Long Term=Bullish - major yearly resistance 1792-1804 needs to be exceeded on a monthly bass and close above 1840 to resume long term up bull trend.
Medium Term=Neutral - It takes a weekly close above 1694 to turn the trend back to bullish. Resistance 1755-1765(Oct/Nov 2012 Resistance) Support 1500-1550.
Intermediate Term=Neutral --it takes a close below 1550 for bearish. 1625-1630 for bullish.
Short Term=BULLISH --- Need a close above 1622-1625 to keep uptrend going. A close below 1575 goes to neutral and below 1555 bearish.
Support and Resistance
(APRILGOLD – Use one dollar higher for spot)
Initial Resistance 1609-1619-and 2nd tier 1627-1625
Initial Support 1583-1593 and 2nd tier 1569-1575 3rd tier 1558-1560
Overview
if there is one thing that has been a consistent in the gold market (or as consistent as it can get) is that the control boyz are allowed free reign when it comes to options expiration. I’ve often speculated that is how they fund the on-going short position/manipulation game. We discussed last night on the website and on twitter that the option expiration best case for the control boyz would be brining gold below 1600 and closing near 1600. We thank reader Evert P. who dutifully supplies me with the info and to Gaurav & Phil C (and a few others) who always keep me reminded when it is coming up.
Evert’s data was right on and the control boyz played it to the hilt. They took the 1600 calls from over $1200 dollars in the money and destroyed them in the Monday session by dropping price to 1588 and wiping almost all the premium. They must have covered the remaining ones they had at that time for pennies. Meanwhile that brought the 1600 puts to a value of $1200 dollars intrinsic and they reversed the market higher and ran gold all the way up to 1607 which then wiped out the Puts and gave them a chance to cover at pennies, and for the final piece of cake dropped prices one final time to 1598 and then coasted out in the 1601-1605 area to close out the April options.
Since they do this every month we can only surmise that they are the DRIVING FORCE that controls the paper market the majority of the time. Not all of the time, but the majority. When we say not all of the time the best example was when Silver exploded above our long term blue channel line and moved from 26 to 49.85 in 2011. They were just overwhelmed and they definitely ate crow---for a while. Their drive by shooting of silver on the night after EASTER (30 pieces of silver) was the biggest massacre of any commodity we’ve seen in quite a while as they pummeled silver by a massive 18 dollars an ounce in what has to be the greatest example of a public display of what happens when you mess with da boyz since JFK got talked into going to Texas to campaign the streets of Dallas in a Limo without its top pulled off.
Barring those few instances the control boyz somehow miraculously find price at the point of where the majority of call options reside almost every month. If you’re wondering why the CFTC shuts down each investigation on silver that the public demands it’s because whenever they investigate the metal, the control boyz ask them to come to DALLAS to show them the data they’ve researched and show them the route they’ll be traveling to get to the trade mart. Of course everyone knows the fastest way to the trade mart (not the safest) is to hang a right on Houston Street and then a left on Elm down thru Dealy Plaza, past the grassy knoll and beneath the triple underpass.
For some reason the CFTC has always just closed the investigations due to insufficient evidence to have finding for a “conspiracy” in silver. While there was a MAGIC bullet in JFK’s case, there no “SILVER “ bullet in JPM’s case.
In summary it was a controlled situation as best as we can see and Gold’s true colors should come forth in the next few days as to where we go in this next two week cycle as well as the end of the medium term cycle and the start of a new one. The final clue to the OPTIONS expiration/manipulation was that price ended the day where it started the day within a few bucks.
As we get back to seeing gold’s true color’s its doesn’t mean it won’t be LOWER. Silver is acting very poorly and is warning that unless it turns up, this next two week cycle is going to be lower (again). (See cycles portion of report).
The situation in Cyprus banking has played out but it’s not the end of the story by any means. Here was my best find of the day to give us an overview of the situation.
Saving Cyprus Means Nobody Safe as Europe Breaks More Taboos
The devil lies in the detail of Cyprus’s salvation.
Saving Cyprus Means Nobody Safe as Europe Breaks More Taboos
The original pact, announced March 16, shocked Cypriots by imposing a levy on all deposit holders.
The island nation’s rescue sets precedents for the euro zone that may stick in the memory of depositors and bondholders alike as investor’s debate who will next fall victim to the debt crisis. Under the terms of the agreement struck early this morning in Brussels, senior Cypriot bank bond holders will take `losses and uninsured depositors will be largely wiped out.
The message that stakeholders of all stripes can be coerced into helping a cash-strapped nation may make investors more skittish they’ll be targeted if Slovenia, Italy, Spain or even Greece again is next in line to need help. The risk is that bank runs and bond market selloffs become more likely the moment a country applies for a new rescue, said economists and academics from Nicosia to New York.
“We now have a new type of rule and everyone within the euro zone has to sit down and see what that implies for their own finances,” Nobel laureate Christopher Pissarides, an adviser to the Cypriot government, told “The Pulse” on Bloomberg Television.
Until now, euro region officials had left bank depositors and senior bondholders untouched as they tried to rescue the bloc’s struggling economies in a series of all-night summits over the past three years.
The Irish banking system collapsed partly because its government refused to renege on a guarantee to deposit holders made after Lehman Brothers Holdings Inc. collapsed. In Spain, senior bank bondholders have been safeguarded, unlike investors in the subordinated debt and preferred shares of Bankia Group (BKIA). And in Greece, a restructuring of government debt was set up in a way that avoided default.
Cypriots Mourn Collapse of Livelihoods as Bailout Crushes Banks
With Cyprus, that tradition has been broken. The original pact, announced March 16, shocked Cypriots by imposing a levy on all deposit holders. It also marks the first time that senior bondholders in a euro region bank have taken losses. In the case of Cyprus Popular Bank (CPB), also known as Laiki Bank, those bond holders will get wiped out.
Cash Strapped
“The Cyprus crisis has opened up some precedents that will make investors more worried about how future euro zone crises will evolve,” said Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York.
Europe’s crisis fighters are spreading the net wider as taxpayers across northern Europe balk at the cost of rescuing their cash-strapped neighbors. That shows there may be few taboos left, said Charles Goodhart, emeritus professor at the London School of Economics.
“They will swear black and blue that Cyprus is a unique case but so was Greece,” he said in a telephone interview. “You can talk about the inviolability of insured deposits but the problem now is would anyone believe you.”
The first use of capital controls by a euro-area member may also pose a challenge to countries such as Malta, Luxembourg and Estonia whose banks also boast large foreign deposits, said Jacques Cailloux and Dimitris Drakopoulos, economists at Nomura International Plc.
Serious Risk
“Fearing a similar fate as those with deposits in Cyprus, there is a serious risk that these depositors decide to reduce their exposure, putting other countries under stress,” they said in a report to clients.
Some spotted silver-linings. Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington, told Bloomberg Television the Cypriot deal marked a “step forward” for Europe by better detailing the order of who loses out in a rescue.
“It provides a lot of clarity for investors and depositors,” he said, drawing a parallel with the Federal Deposit Insurance Corp., which serves to protect depositors in the U.S.
At Berenberg Bank in London, Chief Economist Holger Schmieding said the lesson is that “countries will take a lot of pain to stay in the euro zone. The glue that holds the euro zone together remains strong.”
Bank Funding
One potential spillover from this morning’s agreement is the knock-on effects for bank funding, analysts said. Banks typically fund themselves with some combination of deposits, equity, senior and subordinate notes and covered bonds, which are backed by a pool of high-quality assets that stay on the lender’s balance sheet.
The consequences of the Cyprus bailout could be that banks will be more likely to use contingent convertible bonds -- known as CoCos -- to raise money as their ability to encumber assets by issuing covered bonds reaches regulatory limits, said Chris Bowie at Ignis Asset Management Ltd. in London.
“We’d expect to see some deposit flight and a shift in funding towards a combination of covered bonds, real equity and quasi-equity,” said Bowie, who is head of credit portfolio management at Ignis, which oversees about $110 billion.
Skew Finances
By threatening to skew the management of finances, the Cypriot package risks undermining confidence in an economy already suffering its second recession since 2008. Euro-area services and manufacturing output contracted more than economists estimated in March and economists from Deutsche Bank AG to Morgan Stanley are predicting a sharper economic contraction this year.
“Banks will be more cautious, consumers more timid, bank depositors a little more wary and growth across Europe a little weaker even than it was before,” said Kit Juckes, head of foreign exchange research at Societe Generale SA in London.
The Cypriot saga may also give more ammunition to populist leaders across southern Europe, who say the political elites running crisis management don’t care about ordinary savers. Italy’s political system is gridlocked and Greek voters are signaling mounting support for the opposition Syria party, which wants to renegotiate Greece’s bailout program.
“Cyprus was led to a painful compromise in the euro group meeting late yesterday under the weight of blackmail and threats,” the party, led by Alexis Tsipras, said in an e-mailed statement today.
The true test may only come if the rot spreads from Nicosia and starts to infect larger economies, said Carsten Brzeski, senior economist at ING Group in Brussels. Italy is still struggling to put a government together and Spain’s unemployment rate is making it harder to get the country’s finances in order. In Slovenia, lawmakers are scrambling to avoid becoming the sixth country needing a bailout as they curb investor angst about bad loans equaling a fifth of economic output.
“Germany won the bet as Cyprus eventually bended,” said Brzeski, a former European Commission economist. “However, this strategy is not risk-free and will hardly work with bigger countries with a broader economic business model than Cyprus.”
Cyprus Summary:
*Depositors with less than $100,000 in their banks will be OK.
*As brought to my attention days ago and reported to us from one of our best European sources, one "bad’ bank (Laiki) is being jettisoned.
*Uninsured depositors in all the banks (over $100,000) are all going to take significant haircuts.
*The Russian money interests who have just been fleeced have to be madder than upset hornets. Those involved in confiscating their money might not sleep to well in the weeks and months ahead.
Why Russia?
Is it just a coincidence they are suspected or have been providing support to the Syrian Government? Was this a way of getting back at the Ruskies? You can never be sure.
Meanwhile there some who have had just about enough of the Central Bank Axis Europe/UK/USA & Japan and think it’s high time to forge new roads without the “Fab Four.”
BRICS Nations Plan New Bank to Bypass World Bank, IMF
By Mike Cohen & Ilya Arkhipov - Mar 25, 2013 (Bloomberg)
The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund.
The leaders of the so-called BRICS nations -- Brazil, Russia, India, China and South Africa -- are set to approve the establishment of a new development bank during an annual summit that starts today in the eastern South African city of Durban, officials from all five nations say. They will also discuss pooling foreign-currency reserves to ward off balance of payments or currency crises.
“The deepest rational for the BRICS is almost certainly the creation of new Bretton Woods-type institutions that are inclined toward the developing world,” Martyn Davies, chief executive officer of Johannesburg-based Frontier Advisory, which provides research on emerging markets, said in a phone interview. “There’s a shift in power from the traditional to the emerging world. There is a lot of geo-political concern about this shift in the western world.”
The BRICS nations, which have combined foreign-currency reserves of $4.4 trillion and account for 43 percent of the world’s population, are seeking greater sway in global finance to match their rising economic power. They have called for an overhaul of management of the World Bank and IMF, which were created in Bretton Woods, New Hampshire, in 1944, and oppose the practice of their respective presidents being drawn from the U.S. and Europe.
Reform Needed
“We need to change the way business is conducted in the international financial institutions,” South African International Relations Minister Maite Nkoana-Mashabane said in a March 15 speech in Johannesburg. “They need to be reformed.”
The U.S. has failed to ratify a 2010 agreement to give more sway to emerging markets at the IMF, while it secured Jim Yong Kim, an American, as head of the World Bank last year over candidates from Nigeria and Colombia.
Goldman Sachs Asset Management Chairman Jim O’Neill coined the BRIC term in 2001 to describe the four emerging powers he estimated would equal the U.S. in joint economic output by 2020. Brazil, Russia, India and China held their first summit four years ago and invited South Africa to join their ranks in December 2010.
Trade within the group surged to $282 billion last year from $27 billion in 2002 and may reach $500 billion by 2015, according to data from Brazil’s government.
Funding Disagreement
“If they announce a BRICS bank it will be quite something,” O’Neill said in an e-mailed reply to questions on March 15. “At a minimum it symbolizes they can achieve something as political group and means lots of other things could follow in the future. It also means that they will have their own kind of special World Bank, which may aid infrastructure and trade projects.”
While BRICS leaders may approve the creation of a development bank in principle at the summit, there’s still disagreement on how it should be funded and operated.
The meeting may fail to reach a detailed agreement this week on how to fund the bank, said Mikhail Margelov, President Vladimir Putin’s envoy to Africa. Russia favors capping each side’s initial contribution at $10 billion, he said in a March 15 interview in Moscow.
“It will be some time before it will be feasible for this bank to start financing say, a railway project,” Simon Freemantle, an analyst at Standard Bank Group Ltd., Africa’s biggest lender, told reporters in Durban yesterday. “That is some way out.”
Currency Pool
Agreement on pooling foreign-currency reserves to fend against crises is also “some way off,” South African Trade Minister Rob Davies said on March 22.
In October, Brazilian Finance Minister Guido Mantega said the pool will be modeled on the Chiang Mai Initiative, which gives Japan, China, South Korea and 10 Southeast Asian nations access to $240 billion of emergency liquidity to shield the region from global financial shocks.
Interest rates near zero in the U.S., Japan and Europe have fueled foreign investors’ appetite for higher-yielding assets, driving up currencies from Brazil to Turkey. Brazil has warned of a global currency war as nations take reciprocal action to weaken their currencies and protect export industries.
Brazil’s real has gained 2 percent against the dollar since the beginning of the year, while South Africa’s rand has dropped 8.8 percent in the period.
African Leaders
For South Africa, which makes up just 2.5 percent of total gross domestic product in BRICS, the summit is a way to showcase its role as an investment gateway to Africa. President Jacob Zuma has invited 15 African heads of state, including Egypt’s Mohamed Mursi and Ethiopia’s Hailemariam Desalegn, for talks with the BRICS leaders at the summit. For most of the BRICS leaders, it’s also the first opportunity to meet Chinese President Xi Jinping after his appointment on March 17.
“We will discuss ways to revive global growth and ensure macroeconomic stability, as well as mechanisms and measures to promote investment in infrastructure and sustainable development,” Indian Prime Minister Manmohan Singh said in a statement yesterday.
Gold Hourly Chart
Gold pattern on the hourly chart has a lot of choppy and overlapping qualities and that’s not usually the sign of a sustainable uptrend. That is the one worry and it’s even worse with the silver chart. Resistance is jam packed at 1610-1620 and 1630. Monday was another Flush out day where they cleared the stops. We bought in on the trade page at 1592.50 – 1595 and gold still needs to follow thru to be successful. UNTIL WE GET ABOVE THE RED RESISTANCE LINE at 1610 and even the 1620 area, we can’t eliminate the downside. Three flush outs at higher price levels give us some hope but that’s not to say we won’t get another. The 1585-1590 area is support for Tuesday. A break below the 1575-1580 area and the odds will move back to the downside scenario. If it turns down from here then the 1642-1663 area will come back in play. We can have every single thing bullish about gold or we can have every single thing bearish about gold but price is the only thing that counts. Resistance is the 1608-1613 area and then 1620-1625. In fact resistance is jam packed up there from 1610-1630. The other thing to watch is the green 200 hour moving average at 1600. We’ve got to be above it to have UPTRENDING potential. Today’s flush took us under it and as you can see gold is fighting right now to maintain it. If we breakdown again on Tuesday, 1585-1592 is support. Below1580 and gold can get in trouble again.
What Next?
We got our pullback to the 1590 area we were looking for on Monday. We got a nice bounce back above 1600. BUT I CONTINUE TO BE WORRIED. SILVER scares, me, GDX scares, me the HUI SCARES ME. We’re at the seasonal turn but this is an average. Sometime winter comes late, sometimes winter comes early. So when we say the ideal date it’s like saying spring starts on March 21st. Last year we were cutting the lawn in New England at this time. This year there’s still two feet of snow. BUT ITS SPRING.
There’s been 3 flush outs on the downside in March on the hourly chart. That should be plenty folks. Gold needs to get its act together and fast. If we don’t hold 1600 and close below 1575-1580 the odds are going to favor another two week downturn. If we get that downturn and break the 1540 ON A FRIDAY CLOSING BASIS or a MONTHLY CLOSING BASIS, the odds are going to turn and favor that 1500 won’t hold and lower prices are in store.
Tuesday has support at 1585-1592. A break below 1580 and we think the metals move lower to test supports again if not outright sell off again. We need to get above 1615-1620 and with conviction. Three flush outs are plenty. Now we need results. A break below 1580 and we favor lower into Wednesday or Thursday and it actually could be down hard. A close above 1620 will calm me down a bit.
Bottom Line
The uptrend is still in play on the short term. We now need the INTERMEDIATE TERM to kick in. We’re in the most important time frame for the next three months if not the entire year and that is March 22nd to 29th. We have said from the get-go that we’ve favored a LOW point to be reached in this area. The rally from 1555 to 1615 has taken place. About a week and a half ago, we started considering that the March 7th/8th period was beginning to look like it might be the low. We’ve never eliminated this time frame, but we’ve BEEN WAITING for action. We’ve gotten the push above 1600 but now the FOLLOW thru must begin and it must begin soon. The choppy and overlapping price action needs to end and needs to end soon. SILVER NEEDS TO TURN UP. If I was a doctor I’d still have it on suicide watch when I look at its PULSE (CHART). I’m trying to be a little light hearted here, but the situation is growing to the point that ----that well, how many times can they tell us there is no silver left on earth and have price act this way?
Long Term=Bullish - major yearly resistance 1792-1804 needs to be exceeded on a monthly bass and close above 1840 to resume long term up bull trend.
Medium Term=Neutral - It takes a weekly close above 1694 to turn the trend back to bullish. Resistance 1755-1765(Oct/Nov 2012 Resistance) Support 1500-1550.
Intermediate Term=Neutral --it takes a close below 1550 for bearish. 1625-1630 for bullish.
Short Term=BULLISH --- Need a close above 1622-1625 to keep uptrend going. A close below 1575 goes to neutral and below 1555 bearish.
Support and Resistance
(APRILGOLD – Use one dollar higher for spot)
Initial Resistance 1609-1619-and 2nd tier 1627-1625
Initial Support 1583-1593 and 2nd tier 1569-1575 3rd tier 1558-1560
Overview
Cypriots Mourn Collapse of Livelihoods as Bailout Crushes Banks
Cash Strapped
Serious Risk
Bank Funding
Skew Finances
Cyprus Summary:
*Depositors with less than $100,000 in their banks will be OK.
*As brought to my attention days ago and reported to us from one of our best European sources, one "bad’ bank (Laiki) is being jettisoned.
*Uninsured depositors in all the banks (over $100,000) are all going to take significant haircuts.
*The Russian money interests who have just been fleeced have to be madder than upset hornets. Those involved in confiscating their money might not sleep to well in the weeks and months ahead.
Why Russia?
Is it just a coincidence they are suspected or have been providing support to the Syrian Government? Was this a way of getting back at the Ruskies? You can never be sure.
Meanwhile there some who have had just about enough of the Central Bank Axis Europe/UK/USA & Japan and think it’s high time to forge new roads without the “Fab Four.”
BRICS Nations Plan New Bank to Bypass World Bank, IMF
By Mike Cohen & Ilya Arkhipov - Mar 25, 2013 (Bloomberg)
Gold Hourly Chart
What Next?
Medium Term=Neutral - It takes a weekly close above 1694 to turn the trend back to bullish. Resistance 1755-1765(Oct/Nov 2012 Resistance) Support 1500-1550.
Intermediate Term=Neutral --it takes a close below 1550 for bearish. 1625-1630 for bullish.
Short Term=BULLISH --- Need a close above 1622-1625 to keep uptrend going. A close below 1575 goes to neutral and below 1555 bearish.
Support and Resistance
(APRILGOLD – Use one dollar higher for spot)
Initial Resistance 1609-1619-and 2nd tier 1627-1625
Initial Support 1583-1593 and 2nd tier 1569-1575 3rd tier 1558-1560
Overview
if there is one thing that has been a consistent in the gold market (or as consistent as it can get) is that the control boyz are allowed free reign when it comes to options expiration. I’ve often speculated that is how they fund the on-going short position/manipulation game. We discussed last night on the website and on twitter that the option expiration best case for the control boyz would be brining gold below 1600 and closing near 1600. We thank reader Evert P. who dutifully supplies me with the info and to Gaurav & Phil C (and a few others) who always keep me reminded when it is coming up.
Evert’s data was right on and the control boyz played it to the hilt. They took the 1600 calls from over $1200 dollars in the money and destroyed them in the Monday session by dropping price to 1588 and wiping almost all the premium. They must have covered the remaining ones they had at that time for pennies. Meanwhile that brought the 1600 puts to a value of $1200 dollars intrinsic and they reversed the market higher and ran gold all the way up to 1607 which then wiped out the Puts and gave them a chance to cover at pennies, and for the final piece of cake dropped prices one final time to 1598 and then coasted out in the 1601-1605 area to close out the April options.
Since they do this every month we can only surmise that they are the DRIVING FORCE that controls the paper market the majority of the time. Not all of the time, but the majority. When we say not all of the time the best example was when Silver exploded above our long term blue channel line and moved from 26 to 49.85 in 2011. They were just overwhelmed and they definitely ate crow---for a while. Their drive by shooting of silver on the night after EASTER (30 pieces of silver) was the biggest massacre of any commodity we’ve seen in quite a while as they pummeled silver by a massive 18 dollars an ounce in what has to be the greatest example of a public display of what happens when you mess with da boyz since JFK got talked into going to Texas to campaign the streets of Dallas in a Limo without its top pulled off.
Barring those few instances the control boyz somehow miraculously find price at the point of where the majority of call options reside almost every month. If you’re wondering why the CFTC shuts down each investigation on silver that the public demands it’s because whenever they investigate the metal, the control boyz ask them to come to DALLAS to show them the data they’ve researched and show them the route they’ll be traveling to get to the trade mart. Of course everyone knows the fastest way to the trade mart (not the safest) is to hang a right on Houston Street and then a left on Elm down thru Dealy Plaza, past the grassy knoll and beneath the triple underpass.
For some reason the CFTC has always just closed the investigations due to insufficient evidence to have finding for a “conspiracy” in silver. While there was a MAGIC bullet in JFK’s case, there no “SILVER “ bullet in JPM’s case.
In summary it was a controlled situation as best as we can see and Gold’s true colors should come forth in the next few days as to where we go in this next two week cycle as well as the end of the medium term cycle and the start of a new one. The final clue to the OPTIONS expiration/manipulation was that price ended the day where it started the day within a few bucks.
As we get back to seeing gold’s true color’s its doesn’t mean it won’t be LOWER. Silver is acting very poorly and is warning that unless it turns up, this next two week cycle is going to be lower (again). (See cycles portion of report).
The situation in Cyprus banking has played out but it’s not the end of the story by any means. Here was my best find of the day to give us an overview of the situation.
Saving Cyprus Means Nobody Safe as Europe Breaks More Taboos
The devil lies in the detail of Cyprus’s salvation.
Saving Cyprus Means Nobody Safe as Europe Breaks More Taboos
The original pact, announced March 16, shocked Cypriots by imposing a levy on all deposit holders.
The island nation’s rescue sets precedents for the euro zone that may stick in the memory of depositors and bondholders alike as investor’s debate who will next fall victim to the debt crisis. Under the terms of the agreement struck early this morning in Brussels, senior Cypriot bank bond holders will take `losses and uninsured depositors will be largely wiped out.
The message that stakeholders of all stripes can be coerced into helping a cash-strapped nation may make investors more skittish they’ll be targeted if Slovenia, Italy, Spain or even Greece again is next in line to need help. The risk is that bank runs and bond market selloffs become more likely the moment a country applies for a new rescue, said economists and academics from Nicosia to New York.
“We now have a new type of rule and everyone within the euro zone has to sit down and see what that implies for their own finances,” Nobel laureate Christopher Pissarides, an adviser to the Cypriot government, told “The Pulse” on Bloomberg Television.
Until now, euro region officials had left bank depositors and senior bondholders untouched as they tried to rescue the bloc’s struggling economies in a series of all-night summits over the past three years.
The Irish banking system collapsed partly because its government refused to renege on a guarantee to deposit holders made after Lehman Brothers Holdings Inc. collapsed. In Spain, senior bank bondholders have been safeguarded, unlike investors in the subordinated debt and preferred shares of Bankia Group (BKIA). And in Greece, a restructuring of government debt was set up in a way that avoided default.
With Cyprus, that tradition has been broken. The original pact, announced March 16, shocked Cypriots by imposing a levy on all deposit holders. It also marks the first time that senior bondholders in a euro region bank have taken losses. In the case of Cyprus Popular Bank (CPB), also known as Laiki Bank, those bond holders will get wiped out.
“The Cyprus crisis has opened up some precedents that will make investors more worried about how future euro zone crises will evolve,” said Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York.
Europe’s crisis fighters are spreading the net wider as taxpayers across northern Europe balk at the cost of rescuing their cash-strapped neighbors. That shows there may be few taboos left, said Charles Goodhart, emeritus professor at the London School of Economics.
“They will swear black and blue that Cyprus is a unique case but so was Greece,” he said in a telephone interview. “You can talk about the inviolability of insured deposits but the problem now is would anyone believe you.”
The first use of capital controls by a euro-area member may also pose a challenge to countries such as Malta, Luxembourg and Estonia whose banks also boast large foreign deposits, said Jacques Cailloux and Dimitris Drakopoulos, economists at Nomura International Plc.
Serious Risk
“Fearing a similar fate as those with deposits in Cyprus, there is a serious risk that these depositors decide to reduce their exposure, putting other countries under stress,” they said in a report to clients.
Some spotted silver-linings. Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington, told Bloomberg Television the Cypriot deal marked a “step forward” for Europe by better detailing the order of who loses out in a rescue.
“It provides a lot of clarity for investors and depositors,” he said, drawing a parallel with the Federal Deposit Insurance Corp., which serves to protect depositors in the U.S.
At Berenberg Bank in London, Chief Economist Holger Schmieding said the lesson is that “countries will take a lot of pain to stay in the euro zone. The glue that holds the euro zone together remains strong.”
Bank Funding
One potential spillover from this morning’s agreement is the knock-on effects for bank funding, analysts said. Banks typically fund themselves with some combination of deposits, equity, senior and subordinate notes and covered bonds, which are backed by a pool of high-quality assets that stay on the lender’s balance sheet.
The consequences of the Cyprus bailout could be that banks will be more likely to use contingent convertible bonds -- known as CoCos -- to raise money as their ability to encumber assets by issuing covered bonds reaches regulatory limits, said Chris Bowie at Ignis Asset Management Ltd. in London.
“We’d expect to see some deposit flight and a shift in funding towards a combination of covered bonds, real equity and quasi-equity,” said Bowie, who is head of credit portfolio management at Ignis, which oversees about $110 billion.
Skew Finances
By threatening to skew the management of finances, the Cypriot package risks undermining confidence in an economy already suffering its second recession since 2008. Euro-area services and manufacturing output contracted more than economists estimated in March and economists from Deutsche Bank AG to Morgan Stanley are predicting a sharper economic contraction this year.
“Banks will be more cautious, consumers more timid, bank depositors a little more wary and growth across Europe a little weaker even than it was before,” said Kit Juckes, head of foreign exchange research at Societe Generale SA in London.
The Cypriot saga may also give more ammunition to populist leaders across southern Europe, who say the political elites running crisis management don’t care about ordinary savers. Italy’s political system is gridlocked and Greek voters are signaling mounting support for the opposition Syria party, which wants to renegotiate Greece’s bailout program.
“Cyprus was led to a painful compromise in the euro group meeting late yesterday under the weight of blackmail and threats,” the party, led by Alexis Tsipras, said in an e-mailed statement today.
The true test may only come if the rot spreads from Nicosia and starts to infect larger economies, said Carsten Brzeski, senior economist at ING Group in Brussels. Italy is still struggling to put a government together and Spain’s unemployment rate is making it harder to get the country’s finances in order. In Slovenia, lawmakers are scrambling to avoid becoming the sixth country needing a bailout as they curb investor angst about bad loans equaling a fifth of economic output.
“Germany won the bet as Cyprus eventually bended,” said Brzeski, a former European Commission economist. “However, this strategy is not risk-free and will hardly work with bigger countries with a broader economic business model than Cyprus.”
*Depositors with less than $100,000 in their banks will be OK.
*As brought to my attention days ago and reported to us from one of our best European sources, one "bad’ bank (Laiki) is being jettisoned.
*Uninsured depositors in all the banks (over $100,000) are all going to take significant haircuts.
*The Russian money interests who have just been fleeced have to be madder than upset hornets. Those involved in confiscating their money might not sleep to well in the weeks and months ahead.
Why Russia?
Is it just a coincidence they are suspected or have been providing support to the Syrian Government? Was this a way of getting back at the Ruskies? You can never be sure.
Meanwhile there some who have had just about enough of the Central Bank Axis Europe/UK/USA & Japan and think it’s high time to forge new roads without the “Fab Four.”
BRICS Nations Plan New Bank to Bypass World Bank, IMF
By Mike Cohen & Ilya Arkhipov - Mar 25, 2013 (Bloomberg)
The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund.
The leaders of the so-called BRICS nations -- Brazil, Russia, India, China and South Africa -- are set to approve the establishment of a new development bank during an annual summit that starts today in the eastern South African city of Durban, officials from all five nations say. They will also discuss pooling foreign-currency reserves to ward off balance of payments or currency crises.
“The deepest rational for the BRICS is almost certainly the creation of new Bretton Woods-type institutions that are inclined toward the developing world,” Martyn Davies, chief executive officer of Johannesburg-based Frontier Advisory, which provides research on emerging markets, said in a phone interview. “There’s a shift in power from the traditional to the emerging world. There is a lot of geo-political concern about this shift in the western world.”
The BRICS nations, which have combined foreign-currency reserves of $4.4 trillion and account for 43 percent of the world’s population, are seeking greater sway in global finance to match their rising economic power. They have called for an overhaul of management of the World Bank and IMF, which were created in Bretton Woods, New Hampshire, in 1944, and oppose the practice of their respective presidents being drawn from the U.S. and Europe.
Reform Needed
“We need to change the way business is conducted in the international financial institutions,” South African International Relations Minister Maite Nkoana-Mashabane said in a March 15 speech in Johannesburg. “They need to be reformed.”
The U.S. has failed to ratify a 2010 agreement to give more sway to emerging markets at the IMF, while it secured Jim Yong Kim, an American, as head of the World Bank last year over candidates from Nigeria and Colombia.
Goldman Sachs Asset Management Chairman Jim O’Neill coined the BRIC term in 2001 to describe the four emerging powers he estimated would equal the U.S. in joint economic output by 2020. Brazil, Russia, India and China held their first summit four years ago and invited South Africa to join their ranks in December 2010.
Trade within the group surged to $282 billion last year from $27 billion in 2002 and may reach $500 billion by 2015, according to data from Brazil’s government.
Funding Disagreement
“If they announce a BRICS bank it will be quite something,” O’Neill said in an e-mailed reply to questions on March 15. “At a minimum it symbolizes they can achieve something as political group and means lots of other things could follow in the future. It also means that they will have their own kind of special World Bank, which may aid infrastructure and trade projects.”
While BRICS leaders may approve the creation of a development bank in principle at the summit, there’s still disagreement on how it should be funded and operated.
The meeting may fail to reach a detailed agreement this week on how to fund the bank, said Mikhail Margelov, President Vladimir Putin’s envoy to Africa. Russia favors capping each side’s initial contribution at $10 billion, he said in a March 15 interview in Moscow.
“It will be some time before it will be feasible for this bank to start financing say, a railway project,” Simon Freemantle, an analyst at Standard Bank Group Ltd., Africa’s biggest lender, told reporters in Durban yesterday. “That is some way out.”
Currency Pool
Agreement on pooling foreign-currency reserves to fend against crises is also “some way off,” South African Trade Minister Rob Davies said on March 22.
In October, Brazilian Finance Minister Guido Mantega said the pool will be modeled on the Chiang Mai Initiative, which gives Japan, China, South Korea and 10 Southeast Asian nations access to $240 billion of emergency liquidity to shield the region from global financial shocks.
Interest rates near zero in the U.S., Japan and Europe have fueled foreign investors’ appetite for higher-yielding assets, driving up currencies from Brazil to Turkey. Brazil has warned of a global currency war as nations take reciprocal action to weaken their currencies and protect export industries.
Brazil’s real has gained 2 percent against the dollar since the beginning of the year, while South Africa’s rand has dropped 8.8 percent in the period.
African Leaders
For South Africa, which makes up just 2.5 percent of total gross domestic product in BRICS, the summit is a way to showcase its role as an investment gateway to Africa. President Jacob Zuma has invited 15 African heads of state, including Egypt’s Mohamed Mursi and Ethiopia’s Hailemariam Desalegn, for talks with the BRICS leaders at the summit. For most of the BRICS leaders, it’s also the first opportunity to meet Chinese President Xi Jinping after his appointment on March 17.
“We will discuss ways to revive global growth and ensure macroeconomic stability, as well as mechanisms and measures to promote investment in infrastructure and sustainable development,” Indian Prime Minister Manmohan Singh said in a statement yesterday.
Gold Hourly Chart
Gold pattern on the hourly chart has a lot of choppy and overlapping qualities and that’s not usually the sign of a sustainable uptrend. That is the one worry and it’s even worse with the silver chart. Resistance is jam packed at 1610-1620 and 1630. Monday was another Flush out day where they cleared the stops. We bought in on the trade page at 1592.50 – 1595 and gold still needs to follow thru to be successful. UNTIL WE GET ABOVE THE RED RESISTANCE LINE at 1610 and even the 1620 area, we can’t eliminate the downside. Three flush outs at higher price levels give us some hope but that’s not to say we won’t get another. The 1585-1590 area is support for Tuesday. A break below the 1575-1580 area and the odds will move back to the downside scenario. If it turns down from here then the 1642-1663 area will come back in play. We can have every single thing bullish about gold or we can have every single thing bearish about gold but price is the only thing that counts. Resistance is the 1608-1613 area and then 1620-1625. In fact resistance is jam packed up there from 1610-1630. The other thing to watch is the green 200 hour moving average at 1600. We’ve got to be above it to have UPTRENDING potential. Today’s flush took us under it and as you can see gold is fighting right now to maintain it. If we breakdown again on Tuesday, 1585-1592 is support. Below1580 and gold can get in trouble again.
We got our pullback to the 1590 area we were looking for on Monday. We got a nice bounce back above 1600. BUT I CONTINUE TO BE WORRIED. SILVER scares, me, GDX scares, me the HUI SCARES ME. We’re at the seasonal turn but this is an average. Sometime winter comes late, sometimes winter comes early. So when we say the ideal date it’s like saying spring starts on March 21st. Last year we were cutting the lawn in New England at this time. This year there’s still two feet of snow. BUT ITS SPRING.
There’s been 3 flush outs on the downside in March on the hourly chart. That should be plenty folks. Gold needs to get its act together and fast. If we don’t hold 1600 and close below 1575-1580 the odds are going to favor another two week downturn. If we get that downturn and break the 1540 ON A FRIDAY CLOSING BASIS or a MONTHLY CLOSING BASIS, the odds are going to turn and favor that 1500 won’t hold and lower prices are in store.
Tuesday has support at 1585-1592. A break below 1580 and we think the metals move lower to test supports again if not outright sell off again. We need to get above 1615-1620 and with conviction. Three flush outs are plenty. Now we need results. A break below 1580 and we favor lower into Wednesday or Thursday and it actually could be down hard. A close above 1620 will calm me down a bit.
Bottom Line
The uptrend is still in play on the short term. We now need the INTERMEDIATE TERM to kick in. We’re in the most important time frame for the next three months if not the entire year and that is March 22nd to 29th. We have said from the get-go that we’ve favored a LOW point to be reached in this area. The rally from 1555 to 1615 has taken place. About a week and a half ago, we started considering that the March 7th/8th period was beginning to look like it might be the low. We’ve never eliminated this time frame, but we’ve BEEN WAITING for action. We’ve gotten the push above 1600 but now the FOLLOW thru must begin and it must begin soon. The choppy and overlapping price action needs to end and needs to end soon. SILVER NEEDS TO TURN UP. If I was a doctor I’d still have it on suicide watch when I look at its PULSE (CHART). I’m trying to be a little light hearted here, but the situation is growing to the point that ----that well, how many times can they tell us there is no silver left on earth and have price act this way?
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GOLD CURRENT TRADE
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Our Position
Bought 1Apr Gold on 25/03/2013
Entry: 1592
Stop : 1578
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SILVER CURRENT TRADE
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Our Position
Bought 1May Silver on 25/03/2013
Entry: 28.60
Stop : 28.30
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YOU SHOULD NOT TAKE ANY MATERIAL posted on this BLOG AS RECOMMENDATIONS
TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED.
TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED.
Do your own due diligence.
No one knows tomorrow's price or circumstance.
I intend to portray my thoughts and ideas on the subject which may s be used as a tool for the reader.
I do not accept responsibility for being incorrect in my speculations on market trend.
I intend to portray my thoughts and ideas on the subject which may s be used as a tool for the reader.
I do not accept responsibility for being incorrect in my speculations on market trend.
King Regards
