Jim Sinclair: The Legend, I Knew Him Way Back When

July 23 - Gold $1335.10 down $1.30 - Silver $20.25 down 25 cents

July 23 - Gold $1335.10 down $1.30 - Silver $20.25 down 25 cents

"GET AFTER THEIR ASS!" . A Texas Football Coach

GO GATA!

Living in Texas and being an ex-pro football player with the Patriots, that is one of my favorite quotes. One of those Texas football coaches, the legendary Darrell Royal of UT, and who recently passed away, made a comment way back when about my friend, and former roommate in Manhattan, Ed Marinaro. Ed went to Cornell right after I graduated and quickly became an All-American football player, who should have won the Heisman Trophy (he came in second to Pat Sullivan of Auburn). The only reason Ed did not win was because the gang in the South could not handle an Ivy Leaguer winning the big deal at that time. Ed went on to play in two Super Bowls with the Minnesota Vikings as a starting halfback and then starred on two TV sitcom big hits, Hill Street Blues and Sisters.

Why go there re gold and silver commentary? No reason other than today was a no surprise quiet day and the above quote is one of my favorites, especially as to how it relates to GATA. That is what we do.

AND, it relates to the title of this commentary re the legendary Jim Sinclair, whom I first knew of as a commodities trader in the late 1970's with Shearson Hayden Stone when Sandy Weill was running that show. I joined Shearson right after Ray Dalio was fired for having a girl take off her fur coat (she was completely nude underneath) to make a hedging point) during a seminar in California. I was introduced to Ray who had just formed Bridgewater Associates and was struggling to make his new venture work. It is a most fun story. Ray needed a lot of work done and said, if I was willing to do it for him, I would be his broker. Long story short, I worked on material for Ray until 10:30 at night after night in lower Manhattan at Shearson headquarters before going back uptown where I lived.

There is so much more I could get into re Ray, who is now the number one hedge fund manager in the world and worth about $17 billion, but today is about another legend, Jim Sinclair.

Back then, I was involved with Ray re trading cattle, feeder cattle, and corn, along with trading hogs, pork bellies and soybeans. Get this: there were no financial futures markets re stocks and bonds back then. We were known as cowboys and not really respectable in the acceptable financial arena. We all know how that has all changed . well, at least in terms of the JPM/Goldman Sachs crowd.

Anyway, I became a good friend of a guy named Calvin Coppedge, who was Jim Sinclair's broker at ContiCommodity Services. Calvin was some character. He was living with Princess Elizabeth of the British Crown Royal deal. She was delightful. Calvin was much fun and very bright. But, he was murdered years ago. The point is for this commentary is that Calvin (I was in my late 20's) kept talking about this genius guy, Jim Sinclair. I was entertained, but into what I was doing with Ray Dalio in the ag world. Gold then went bananas.

(Could not resist adding what Jim sent me about Calvin C): "He gave me a human skull for my birthday from Macbeth."
Jim

What I remember most back then was what a big deal Jim was in New York. When gold was making its big run to $850 or so in 1980 Jim was the talk of the town. The politicians, actors, big money types were all following Jim. And, I THINK, he got many of them out of the trade at the right time. So, here's to you Jim and to your second run at the big time in Manhattan, Connecticut, and Tanzania. You told everyone what was going on back then and were so right . and you will be so right again in your prediction of $3500 gold.

OK, now back to the nitty gritty of the day, which is pretty good to report. After yesterday's surges, both gold and silver did some checking on the downside and held support. Gold fell to $1326 and then firmed up very well. Note that it left $1300 in the dust.

Silver was a bit different. It crashed back to $20, its key resistance now support level, before making a modest 50% comeback. While not as firm as gold today, its rejection of $20 on the downside in such a clear fashion may be the subtle Cat's Meow.

More good news to report on the physical gold front. The AM Fix was $1326.75. In yet another anomaly, the PM Fix jumped to $1333.50. The physical market is in very good shape.

The gold open interest fell 5291 contracts to 439,414. So, part of yesterday's big rally was due to a number of the latest commercial shorts and specs covering. No surprise there.

The silver open interest went UP 909 contracts to 133,641. You got me on that one? When are the JPM shorts going to be FORCED to give up?

Inputs and comments

*Dave from Denver late yesterday afternoon.

Just got off the phone with my NYC buddy (the one who gave me the heads up about wealthy Europeans demanding their gold from JPM and other bullion banks over there). He was at a convention on Friday for big intstitutional investment funds. The CIO of the Memorial Sloan Kettering fund gave a presentation in which he said "you have to buy physical gold and take possession of it or else you don't own gold - that's what we do." He said they use gold as a hedging device but that it doesn't work as a hedge unless you have it in your own possession. Every other form of gold is embedded with counterparty risk.

My friend said that what this means is that it's further confirmation that the very wealthy elite who are "plugged in" are buying a lot of gold and taking possession because funds like MSK have very wealthy insiders on the board.

Speaking of which, another 3+ tonnes was removed Friday from the Comex "eligible" bin. This time for HSBC's eligible inventory. Total gold on the Comex is now down to 6.8 million ounces. Note that this is "reported" gold stocks, for which the CME now uses a disclaimer in reporting the numbers.

The total amount of gold futures open interest is now 47 times more than the registered gold (available for delivery gold) on the Comex.

***

"Why is it that no one has mentioned the open interest in Aug.Gold currently at 124,381 (7/23)."

Rocket Rich...

Calling all 'Rocketeers of the Happy Silver Ship',

Given my track record in the last 24 months at calling turns, any expectations I might have on the short term direction of our Favourite Metal should be treated with a Code Red Caution!

However regardless the picture below should raise an eyebrow or two!

If this truly is the low and we are now heading back up to new heights within this microphone shaped cycle, then where to next and when?

Well there's no guarantees in this game, but if the Cycle is to continue to repeat in a similar way it has throughout this Screaming Bull to date, then it's only reasonable to expect a return to the Upper Trendline in the next 2.5 years roughly, Here's a chart below I etched together a few weeks back, I'll leave it to tell it's own story!

Who's still riding this beautiful steed? I know I am!

Behavioral Finance

*A quiet day for the PPT and Gold Cartel.

The dollar fell 25. to 81.97. The euro rose .0043 to 1.3247. The pound gained . 0024 to 1.5383. The yen went up .21 to 99.24.

CARTEL CAPITULATION WATCH

Late edition from Jesse...

23 July 2013

http://jessescrossroadscafe.blogspot.com/2013...ice-really.html***

U.S. economic news:

09:00 May US FHFA House Price Index +0.7% vs. consensus +0.8%
Apr reading was +0.7%
* * * * *

U.S. house prices target="_blank" rose 7.3 percent in the year through May as buyers competed for a small supply of listings, according to the Federal Housing Finance Agency.

Prices target="_blank" increased 0.7 percent on a seasonally adjusted basis from April, the FHFA said in a report today from Washington. The average economist estimate was for a 0.8 percent gain, according to data compiled by Bloomberg.

Real estate values are climbing as improving target="_blank" employment helps draw buyers into the market for a tight inventory of homes. A separate report today from Zillow Inc. showed U.S. home values rose 2.4 percent in the second quarter from the previous three months. It was the biggest gain for a second quarter since 2004, the Seattle-based property-research company said.

"The U.S. housing market as a whole is currently not experiencing a bubble, but in many places it sure must feel like one," Zillow Senior Economist Svenja Gudell said in a statement. "Homeowners are feeling a sense of whiplash after years of depreciation."

The limited target="_blank" supply and higher mortgage rates may be restraining purchases. target="_blank" Sales of previously owned homes unexpectedly slipped 1.2 percent in June to 5.08 million annualized rate, the National Association of Realtors reported yesterday. The number of properties on the market last was month was the fewest for any June

continued @ target="_blank" http://www.bloomberg.com/news/2013-07-23/u...hrough-may.html

13:02 2-yr Treasury auction yields 0.336%, with bid/cover 3.08 vs average 3.65
Allotted at high 42.14%
Indirect participation 30.39% vs average 26.67%
Direct Participation 16.37%
In reaction:
2-year (1/32) to yield 0.31%
3-year (2/32) to yield 0.61%
5-year (3/32) to yield 1.32%
7-year (7/32) to yield 1.91%
10-year (7/32) to yield 2.51%
30-year (17/32) to yield 3.58%
Dow +24.27 to 15,569.82
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07:55 Half of economists surveyed expect Fed to reduce monthly asset purchases to $65B in September - Bloomberg
Bloomberg, citing its latest survey, noted that 50% of economists polled said that they expect the Fed to reduce its monthly pace of bond purchases to $65B in September from the current level of $85B. The article noted that this is up from 44% in last month's poll. Purchases are expected to be divided between $35B in Treasuries and $30B in MBS. Half the economists also expect the Fed to wrap up QE3 in Q2 of next year, while 24% forecast an end in Q3 of 2014.
A September start date for tapering has been widely discussed, as have expectations for a ~$20B reduction in monthly asset purchases. In addition, Fed Chairman Bernanke has already said that if the economic outlook evolves in line with the current thinking at the Fed, the asset purchase program could be wrapped up by the middle of 2014 with the unemployment rate around 7%. target="_blank"
http://www.bloomberg.com/news/2013-07-2...s-surveyed.html
* * * * *

Author: Reuters
Posted: Tuesday , 23 Jul 2013

WASHINGTON/NEW YORK (Reuters) -

Wall Street's multibillion-dollar commodity trading operations will be put under the political spotlight on Tuesday as a powerful U.S. Senate committee questions whether commercial banks should control oil pipelines, power plants and metals warehouses.

The Senate Banking Committee hearing comes as Goldman Sachs , Morgan Stanley and JPMorgan Chase - which generated an estimated $4 billion in commodity revenues last year - face growing pressure from a number of investigations into their operations, and as the Federal Reserve reviews Wall Street's right to operate in raw material markets.

Big aluminum consumers like MillerCoors are set to tell the committee that the banks' control of metal warehousing firms has driven up industry costs by as much as $3 billion. The banks will not speak at the hearing, with their views represented by a lawyer who often works with Wall Street.

The threat to Wall Street's physical commodity trading divisions has escalated abruptly across multiple fronts, putting an uncomfortable spotlight on a lucrative side of their business that has thus far fallen largely outside of regulators' sights.

Last Friday, the Fed raised the stakes dramatically, issuing a surprise statement to say it was reviewing a landmark 2003 ruling that first allowed commercial banks to trade physical commodities such as gasoline barges and coffee beans. Until now the Fed had been thought only to be debating whether or not certain banks could own assets, not trade the raw materials.

"Since 2003, our government and central bank have allowed an unprecedented mixing of banking and commerce," Joshua Rosner, managing director of independent research firm Graham Fisher & Co, said in prepared remarks.

"So far, that grand experiment has gone better for the banks than it has for consumers."

At issue is not whether banks should be allowed to trade derivatives like corn futures or oil options, but whether they should be allowed to invest in infrastructure such as tankers and warehouses that can be integrated with their trading operations - and more broadly whether they should be allowed to continue holding title to the underlying physical commodities.

Goldman, Morgan Stanley and JP Morgan declined to comment in detail on their physical commodity trading.

WALL ST FRUSTRATIONS

The Fed statement was the latest in a series of setbacks for banks at a time of growing frustration in Washington over the failure to complete reforms meant to prevent "Too Big to Fail" banks from endangering the wider economy.

Last week the Commodity Futures Trading Commission (CFTC) also launched the opening salvo of a possible enquiry into the lucrative but controversial business of metals warehousing, which has become a potent political lightning rod.

"Large investment banks should not be allowed to warehouse physical commodities like fuel or building materials, inflating prices for consumers and small businesses and profits for Wall Street," Senator Ed Markey of Massachusettes said on Monday.

JP Morgan and Goldman both purchased major London Metals Exchange (LME) warehouse operators in 2010.

Over the following years, a glut of aluminum and other metals piled up in these storage sheds, forcing companies to wait as long as 18 months to take delivery of physical supplies, Tim Weiner, Global Risk Manager of commodities and metals at MillerCoors LLC, is set to tell the committee.

"What's happening is that the aluminum we are purchasing is being held up in warehouses controlled and owned by U.S. bank holding companies," he will say, according to advance testimony. He says the rules that have caused the queues and inflated premiums cost companies $3 billion last year.

TRADING WOES

JP Morgan is also reportedly close to a more than $400 million settlement with the Federal Energy Regulatory Commission (FERC), as the bank tries to put to rest allegations that its traders manipulated power markets in the Midwest and California.

The bank's alleged activity in those markets was linked to its control over real power plants and energy supplies, a fact likely to sharpen questions over the rules for ownership.

The hearing is the first to address the oversight of banks in physical commodity markets since a Reuters report last year revealed that Goldman and Morgan Stanley were still awaiting a Federal Reserve decision on whether they can still own physical assets after becoming bank holding companies in 2008.

Commercial banks are prohibited from owning trading assets, but the two former investment banks argued that their commodity activities are permitted under a "grandfathering" clause in a 1997 law that effectively scrapped much of the Glass-Steagel act separating the commercial and investment banks.

The Fed has until mid-September deadline to make that decision, and has never commented on the issue. The central bank's reluctance to address the issue publicly may also come under scrutiny at the hearing.

Separately, JP Morgan - which as a commercial bank has never been allowed to own assets - is believed to have reconfigured its Liverpool, UK-based Henry Bath metal warehousing business in order to qualify it as a "merchant banking" investment with the Fed, sources have said.

It is unclear whether that effort, which would require the warehouses to be managed at arm's length from the bank and divested within 10 years, was successful. JP Morgan has also floated a possible sale of Henry Bath, sources have said. The bank has declined to comment on the status of the unit.

Randall D. Guynn, a partner and head of the Financial Institutions Group at law firm Davis Polk & Wardwell, says the Federal Reserve's original 2003 decision to allow Citigroup to trade physical commodities should not be lightly dismissed.

"Both Congress and the Federal Reserve have previously found that the public benefits of these activities outweigh their potential adverse effects," he will say, according to testimony.

-END-

World economic news:

06:42 Macro Summary: Eurozone

ECB:

ECB's Praet says rates could reduced: Reuters cited comments from ECB executive board member Peter Praet, who said in an interview with Corriere della Sera that interest rates could be reduced further. He cited the ECB's new forward guidance measure. He also noted that as a non-standard measure, the ECB continues to offer banks unlimited liquidity. Praet has previously alluded to the possibility of lower rates if inflation remains moderate. He has also publicly discussed the pros and cons of taking the deposit rate into negative territory, though he has expressed skepticism about the central bank buying up loans if economic conditions deteriorate further, noting that it should not interfere with the allocation of credit.

OMT remains untested: The FT, in an article that did not break any new ground, discussed how despite its overwhelming success in lowering yields and removing the tail risks from the Eurozone sovereign debt crisis, the ECB's OMT remains untested. It also highlighted how few details about the OMT have emerged, while some key elements, including market access dynamics, have changed. In addition, it pointed out that opposition to the OMT has not diminished at the Bundesbank, while Germany's constitutional court could still try and limit how it operates. It went on to highlight thoughts that despite the heightened speculation that both Portugal and Ireland could be OMT candidates, the ECB may ultimately prefer to leave the program on the sidelines, where it seems to be most effective.

Poll shows collateral easing will have little impact on SMEs: Reuters reported on Monday that its poll showed that the ECB's move to ease collateral rules to increase SME funding will have little impact given that many firms are struggling and not in a position to borrow. Recall that last Thursday, the ECB expanded the range of ABS it will accept as collateral at its funding operations, while also lowering the haircut. It estimated that this will expand eligible collateral by ~?20B. According to article, half of 24 traders polled by Reuters said the move would have no impact in making it easier for SMEs to secure funding, while eight said there would be no significant change.

Growth vs Austerity:

Germany not finding any help in austerity push: The WSJ discussed how Germany failed to win support for its austerity prescription at last weekend's G20 meeting. The paper said that while this dynamic undermines its position over how to revive the Eurozone economy, Berlin is unlikely to shift its stance ahead of national elections in September. It also pointed out that Germany's austerity push was further challenged by official figures on Monday (see EUSTAT) showing that government debt rose sharply in the Eurozone in Q1, with increases particularly high in the peripheral countries that cut spending and raised taxes at Berlin's insistence.

Corporate bond market:

Companies borrowing less from Eurozone banks: The FT, citing data from Fitch, said that European companies are on track to borrow less than ?500B from the syndicated loan markets this year for the first time in a decade. It said that just under half of the ?495B total new debt funding for European companies so far this year has been from the loan markets, which is the smallest ever proportion and down from 60% last year. The paper noted that the data highlight the bank deleveraging trend and how Europe is increasingly moving towards a US-style market-based model of corporate finance.

Portugal:

Some troika officials believe Portugal may need a second bailout: The FT discussed the recent political volatility in Portugal. The article noted that Portuguese bonds and stocks rallied on Monday after President Aníbal Cavaco Silva decided against a snap election and backed the coalition government. In addition, Prime Minister Pedro Passos Coelho said that he was determined to restore investor confidence and keep the current bailout program on track. However, the paper said that despite the relief rally, some officials from the troika believe the recent political instability has made a second bailout when the current program runs out in mid-2014 far more likely.

Faltering bond market recovery suggests Portugal may need more help: The WSJ noted that while the Portuguese bond market has recovered some of its early-July rout that stemmed from heightened political uncertainty, the current level of the 10-year yield (it was ~6.29% thanks to a sharp rally on Monday) is widely considered too high to allow regular bond sales. Recall that the government had planned to resume regular bond sales in the second half of 2014 following the end of its bailout program. The paper said that if Lisbon cannot win back the confidence of private investors by then, which will be difficult given the weak economic outlook, it will likely be forced to secure additional financial support. Such support could entail a credit line from the ESM, a bridge loan or a new bailout package. It added that this dynamic would represent another setback for the Eurozone's plan for its bailed-out countries.

Spain:

Rajoy to face parliament over corruption scandal on 1-Aug: The Spanish press is reporting that Prime Minister Rajoy will appear in parliament on 1-Aug to address the escalating slush fund scandal. Recall that Rajoy had been under heavy pressure from the opposition, which had threatened a no-confidence vote if he refused. On Monday, Rajoy promised to give a full explanation. While Rajoy has denied any wrongdoing, former PP treasurer Luis Bárcenas recently confirmed in court the existence of the slush fund and the payments to PP officials. According to recent polls, the majority of Spaniards believe that Rajoy accepted undeclared cash payments from the slush fund.

More property market pain for Spain's banking sector: Reuters discussed the continued headwinds facing the Spanish banking sector from the property market crash. The article noted that real estate experts are warning that banks may have to take bigger writedowns on the plots of land that they were saddled with when developers went bust. It said that much of the old farm land and fields on the outskirts of cities that were snapped up by construction firms during the boom are failing to attract any buyers, even at big discounts. It added that banks may even be forced to commit more money building properties on the land that can be sold, while plots in remote areas may never recover any value. According to the article, while official data shows land prices have fallen 43% since their peak in 2007, some real estate experts believe they dropped at least 70%.

Italy:

Government continues to face opposition to reform efforts: The FT discussed the continued opposition on the part of major lobbies in Italy to economic reforms. The paper noted that lawyers recently went on strike for a week to protest plans to unclog the civil lawsuit system by extending the use of mandatory alternative dispute procedures, or mediation. It added that last year, they succeeded in undermining former Prime Minister Monti's attempt to abolish minimum legal fees. It said he also ran up against the entrenched power of pharmacists, who are still able to charge 20x more than what a packet of headache pills would cost in a UK supermarket. In addition, doctors, vets and health workers recently protested attempts by successive governments to cut public spending.
* * * * *

06:41 Macro Summary: China

Market:

Chinese stocks rose the most in nearly two weeks after Premier Li Keqiang said China wouldn't tolerate growth below 7%. The Shanghai Composite Index added 2%.

Growth/economic outlook:

7% seen as bottom-line for tolerable growth: Dow Jones noted that The Beijing News cited Premier Li Keqiang as saying economic growth must be kept above 7% as that is the bottom line of the government's tolerance. The report cited Li as telling the State Council that growth can't be allowed to slip below 7% as that will help the government reach it's official target of doubling the size of the economy this decade. It added that he said a "reasonable" growth target of 7.5% was set with maintaining labor market stability in mind, also noting that the government's tolerance for consumer inflation was 3.5%.

Bank says economy faces continued decline: China Daily reported that the Bank of Communications, China's leading commercial bank, released its projections for China's economy in the second half of the year, predicting GDP growth of around 7.5% by the end of the year. The report said China's economy still faces downward pressure because of sluggish domestic and foreign demand and economic structural imbalance. It said the government has shown determination to push forward with restructuring and reforms, and it will take time to produce any noticeable results. It added that in spite of the slowdown factors, the economy is unlikely to have a "hard landing". It predicted Q3 growth of 7.4% and Q4 growth of 7.2%.

Employment outlook weakens: China Daily noted that Manpower Group, a global workforce provider, said in its employment outlook survey for Q3 that Chinese employers' hiring intentions will weaken in the second half of the year but the employment rate is not a problem yet in China. The report said the net employment outlook slipped to its weakest level since Q1-2010, declining by 5% compared with the same period last year. The survey showed that 14% of the employers expect to increase payrolls in Q3, 2% anticipate a decrease and 45% forecast no change.

Provinces see slower growth: China Daily reported that the country's regional economies generally posted slower GDP growth in Q2. Of the 14 municipalities and provinces across China to have published their GDP figures in the first half of the year, 10 regions' growth rates dropped compared with the Q1. Three regions maintained the same growth rate, while one rose. The article noted that experts say that provinces with a greater reliance on fixed-asset investment would see their GDP growth come under greater pressure in the second half of the year, as there was little prospect of the central government rolling out a large-scale investment program.

Reform/stimulus:

Reforms must be deepened to address economic challenges: Reuters noted that President Xi Jinping said today that China must deepen reforms to address a slew of challenges confronting the economy. Xinhua quoted him as saying that officials must hold high the spirit of reform and innovation when managing the country to propel sustainable and healthy development of the economy.

Reforms still high on agenda: Xinhuanet reported that Premier Li issued a new call for China's macroeconomic policies to be more "scientific, forward-looking and targeted" in order to promote more sustainable growth. He noted that the nation will pursue a balance between economic stabilization and restructuring to bolster the economy. The article said such confidence-building talk shows policymakers are keeping their stimulus powder dry and further reforms still high on their agenda.

China to increase railway investment: Bloomberg pointed out that railway shares rallied after China Business News reported that state-run China Railway Corp. may increase investment for railway construction this year beyond the 650B yuan ($106B) planned earlier this year. The Shanghai Securities News cited railway officials that said new high-speed rail lines could help reduce overcapacity in industries such as steel and cement.

Capital flows:

Foreign cash flows out of China: Dow Jones noted that foreign capital flowed out of China in June as economic growth slowed and a rise in the yuan stalled, contributing to a credit crunch that briefly strained the banking system. PBoC data released yesterday showed the net outflow of foreign capital in June was the first since November. The PBoC and financial institutions sold a net 41.2B yuan ($6.7B) of foreign currency in June compared with net purchases of 66.86B yuan in May.

Forex regulator says no capital flight from China: The WSJ reported that China's forex regulator said the country is not seeing capital flight despite signs of funds exiting from emerging markets amid rising expectations that the US will taper QE. Note the swing to net sales in June - after six months of net purchases - suggests capital has started to flow out of the country. The regulator said cross-border capital flows in the second half will be generally stable though there may be short periods of fluctuations. It also said it will strengthen cross-border capital monitoring to adjust to two-way capital flows.

Property market:

City of Yancheng halts home price limits: Bloomberg cited a report from the official People's Daily which said China's eastern city of Yancheng has halted limits on home prices because an increase in supply was putting pressure on prices. The paper said the city has suspended the price limit for "a period of time". The article pointed out that the city is too small to show whether or not the government has allowed the easing of property curbs.
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07:37 Macro Summary: Japan

Economy:

Government upgrades economic view: Kyodo noted that the government said on Tuesday that the Japanese economy is on the verge of escaping nearly two decades of deflation. The Cabinet Office released a white paper that said that the economy trapped in prolonged deflation "has shown signs of turning around," adding that "consumer preference for lower-priced products has been waning." It also noted that fiscal improvement is an urgent issue and pointed out that sales tax increases would have a meaningful effect on boosting tax revenue.

Consumer confidence at highest level in over seven years: CNBC noted that a survey by Nielsen showed on Tuesday that consumer confidence in Japan rose to its highest level in over seven years in Q2. According to Nielsen, Japan's consumer confidence index rose five points to 78, its highest reading since Q1 of 2006. However, it added that the figure remains below the global average of 94. The survey showed that the perception of Japan's job market has shown steady improvement, with 30% of consumers positive on their employment prospects, up from just 4% in Q4 of 2012.

Reform:

Abe warns against backtracking on reform: The WSJ noted that Prime Minister Abe warned his fellow party members about backtracking on economic reform. The article pointed out that while Sunday's upper house election results gave Abe's government coalition control of both chambers, some of the candidates from his own LDP party that were successful have strong ties to protectionist lobbies. It added that their presence raises concerns that the LDP may return to its old ways and once again let the opportunity to implement crucial reforms slip by in an effort to protect the interests of their supporters.

Sales tax:

Aso says sales tax needs to be raised next year: Reuters cited comments from Japanese Finance Minister Taro Aso, who said that Japan must raise its sales tax next year as scheduled to show it is serious about fiscal reform. He noted that delaying the increase would go against the commitments made to the G20 that Japan would repair its finances. He added that the government could take steps, including the implementation of an extra budget, to mitigate the impact. Recall that Prime Minister Abe recently said that he would like to decide on whether to proceed with the sales tax increase this autumn, when more economic data is available to evaluate the recovery. For his part, Aso also stressed the importance of Q2 GDP data out on 12-Aug and said that he would like to see a final decision as early as the beginning of September, before the G20 summit in Russia.

Stocks:

Kuroda says stocks up on positive response to economic developments: Dow Jones cited comments from BoJ Governor Haruhiko Kuroda, who said that Japanese stocks have been moving higher as of late in a positive reaction to the yen's weakening and the signs of traction in the real economy. Kuroda also noted that the BoJ will maintain its monetary easing stance, adding that its flexible bond-buying operation has helped to curb increases in long-term JGB yields.

JGBs:

Investors not shifting money out of JGBs and into riskier assets as fast as BoJ had hoped: The Nikkei said that amid the renewed stability in the market, investors are not shifting money out of JGBs and into riskier assets as fast as the BoJ had hoped. The article noted that in June, life and nonlife insurance firms bought ¥812.2B more in bonds than they sold. It added that life insurance companies continue to invest mainly in JGBs as the current yield on the 20-year note at 1.7% is high enough to create a positive spread on the yields promised by new insurance contracts, which stand at ~1%. It also said that leading banks are scaling back JGB sales to the BoJ.

TPP/Trade:

Japan's entry into TPP talks adds layer of complexity: Reuters discussed Japan's entry into US-led trade talks on Tuesday. The article noted that Tokyo's entry, which takes to 12 the number of countries in the Trans-Pacific Partnership (TPP), adds another layer of complexity. It pointed out that even after Prime Minister Abe's big victory in Sunday's upper house election, he will come under pressure from the conservative faction of his LDP to resist US calls to slash Japan's high tariffs. StreetAccount notes that previous reports have suggested that Japan could still protect its agriculture industry by securing long phase-in periods for tariff reduction, combined with increased direct government subsidies to dampen the pain from competition.
* * * *

GOLD/SILVER

Silver Chart Observations,.. target="_blank"

ART CASHIN: Traders Are Talking About A Gold Conspiracy Theory And There's Evidence To Back It Up target="_blank"

BI 2013-07-23 6:28 AM Sam Ro

No discussion about gold is complete without a good conspiracy theory.

While most theories are easily dismissed, some stay around for a while due to a confluence of circumstantial evidence surrounding it.

Wall Street veteran Art Cashin addresses one such theory in this morning's Cashin's Comments.

He builds off of this wee target="_blank"kend's New York Times story about Goldman Sachs' aluminum warehousing operati target="_blank"on and Monday's gold spike.

A quick note about jargon: commodities like gold will have a futures price and a spot price. The futures price is the price you'd see on a contract, which is traded on an exchange like the NYMEX. The spot price is the current price of the commodity. Backwardation occurs when the spot price is above the futures price. Typically, these two prices converge when the futures contract matures.

From Cashin:

All That Glitters Is Not Arbitrage - Monday, spot gold spiked up $45 and the media pundits pointed to things from China to the FOMC. While all the cited may have been factors, veteran traders saw the bulk of the move resting in a conspiracy story.

In my mid-day email to friends I had noted this:

Gold soars as NYT story on metal warehouses fans flames of conspiracy theorists that gold warehouse stores have been "lent" out. That theory also aided by backwardation (spot price far above near future).

If you haven't been following gold closely, let me expand on that a little. For several months "physical gold" (bracelets, coins and small bars) have seen near riotous demand with long lines stretching into the streets. At the same time "paper gold" (ETF's, futures and nominal spot) have seen sharply falling prices. That dichotomy has sparked more than a few conspiracy theories.

The worst (and most strained) claims the world's central banks have put a bear raid on gold. That rumor claims that they are trying to cover the fact that they have sold/lent the gold they were supposedly safeguarding for their citizens. A plunging gold price would reduce the urge to look behind the curtain (or into the vault) and discover this misfeasance. A more pervasive form of the rumor/hypothesis substitutes the global banks for the central banks but with the same, theoretical, abuse of custody.A key support of these theories is the backwardation in gold - the spot price is higher than the near future contract. That's unusual. It could normally be resolved by selling spot gold and buying the cheaper future one month out. Thus, in a month, you would reap an apparent locked-in, riskless profit. Yet no one seems to be doing it. Is there doubt that there is gold in storage that will be deliverable in a month? So, the theorists assume. Now add in the front page NYT story, hinting chicanery and manipulation by the big banks of warehoused metals. Was this the smoking gun? Some folks seemed to think so as a short covering stampede exploded the gold price. The next five days will be key.

Arb, or arbitrage, is a fancy word traders use to describe a situation where they can take advantage of market price discrepanicies to book guaranteed profits.

Is there something the traders know that we don't know? Are there other forces preventing the arb opportunity from being arbed away?

Unfortunately, we are not sophisticated enough to answer these questions. But email target="_blank" us at moneygame@businessinsider.com if you can.

-END-

The legend.

Gold will move in hundreds of dollars a day on Comex soon says Jim Sinclair

Posted on 23 July 2013

World famous gold guru Jim Sinclair is telling his followers that the gold price will soon move in 'hundreds of dollars a day' when the Comex changes its settlement rules as it must because the exchange is running out of physical gold.

'The cause of today's spectacular rise in the gold price is the reality that with Friday continue large drop in Comex warehouse gold inventory,' he writes. 'No cogent argument can be formed against the reality that because of the continue fall in gold inventory that within in 90 days or sooner the Comex must change its delivery mechanism.Cash settlement'The highest probability is that Comex will have to move to cash settlement rather than gold. Part of that settlement could be lots of 100,000 GLD (gold exchange traded fund) that represents the ability to exchange for gold.

'Their problem is that if GLD is part of the settlement mechanism for the spot Comex contract that GLD will be destroyed by the convertibility. It is a truism in gold that which is convertible into gold will in fact be converted over time.

'Gold rose today because those knowledgeable know the inevitability of the changing of the Comex contract, as it is today which calls for settlement in gold between contracting parties. There is no question this is the emancipation of physical gold from the fraud of no gold, paper gold.

'The emancipation will cause physical gold exchanges to take birth and to be the discovery mechanism for the price of gold. This is the end of the ability to use paper gold future contracts as a mechanism to make the gold price sing and dance at the will of the manipulators.True value'With manipulation coming to an end the true value of gold will be discovered by the cash exchanges that are now taking birth. The advent of the cash spot exchanges around the world is the natural demise of the Comex set up as convertible and now being converted.

'As long as one can buy spot, pay insurance, transportation and re-casted by Rand Refinery to Asian products sold profitably, the demands for real gold are ending the hay days or even existence of the futures exchanges.

'Gold is headed back to be traded as it was before 1973. Gold will trade well above $3,500 and those who have lived in the gold market like me for now 53 years know it. A price of $50,000 for gold is not out of the question as a result of its emancipation from fraudulent paper, no gold, paper gold.'Gold running outHe continues: 'The warehouse inventory of every futures gold exchanger is screaming this. The fact that there is no meaningful above ground supply of gold is screaming this. The fact that most of the central banks supply of gold is leased is screaming this.

'There is no reason why gold cannot move up hundreds of dollars a day when the Comex changes their spot contract settlement, as they must, as they will, very soon.'

The next edition of the popular ArabianMoney investment newsletter has an exclusive interview with Jim Sinclair and edited highlights of his four-hour presentation in Vancouver on July 10th. Sign up to see this private circulation public target="_blank"ation (click here). target="_blank"

http://www.arabianmoney.net/gold-sil...s-jim-sinclair/-END-

Jim will be right again in the end.

Jim Sinclair: Comex must change its delivery mechanism soon

Submitted by cpowell on 07:26PM ET Monday, July 22, 2013. target="_blank" Section: Daily Dispatches

By Jim Sinclair
JSMineSet.com
Monday, July 22, 2 target="_blank"013

http://www.jsmineset.com/2013/07/...livery-mecha...The cause of today's spectacular rise in the gold price is the continuing large decline in the Comex warehouse gold inventory. Because of the continued fall in gold inventory, within 90 days the Comex must change its delivery mechanism.

The highest probability is that the Comex will have to move to cash settlement rather than gold. Part of that settlement could be lots of 100,000 shares in the gold exchange-traded fund GLD, the threshold amount of lots that can be exchanged for gold.

But if GLD is part of the settlement mechanism for the spot Comex contract, convertibility eventually will destroy GLD. What is convertible into gold will in fact be converted over time.

Gold rose today because the knowledgeable know the inevitability of the changing of the Comex contract. This is the emancipation of physical gold from the fraud of no-gold paper gold. Emancipation will cause physical gold exchanges to be born and to become the discovery mechanisms for the price of gold. This will end the use of paper gold futures contracts to make the gold price sing and dance at the will of the manipulators.

With manipulation coming to an end, the true value of gold will be discovered by the cash exchanges that are starting. The advent of cash spot exchanges around the world is the natural demise of the Comex setup as what is convertible is being converted.

As long as one can buy spot, pay insurance and transportation, have the gold recast by the Rand Refinery into Asian products, and sell it profitably, the demand for real gold will end the heyday and even the very existence of gold futures exchanges.

Gold is headed back to trading as it did before 1973. Gold will trade well above $3,500 and those like me who for 53 years have lived in the gold market know it.

A price of $50,000 for gold is not out of the question as a result of its emancipation from fraudulent no-gold paper gold.

GOFO is screaming this truth. The warehouse inventory of every futures gold exchange is screaming this. That there is no meaningful above-ground supply of gold is screaming this. That most of the central banks' gold is leased is screaming this.

There is no reason why gold cannot move up hundreds of dollars a day when the Comex changes its spot contract settlement, as it must and will very soon.

-END-

Gold's more volatile sibling, silver, could be a considerably better investment in a rising gold price scenario, but it still depends on whether or not gold has bottomed.

Author: Lawrence Williams
Posted: Tuesday , 23 Jul 2013

LONDON (Mineweb) -

In yesterday's trade gold moved up nearly $40 an ounce and has maintained its higher level overnight. Silver was initially slow to move, but then also managed a gain of close on $1 per ounce.

While still far short of getting anywhere near their levels of two years ago, this does look as though it could be the start of a general recovery in precious metals prices. The big question, of course, is: is this the beginning of an upwards re-rating, or will we see another stutter and fall back? And, if the former, how high can the momentum carry it?

If the gold pundits are right in their assumptions, then this could indeed be the start of something big. The gold bulls believe the big money has been driving gold downwards, closing off short positions and is now poised for taking it back up again - and this time, if they have indeed managed to exit the shorts, then the sky could be the limit. Gold could be set for a rise equally as fast, and as steep as the recent downturns - or so the argument goes.

But, there is one big flaw in the assumptions. On the way down it was strongly believed that the big money taking gold downwards was in collusion with the central banks of this world, and the U.S. Fed in particular, and while the big money can perhaps now see big profits on the horizon through buying low and then helping drive up the price, surely this is contrary to central bank desires?

While most central banks will deny that gold is, in reality, money any more, they do claim to hold vast reserves of the precious metal and it does tend to be viewed as an indicator of currency strength and thus of economic health.Add to that the theory that the central banks have leased out so much gold that their vaults may be rather emptier than official figures would suggest, a move to replenish these becomes more and more costly, and difficult to achieve, if gold is back on the rising path again.

Silver is not beset by quite the same strictures though. It's not a metal the central banks care about overmuch so is thus even more open to overt manipulation by the big money than its yellow sibling. Regardless, it still tends to move with gold, but in a more exaggerated manner.

Some analysts point to a big supply/demand surplus, but that ignores investment demand (which they do tend to take into account with gold) which is in reality what actually drives the price. As gold fell, silver fell further with the gold:silver ratio currently sitting at around 65.

Over the past century this ratio has fluctuated between peaks of around 100 and 15, but for part of this silver was still a monetary metal, while now, arguably, its price is driven by jewellery, industrial and investment factors, with the latter the key in terms of price fluctuations.

The last time the gold: silver ratio got down to its oft touted 'historic' level of 16:1 was when the Hunt Brothers tried, and nearly succeeded, in cornering the market. Unless one or more of the megabanks tries the same thing again, and this is doubtful as well as probably illegal, we don't see the ratio ever returning to this kind of level without its original monetary underpinning.

More recently the ratio has moved between 85 and 35, but mostly it sits in the 45 to 65 range, with the ratio moving lower when gold rises and higher when gold falls which gives silver its reputation for its higher volatility among the precious metals.

Thus, were gold to climb back to its $1500 level (a rise of around 13%) in the relatively near future, as many reckon and which can't be beyond the bounds of possibility, then a ratio of 65, as at present would see silver at $23 (a similar rise), but at a ratio of 45 silver would get to $33 - a much bigger increase of around 62%. Even at a comparably small fall in the ratio to say 57, a level seen only 3 months ago, silver would rise by 30%.

Given the gold:silver ratio's propensity to come down as gold rises, in a stronger gold price scenario then a sharp reduction in the gold:silver ration, and thus a far bigger percentage increase in the silver price, would seem more likely than not.

Yes, it is perhaps more of a gamble to invest in silver rather than gold, because of the increased volatility factor as silver investors have found during gold's poor performance of late. But, if you firmly believe that gold has bottomed and is set to start to rise again then silver looks to be the better bet in terms of percentage appreciation.

Silver guru Ted Butler would agree. In his latest weekly review he points to three years ago when both the gold:silver ratio and the absolute gold price were at similar levels to those seen recently (gold was at around $1250 and silver at $18).

From that point gold rallied to a peak of $1920 around a year later ( a gain of 50%), while silver took a little longer to peak to $49 the following April ( a massive gain of around three times that of gold) before silver was dramatically taken down - in a similar manner to gold earlier this year.

Butler reckons that it's not hard to imagine a similar scenario to occur in the near future. Whether though the kinds of extremely rapid rises which led to the gold and silver peaks, and may ultimately have led to their downfall as the huge short position holders with massive financial backing needed to redress the situation, will re-occur, at least in the near future, may be unlikely given how short a time has elapsed since those peaks, but a more gradual, and controlled, rise could well be on the cards.

But - as we noted earlier, everything depends on the movement in the gold price. If the big price takedowns by the big money are now over, then gold should rise regardless of Fed tapering.

The global economy remains in a mess while the Detroit bankruptcy, which could be followed by a whole spate of other mega municipalities in a similar situation, will surely bring home to the U.S. public that things are not quite as rosy as the politicians and economists try to make out.

The Eurozone has other shocks to come on the world stage. Gold supposedly thrives on uncertainty. At some stage it will turn upwards and when it does silver will too - but f target="_blank"aster.

http://www.mineweb.com/mineweb...2&sn=Detail-END-

A few things stood out today.

*Gold consolidated its gains VERY well and was so firm.

*The silver shorts continue to press their case, but it managed to hold the VERY key support at $20.

*Adnd YEAH BABY with the shares. The XAU rose 3.26 to 103.69 and the HUI gained another 7.59 to 262.52.

Considering yesterday's blastoff, today was a comfortable win for our camp. Upside fireworks still appear to be in the cards.

GATA BE IN IT TO WIN IT!

MIDAS

Appendix