Belgium Gets Negative Borrowing Cost

And finally, Belgium also started to earn money by borrowing from others.

Investors actually pay us to put their money in our government bonds. The 3 month Belgium bond yield has gone negative on 19 July 2012. I thank you very much for this free money!

Chart 1: Belgium 3 Month Bond Yield

LIBOR scandal and the Significance of it on gold & silver lease rates

Following the LIBOR scandal we need to take a look at gold and silver lease rates, because lease rates are calculated as LIBOR - GOFO (London Interbank Offered Rate - Gold Forward Offered rate).

The London Interbank Offered Rate is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks. GOFO is the interest we need to pay if we swap gold for U.S. dollars. Whenever GOFO goes down (or gold lease rates go up), it means people are craving to get their hands on gold. At the same time, when LIBOR goes up (or gold lease rates go up), it basically means the same: higher gold prices to come.

To read the effect of LIBOR on the gold lease rate in more detail, go to: LIBOR scandal and its effects on gold and silver lease rates.

Status on the CRB Index

Just recently, sentiment in the commodity market has been positive. Capacity utilization improved, the CRB index started to move upwards, chances on QE3 are improving, the dollar index moves into a top formation. In this article I will discuss the prospects in each sector of the CRB index.

On Tuesday 17 July 2012 the capacity utilization rate came in at 78.9%, up from 78.7% the previous month. As I noted here, the capacity utilization rate is a leading indicator for inflation. This inflation will start to be visible next year as there is a lag between the capacity utilization rate and commodity prices.

The different sectors in the CRB index composition are: petroleum, agriculture, metals and natural gas. I will analyse them one by one in this article.

Chart 1: CRB Index

Copper turns back to Backwardation

It seems that the red graph is going down, which means it is likely that copper goes into backwardation again. So the copper price should rise if all goes well, together with the S&P.

Chart 1: Copper Contango

Capacity Utilization in June 2012 at 78.9%

Good news! The capacity utilization rate for the total industry in June 2012 came in at 78.9%, up from 78.7% a month ago (Chart 1).

Interestingly, the mining industry posted its biggest gain in capacity utilization. Mining had a capacity utilization of 89.4%, up from 89.0 % a month earlier.

So no worries, inflation is still in the game.

Chart 1: Capacity Utilization Rate

Bankrupt Cities in the U.S.

Let's follow the bankruptcy of cities in the U.S. Maybe a trend can be found.

Table 1: Bankruptcies in U.S.