The MasterCharts: March 2011
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Wednesday, March 30, 2011

Silver, it's turned positive in relation to gold

Silver, it's turned positive in relation to gold.
from Richard Russell:
March 29, 2011 -- Silver, it's turned positive in relation to gold. The chart below tells the story. Back in October 2009 one ounce of gold would buy over 80 ounces of silver. From that point on the ratio of gold to silver changed in favor of silver.

As of today, one ounce of gold will buy only 38.3 ounces of silver. Students of the precious metals are wondering how low the ratio might go. There was a long period when one ounce of gold would buy only 16 ounces of silver. The obvious professional play since late-2009 was to sell gold short and buy silver.

Below is a chart of the ratio going back 19 years. You can see that the ratio has broken below the 1998 low. The conclusion -- stick with silver, but don't sell your gold.

-- The MasterFeeds

Friday, March 25, 2011

Dietary Macronutrient Composition per capita

Check it out on The MasterCharts

Venezuelan Inflation: Structural or Self-Generated?

Seems pretty clear, but for some reason they just can't get their heads around the fact the inflation is simply a monetary phenomenon, as uncle Milton used to say….

an excellent piece from The Devil's Excrement

Venezuelan Inflation: Structural or Self-Generated?
The Devil's Excrement

March 24, 2011

We were told by Minister of Planning and Finance Giordani, who has been in this Government over ten of the last twelve years, that Venezuela's inflation problem was "structural" and in the never changing strategy of blaming the "previous" Government for everything, he accused the IVth. Republic of this problem. I guess twelve years is not enough in his mind to solve this problem, ignoring the fact that in those twelve years, the most insidious influence on inflation, that of the world, almost magically vanished, with most countries not only having single digit CPI's, but many in the low single digits.
As a famous true and real economist said, inflation is simply a monetary phenomenon. Such a simple concept that is so poorly understood in inflationary and populism-ruled countries like ours. You see, if this were not true, Governments could just spend and make everyone rich. Life would be as simple as Chavez and Giordani want it to be.
But money does not imply wealth. Money is how we exchange things. We went from barter to money, to create a neutral way of transacting. In the beginning of commerce, you had one good and exchanged it for another or for a service. Too many mangoes on the trees and nobody wanted to give you anything for a mango, too much supply. By the end of mango season, you could probably get a lot for it, not enough supply and probably some demand.
But I digress…
If the Government "creates" too much money, without the underlying productivity or supply of goods and services increasing, the money will lose value, there will be inflation and it will be worth less. So, that is what Central bBank's are supposed to do, try to fine tune the amount of money to balance it out with the supply of goods and services.
Thus, if you want to see why there is inflation, you have to look first at monetary liquidity, the so called M2, which measures all of the money available out in an economy. This number is supposed to be made public weekly by the Venezuelan Central Bank under "Agregados Monetarios" here. Lately, there is some delay to have this number published, but more ominously we no longer see its components, it has been over a year since we can see what is increasing faster in all the parts of M2. I will not bore you with the technicalities.
When you look at M2 since Hugo Chavez became President, the picture is quite scary at first and at second sight, as seen in the plot below:

Thursday, March 24, 2011

Gold up, silver at 31-year high on flight to safety

Gold up, silver at 31-year high on flight to safety

CRB Index, Oil, Gold and Copper monthly – a 'transitory' rally for 10 years

Monday, March 21, 2011

Silver: China Imports 245T In Feb, Qatar SWF “Interested” In Buying

China Imports 245 Tonnes of Silver in February and Qatar SWF "Interested" in Buying Silver

Date: March 21, 2011

Gold and silver rose on the open in Asia and have continued those gains so far in European trading with the Libyan military conflict leading to a safe haven bid and falls in the dollar and yen. The all time and multiyear nominal dollar highs set on March 7th ($1,444.95/oz and $36.75/oz) look set to be challenged as gold is less than 1% from its record high and silver less than 2% from its nominal recent high.

Safe haven demand continues especially in Asia and macroeconomic and geopolitical risk remains elevated. The tragedy in Japan and possibility of an ecological catastrophe has clouded the economic picture and created even more uncertainty which will lead to continuing physical demand.

In Japan, many ATMs have not been working for days now and this is leading to safe haven demand for gold. Should efforts to sort out the ATM problem not be resolved this week it could out pressure on the already strained Japanese financial system.

Iran and Other Central Banks Secretly Increasing Gold Reserves

News that Iran and other nations with large dollar currency reserves have greatly increased their gold reserves (see News) will not come as a surprise to our readers. It stands to reason that they would given the degree of exposure which most creditor nations have to the U.S. dollar. It also stands to reason as some of them do not have cordial relations with Washington and may be reluctant to fund the U.S. continuing imprudent fiscal policies.

Gold was not the only precious metal being bought with the FT reporting that the sovereign wealth fund of Qatar, the Qatar Investment Authority is reportedly interested in acquiring both and gold and silver.

The QIA has assets estimated to exceed $65 billion and this one sovereign wealth fund alone could easily corner the very small physical silver market which is worth some $36 billion at today's prices (1 billion ounces of above ground, investment grade refined silver bullion multiply by $36 per ounce).

China Imports 245 Tonnes of Silver in February and Qatar SWF "Interested" in Buying Silver
Central banks and sovereign wealth funds with massive exposure to the dollar, such as the Russians and Chinese, are not going to shout from the roof tops their intentions to diversify into gold and silver bullion as this would lead to a surge in bullion prices and an even greater depreciation of their dollar holdings.

China imported 245.6 metric tons of silver in February. The figure is close to the 260.6 metric tons imported in February 2010 and suggests that the Chinese are more than willing to buy silver at over $30 per ounce. It also suggests that the record Chinese imports of 3,475,394 kilos seen in 2010 (a massive four fold increase from 2009) may be again attained in 2011.

This demand is likely from the private sector rather than official but it is quite possible that there has been official buying in recent months. This may have come from the Chinese State Administration of Foreign Exchange (SAFE) which manages nearly $3 trillion of currency reserves. The Chinese has experienced the collapse of a paper currency and hyperinflation as recently as 1949 and therefore appreciate the value of gold (and silver) as currencies which cannot be debased.


(Financial Times) -- Iran bought gold to cut dollar exposure

Iran has bought large amounts of gold in the international market, according to a senior Bank of England official, in a sign of how growing political pressure has driven Tehran to reduce its exposure to the US dollar.

Andrew Bailey, head of banking at the Bank of England, told an American official that the central bank had observed "significant moves by Iran to purchase gold", according to a US diplomatic cable obtained by WikiLeaks and seen by the Financial Times.
Mr Bailey said the gold buying "was an attempt by Iran to protect its reserves from risk of seizure".
Market observers believe Tehran has been one of the biggest buyers of bullion over the past decade after China, Russia and India, and is among the 20 largest holders of gold reserves.
They estimate it holds more than 300 tonnes of gold, up from 168.4 tonnes in 1996, the date of the most recent International Monetary Fund data.
The cable, dated June 2006, is the first official confirmation of Tehran's buying.
Last year central banks became net buyers of bullion after 22 years of large sales, helping drive gold prices to all-time nominal highs. Trades by central banks are often kept secret.
Bankers said other Middle Eastern countries had also been quietly adding to gold holdings to diversify away from the dollar amid political tensions and volatility in currency markets.
"The totality of central bank reserves is not what is reported to the IMF," said Philip Klapwijk, executive chairman of GFMS, a precious metals consultancy. "There's probably another 10 per cent on top of that."
Cables obtained by WikiLeaks cite Jordan's prime minister as saying the central bank was "instructed to increase its holdings" of gold, and a Qatar Investment Authority official as saying the QIA was interested in buying gold and silver.
"There is no question some Middle Eastern countries are very interested in buying gold," said George Milling-Stanley, head of government affairs at the mining industry-backed World Gold Council.
In the past two months, the political unrest in the Middle East has helped propel gold to a record price of $1,444.40 a troy ounce.
The Bank of England declined to comment on the cables, but did not dispute their contents. The central banks of Iran and Jordan and the QIA did not respond to requests for comment.QIA did not respond to requests for comment.

Thursday, March 17, 2011

The Day The Yen Carry Trade Died | zero hedge

The Day The Yen Carry Trade Died | zero hedge

It's gotta hurt real bad now!!!

While everyone is staring in disbelief at the USDJPY, the real carry action is in the high yielding-YEN pairs, i.e., the development, high growing countries. And it's a massacre: ZARJPY, NZDJPY, AUDJPY - all are plunging far more than the USD. This is nothing short of a complete carry trade unwind. The implications: the cheapest recurring source of funding for risk assets - the Yen carry trade, is over. Those who managed to sell early on are lucky. The rest will get such an onslaught of margin calls tomorrow they may need to access the discount window (if Primary Dealers and the luckier banks). Many will be forced to sell assets to satisfy collateral requirements as ongoing sales of carry pairs push the Yen ever higher, and force ever more liquidity out of the market. And if the Yen carry trade is done, the question is when will the USD, which has also been a carry currency for some time, follow suit. And, once again, the most troubling observation is that the BOJ has not intervened. Our sinking feeling is that after pumping 50 trillion or so in money markets, the petty cash may be running quite low. In any case, ES opens in 2 minutes. Grab the popcorn now.

The Day The Yen Carry Trade Died | zero hedge

Check it out on The MasterCharts

USDJPY Goes Bidless

USDJPY Goes Bidless | zero hedge
Check it out on The MasterCharts

Tuesday, March 15, 2011

We’ve Taken Out All Trendlines

We’ve Taken Out All Trendlines

Things are getting VERY ugly in the financial markets. Indeed, we’ve taken out virtually every trendline that supported the markets from the 2008 Crash.
First off are the emerging markets: trendline broken and retest failed.
Same goes for THE commodity play: Brazil:
And the “growth miracle” China:
Here in the US, the S&P 500 has taken out the trendline that supported it from the end of September onwards:
The US Dollar has ALSO taken out its long-term trendline:
In plain terms, the financial system is RED ALERT. The question now is if additional liquidity can prop this giant house of cards up anymore.

We’ve Taken Out All Trendlines

Check it out on The MasterCharts

Friday, March 11, 2011

You should always listen to the Dr.

Copper: the doctor’s prognosis

Published: March 10 2011 20:03 | Last updated: March 10 2011 22:50

It should come as no surprise that the strong, positive correlation between the world’s two leading industrial commodities has broken down over the past month. Oil has surged 15 per cent on supply concerns while copper is off 9 per cent from the record high of $10,190 a tonne it hit in London trading in part due to fears of what dearer and scarcer crude might do to the world economy. But developments in the Middle Kingdom, not just the Middle East, are affecting copper prices.

China, by far the world’s single largest copper consumer, already outstrips the appetite of what some decades ago was called the “industrialised world.” Its demand for the red metal overtook that of North America and Western Europe combined in 2008 and analysts at Credit Suisse forecast it will be double their consumption by 2013, soaking up a third of all supply.
Given its projected needs for copper-intensive infrastructure, those forecasts seem consistent with economic growth expectations. Even so, the copper market may be ascribing an overly smooth and upward-sloping trajectory for demand in the medium-term. Chinese imports of all industrial commodities took a tumble last month due to the Lunar New Year celebrations, but copper’s fall seems especially sharp. Shipments of 235,000 tonnes were the lowest since January 2009 when prices were a third today’s level.

For some months, local inventories have seemingly grown faster than underlying demand and the discount between local and international prices would have suggested. Some analysts, noting that a large part of Chinese bonded copper inventories have been used as collateral for loans, believe that this artificially stimulated the surge in imports. If so then this could make copper demand doubly-sensitive to Chinese government efforts to slow down credit growth.

Known as “the only metal with a PhD in economics” for its forecasting prowess, perhaps “Dr Copper” was warning us of speculative froth as much as expected growth when it surged earlier this year. If so, more weakness seems likely. / Lex - Copper: the doctor’s prognosis