Baltic Dry Index. 1302 +10
LIR Gold Target by 2019: $30,000. Revised due to QE.
"From a strictly economic point of view, buying gold in a major inflation and holding it probably presents the least risk of capital loss of any investment or speculation."
Henry Hazlitt
Is the era of free money ending? Well ending everywhere outside of the insane policy of the Fed’s United States of America. There have already been tightening moves in Australia, New Zealand and China, today we get signals from the European Central Bank and the Bank of England. Of the two, only the ECB is likely to signal a rate increase at their next meeting, the UK economy is far too weak to start raising rates at its next meeting. But if the ECB does signal the end of easy money later today, the US dollar will suffer from the Fed’s zero interest rates policy and the polarized gridlock among the politicians. If that happens, to avoid aggravating China’s serious inflation problem that threatens to bring on social unrest, China needs to quickly loosen their tie to the US dollar. But when China jumps, the dollar very likely dumps. We are headed for summer currency crisis it seems to me.
"Whenever an overall breakdown of a monetary or financial system occurs, return to gold always restores order, revives confidence and brings back prosperity."
Donald Hoppe
Trichet May Signal Rate Cycle Pace as ECB Fights Inflation
By Jeff Black - May 5, 2011 12:01 AM GMT+0100
European Central Bank President Jean- Claude Trichet today may indicate just how fast he’s prepared to raise interest rates over the coming months.
While policy makers meeting in Helsinki will keep the benchmark rate at 1.25 percent, according to all 48 economists in a Bloomberg News survey, any pledge by Trichet for “strong vigilance” would signal an increase as soon as June. The Frankfurt-based central bank in April raised borrowing costs from a record low for the first time in almost three years.
ECB officials including Italy’s Mario Draghi, seen as the frontrunner to replace Trichet from November, have signaled they’re in favor of further monetary tightening to fight inflation that quickened to 2.8 percent last month, the fastest in 2 1/2 years. Their task of normalizing policy is being complicated by governments struggling to contain the debt crisis that forced Portugal to ask for external help last month.
----The ECB will announce its decision at 1:45 p.m. in Frankfurt and Trichet holds a press conference 45 minutes later. ECB officials gather twice every year away from their headquarters, with Trichet holding his last briefing in Berlin in October before his term ends.
‘Abnormally Low’
The Bank of England will keep its benchmark interest rate at 0.5 percent when policy makers meet today, according to a Bloomberg survey. In the U.S., the Federal Reserve last week retained its pledge to keep rates “exceptionally low” for an “extended period” to bolster the world’s largest economy.
Euro-area growth may average 1.7 percent this year and 1.8 percent in 2012, with inflation at 2.3 percent and 1.7 percent this year and next respectively, the ECB forecasts. With surging oil costs fueling price pressures, ECB Executive Board member Jose Manuel Gonzalez-Paramo said on April 26 the period of “abnormally low” interest rates “may be ending.”
-----“If there is the risk that inflation feeds through into second-round effects, the ECB won’t even think about it,” said James Nixon, co-chief European economist at Societe Generale SA in London, who forecasts the central bank to raise borrowing costs next month. “They’ll raise rates.”
In 2005, when the ECB last stepped up efforts to counter inflation threats, policy makers raised the benchmark rate at least once every quarter. A similar approach would point to the central bank raising borrowing costs in July.
Adding to signs of cost pressures, euro-region producer- price inflation unexpectedly accelerated to 6.7 percent in March. That’s the fastest since September 2008.
Today we take a look at what is happening in precious metals, gold is firm to rising whereas silver has pulled back about 20%, at least if you believe price discovery from New York’s dodgy Comex Exchange. Below, some coverage of silver.
"Never have the world's moneys been so long cut off from their metallic roots."
Murray M. Rothbard
Silver loses shine in 20pc tumble
The price of silver futures tumbled again on Wednesday, taking total losses to more than 20pc in a week amid fears that the precious metal represented a bubble bursting.
By Louise Armitstead 11:59PM BST 04 May 2011
Silver – which has suffered its biggest three-day fall in 28 years – plunged from a peak of almost $50 an ounce last Thursday to a low last night of below $40.
In recent weeks, experts have warned that a dangerous bubble was forming in the silver markets. The price has soared nearly 175pc between August and the end of last week.
Gold, which has also risen to record highs, is up 28pc over the same period.
Traders said a raft of hedge funds and other big speculators in the silver markets decided to take their profits and sold large positions last week.
The spike in the trading volumes is thought to have caused a panic in the markets which was then exacerbated by the four-day royal wedding holiday in London. The prolonged closure of the world's biggest precious metal market caused liquidity problems at a bad moment.
Also over the weekend, Comex, the American exchange for silver futures, ramped up margin requirements.
http://www.telegraph.co.uk/finance/commodities/8494041/Silver-loses-shine-in-20pc-tumble.html
CME Margin Hike Is 4th AND 5th - Charting The Parabolic Rise In CME Silver Margin Hikes
Remember when earlier we said the CME had hiked silver margins for the 4th time in 8 days? We lied. In fact, what the CME did was to hike margins for the 4th (effective May 5) AND 5th times (effective May 9). That's right, dear reader, in one release, the CME has performed two concurrent margin hikes, which means today's action is the 5th margin hike in 8 days, a previously unheard of event! As of May 9th, the initial margin is $21,600, or 11% of the contract value, while the maintenance is $16,000. This is nothing short of sheer panic at the CME. At this point we can only wonder if the FDR-style precious metals confiscation executive order will come by way of the CME or the FBI. And for everyone asking, below is the chart of recent CME margin hikes in silver.
Spot the parabola:
More
As ever, Comex silver is rigged. It was rigged in 1980 to break the Hunts’ silver squeeze, it is rigged today against the leveraged longs, probably to try to allow JP Morgan a way out of their massively under water paper silver short position. But high volatility is a typical feature of long term bull markets. Parabolic bull moves are notorious for severe rapid corrections before new money surges in and the bull starts all over again. I doubt that this time it will be any different. The US is set firm on a policy of destroying its currency. It is deliberately intending to run trillion and half deficits for the rest of this decade. For the rest of the century for all that I know. Until that policy changes and until Europe’s sovereign default problem is truly solved, converting paper currency into tangible assets with proven utility as long term stores of value, is a no brainer. Large sell-offs merely provide cheaper entry points for purchasing physical tangible assets. Note, I do not recommend entering the rigged game of Comex futures trading. Gold and silver are merely the easiest form of tangible asste to hold for most. If the Comex committee is determined to make silver appear cheap to gold, I will merely convert my usual “stay long gold and silver” into “stay long silver and gold”.
If Comex wants to give away silver relative to gold for the sake of Blythe Masters silver team’s penchant for shorting paper silver, it represents an opportunity for everyone else. As we will see in the Crooks and Scoundrels Corner, food price inflation is highly likely to explode later in the year.
"The gold standard sooner or later will return with the force and inevitability of natural law, for it is the money of freedom and honesty."
Hans F. Sennholz
At the Comex silver depositories Wednesday, final figures were: Registered 33.15 Moz, Eligible 69.70 Moz, Total 102.85 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
No crooks today, just an update on what is turning into a very scary northern hemisphere grain growing season. In addition to the 100 year drought hitting much of Western Europe, problems with the northern China wheat crop, Texas and parts of Oklahoma and Kansas are experiencing their own severe drought. Though it’s only the first week of May so it’s still too early to write off spring planted crops, our world is living dangerously this year with a major food “incident” looming. The droughts in Texas and Britain and Europe are also impacting cattle and sheep, although it’s too early to try assessing how much impact they will have. But any impact will result in higher meat prices.
“Massive crop losses” feared from US drought
The worst drought in more than 40 years intensified across Texas over the last week, with high winds and heat causing “massive crop losses,” with little relief in sight, according to weather experts Thursday.
A report released Thursday from a consortium of national climate experts, dubbed the Drought Monitor, said drought worsened along the Texas border with Oklahoma, and in western, central and southern Texas.
Ranchers were struggling to feed and water cattle, and farmers were left to watch their crops shrivel into the dusty soil. Some experts estimated that producers were giving up on as much as 70 percent of the state’s wheat acreage.
“There are some scary things going on in Texas,” said Brian Fuchs, climatologist with the National Drought Mitigation Center, which released its weekly drought analysis Thursday morning.
The National Oceanic Atmospheric Association said this week that the drought appeared to be the worst since at least 1967.
Lost agricultural production in Texas was estimated to top $3 billion, which compares with $4 billion in losses in 2006 and $3.6 billion in 2009.
The dramatically lower-than-normal amount of moisture in the soil has caused widespread crop failures, including to the state’s hard red winter wheat crop.
Texas is a key production area for wheat. The losses there and in parts of the U.S. Plains hit by drought will aggravate already short supplies around the world.
“There has been some significant damage to the wheat crop,” said analyst Jerry Gidel of North American Risk Management.
Gidel said that, considering crop problems in Europe and Russia, markets were keeping a close eye on the U.S. wheat crop.
“The focus really is on the U.S. now,” he stressed.
----Also, because Texas is the largest U.S. cattle state, the shrinking herd there could translate into even higher prices for beef in the United States and export markets.
Data issued Thursday by a consortium of national climate experts said 95 percent of Texas was suffering “severe drought,” or worse, up from 92 percent a week earlier. More than 70 percent of the state was in the worse conditions of “extreme drought” or “exceptional drought.” That is up from 68 percent a week ago in extreme and exceptional drought.
“High temperatures combined with no precipitation and high winds continue to drive widespread wildfires and have led to massive crop losses,” the latest Drought Monitor report stated.
There was a slight alleviation of drought in central and eastern Oklahoma as more than seven inches of rain fell during the past week.
But for farmers farther south, there was no relief in sight.
----“If rains don’t develop and help lessen the drought situation before we really get into summer, there are going to be more problems than what we’ve seen right now,” Fuchs said.
The drought in Texas and the Southwest comes at the same time that violent storms are spawning flooding and deadly tornadoes through parts of the Midwest and Southeast.
The excessive rainfall has slowed the planting of corn in the Midwest and could threaten other crops like soybeans.
http://peakoil.com/enviroment/massive-crop-losses-feared-from-us-drought/
"Increasingly, the wealth of the modern world has come to be represented by financial assets rather than real assets, and this to me is a very unhealthy situation, because financial assets are inherently unstable. Financial assets (currencies, bonds, mortgages, stocks, bank credit, etc.) can be quickly and violently reduced in value, or destroyed completely by either inflation or deflation."
Donald J. Hoppe
The monthly Coppock Indicators finished April:
DJIA: +182 Up. NASDAQ: +236 Up. SP500: +185 Up.
The Dow and SP 500 and NASDAQ have all reversed from down to up. The Fed’s rigging of the indicators seems to have worked. Note: like all indicators, they were devised for normal markets not markets where the central bank is flooding the economy with new cash. In current conditions where risk is suspended by too big to fail, I doubt any indicators are showing more that where the Fed’s new cash is flowing in our world of casino capitalism.
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