Macleod’s Market Report: Gold Storms Through $1350

empire revoltRussia and NATO are playing a game of financial chicken over Ukraine, which is deeply concerning.
Russia appears to have calculated that the West would not dare to precipitate a financial and trade war with the largest exporter of energy on the planet.  However, it appears that the West is ignoring economic risks: Russia is not to be permitted to invade a sovereign territory next to the EU’s border, so it’s political principals before money. To make the situation considerably more serious, China has weighed in on Russia’s side, as she was bound to do as co-founder with Russia of the Shanghai Cooperation Organisation.
The point is not lost on those interested in gold: it amounts to a financial war between long-time bulls in Eurasia, and long-time bears in the West.

All the golden cards are held by China and Russia while we Westerners have none. 


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Submitted by Alasdair Macleod, GoldMoney:

Last Monday gold ended a week-long consolidation that saw it fall from $1354 to $1329, before rising strongly to over $1370 yesterday. Not only is Asian demand still outstripping mine supply by a large margin, but physical ETFs such as GLD are now beginning to see more buyers than sellers, and so are no longer a source of supply.

Gold has also decoupled from the risk-on/risk-off nonsense of the last few years. While other risk assets such as equities have fallen sharply, gold has risen, and it has also risen while other metals, notably copper, have fallen sharply. Also of note is growing confusion in currency markets, with the fundamentally flawed euro, heavily dependent on Russian energy, being the strongest of the major currencies.

Silver has underperformed perhaps with half an eye on industrial metals. It retreated from last month’s high of $22.15 to a low of $20.60 last Monday, before rallying with gold over the rest of this week to $21.15 last night. Gold is therefore up while silver is down by about 4%, and the chart below which is of gold and silver rebased to 24th February shows this strong divergence.

Gold & Silver 24 Feb=100

Russia and NATO are playing a game of financial chicken over Ukraine, which is deeply concerning. Russia appears to have calculated that the West would not dare to precipitate a financial and trade war with the largest exporter of energy on the planet. However, it appears that the West is ignoring economic risks: Russia is not to be permitted to invade a sovereign territory next to the EU’s border, so it’s political principals before money. To make the situation considerably more serious, China has weighed in on Russia’s side, as she was bound to do as co-founder with Russia of the Shanghai Cooperation Organisation.

The point is not lost on those interested in gold: it amounts to a financial war between long-time bulls in Eurasia, and long-time bears in the West. All the golden cards are held by China and Russia while we Westerners have none. This is why buying interest is initially focusing on gold rather than silver.

This Sunday the Crimea is holding its referendum, and there is little doubt about the outcome. Perhaps the West’s strategy is to scare voters into voting to stay with the Ukraine. If so we can hope the financial rhetoric will die down afterwards whatever the outcome, because a financial war would be extremely damaging to the global economy.

Equally serious are the growing signs that China may be the verge of a credit crisis, which would probably unleash a flood of money in favour of gold. My weekend article goes into the dynamics behind and the likely consequences of this event.

 

Next week

Here is next week’s calendar.

Monday.

UK: Rightmove House Price Index.
Eurozone: HICP (Final).
US: Empire State Survey, Capacity Utilisation, Industrial Production, NAHB Builders Survey.

Tuesday.

Eurozone: Trade Balance, ZEW Economic Sentiment.
US: Building Permits, CPI, Housing Starts, Fed FOMC Meeting (2 days).
Japan: Customs Cleared Trade.

Wednesday.

Japan: Leading Indicator.
UK: Average Earnings, Claimant Count Change, ILO Unemployment Rate, Budget Day.
Eurozone: Labour Cost Index, Rate Setting Meeting.
US: Current Account, FOMC Fed Funds Rate,

Thursday.

UK: CBI Industrial Trends.
US: Initial Claims, Existing Home Sales, Leading Indicator, Philadelphia Fed Survey.

Friday.

Eurozone: Current Account, Flash Consumer Sentiment.
UK: Public Borrowing.

 


Comments

  1. Exit Polls in Crimea show 93% voted to join Russia. We must wonder now how far King Oreo’s empty threats will go and if the EU wants to lay down sanctions that would surely cut off 35% of the natural gas that is used from the Russian gas pipeline. Time for U S to get it’s ass kicked for being the world’s policemen. George Washington’s words….No Foreign Entanglements!
     
    The Black Swan we have been waiting for!

    • Makes you think no one in the U.S. State Dept has ever read a history book or looked at a map.  Of course Crimea was going to vote to return to Mother Russia.

    • @UglyDog
       
      “Makes you think no one in the U.S. State Dept has ever read a history book or looked at a map.”
       
      Maybe they are too busy looking at their NWO play-book to notice little things like that, UD.
       

  2. KLUMMAC doesn’t like voting unless it’s for him and his crap
     He wishes he could get 93% of anything.   His approval rating is WGASA

    • Hey, the little N. Korean punk received 100% of the vote in his recent “election”.  Amazing to be so beloved.

    • @AGXIIK
       
      “He wishes he could get 93% of anything.”
       
      Actually, he IS working in that.  Before he is done on Jan. 20, 2017, he very well might have a 93% disapproval rating. The remaining 7% will, no doubt, be the hard-core center of the mooch class.  Everyone else will have figured out by then that the survival of their country is more important than a few freebies stolen from those who worked for them and given to those who have not in exchange for their votes.
       

    • Poke the bear to hard and he may kill us all

  3. Just dying to see what Dow Futures will look like this evening!

  4. Congratulations to the people of Crimea. Now, let see what these clowns in the EU and US have unleashed. Try controlling these Neo Nazi’s who say they will blow the gas pipelines feeding the EU. Will be so ironic.

    • If they do that, Putin will probably shrug, shut the valves supplying that energy to those pipelines, and then sell all they can produce to China, India, Japan, and a few other Asian countries.  Russia does not HAVE to sell a drop of oil or gas to the EU.  They can do VERY well supplying Asia with energy.  It may not be as convenient but not having to deal with Western idiots just might make it worthwhile.

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