In The News Today

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Jim Sinclair’s Commentary

The latest from John Williams’

– Annual June PPI Inflation Hit 15-Month High of 2.5%
– 0.8% Monthly PPI Jump Reflected Reversal in Negative Seasonals for Energy
– Consumer Credit Growth Still Limited to Federal Student Loans

"No. 541: June Producer Price Index, Consumer Credit, Seasonal Adjustments"


Jim Sinclair’s Commentary

Where has all the physical gold gone? To the Banksters, of course.

Shortage of gold hits diamond and jewellery units
By Rajesh Bhayani & Dilip Kumar Jha

A number of jewellery units and workers have been idled due to the severe shortage of gold in the wake of several restrictions on the yellow metal’s import.

Imports in April and May together were a little over 300 tonnes. This fell to 38 tonnes in June. Excess imports in May gave some initial relief but that cushion is long gone.

"Several jewellery units and artisans are idle. Demand has also fallen. This is true not only for gold jewellery but also diamond jewellery and cutting and polishing units," said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation (GJF). "Business has halved in the past few weeks."

The jewellery industry’s size is estimated at $45 billion (Rs 2.7 lakh crore), involving 600,000 units and employing a little over 10 million people.

Small and medium-size diamond cutting and polishing factories have also been badly affected, for, apart from the gold problem, the fall in the rupee’s value has hit the supply of rough diamonds. "Around 10 per cent of the factories in Surat have been closed, with another 10-15 per cent left with no work at all. They are awaiting a change in government policy for adequate supply of gold, coinciding with the restoration in demand both from the domestic and international markets," said Pravin Nanavati, joint secretary, Gujarat Heera Bourse.



Jim Sinclair’s Commentary

Here comes infinite stimulation to support the Administration. Gold goes to a new high.

Bernanke Departure With Duke Heralds Cascade of Fed Appointments
By Joshua Zumbrun – Jul 11, 2013 10:00 PM MT

Elizabeth Duke’s resignation from the Federal Reserve Board and Chairman Ben S. Bernanke’s potential departure in January could set off a series of vacancies and appointments that give President Barack Obama the opportunity to leave his mark on the Fed for a decade or longer.

Duke announced yesterday she is leaving the board in August, and Obama signaled last month that he expects Bernanke to leave when his current term expires next year, saying the central bank chief had stayed in his post “longer than he wanted.”

“There’s an opportunity for the president to shape the composition of the board for a long time,” said Roberto Perli, a Washington-based partner for Cornerstone Macro LP and a former senior staff economist in the Fed’s division of monetary affairs. “Obama is unlikely to nominate someone who differs from the current policy framework. It cements the fact that monetary policy is likely to remain very accommodative for the next couple of years, if not longer.”

The pending vacancies at the Fed will require confirmation by the Senate, which has posed an obstacle to previous financial regulatory appointments by Obama, including at the central bank. Nobel-prize winning economist Peter Diamond was unable to win confirmation to the central bank in 2010 amid Republican opposition. The Senate approved Bernanke for his second term with the thinnest margin of any recent chairman, as senators registered outrage at bailouts during the financial crisis.


Jim Sinclair’s Commentary

This is the emancipation of physical gold’s price from the manipulative price determination by paper gold.

Dwindling Gold Inventories and the Rising Sentiments in Gold
Jul 12

The U.S. Comex gold futures surged 2.73 percent in the past two days to $1,279.90 on Thursday while the dollar index suffered a loss of 2.17 percent. The CRB Commodities index, the S&P 500 index, and the Euro Stoxx 50 index have rebounded 1.01 percent, 1.37 percent and 0.64 percent respectively on Wednesday and Thursday. The U.S. 10-year government bond yield rallied about 6bp in the same period.

Bounce After Bernanke
The U.S. Fed’s speech, rather than the FOMC minutes, has moved the markets. Bernanke spoke after the market close on Wednesday, saying that the U.S. economy desires a highly accommodative monetary policy for the foreseeable future. The Fed wants to tell the markets that tapering the QE programme does not equate to tightening the monetary policy, or raising the interest rates. The FOMC minutes reviewed that many Fed governors would like to see more signs of improvement in jobs before agreeing to tapering. Both risky assets and gold reacted positively to the dovish comments by the Fed. The most recent weekly jobless claims in the U.S. unexpectedly rose by 16,000 to 360,000. Equities also got a boost after the Bank of Japan has said that Japan is recovering moderately, and has upgraded its growth forecast for seven consecutive months.

Paper Investments versus Physical Demand
The CFTC reported that net short positions by speculators reached a record high of 129,616 contracts as of 2 July. On July 11, Bloomberg calculated that gold-backed ETP holdings fell to 1,986.47 tons, the lowest level in three years. At the same time, physical demand has been improving. The Comex gold inventories have been depleting fast because the physical buyers in Asia have been taking delivery of gold. The total Comex and Nymex gold inventories have declined from 11 million troy ounces in February 2013 to about 7.1 million troy ounces in July, with the big drop in April and July this year. According to Standard Chartered, the one-month borrowing cost for gold rose to 0.3038 percent on 10 July, back to the level of December 2008. If the market realizes that the Fed is still very accommodative, and the demand for jewellery, bars and coins continues to rise, then the gold shorts will likely be squeezed hard.


Jim Sinclair’s Commentary

Any thought that the backs will not play this loophole is non-sense.

Big Banks Will Game New Capital Rules, Lawmakers Fear
by Victoria Finkle
JUL 11, 2013 5:05pm ET

Senate Banking Committee members pressed banking officials about the significance of new capital standards at a hearing Thursday on the Dodd-Frank Act, including concerns that institutions will work around new rules and remain highly leveraged.