maandag 30 november 2015

COMEX Stock Paper Gold Leverage Hits New All Time High

Does this paper gold leverage look healthy to you?

Eligible to registered gold hits leverage of 46.

There's virtually no registered gold anymore in the vaults, HSBC and JP Morgan took all their registered gold out.

COMEX, can you default already?

zaterdag 28 november 2015

Gold Repatriation is Accelerating

The new numbers for October are out and we can see that gold repatriation from the Federal Reserve Bank of New York is accelerating again.

What Happened to Dr. Copper?

Resource investors are much aware of the recent carnage in commodities like copper, zinc, aluminum, oil, gold, silver. In fact, the global natural resource index has hit a multi year low together with an all time low for the Baltic Dry Index, which measures freight and transportation costs.

What's even more stunning is that we see this weakness two months before the seasonally weak first quarter of 2016. So more weakness is about to come. The economies that are the most hit are the resource based economies like Canada, Australia, China, Brazil, Russia, Mexico and other emerging markets. These countries are hit so hard, people are giving them a new nickname: "submerging markets".

To give an idea of the severity of the state of the resource sector, we can take a look at what percentage of the total market cap is still invested in resources (see chart below from Deutsche Bank). We can see that resources have almost become irrelevant in our society (15% of total market cap), going back to the low of the Nasdaq bubble in 2000.

With all of this in mind, we wonder why there is this glaringly obvious discrepancy between copper and the stock market (see chart below from StockCharts). It seems that this correlation has been broken. Many investors view the price of copper as one of the best indicators of global economic activity.

Go here to read the analysis.

China Power Consumption is Weak

China's power consumption didn't grow at all year over year in October 2015. This translates in a GDP growth that is not accelerating, but decelerating. This will not bode well for commodity demand.

donderdag 26 november 2015

Junk Bond Market Forecasts a Looming Stock Market Crash

There is a particular debt market that is very interesting to watch and that is the junk bond market. We call these bonds "junk bonds" because the debt is issued by corporations that do not have high credit ratings and they need to pay higher interest rates.

The reason why we need to monitor this market is the following. The high yield debt market is a leading indicator for the direction of the stock market. Whenever investors leave the junk bond market, yields will spike upwards and the price of these bonds will decline in value. This will lead to less borrowing and consequently lead to less spending. What we then see is a stock market crash with typically a delay of a few months (see chart below from FRED). You can clearly see that the stock market (red chart) is overdue for a correction as the high yield bond market (blue chart) is declining in value.

Read the full analysis here.

zaterdag 21 november 2015

Managed Money Shorts Gold and Silver

The gold and silver price may have hit a new low as predicted due to lower premiums and bad COT reports (managed money shorts were very low). But today I have better news.

According to the COT report the managed money shorts have all come back again and will support a higher price. So it is a good time to buy precious metals right now.



SGE withdrawals are robust, so there is Chinese demand although not too much. U.S. Mint sales are robust but not as high as in Q3. Premiums at APMEX are given below.

Premiums are back at their historic average, but still elevated.

Premiums in China are very high for silver, but not so high for gold.