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2018 Inflation 'Concerns' See Gold Price Rally Before Fed Rate Rise

December 13, 2017

GOLD PRICES rallied $10 per ounce from yesterday’s fresh 5-month lows against the Dollar in Asian trade Wednesday, only to lose half that bounce in London as traders looked to today’s key US monetary policy decision from the Federal Reserve.

With US inflation data due later on Wednesday, just before the US Fed’s widely-expected quarter-point hike to interest rates, new data this morning put Germany’s consumer-price index 1.8% higher in November from the same month in 2016.

That extended 2017’s run of the strongest inflation in Germany since 2012.

Gold priced in Dollars retreated to $1241 per ounce, only $5 above Tuesday’s low, as world stock markets failed to follow Wall Street up to yet more new all-time highs.

Silver prices tested last week’s 5-month low at $15.65 per ounce, losing some 2% for 2017 to date versus the Dollar.

Brent crude meantime rose near Monday’s 2-year highs above $64 per barrel as the key pipeline from the North Sea’s Forties oil field remained shut for repairs.

Natural gas prices in Europe’s wholesale spot market traded near 4-year highs.

“The outlook for inflation is likely to remain a source of concern in 2018,” says Edward Bonham Carter, vice-chairman of £48 billion ($64bn) UK asset managers Jupiter.

“There is a question mark over how long wage growth can remain subdued in countries like the UK and the US, with labour markets being so tight.”

Average weekly wages in the UK rose 2.3% in the 12 months to October, new data said Wednesday.

But with inflation in the cost of living rising 3.1%, real wages – when adjusted for inflation – held more than 3 pence in the Pound below their all-time peak of March 2008.

Chart of real vs nominal UK wages, 2005-2017. Source: Office for National Statistics

Major government bond prices slipped on Wednesday, edging the yield offered to new buyers higher.

Ahead of the Fed decision, 10-year US Treasury yields touched 2.42% per annum, the highest since late October.

Betting also grew that the Fed will surprise the markets with a half-point hike to a ceiling of 1.75%, pricing that possibility at odds of more than 1-in-8 – some three times the likelihood implied by the Fed funds futures market this time last month.

“On a long-term basis, the shift of the business cycle leads us to expect commodities to outperform other asset classes, even as policy makers are forced to hike rates,” says a new commodities note from US investment bank and London bullion market maker Goldman Sachs.

“The demand backdrop today is now even stronger than a year ago.”

Now forecasting a return of nearly 10% from commodities in 2018 – up from the 4% it forecast in October – “There is no evidence of a mass exodus from gold” in favor of crypto-currency Bitcoin, Goldman Sachs’ analysts add, pointing to solid investor holdings in gold-backed exchange-traded trust funds, currently the highest since spring 2013 saw gold’s sharpest price drop in three decades.

“Bitcoin is attracting more speculative inflows,” Goldman says, calling the sources of demand for gold as an investment hedge “vastly different”.

Bitcoin spot prices overnight set fresh all-time highs above $17,600 – a gain of 2,168% from this time last year.

“Platinum [has been] falling significantly more sharply than the other precious metals,” says the daily commodities note from German financial services group Commerzbank, pointing to the industrially-valuable metal’s fresh 22-month lows at $870 per ounce.

“The price differential to gold widened to around $365 again – the biggest gap in two months – and the gap [with gasoline autocatalyst metal] palladium increased to $135.

Chart of platinum vs palladium prices, monthly 1992-2017. Source: Johnson Matthey

The last time that prices to buy platinum were “this cheap as compared with palladium,” notes Commerzbank, “was in April 2001.”

Spot Gold Halves Post-2014 Recovery vs. Euro Ahead of Fed, ECB, BoE Decisions as Middle East Tensions Worsen

December 13, 2017

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SPOT GOLD prices failed to hold a 0.4% overnight rally from new 5-month lows in London on Tuesday, slipping back as world stock markets rose again ahead of tomorrow’s key US Fed decision on Dollar interest rates amid worsening tensions in the Middle East.

Edging back towards $1241 per ounce today, the price of gold bullion for immediate delivery has now halved the 16% gains for 2017 reached at early September’s 12-month peak.

Priced in the Euro, spot gold yesterday touched its lowest level since February 2016 at the end of New York trade, falling to €1053 per ounce as the S&P500 stock index of US corporations set a fresh all-time record high.

For gold priced in the Euro, that marks a 50% retracement of the recovery to last year’s Brexit referendum peak from its 4-year lows of end 2014.

The European Central Bank will stress the 19-nation currency zone’s solid growth but won’t announce any major change to its sub-zero rates and QE money creation scheme at its meeting on Thursday, according to analysts.

Chart of spot gold priced in the Euro, last 5 years. Source: BullionVault

“Bullion staged a modest recovery during Asian trade,” says the daily note from Swiss refining and finance group MKS Pamp, “as demand out of China underpinned price action.”

Spot gold prices in Shanghai fixed more than $10 per ounce above comparable London quotes, near the strongest incentive to new imports to the world’s No.1 consumer market of the last month.

“Interest out of the Far East took the metal toward $1245 as participants slowly re-enter the market with spot now around five month lows,” says MKS, but the rally “lacked follow-through interest to make a meaningful break higher [before] the FOMC rates decision.”

The latest US consumer-price inflation data are due on Wednesday, shortly before the Federal Reserve’s widely-expected hike in interest rates to 1.50% – the highest US cost of borrowing since the collapse of Lehmans Brothers in the fall of 2008.

UK inflation last month rose to 3.1% per year, the fastest increase in the cost of living since March 2012.

Expected to leave rates unchanged at its decision on Thursday, the Bank of England will delay the open letter it is now obliged to send the UK finance minister – explaining its plans for getting inflation back to the 2% target – for two months.

HM Treasury today tweeted a chart showing how the official forecast “expects inflation to fall…in the coming years.”

The price of Brent crude held Tuesday near 2.5-year highs above $65 per barrel as production from the UK’s North Sea oil rigs was cut back while engineers try to repair a crack in the main pipeline linking the Forties field to the Scottish mainland.

Vladimir Putin – president of No.5 oil producer and No.2 gold mining nation Russia – yesterday announced victory over Islamic terrorists ISIS in Syria and ordered his military to start withdrawing.

http://tass.com/defense/980174

US president Donald Trump will not challenge Syrian president Bashar al-Assad’s “continued rule” until the war-torn country’s 2021 elections, according to a report in the New York Times.

World No.5 gold consumer nation and Nato military alliance member Turkey will meantime “finalize” the purchase of a Russian missile defense system this week, President Recep Tayyip Erdoğan said Monday.

Reporting a 30% rise in bilateral trade between Russia and Turkey so far this year, Erdoğan said co-operation between Ankara and Moscow is “getting stronger day by day,” reports the Hurriyet newspaper.

Erdoğan was a target in the Turkish police’s 2012-2013 investigation into bribery and money-laundering linked to neighboring Iran’s sanction-busting export of oil for gold, a former officer yesterday testified in the New York trial of a leading Turkish banker.

Both Putin and Erdoğan have condemned the US decision to recognize Jerusalem as the capital of Israel of by moving its embassy there from Tel Aviv.

“I am not used to receiving lectures about morality from the leader who bombs Kurdish villagers in his native Turkey, who jails journalists, who helps Iran go around international sanctions,” said Israel’s Prime Minister Benjamin Netanyahu on Sunday.

Silver Prices Erase 2017 Gain as Comex Bulls Retreat Fastest Ever Before Fed Rate Hike, CBOE Bitcoin Launch

December 12, 2017

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SILVER PRICES failed to follow a small bounce in gold bullion Monday morning in London, holding unchanged versus the US Dollar from New Year 2017 as gold held $100 per ounce higher from January 1st ahead of this week’s long-anticipated US Federal Reserve decision on interest rates.

With silver prices slipping towards last week’s new 5-month lows beneath $15.70 per ounce, world stock markets rose with commodities and major government bonds.

Gold bullion rose $3 only to slip $1 below last week’s finish at $1248.50.

Bitcoin meantime held $1000 below last week’s fresh all-time high despite Sunday night’s much-reported launch of futures contracts tracking the crypto-currency on trading exchange the CBOE.

This week brings 20 central bank decisions, with the US Federal Reserve’s widely-expected interest rate hike on Wednesday followed the next day by votes from the UK’s Bank of England and the European Central Bank in Frankfurt.

“We expect to see the classic ‘buy the rumour, sell the fact’ type of USD reaction” to the Fed decision, says a forex note from Dutch bank ING, pointing to what it calls “greater downside risks” for the Dollar thanks to the “dovish tones emerging” from US data.

“Friday’s job report highlighted why we still favour gold in 2018,” says a note from Canadian brokerage TD Securities, “[because] persistent weak wage inflation should prevent the Fed from getting overly hawkish, thus keeping real rates low and the curve flat.

“Large deficits from [President Trump’s] proposed fiscal stimulus should also bode well for precious metals.”

Betting on this week’s Fed decision now sees a 90% certainty of the US central bank raising its key interest rate to a ceiling of 1.50%.

The other 10% predicts a shock hike of half-a-point to 1.75%, says data from futures exchange the CME Group.

Looking one year ahead, almost 1-in-4 bets on November 2018 Fed funds futures now forecasts 3 or more rate hikes coming next year, more than double the level of this time last month.

Betting on precious metals prices in contrast turned sharply lower last week, new data from US regulator the CFTC showed Friday, with hedge funds and other ‘Managed Money’ traders cutting their bullish position on Comex gold futures and options by almost one third to a 17-week low net of that same group’s bearish bets.

The ‘Managed Money’ category’s net long position on Comex silver derivatives sank faster still, down 61% to a 19-week low and falling by the largest number of contracts since this data series began in 2006.

Chart of 'Managed Money' net long position in Comex silver futures and options, notional tonnes equivalent. Source: BullionVault via CFTC

“Given that the gold price has fallen further” since last Tuesday’s reporting data, “net long positions are also likely to have been further reduced,” says the commodities team at German financial services provider Commerzbank today.

Looking at silver, “Our dry powder analysis shows that the market is left with little speculative ammunition to pull prices lower on the short term,” says analysis from French investment bank Societe Generale.

“Fundamentals on the other hand remain a headwind on longer horizons,” say the SocGen analysts, noting that silver prices are “highly correlated to gold” and repeating their economist colleagues’ forecast of three 2018 – likely to “weigh on investors’ appetite” for precious metals.

“Though gold could bounce higher in the near term as investors ‘buy the fact’ of a Fed hike,” agrees Jonathan Butler, strategist at Japanese conglomerate Mitsubishi, “the outlook for rate rises going into next year will be of arguably greater interest for precious metals.”

Wednesday’s decision will be accompanied by new Fed member forecasts on GDP, inflation and rates, but few analysts expect “major changes to policy ahead of the new Fed Chair Jerome Powell taking up his role” in February, says Butler.

“Dovish language or any caution on the future pace of interest rate hikes would give some support to gold and precious.”

Silver Bullion 'Set to Beat Gold' in 2018 as Both Hit 5-Month Lows, Bitcoin Whips 20% from New Top

December 9, 2017

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GOLD and SILVER prices steadied above 5-month lows versus the US Dollar in London trade Friday, rallying into the weekend as global stock markets rose.

The EuroStoxx 50 index of Europe’s largest corporations added 1.8% for the week.

Commodities edged higher but major government bond prices slipped further from Thursday’s drop, when gold fell to its lowest since early July at $1244 per ounce.

Silver fell harder, also setting new 5-month lows against the Dollar overnight at $15.65 per ounce, before rallying 20 cents in Friday’s Asian and London trade.

That curbed the ratio of the two metals’ prices relative to each other at 79.0 ounces of silver per 1 ounce of gold – just shy of the highest since April 2016.

The Gold/Silver Ratio has averaged 73.6 so far this year, making gold one-third dearer in terms of silver than its 50-year average.

Chart of the Gold/Silver Ratio, daily since 1968. Source: BullionVault via LBMA

“At [this] gold/silver ratio,” says a new 2018 outlook from analysts at German financial services firm Commerzbank, “the silver price is low in historical terms.”

Forecasting a deficit in silver between supply and demand next year, Commerzbank’s commodities team now expect silver to “outperform” a rally in gold, reaching $18 per ounce by next December and pulling the Gold/Silver Ratio down to 75.

Friday’s weak rebound in gold bullion put the metal on track for its sharpest weekly drop versus the Dollar since May, down 2.3% from last Friday at $1245 per ounce.

Gold’s weekly losses were sharper still against the British Pound, which surged and then gave back a 1.5-cent jump overnight on news of a new Brexit deal between the UK and the European Union, enabling talks to move onto Britain’s post-March 2019 trade relationship with the world’s largest single economic bloc.

Promising “no hard border” between Northern Ireland and EU-member the Republic of Ireland, the deal will cost the UK taxpayer perhaps £39 billion (€45bn).

The UK gold price in Pounds per ounce bottomed overnight at £923 per ounce, erasing the last 12 months’ prior 12% gains.

So-called crypto-currency Bitcoin meantime sank 20% from Thursday’s fresh all-time above $17,300 – a six-fold gain from 6 months ago – before rallying to $15,800.

“We have not abandoned you guys,” said Marko Kobal, CEO of Bitcoin exchange NiceHash, to customers via Facebook last night, promising to try and recoup the 4,700 units stolen by hackers from Bitcoin wallets run by the Slovenian company early Wednesday.

The second-half of 2017 “should” have already seen silver outperform gold, Commerzbank says, because of “positive economic trends and increased risk appetite.

“Furthermore, Chinese silver imports after ten months are already higher than in 2016 as a whole, which points to robust industrial demand.”

Contrasting with Commerzbank’s bullish outlook for 2018, “Silver prices will weaken,” says a note from Dutch bank ABN Amro‘s Georgette Boele, “because of more Fed rate hikes, higher US Treasury yields and a higher US Dollar.”

Also, “The speculative positions in silver [futures contracts] and the total ETF [trust-fund] positions are considerable and there is clearly room for liquidation,” she adds.

By Thursday night’s close in New York, the number of shares in the largest silver-backed ETF – the iShares Silver Trust (NYSEArca:SLV) – had grown more than 1% from Monday as prices dropped 2.5% for the week so far.

That took the quantity of bullion needed to back the SLV back above 10,000 tonnes, equal to almost 37% of global annual mine output.

Holdings for the SPDR Gold Trust (NYSEArca:GLD) – the largest such gold-backed vehicle – have slipped 1 tonne this week to 842 tonnes, equal to some 26% of annual global mine output.

All told however, gold ETFs worldwide now need well over 2,300 tonnes of bullion backing, equal to 72% of one year’s total mine output.

Chart tese 2

December 9, 2017

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GOLD PRICES cut this year’s gain below 9% for US Dollar investors in London trade Thursday morning, dropping to new 4-month lows beneath $1255 per ounce as crypto-currency Bitcoin surged past $15,000 for a 2017 gain of 1,456%.

Commodities today slipped overall after Wall Street stock markets closed lower overnight for the fourth session running from last week’s new record highs.

Copper steadied after this week’s slump, but held 9% below October’s 3-year high.

Protests meantime continued over President Trump’s decision to relocate the US Embassy from Tel Aviv to the Israeli capital, Jerusalem, with fundamentalist Palestinian group Hamas calling for a new intifadaon what it deemed a “declaration of war”.

Rogue nuclear state North Korea today said US Air Force drills above its southern neighbor make the outbreak of war “an established fact”.

“While we stand back, aghast at the complacency in Western financial markets,” says investment strategist Albert Edwards at French bank Societe Generale, “it may be China that is re-emerging, almost unnoticed, as an issue.”

Predicting that, as history shows, whatever triggers a crash in global markets will “highly likely be something that investors are not currently worrying about,” Edwards notes the doubling of new credit issued in China this year.

Gold Prices Drop Thru' 2017 Uptrend, Bitcoin +1456% as 'Unseen' China Risks Build

December 8, 2017

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Commodities today slipped overall after Wall Street stock markets closed lower overnight for the fourth session running from last week’s new record highs.

Copper steadied after this week’s slump, but held 9% below October’s 3-year high.

Rogue nuclear state North Korea today said US Air Force drills above its southern neighbor make the outbreak of war “an established fact”.

Chart of annual growth in China credit issuance. Source: Axiom Capital

“Financial deleveraging is poised to pick up soon,” reckons Edwards’ colleague at SocGen Wei Yao.

Moreover, Edwards adds, “It seems the level of credit necessary to stimulate growth in China could prove elusive at this point,” quoting Gordon Johnson of Axiom Capital.

Had anyone forecast a doubling of new credit issuance in China for 2017, Johnson says, “we would have expected all economic indicators in China to be moving substantially higher.”

“China is still the big swing factor in commodity markets,” says a report on Bloomberg, “and metals traders are starting to price the possibility that slower growth will mean less demand.”

A survey of economists forecasts that China’s infrastructure investment will grow only 12% in 2018, the newswire says, slowing from nearly 20% annual growth in 2017 to date.

New data from the People’s Bank of China said today that it kept the nation’s official gold reserves unchanged for the 13th month in succession in November, maintaining a holding of 1824 tonnes even as overall foreign exchange reserves grew for the 10th month running to a 1-year high near $3.2 trillion.

Friday should bring the latest China import and export data.

Tomorrow will also bring the latest official estimate of US jobs growth and wages.

“The [Fed’s December] rate hike is now looming,” notes David Govett at precious metals and commodities trading house Marex Spectron in London.

“People [trading futures contracts] are suddenly realizing that gold may not be the most attractive long position at the moment. [But] people’s memories are short.”

With Bitcoin surging 50% from this time last month Thursday morning, “Gold failed to hold above $1267/60,” says the latest technical analysis from SocGen, pointing to “the confluence of the trend line drawn from December 2016, the 200-day Moving Average and the 61.8% retracement of the up move from last July’s low.”

Gold prices are now “heading for the next retracement level…at $1245/39,” says SocGen’s technical team, “where a pause should take place.”

“On the down side,” says Swiss refining and finance group MKS Pamp’s Asian trading desk, “key support is between $1261-1257.”

With the gold price’s low point from October now broken, “support remains…[at] $1240.90,” says the New York technical analysis from bullion bank Scotia Mocatta.

The US Dollar meantime extended its rally on the currency markets Thursday, pushing the Euro down towards 2-week lows beneath $1.18.

That still left gold prices for Euro investors below €1065 per ounce, on track for a 3% drop in 2017.

The British Pound bounced hard from a sudden 1-week low as rumors said the UK Government is ready to make a new proposal to avoid a “hard border” between Northern Ireland the Irish Republic following March 2019’s Brexit from the European Union.

Price of Gold Bars Rallies with 'Tail Risks' as ETFs Expand, China Fears US-N.Korea Strike, Trumps Moves Israel Embassy

December 7, 2017

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GOLD BARS rallied from yesterday’s 9-week low in Asian and London trade Tuesday as global equities slipped with commodity prices amid rising tensions over Washington’s policies in both the Middle East and towards rogue state North Korea.

A Chinese state-run newspaper today gave readers near the border with North Korea a page of “common sense” advice for the event of a nuclear strike.

The US Air Force then ran simulated bombing runs above neighboring South Korea.

President Donald Trump was meantime scheduled to announce later today that he is moving the US Embassy in Israel from Tel Aviv to Jerusalem – a move spurring Palestinian protests and condemned as unnecessarily provocative by Washington’s allies across the Middle East and Europe.

As the Dollar price of wholesale gold bullion bars gained $6 from Monday’s low at $1261.80 per ounce, world stock markets fell again after US equitis closed lower overnight for the third time running since last Thursday’s new all-time high.

With the current “suspension” of the United States’ official debt ceiling set to expire on Friday, risking a shutdown of government departments, “few economists think Trump’s tax cuts” – now approved by the Senate and forecast by the Congressional Budget Office to widen the gap between revenues and outlays by $1.4 trillion over 10 years – “will spur growth,” says Newsweek.

Last week’s Senate approval of Trump’s “extensive tax cuts…[saw] market participants regain their risk appetite, so the gold price fell,” reckons bullion market analysts at Germany’s Commerzbank.

But “tax reform is not completely negative for precious metals from a macro perspective,” says Japanes conglomerate Mitsubishi’s strategist Jonathan Butler in his latest weekly analysis.

“With a risk of the reforms blowing a hole in the budget [to] send the US budget deficit skyrocketing, gold and precious metal may still retain some support from tail risk hedging.”

Annual gold ETF gold bar inflows worldwide. Source: World Gold Council

Investors using trust-fund products backed by bullion bars to gain price exposure last month grew their total position by 0.4% according to data compiled by mining-backed market development organization the World Gold Council.

But while investor demand for new shares took the amount of gold bars needed to back these exchange-traded trust funds worldwide up some 9 tonnes to a new 2017 high at 2,357 tonnes, the largest single ETF – the New York-listed SPDR Gold Trust ( NYSEArca:GLD) – shrank by 11 tonnes.

Outweighing that outflow, “Global inflows were concentrated in Europe,” says the World Gold Council, with lower-cost US fund the iShares Gold Trust (NYSEArca:IAU) also growing alongside German-listed gold ETFs designed to give investors exposure to the gold price in Euros.

Gold bullion bars today retreated near last week’s 4-month lows against the single Euro currency, slipping to €1068 per ounce.

The UK gold price in Pounds per ounce meantime rallied £10 per ounce from Tuesday’s new 5-month low of £938 as Sterling fell amid fresh wrangling both in Parliament and within the Conservative Government of Theresa May over the now stalled Brexit negotiations with the European Union.

Meantime in Ankara, the Chief Public Prosecutor’s Office today launched a fresh investigation into Turkey’s opposition CHP leader Kemal Kılıçdaroğlu for “allegedly insulting the president” with claims that Recep Tayyip Erdoğan assisted and covered up sanctions-busting involving gold bars shipped to rogue state Iran, now exposed by the trial in New York of a senior Turkish banker.

Erdoğan himself filed a criminal complaint against Kılıçdaroğlu this morning.

The Hurriyet newspaper says that Erdoğan yesterday linked the testimony of Iranian-Turkish gold trader Reza Zarrab to US policy over Syria, from where Washington wishes to distract attention so it can “facilitate the establishment of a terror state in Turkey’s southern neighbor”, referring to Kurdish independence group the YPG.

Gold Price Slips Near 'Significant Support' as World Warns Trump on Israel Embassy, Brexit Talks Stall

December 6, 2017

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GOLD PRICES slipped near 1-month lows against a rising US Dollar in London trade on Tuesday, drifting back to $1273 per ounce as world stock markets followed Wall Street lower after Monday’s drop.

Commodities fell as major government bond prices edged longer-term interest rates higher.

“Gold should encounter significant support at $1269/67 and a rebound should follow once these levels are met,” says the latest technical analysis from French investment bank Societe Generale, pointing to the 200-day moving average of Dollar gold prices.

Chart of US Dollar gold prices per ounce, last 12 months. Source: BullionVault

Gold prices in India – the world’s No.2 consumer nation – today rose to a 6-week high premium above London quotes of $1.50 per ounce according to traders in the key import point of Ahmedabad.

Gold premiums in China – the No.1 consumer – held near $7 per ounce on the Shanghai Gold Exchange, below the typical incentive to new imports.

Over in Madrid, Spain’s chief prosecutor today cancelled the international arrest warrant for ex-Catalan leader Carles Puigdemont, currently in Belgium ahead of the would-be breakaway region’s new elections on 21 December.

The national detention order still stands, however.

Over in Manhattan, yesterday’s testimony in the Turkey-Iran sanctions-busting trial of politically-connected Turkish banker Mehmet Hakan Atilla saw the US’s star prosecution witness – former gold trader Reza Zarrab – admit to bribing his way out of jail in 2014.

“[Turkey’s] ruling party has an active and effective propaganda apparatus in place,” says columnist Semih Idiz in today’s Hurriyet, and so President Recep Tayyip Erdoğan “will easily be able to survive this affair at home” despite being implicated in the scandal by Zarrab.

Atilla’s lawyers argued Monday that prosecutors have hidden key evidence showing that Zarrab will lie to reduce his own sentence.

With the Trump administration meantime delaying a decision on whether to move its embassy in Israel from Tel Aviv to the disputed city of Jerusalem, “[We] could go as far as cutting our diplomatic relations with Israel,” Erdoğan today told a parliamentary meeting of his ruling AKP party, calling it a “red line” for Muslims.

President of France Emmanuel Macron overnight joined Saudi Arabia in asking the US to avoid heighening regional tensions with such a move.

“Any action that would undermine [peace efforts] must absolutely be avoided,” agreed European Union diplomat Federica Mogherini on Tuesday.

British diplomats meantime struggled on Tuesday to propose a new solution to the risk of a “hard border” between Northern Ireland and the Republic once the UK leaves the EU, after Prime Minister Theresa May yesterday saw her coalition partners the DUP party reject any plans for Ulster to stay within the EU single market unless the rest of the UK also remains.

Irish Prime Minister Leo Varadkar said he was “surprised and disappointed” by the move, which UK opposition politicians called a “damaging embarassment”.

Gold prices in UK Pounds recovered Monday’s drop to 5-month lows at £940 per ounce as Sterling fell hard on the FX market.

On financial regulation the UK Government wants a “cut and paste of the status quo” post-Brexit said Economic Secretary to the Treasury Stephen Barclay MP to the EU Financial Affairs Sub-Committee today, adding that the City of London has “no appetite” to push for a regulatory “race to the bottom” once the UK leaves the European Union.

With US regulators meantime prosecuting a crypto-currency promoter – based in Canada – who raised $15m after promising 13-fold gains in 1 month, regulated futures exchange the CBOE said Monday it will launch Bitcoin contracts on 10 December, one week before competitor the CME’s scheduled launch.

“[Bitcoin] is a toxic concept for investors,” said former Morgan Stanley economist and now senior Yale fellow Stephen Roach to CNBC overnight.

“Bitcoin is the most vertical of any pattern I’ve ever seen in my career…a dangerous speculative bubble by any shadow or stretch of the imagination.”

Prices to buy Bitcoin – a search term now well ahead of ‘buy gold’ according to Google – today neared Sunday’s fresh all-time high above $11,800.

Gold Prices Down, Bitcoin 'Bubble' Up with Stocks + Dollar on Trump's Tax Plan

December 5, 2017

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GOLD PRICES dipped Monday morning as the US Dollar gained following the Senate’s approval of Donald Trump’s tax cuts and Western stock markets rose, writes Steffen Grosshauser at BullionVault.

The US Dollar briefly touched a 2-week high after the Senate narrowly approved the Republican Party’s tax overhaul on Saturday, including plans to slash the corporate tax rate from 35% to 20%.

This likely tax victory for US President Donald Trump took the focus away from the ongoing FBI investigation into alleged links between his advisory team and the Russian government.

European stocks meantime rebounded after Friday’s decline, led by the German Dax index climbing 1.23% and the Stoxx Europe 600 index heading for its first gain in three days.

The Dollar price of crypto-currency Bitcoin fell $500 from Sunday’s brief new all-time record high above $11,700.

The British police now warned of an explosion in the use of Bitcoins by criminals to launder money, causing calls for regulation.

“[This] looks like the second biggest bubble in history after Tulip mania,” reckons analyst and newsletter writer James Rickards, editor of Strategic Intelligence and author of the best-seller Currency Wars.

Furthermore, “We’ve never seen Bitcoin’s performance in a financial panic — so that’s a big uncertainty right there, leaving aside the criminality.”

Betting on gold prices by hedge funds and other money managers grew over 15% last week net of that group’s bearish bets, reaching the largest size in 9 weeks according to data on Comex futures and options positioning from US regulator the Commodities Futures Trading Commission (CFTC).

The net-long positions of “managed money” in silver, in contrast, shrank 12% last week.

Last week the CFTC approved the launch of Bitcoin futures contracts by Comex operator the CME Group, now scheduled for 18 December.

Chart of Managed Money category's gross long and bearish position on Comex gold futures and options. Source: BullionVault via CFTC

“With this [US] tax deal, markets could pick up speed into the end of the year,” reckons Angelo Meda, head of equities at Italian asset manager Banor SIM in Milan.

“It looks like the ingredients for a year-end rally [in stocks] are there.”

Gold prices today dropped 0.5% to $1274 per ounce, still up more than 12% year-to-date versus the Dollar but trading almost unchanged against the Euro and British Pound.

UK gold prices in Pounds per ounce fell back to £940 per ounce Monday morning — near its lowest in 12 months — as Sterling rose following reports of agreement with the EU over the issue of a ‘hard border’ between Northern Ireland and Eire following March 2019’s Brexit deadline.

UK Prime Minister Theresa May is set to meet EU negotiators in Brussels today to break the deadlock.

Progress was reportedly made at the weekend on a “divorce bill” plus citizens’ rights post-Brexit.

Half of Britons now support a second vote on whether or not to leave the European Union, according to a new poll.

The US and South Korea on Monday meantime launched their largest-ever air drills, ignoring North Korea’s warning that this would push the Korean insula to “the brink of nuclear war”. The drill followed another test of an intercontinental missile by North Korea a week earlier despite international sanctions and condemnation.

The silver price again extended the drop in gold on Monday, falling to 2-month Dollar lows at $16.38 per ounce.

Bitcoin: Lighter Than Air

December 4, 2017

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So the perfect ‘asset’ for this bubble in everything…

BITCOIN blew by another milestone, writes Bill Bonner in his Diary of a Rogue Economist.

Last week, the world’s first cryptocurrency hit a new record above $10,000.

It started off the year trading at just $997.

“I can’t believe what happened,” said a friend.

“I bought $1000 worth in 2012. Bitcoin was trading at about $8 at the time. Then one of the big cryptocurrency exchanges, Mt. Gox, was hacked and almost $500 million worth of Bitcoin was stolen. I got out.

“If I had just held onto my stake, it would have been worth more than $1.2 million today.”

You hear stories like that all the time now. They are bull market stories. The hero regrets having sold too early.

Later on come the bear market stories when he regrets having sold too late.

But let’s enjoy the bull stories now…while we can.

The typical story has its hero…and its villain. The hero bought Bitcoin when everyone told him not to. Now he’s regarded as a genius. Even his father-in-law is asking his opinion on everything from politics to cocktail recipes.

Last week, the geniuses multiplied…

From what we can tell, Bitcoin is headed to the moon. Or to Hell.

Weightless…frictionless…why not?

If it hit $9,000…why not $90,000…or even $900,000?

Bitcoin is a perfect “investment” for the fake-money era. Lighter than air. Not here; not there. Neither animal, vegetable, nor mineral.

Immaterial. Implausible. Imponderable. And immeasurable. There is nothing to hold it back.

Almost all assets are overpriced or fraudulent – usually both. Something was bound to soar to the top of this gassy heap. Why not Bitcoin?

Stocks have been bid up to the sky by fake money from central banks.

Management teams took the Fed’s super-low-interest-rate loans and pretended to be investors – buying back and canceling shares in the corporations they run to boost earnings per share.

Unbelievably, the only net buyer of US stocks since 2009 has been corporations themselves!

Earnings were faked, too, using “non-GAAP” adjustments to make it look like they were more profitable than they really were.

The third quarter of this year may have set a new record. Of the 30 Dow companies, 14 reported “adjusted” earnings, rather than using the old-fashioned Generally Accepted Accounting Principles (GAAP).

And those 14 companies reported adjusted income 26% higher than the GAAP numbers would have shown.

One case, drug maker Merck, stands out. It took a loss of 2 cents a share and turned it into a profit of $1.11.

How did it do that?

We don’t know exactly, but the usual magic depends on declaring certain expenses “one-time-only outlays that might give investors a misleading picture of the regular and usual earnings of the business.”

That gets you through one year. Then, the following year, you find other mistakes that you swear you will not repeat.

In smaller companies – especially in the tech sector – the practice is even more extreme.

Twitter, for example, showed a loss of $21 million in the third quarter. But with a little hocus-pocus on the ledgers, it was able to turn that into non-GAAP earnings of $78 million.

Bitcoin is perfect for this kind of market. It doesn’t have to deceive investors about its profits. It has none.

And, of course, the statistics and metrics we use to keep track of the economy have also been faked.

The feds claim full employment when there are more working-age men without jobs than ever before. Consumer price inflation is seriously miscalculated – as everyone who goes shopping knows.

We don’t shop often. But the other day, we bought a pomegranate. It cost $2.50. The lady at the checkout was appalled. “Do you still want it?” she asked.

“Real” (inflation-adjusted) GDP is still rising modestly, but only if you adjust it by the fake inflation number. If you applied a more realistic figure, it would show the US economy in recession for the last 10 years.

Meanwhile, the world’s governments go further into debt on the fake premise that they will pay it back.

Bitcoin has no debt problem, either. Nor does it have any of the fake qualities of other investments. It is 100% real…or at least 100% not fake.

It has no sluggish, greedy management to mess up the company’s business…no rising material costs to squeeze its margins…no wages to renegotiate…no bonuses to pay…none of the things that pinch profits.

And it doesn’t have to tell lies. The truth is strange enough.

One new crypto “coin” was called UET. Its promoter explained the investment thesis as follows: “You’re gonna give some random person on the internet your money.”

UET stands for Useless Ethereum Token – a reference to the second-largest crypto asset by market value, Ethereum – and has a logo with someone giving you the middle finger.

Nevertheless, it still trades…for approximately nothing.

Here at the Diary, we’ve been skeptical of Bitcoin…but ready to be impressed.

Our sons think it’s the real deal – le dernier cri in money circles. They took some of the family money and invested it in cryptos in June. In less than five months, we’re up more than 200%.

There’s nothing like success to stop the learning process. You don’t ask questions when prices are rising.

Still, we can’t help but wonder. Maybe the mysterious creator of Bitcoin, Satoshi Nakamoto, was a genius. But it’s unlikely that there are so many others.

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