emerged after the Chinese finance minister Lou highlighted the downside risks to Chinese growth ahead of tomorrow’s preliminary HSBC Manufacturing PMI (Exp. 50.0, prev. 50.2). This, allied with renewed focus on Fed tightening has weighed on metals across the globe, with Dalian iron ore futures printing contract lows for the second consecutive session and hitting five-year generic contract lows as silver slides to 2010’s levels. Gold still remains just above the YTD lows but has traded within USD 15.00 of the key USD 1,200/oz support, last convincingly broken in late December.
* * *
DB's Jim Reid concludes the overnight Recap
After a couple of weeks of focusing a lot of attention on the FOMC and the Scotland vote, markets will no doubt move on and start finding something else to think about this week. The themes bubbling under the surface at the moment are that the low TLTRO take up might encourage full European QE, that global inflation is again edging lower and that China's economy looks to be slowing.
The G20 meeting in Australia was the main source of weekend headlines. The world’s finance ministers and central bankers once again reaffirmed their commitments on global economic growth with investment seemingly a key theme this time. Indeed the leaders agreed that investment is critical to boost demand and collectively have agreed to a Global infrastructure initiative to increase quality investments. In implementing this initiative, leaders have reaffirmed support to quality public and private investments which will include the optimal use of government’s balance sheet while maintaining appropriate risk controls. They hope this will eventually facilitate the normalisation of monetary policy in advanced economies. The communiqué suggested that they were mindful of the potential build up of financial market risk given the environment of low interest rates and low asset price vol. One has to be guarded when reading such statements as the practice of implementing such initiatives has proved to be much more challenging than the promise of them since the GFC.
In synch with this infrastructure investment theme, the former US Treasury Secretary Larry Summers was on a Fox programme on Sunday urging for a major plan to boost the US economic growth by more infrastructure investments. He is of the view that government borrowing at these Treasury yields now for the renewal of ageing infrastructure would be beneficial in the long run.
In terms of markets, Dollar strength has been one of the key themes over the last few months although we seem to be taking a breather overnight. Indeed that and a rebound in JPY seems to be adding some negative pressure on Japanese equities overnight. The Nikkei is around 0.8% lower as we type although relatively speaking still outperforming a very weak session in China. The Shanghai Composite, HSCEI and Hang Seng indices are -1.4%, -1.8% and -1.3% lower. In reality we’ve seen a run of very weak Chinese economic data of late which for August included a meaningful drop in the growth rate of investment and industrial production (which hit a post-2008 low) and a further drop in property sales (which contracted at a rate of 9% YoY). In the same month we learnt that China’s imports contracted -2.4% YoY leaving the 6m moving average rate at its lowest level since the GFC and subsequent global slowdown. Chinese iron ore import prices have also fallen to lows also not seen since 2009 on the back of this.
Clearly one has to be careful not to call a trend on the back of a month’s worth of data (especially given that this is China), however two points make these recent developments worrying. First the fact data has been so bad across a range of statistics (including power consumption) suggests a very real slowdown in growth. Second the Chinese economy is breaking out of a pattern it has followed each year for the past few, with a weak start to the year prompting government growth policies which in turn helped growth to pick up. This year the government once again announced policies to rev up growth after a slow start to the year however their positive effects appear to have been more short lived (lasting just a month or so) and it looks like major stimulus is not on the cards right now. At the G20 meeting China’s finance minister Lou Jiwei said that the country faces downward pressure and reiterated that there will not be any major policy change in response to individual economic indicators. There was news that Nanjing has lifted home purchase restriction over the weekend in a latest effort by local governments to stimulate housing demand. So China could be a story to watch in the coming weeks.
Back to markets, Asian IG spreads are 1-2bp tighter across key benchmarks which pretty much took the lead from the fairly firm US session on Friday. Indeed the CDX IG was nearly 1bp tighter which was a relative outperformer against a softer finish to the week in equities. The S&P 500 and NASDAQ were both modestly lower on the day which also saw further gains in Treasuries. The 10yr UST yield finished Friday 4bps lower and is another 1-2bp lower in Asia overnight at 2.56%.
Looking at the day ahead and beyond, US existing home sales and eurp-area consumer confidence for September are the main release for today although we’ll also pay some attention to any soundbites from the Fed’s Dudley at a Bloomberg summit today. Draghi will also speak before the EU parliament in Brussels at 3pm local time. Then we have PMI Tuesday with the release of the Markit/HSBC PMI manufacturing September readings for China and the Eurozone. The former should provide us with further clues in light of the recent downward momentum in China data flow. On Wednesday, we’ll get US new home sales, Italian consumer confidence, and the German IFO report. The US durable goods data in August will be a highlight on Thursday on top of the usual weekly jobless claims report. We will wrap up the week on Friday with the third revision to the Q2 US GDP data where consensus is looking for a small upward revision. On top of all, this week also sees a handful of Fedspeak (Kocherlakota, Bullard, Powell, George, Mester, Evans and Lockhart) right on the heels of the FOMC meeting last week so we should get more Fed-related news flow in the coming days.


The following is a huge story as China is slamming the brakes on its economy:

(courtesy zero hedge)

China's Economy Slams On The Brakes: 30% Of Coal Miners Unable To Pay Employees On Time

Tyler Durden's picture

The thing about any debt-funded Ponzi scheme is that it is like a great white: it has to keep moving, or else it dies. The problem with China is that for the past decade, in order to fund the most rapid period of industrialization and modernization in history, it has been moving at an absolutely torrid pace.  And by moving we mean creating credit, which always takes us back to our favorite chart comparing the US and Chinese financial systems, that of total bank assets in the two countries. Spot which one is poised for a horrendous crash the second credit creation slows down from the breakneck pace of $3.5 trillion in inside money creation per year...

Still, what China has successfully done in recent years, is maintaining the facade that all is well in the economy, despite ever sharper gyrations in its credit markets, gyrations which have finally put enough pressure on the economy to send China's core driver of economic growth, fixed investment which accounts for over 50% of GDP, sharply lower, something we explained a month ago when we observed that the Chinese commodity crash is not only continuing but accelerating at a record pace, and in fact as we reported overnight, Singapore iron ore futures just tumbled to a record low.
And where this slowdown was seen best of all, is in China's critical coal industry, critical because not only is China the world's largest consumer of coal, not only does coal provide the bulk of China's electric production, generating nearly 70% of the country's electricity, or because the industry employs so many workers, but because it is to many the best harbinger of what else is taking place within China's resource and commodity space. And what is taking place is very bad, as we showed in early September:

Maybe most importantly, the Chinese coal industry is one of the places where the country's shadow banking funding structures, including wealth products and trusts, is most pervasive.
Also, keep in mind that as a result of Beijing folding instead of holding bankrupt companies to task, it has simply delayed the inevitable. Because this is what BofA said back in February:
We believe that during April to July the market may see many trust products threatening to default, especially those related to coal mines. By our estimate, the first real default most likely could happen in May with a Sichuan lead/zinc trust product worth Rmb140mn. This is because the product is relatively small (so the government may use it as a test case), the underlying asset is not attractive (so little chance of 3rd parties taking it over) and we also have heard very little on parties involved trying to work things out. Whether this will trigger an avalanche of future trust defaults remains to be seen and this presents a key risk to the market in our opinion.

... it’s still possible that many of the upcoming cases in Apr-July may get worked out one way or the other. Nevertheless, as we believe that many of the underlying assets of the trust products are insolvent, it’s a matter of time that many products will ultimately default, in our view. Various bail-outs will only delay the inevitable.
Of course, nothing was worked out, and only yet another record credit injection in Q2 prevented a credit crunch that could and would have rivaled what happened in June of 2013 when overnight repos soared to 25%.
Instead, what has happened, is that the fundamentals in the coal space have gotten even worse, the cash flow is even weaker, if it exists in the first place, while the funding mechanisms are more stretched than ever.
But the one place where the feces are finally hitting the fan, is in the companies themselves, as kicking the can for the past year has done nothing to resolve the underlying issues. And as a result, here is what is going on in China, courtesy of SCMP:
Wang Xianzheng, the chairman of the China National Coal Association, told an annual meeting of the Coal Industry Committee of Technology at the weekend that more than 70 per cent of the country’s coal miners were losing money and had cut salaries.
Translated: widespread wage deflation, in a country where M2 is expected to grow at a double digit pace...
And the really bad news:
About 30 per cent of the industry’s miners had not been able to pay their employees on time and a further 20 per cent had cut salaries by more than 10 per cent, the Economic Information Daily, a Xinhua-affiliated newspaper, reported on Monday.

Due to weak economic conditions, coal output fell 1.44 per cent year on year in the first eight months of this year to 2.52 billion tonnes, while sales dropped 1.62 per cent to 2.4 billion tonnes, the association’s figures show.

Coal inventory last month stayed above 300 million tonnes for a 33rd month.


China’s main coal ports recorded an 8.3 per cent year-on-year decline in inventory at the end of last month, and the national import volume fell 27.4 per cent year on year to 18.86 million tonnes, the association’s figures showed. In July, Wang called on coal-mining firms to reduce output by 10 per cent. Leading listed miner China Shenhua Group has cut its output target for this year by 4 per cent, while rival China Coal Energy has trimmed its target by 10 per cent.
Clearly, they did not.
And the result is that nearly a third of the coal industry doesn't know if and when it will get paid, while over two thirds are on the verge of being fired. We are talking millions and millions of workers. Correction: millions of soon to be angry workers. And if those angry workers make their way to Beijing or Shanghai, what China's SHIBOR, repo rate, or any other made up financial metric is, will be the least of anybody's worries.


 We are now beginning to see the destruction of the USA Petrodollar and in its place:

the Petro-yuan

(courtesy zero hedge)

The PetroYuan Cometh: China Docks Navy Destroyer In Iran's Strait Of Hormuz Port

Tyler Durden's picture

Since China fired its first 'official' shot across the Petrodollar bow a year ago, there has been an increasing groundswell of de-dollarization across the world's energy trade (despite Washington's exclamations of 'isolated' non-dollar transactors). The rise of the PetroYuan has not been far from our headlines in the last year, with China increasingly leveraging its rise as an economic power and as the most important incremental market for hydrocarbon exporters, in the Persian Gulf and the former Soviet Union, to circumscribe dollar dominance in global energy - with potentially profound ramifications for America’s strategic position. And now, as AP reports, for the first time in history, China has docked a Navy Destroyer in the Southern Iranian port of Bandar-Abbas - right across the Straits of Hormuz from 'US stronghold-for-now' Bahrain and UAE.

The rise of the PetroYuan has not been far from our headlines in the last year:

China Fires Shot Across Petrodollar Bow: Shanghai Futures Exchange May Price Crude Oil Futures In Yuan

Guest Post: From PetroDollar To PetroYuan – The Coming Proxy Wars

The Rise Of The Petroyuan And The Slow Erosion Of Dollar Hegemony

And now, as AP reports, for the first time in history, China has docked a Navy Destroyer in a Southern Iranian port of Bandar-Abbas - right across the Straits of Hormuz from 'US stronghold-for-now' Bahrain and UAE.
Adm. Hossein Azad, naval base chief in the southern port of Bandar Abbas, said the four-day visit that began Saturday saw the two navies sharing expertise in the field of marine rescue.

"On the last day of their visit while leaving Iran, the Chinese warships will stage a joint drill in line with mutual collaboration, and exchange of marine and technical information particularly in the field of aid and rescue," said Azad.

The report said the destroyer was accompanied by a logistics ship, and that both were on their way to the Gulf of Aden as a part of an international mission to combat piracy.


Last year a Russian naval group docked in the same port on its way back from a Pacific Ocean mission.

The move is also seen part of off efforts by Iran to strike a balance among foreign navies present in the area near the strategic Strait of Hormuz, the passageway at the mouth of the Persian Gulf through which a fifth of the world's oil is shipped.
U.S. Navy's 5th Fleet is based in nearby Bahrain, on the southern coast of the Gulf.
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Here's why it matters...

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History and logic caution that current practices are not set in stone. With the rise of the “petroyuan,” movement towards a less dollar-centric currency regime in international energy markets—with potentially serious implications for the dollar’s broader standing—is already underway.

As China has emerged as a major player on the global energy scene, it has also embarked on an extended campaign to internationalise its currency. A rising share of China’s external trade is being denominated and settled in renminbi; issuance of renminbi-denominated financial instruments is growing. China is pursuing a protracted process of capital account liberalisation essential to full renminbi internationalisation, and is allowing more exchange rate flexibility for the yuan. The People’s Bank of China (PBOC) now has swap arrangements with over thirty other central banks—meaning that renminbi already effectively functions as a reserve currency.

Chinese policymakers appreciate the “advantages of incumbency” the dollar enjoys; their aim is not for renminbi to replace dollars, but to position the yuan alongside the greenback as a transactional and reserve currency. Besides economic benefits (e.g., lowering Chinese businesses’ foreign exchange costs), Beijing wants—for strategic reasons—to slow further growth of its enormous dollar reserves. China has watched America’s increasing propensity to cut off countries from the U.S. financial system as a foreign policy tool, and worries about Washington trying to leverage it this way; renminbi internationalisation can mitigate such vulnerability. More broadly, Beijing understands the importance of dollar dominance to American power; by chipping away at it, China can contain excessive U.S. unilateralism.     

China has long incorporated financial instruments into its efforts to access foreign hydrocarbons. Now Beijing wants major energy producers to accept renminbi as a transactional currency—including to settle Chinese hydrocarbon purchases—and incorporate renminbi in their central bank reserves. Producers have reason to be receptive. China is, for the vastly foreseeable future, the main incremental market for hydrocarbon producers in the Persian Gulf and former Soviet Union. Widespread expectations of long-term yuan appreciation make accumulating renminbi reserves a “no brainer” in terms of portfolio diversification. And, as America is increasingly viewed as a hegemon in relative decline, China is seen as the preeminent rising power. Even for Gulf Arab states long reliant on Washington as their ultimate security guarantor, this makes closer ties to Beijing an imperative strategic hedge. For Russia, deteriorating relations with the United States impel deeper cooperation with China, against what both Moscow and Beijing consider a declining, yet still dangerously flailing and over-reactive, America.

For several years, China has paid for some of its oil imports from Iran with renminbi; in 2012, the PBOC and the UAE Central Bank set up a $5.5 billion currency swap, setting the stage for settling Chinese oil imports from Abu Dhabi in renminbi—an important expansion of petroyuan use in the Persian Gulf. The $400 billion Sino-Russian gas deal that was concluded this year apparently provides for settling Chinese purchases of Russian gas in renminbi; if fully realised, this would mean an appreciable role for renminbi in transnational gas transactions.
Looking ahead, use of renminbi to settle international hydrocarbon sales will surely increase, accelerating the decline of American influence in key energy-producing regions. It will also make it marginally harder for Washington to finance what China and other rising powers consider overly interventionist foreign policies—a prospect America’s political class has hardly begun to ponder.


As Bill Holter explains, many are moving away from the dollar.  Today the Russian Financial MInister calls for a shift away from USA treasuries:

(courtesy zero hedge)

Russia FinMin Calls For Shift Away From US Treasurys Into BRIC Bonds, Settlement In Non-Dollar Currencies

Tyler Durden's picture

It is no secret that Russia has had enough of the Petrodollar, and in light of ongoing western sanctions - which many view not so much as a reaction to events in Ukraine bur merely as an attempt to halt the Russian revolution against the Petrodollar status quo, crushing its economy before the momentum grows and more countries join Moscow - is constantly thinking of ways it can ditch the dollar as a medium of exchange as fast as possible. The problem is that when it comes to retaliating against the West, Russia - short of declaring an embargo on USD payments for its commodities - has little control over what currency its western trading partners will pay in. So instead it is focusing on its net exporting peers, aka the BRICS, with whom as previously reported, Russia had launched a "bank" alternative to the IMF when it comes to backstop and bailout funding, one that avoids reliance on the SDR, the USD, and on Western empathy.
It is the same BRICs that, Russia's Prime Minister Dmitry Medvedev, told Rossiya TV in an interview earlier today, should conduct transactions in national currencies, bypassing cross-rates with the US Dollar, adding that "we can easily make mutual settlements directly," and the mechanism should be beneficial to both sides of transactions.
And if it wasn't clear by now, Russia pivot away from the west and toward China is pretty much complete. Medvedev also said that "our collaboration with China is of strategic importance. We have great, brilliant political contacts, we have excellent economic relations. [China] is our strategic partner, and we are interested in expanding the volume of cooperation. We are not afraid of collaborating because we are confident that this is equal, friendly and mutually beneficial collaboration in all areas."
Meanwhile, regarding escalating Western tensions, the PM said that sanctions have created a bad situation for Russian banks on financial markets, all sources of liquidity are frozen. "We regard this as a senseless and ugly decision toward Russia, but we’ll manage without it." So does that mean that China will step in to provide the required FX reserves as Russia minimizes its USD exposure? Perhaps, but not entirely: Medvedev did add that "Asia, other markets “unlikely fully” to compensate for frozen European financing."
The PM also said that Russia passed through similar squeeze in 2008-2009 and can manage with central bank resources, adding that Europe is still important market for Russia, if EU members "make no absurd decisions to squeeze us out of this market, we’ll stay there, it’s interesting for us."
But while Medvedev was the good cop today, it was Russia's finance minister Anton Siluanov who was the designated "bad guy", and as the WSJ reportedRussia is considering diversifying its debt portfolio away from countries that have imposed sanctions on Moscow and into the papers of its BRICS partners.
Speaking on the sidelines of an annual investment forum in the Black Sea town of Sochi, Mr. Siluanov said the Finance Ministry wants to diversify its investment basket, and is looking for higher yields without too much risks. He said the ministry will consider buying papers issued by Brazil, India, China and South Africa, which along with Russia are known collectively as the Brics countries.

"[We would like to] walk away from investing in papers of the countries that impose sanctions against us," Mr. Siluanov said, adding that the reshuffle would be carried out gradually. He didn't elaborate on when the first purchases of Brics debt may take place.
The good news for the US, now that Russia appears set on either rapidly or slowly selling off its US Treasury exposure, is that Kremlin has possession of only $115 billion in US paper, which happens to be more than the $100 billion it reported in May when the first shock of a Russian bond sell off hit the market, and both of which happen to be amounts the Fed can easily monetize into its record big balance sheet (which, taper or no taper, just grew by $28 billion in the past week alone) in just over a month.
But at the end of the day it is not what Russia does, but what its other BRIC peers and US Treasury holders do. Because while Moscow may be in possession of just over $114.5 billion in US paper, China, Brazil and India share among them some $1.6 trillion in US Treasurys, better known as "leverage" in every sense of the word, or an amount that not even the Fed could monetize on short notice without sending a massive shockwave through the global capital markets.
In other words, while the US pushes Russia hard, it may be careful not to push it too hard, and in the process start an avalanche that leads to a BRIC bond avalanche, which may well be one possible endgame as the world is forced to transition from the US Dollar as a reserve currency in the coming years.
Never gonna happen?
Considering that none other than Obama's own former chief economic advisor, Jared Bernstein, is advocating dropping the USD as the global reserve currencywe would be careful with using the word "never" in this specific case...

Jim Willie: The Crash Heard Round the World- Saudis to Reject USD for Oil Payments

Ukraine Introduces Capital Controls

First Germany, Now France Folds On Syrian Airstrikes

and now for your major data points for today:

Portuguese 10 yr bond yield:  3.17 par in basis points  from Friday night.

(Portugal imploding)

Your closing Portuguese 10 year bond yield Monday night up 1 in basis points on the day 

Portuguese 10 year bond yield:  3.18%  

Your closing Japanese yield Monday down 2 in basis point from 
Friday night:

 yield .54%  

Japanese 10 year bond yield:  .54% 

And now for your closing Japanese 10 year bond yield / par in   basis points from the morning: ( Japanese markets imploding)

Japanese 10 year bond yield:  .54%


Your opening currency crosses for Monday morning:

EUR/USA:  1.2836  up  .0015

USA/JAPAN YEN  109.03   down  .010

GBP/USA  1.6327 up .0052

USA/CAN  1.0979  up .0029

This morning the Euro is well u[ , trading now just above at the 1.28 level at 1.2836 as Europe continues to face deflation.  The yen is up a bit and It closed in Japan u p 1 basis point at 109.03 yen to the dollar (..  The pound is up  from Friday as it now trades just above the 1.63 level  to 1.6327.  The Canadian dollar is down this morning with its cross at 1.0979 to the USA dollar.

 Early Monday morning USA 10 year bond yield:  2.57% par in  basis points from  Friday night/   (USA economy not doing so well with this low yield)

USA dollar Index early Monday morning: 84.72 down 1 cent  from Friday's close


The NIKKEI: Monday morning: down 115 points or 0.71%

Trading from Europe and Asia:

1. Europe  all in the red

2/    Asian bourses all in the red (except India )  / Chinese bourses: Hang Sang red, Shanghai in the red,  Australia in the red:  /Nikkei (Japan) red/India's Sensex in the green 

Gold early morning trading:  $1214.00

silver:$ 17.73



Your closing Spanish 10 year government bond Monday/ up 3 in basis points in yield from Friday night.  

Spanish 10 year bond yield:  2.21% !!!!!!  

 Your Monday closing Italian 10 year bond yield up 1 in basis points and trading  17 in basis points above Spain./

IIItalian 10 year bond yield;  2.38% 



Closing currency crosses for Monday night/USA dollar index/USA 10 yr bond:   Europe falling apart this afternoon

Euro/USA:  1.2849   up .0027
USA/Japan:  108.80 down .240   
Great Britain/USA:  1.6360  up .0085 

USA/Canada:  1.1041 up .0091 

The euro rose  in value during this afternoon's  session, and it was 
up on the day , closing just above  the 1.28 level to 1.2849.  The yen was well  up during the afternoon session, and it gained 24 basis points on the day closing well below the 109 cross at 108.80.   The British pound gained some lost ground  during the afternoon session and was up for the day as it closed at 1.6380

. The Canadian dollar was down during the afternoon session, and it was down on the day closing at 1.1041. 

Your closing USA dollar index:

84.67 down 6 cents on the day  

your 10 year bond yield 2.56%

European and Dow Jones stock index closes:

England FTSE down 64.29 or .94%
Paris CAC       down 18.67 or .42%
German Dax   down 49.72 or .51%
Spain's Bovespa down 54.00 or .49% 
Italian FTSE-MIB  down 299.35 or 1.43

The Dow:  down 107.06 or .62%
Nasdaq; down   52.10  or 1.14%


And now for your big USA stories:

Existing home sales drop the most since January:

(courtesy zero hedge)

Existing Home Sales Drop Most Since Jan; Biggest Miss Since Nov 2013

Tyler Durden's picture

After 4 straight months of bounce-back exuberance that 'confirms' the hope that NAHB sentiment appears to present, existing home sales dropped 1.1% in August (against expectations of a 1.0% rise) and previous growth was revised lower. This is the biggest miss since November 2013. The South and West saw the biggest drops as inventory fell.First-time homebuyers remain sidelined with only 29% of total sales. The National Association of Realtors blames the drop on "investors stepping away from the market," and notes distressed sales are the lowest since October 2008.

The trend is at an end...

as reality is about to hit optimistic sentiment...

Charts: Bloomberg


I am glad to be back to my old reliable computer.

I will see you tomorrow night


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