Hedge Funds Vulnerable After Raising Gold Bets

After boosting bets on higher gold prices,hedge funds may hesitate from buying more of the metal on expectations for higher U.S. interest rates and unless the standoff between Russia and the West intensifies, UBS AG said.

The CHART OF THE DAY shows that speculators and other money managers increased their net-long positions, or wagers on a rally, to the highest level since November 2012 in the week ended March 18. The buying of gold futures and options helped prices reach a six-month high on March 17. It fell as much as 6.3 percent since then.

Gold rebounded from the biggest annual drop in three decades as Russia’s move to annex Crimea spurred demand for a haven. Federal Reserve Chair Janet Yellen said on March 19 that that the central bank’s benchmark rate may rise about six months after monetary stimulus ends later this year. Prices rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system and cut interest rates to boost the economy.

“In the wake of the more hawkish Fed last week, the continuous expansion in spec positioning and with geopolitical headlines dampened, longs are likely feeling quite vulnerable here,” Edel Tully, a UBS analyst in London, wrote in a report yesterday. “The pace of increase itself has been quite dramatic. Simply put, this nature of positioning is unsustainable. We don’t think gold has yet found its price floor.”

Gold has climbed 8.8 percent to $1,311.63 an ounce in London since the end of December, after dropping 28 percent last year, and reached $1,392.22 on March 17. Speculators are holding a net-long position of 138,429 contracts, U.S. Commodity Futures Trading Commission data show. Prices were above $1,700 when the wager was last that high.

Top industrial powers threatened stiffer sanctions to deter Russian President Vladimir Putin from seizing more of Ukraine. U.S. and European Union have focused mainly on imposing asset freezes and visa bans on individuals. Putin said he doesn’t plan to further split up Ukraine after Crimea voted to join Russia.

Weekly Economic Data for the week 22-Mar-14 to 28-Mar-14

Expected impact on price:	This indicator shows the effect of the anticipation of data on the prices of related country’s major indices. We have categorized it as below: Very Good Good Neutral Bad Very Bad
Actual:	Refers to the actual/latest figures after its release.

Data for the week 22-Mar-14 to 28-Mar-14

Date	Time (IST)	Country	Data	Exp.	Prior	Exp. chg today	Avg. chg of last 1 year	Exp. Impact on Price
24-28 Mar-2014	-	United Kingdom	Nationwide Housing Prices PX (MoM)	0.8%	0.6%	0.20%	0.00	Neutral
24-Mar-2014	07-15 AM	China	HSBC Manufacturing PMI	48.7	48.5	0.20	0.97	Neutral
25-Mar-2014	02-30 PM	Germany	IFO - Business Climate	110.9	111.3	-0.40	0.00	Neutral
25-Mar-2014	03-00 PM	United Kingdom	Consumer Price Index (MoM)	0.50%	-0.60%	1.10%	0.00	Very Good
25-Mar-2014	07-30 PM	United States	Consumer Confidence	78.5	78.1	0.40	4.00	Neutral
25-Mar-2014	07-30 PM	United States	New Home Sales	0.445M	0.468M	-0.02	0.01	Very Bad
26-27 Mar-2014	00-00 AM	United States	U.S. President Obama Meets NATO Secretary General					Neutral
26-Mar-2014	05-00 PM	European Monetary Union	EU Summit Held in Brussels
26-Mar-2014	06-00 PM	United States	Durable Goods Orders	0.70%	-1.00%	1.70%	6.72	Neutral
26-Mar-2014	08-00 PM	United States	EIA Crude Oil Stocks change	--	5.850	-5.85	3.45	Neutral
27-Feb-2014	02-30 PM	European Monetary Union	M3 Money Supply (3m)	1.2%	1.2%	0.00%	0.18	Neutral
27-Mar-2014	06-00 PM	United States	GDP Annualized QoQ	2.7%	2.4%	0.30%	0.45	Neutral
27-Mar-2014	07-00 PM	United Kingdom	BoE Publishes Financial Policy Committee Statement					Neutral
27-Mar-2014	08-00 PM	United States	EIA Natural Gas Storage change	--	-48	48.00	33.60	Neutral
28-Mar-2014	03-00 PM	United Kingdom	Gross Domestic Product (QoQ)	0.7%	0.7%	0.00%	0.34	Neutral
28-Mar-2014	03-30 PM	European Monetary Union	Consumer Confidence	--	-9.3	9.30	1.04	Neutral
28-Mar-2014	07-25 PM	United States	Reuters/Michigan Consumer Sentiment Index	80.5	79.9	0.60	2.48	Neutral

Miners protest at Anglo’s Los Bronces mine in Chile

Contract workers staged Monday a massive a protest at Anglo American’s Los Bronces copper mine in central Chile, as the company refused last week to negotiate their demands.

The London-listed miner said in a statement that operations remain unaffected. However, it noted there have been “fires, looting, vehicle thefts and disturbances.”

The contractors’ leader, Cesar Inostroza, told local newspaper La Tercera (in Spanish) they are demonstrating against alleged anti-union practices, including layoff threats and harassment.

Anglo, the operator of Los Bronces, owns 50.1% of the mine. Mitsubishi has a 20.4% stake, and  Chile's state-owned Codelco and its joint venture partner Mitsui hold the remaining 29.5%.

UPDATE

Anglo American halting Chile Los Bronces mine ops due to protest

WWW.REUTERS.COM

SANTIAGO (Reuters) - Global miner Anglo American Plc <​AAL.L> said on Monday it was halting operations at its Los Bronces copper mine in central Chile because of a violent protest by contract workers.

Russia Is Slowly Turning The NatGas Tap Off To Europe

While Naftogaz (Ukraine's gas pipeline operator) states that all gas transportation from Russia to Europe is running normally, Bloomberg reports that Russian natgas exports to Europe are declining. Shipments are down over 4% from the prior week and also lower to Ukraine. This 'adjustment' follows increased sanctions by the West as Medvedev's notable statement this morning that Ukraine owes Russia $16bn.

NatGas output is tumbling

The good news:

Gazprom today said natgas transit to Europe via Ukraine, supplies for Ukrainian consumption  

But Pay Up...

Ukraine owes Russia $11b after collapse of 2010 deal, Russian Prime Minsiter Dmitry Medvedev says to President Vladimir Putin at Security Council meeting, according to transcript on Kremlin website.

Medvedev adds $3b Ukraine bonds bought in Dec., ~$2b debt to Gazprom for natgas supplies

NOTE: In 2010, Russia agreed to sell natgas at discount in exchange for extending lease to Black Sea naval port of Sevastopol in Crimea to 2042 from 2017

Or Else...

Russian natgas exports to Europe and Turkey, excl. former Soviet Union, declined to 405.3mcm as of March 22,  according to Bloomberg calculations based on preliminary data from Energy Ministry’s CDU-TEK unit.

Avg daily exports to region were ~457mcm in March, lower than yr earlier: calculations based on CDU-TEK data

Shipments March 16-22 were 3.04bcm, 4% decrease vs level in week ended March 15

Russia is now asking close to $500 for 1,000 cubic meters of gas, the standard unit for gas trade in Europe, which is a price about a third higher than what Russia’s gas company, Gazprom, charges clients elsewhere.

Russia says the increase is justified because it seized control of the Crimean Peninsula, where its Black Sea naval fleet is stationed, ending the need to pay rent for the Sevastopol base. The base rent had been paid in the form of a $100 per 1,000 cubic meter discount on natural gas for Ukraine’s national energy company, Naftogaz.

And if that's not clear enough...

Which Precious Metal Is Controlled By The Russians - Palladium

Palladium is like the Rodney Dangerfield of precious metals. It never gets any respect.

If you ask someone about precious metals, in fact, just about everyone has heard of gold and silver. And occasionally platinum.

But palladium is one of those obscure precious metals that few people think about, or even know about.

Aside from actually having its own currency code (XPD), palladium is widely used in a variety of industrial applications, from spark plugs to catalytic converters to hydrocarbon ‘cracking’ to electronic components.

And here’s something most people don’t know: most of the world’s palladium is mined in Russia.

Since October 2013, Palladium prices have had a moderate boost—about a 5.3% increase in five months.

But given what’s happening in Russia, prices could soar. In fact, with trade sanctions looming, palladium could be taken off the world market indefinitely.

As the following chart shows, palladium has just broken out to a new 52-week high and is showing strong upward momentum.

Moreover, if you look at the 5-year chart, it could be about to break out to even longer-term highs.

I would consider buying palladium today, with a stop-loss order to protect your capital, at $759. That means if the market should prove this thesis wrong, the loss would be limited to just 4%.

I think the near-term upside target is the 5-year high of $855. That’s about an 8% gain from where we are today.

An upside of 8% versus a downside of 4% makes palladium a good risk/reward trade, given that the odds of the higher-price outcome are much better than the odds of the lower-price outcome.

But if tensions between the West and Russia escalate and trade sanctions stay in place for a prolonged period, $855 could be a very conservative upside target for palladium.

The last time Russia withheld palladium supplies from world markets back in 2000, the price rose 151% from a low of $433 in January 2000 to over $1,090 an ounce by January 2001.

In a scenario like that, palladium would be an incredibly profitable trade.

One easy way to take a position in palladium is via the ETFS Physical Palladium Shares (PALL on the New York Stock Exchange).

A new physical palladium ETF sponsored by Standard Bank has also just launched in South Africa.

And Absa Bank, which already sponsors the world’s largest platinum-backed ETF, has also announced it will launch a palladium ETF called NewPalladium. It will list on the Johannesburg Stock Exchange on March 27th.

These new palladium ETF launches, coming at a time of tightening supply due to Russian sanctions, could easily add more upward momentum to palladium prices, as they will withdraw supply from the market to physically back their shares.

However, if you want to avoid the possibility of any counterparty risk, there’s no substitute for owning the physical metal yourself.

The Royal Canadian Mint has in the past minted palladium versions of its very popular and instantly recognizable Maple Leaf bullion coins.

You can also buy 1 troy ounce palladium bars from most major dealers.

Hedge funds bullish gold bets surge to 13.8m ounces

The gold price ended higher Friday after bullish positions held by large investors soared again.

By the close of regular trade on the Comex division of the New York Mercantile Exchange, gold futures for June delivery – the most active contract – rose to $1,335 an ounce but remained sharply off for the week.

On Monday the metal hit a high above $1,380, the best level since June and up 14.8% since the start of the year.

Long positions – bets that the price will go up – held by so-called managed money increased to 151,939 lots in the week to February 18 according to Commodity Futures Trading Commission data released after the close of business on Friday.

At the same time short positions, indicating weaker prices ahead, were cut by 7,563 to just under 13,510, which translates on a net basis hedge funds holding 138,429 lots or 13.8 million ounces, the highest in more than a year.

The 12.5% jump was the sixth week in a row that large investors increased bullish positions and more significantly it showed fresh buying, compared to the increases of previous weeks which were to cover short positions.

In December 2013 longs fell to a paltry 26,774 lots while shorts held by large investors peaked at more than 80,000 lots, the highest since 2007, back when gold changed hands for $700 an ounce.

It's not only gold derivatives that are finding favour from the smart money in 2014.

Holdings of SPDR Gold Shares – the world’s largest gold ETF holding more than 40% of the total – on Friday shot up 4.2 tonnes, bringing year to date gains to 18.75 tonnes.Investors in gold-backed ETFs are also returning to the market in droves after 2013 saw net redemptions of a staggering 800 tonnes.

While the additions have been fairly modest it is in sharp contrast to last year when GLD recorded only 17 days of inflows over the course of the 12 months and almost 540 tonnes left the fund.

In the week to 14 March global gold ETF holdings rose 12.3 tonnes the biggest move since November 2012, taking total holdings to 1766.4 tonnes, the highest level since December 27 and more than 30 tonnes above the lows for the year.

Gold bullion holdings in global ETFs hit a record 2,632 tonnes or 93 million ounces in December 2012.

But I personally feel it will touch $ 1285 or $ 1261 before any Big upside move. In Weekly Charts Bearish Engulfing Pattern is formed which means correction may be to Fibonacci 38 or 50 % .

Would America Go To War With Russia?

Would America Go To War With Russia?

Vice President Biden was in Warsaw last week to reassure our eastern NATO allies that they have the support of a “steadfast ally.” But if Russia moved against Poland or the Baltic States, would the United States really go to war? Or would we do nothing and effectively destroy the NATO alliance?

President Obama has ruled out a “military excursion” in Ukraine. America is not obligated legally to take action against Russia for annexing Crimea. We would not go to war if Russia mounted a large-scale invasion of Ukraine to restore the ousted, pro-Moscow government of Viktor Yanukovych, currently under U.S. sanctions. And we would not even send troops if Ukraine was partitioned, or absorbed by Russia. Americans have no interest in such a conflict, and no stomach for it.

NATO allies are a different matter. The North Atlantic Treaty is a mutual-defense pact, and Article 5 says that an armed attack against one member state “shall be considered an attack against them all.” This is a clear red line. The only time Article 5 has been invoked was in the wake of the September 11, 2001 terrorist attacks, and most NATO allies sent troops to support the efforts in Afghanistan and Iraq.

Could the current crisis expand to touch NATO? The developing situation in Ukraine has been compared to Germany’s absorption of Austria in 1938, or the subsequent partition and dismemberment of Czechoslovakia. Hillary Clinton compared Russian president Vladimir Putin to Adolf Hitler, which by extension puts President Obama in the role of British prime minister Neville Chamberlain, who famously failed to achieve “peace in our time” at Munich.

Push the analogy further. The Second World War was sparked by Warsaw’s resistance to Berlin’s demand to annex the Polish Corridor, a small stretch of land—smaller than Crimea—separating the German provinces of Pomerania and East Prussia. Hitler responded by invading Poland and partitioning it with the Soviet Union. Britain and France had pledged to defend Polish independence, and two days after Germany invaded, they declared war. In his war message,Chamberlain explained that Hitler’s actions showed “there is no chance of expecting that this man will ever give up his practice of using force to gain his will. He can only be stopped by force.”

This may or may not describe Mr. Putin, as Mrs. Clinton alleged. But if similar circumstances arise in the near future, will the United States honor security guarantees made to Poland and the Baltic States when the Russian threat was only a theory?

Mr. Biden stood with Estonian president Toomas Ilves Tuesday to “reconfirm and reaffirm our shared commitment to collective self-defense, to Article 5.” He wanted to make it “absolutely clear what it means to the Estonian people” and that “President Obama and I view Article 5 of the NATO Treaty as an absolutely solemn commitment which we will honor—we will honor.” Shortly thereafter, Moscow “expressed concern” about the treatment of ethnic Russians in Estonia. Mr. Putin justified his actions in Crimea as “restoring unity” to Russian people. Estonia’s population is 25 percent ethnic Russian, compared to 17 percent in Ukraine, mostly in the north and east part of the country. Suppose anti-Russian riots “spontaneously” broke out in Estonia. What would the United States do if Moscow invoked a “responsibility to protect” these people and bring them “back” to the Motherland? Would President Obama take military action against Russia over a small, secluded piece of a tiny, distant country? Would it be like the Polish Corridor in 1939? This is highly doubtful—highly doubtful.

Aren’t we obligated by treaty to intervene? Mr. Biden mentioned the “absolutely solemn commitment which we will honor.” It was so important he said it twice. However, Article 5 says that NATO members pledge to come to the assistance of the attacked state using “such action as it deems necessary, including the use of armed force.” It doesn’t take a White House lawyer to see the gaping loophole—President Obama can simply deem that the use of U.S. force isn’t necessary. He can walk back the red line, as he did with Syria. Stern talk and minimal sanctions would follow, but Estonia would lose some, if not all of its territory. And in practical terms it would mean the end of NATO, which is one of Moscow’s longstanding strategic objectives. Mr. Putin’s chess game does not end in Crimea.