Weekly Economic Data for the week 02-Aug-14 to 08-Aug-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 02-Aug-14 to 08-Aug-14

Date	Time (IST)	Country	Data	Exp.	Prior	Exp. chg today	Avg. chg of last 1 year	Exp. Impact on Price
05-Aug-2014	07-15 AM	China	HSBC China Services PMI	--	53.1		1.41	Neutral
05-Aug-2014	10-00 AM	Australia	RBA Cash Rate Target	2.5%	2.5%	0.00%	0.05	Neutral
05-Aug-2014	10-30 AM	India	HSBC India Services PMI	--	54.4			Neutral
05-Aug-2014	10-30 AM	India	HSBC India Composite PMI		53.8			Neutral
05-Aug-2014	11-00 AM	India	RBI Cash Reserve Ratio	4.0%	4.0%	0.00%	0.03	Neutral
05-Aug-2014	11-00 AM	India	RBI Repurchase Rate	8%	8%	0.00%	0.16	Neutral
05-Aug-2014	11-00 AM	India	RBI Reverse Repo Rate	7%	7%	0.00%	0.16	Neutral
06-Aug-2014	02-00 PM	United Kingdom	Industrial Production (MoM)	0.6%	-0.7%	1.30%	1.75	Neutral
06-Aug-2014	06-00 PM	United States	Trade Balance	-44.9B	-44.4B	-0.50%	3.21	Neutral
06-Aug-2014	08-00 PM	United States	EIA Crude Oil Stocks change	--	-3.697		3.45	Neutral
07-Aug-2014	11-30 AM	Germany	Industrial Production s.a. (MoM)	0.12%	-0.18%	0.30%	2.36	Neutral
07-Aug-2014	04-30 PM	United Kingdom	Bank of England Bank Rate	0.5%	0.5%	0.00	0.00	Neutral
07-Aug-2014	05-15 PM	European Monetary Union	ECB Main Refinancing Rate	0.15%	0.15%	0.00		Neutral
07-Aug-2014	08-00 PM	United States	EIA Natural Gas Storage change	--	88		33.60	Neutral
08-Aug-2014	--	China	Imports (YoY)	0.3%	0.55%	-0.25%	6.92	Neutral
08-Aug-2014	--	China	Exports (YoY)	75.0%	72.0%	3.00%	5.65	Neutral
08-Aug-2014	--	China	Trade Balance	26.00B	31.56B	-5.56	13.34	Neutral
08-Aug-2014	--	Japan	BOJ 2014 Monetary Base Target	--	¥270T		0.00	Neutral

Dynamic Levels

BofA Warns Euro Bank Stocks Are Rolling Over, "Negative For All Risk Assets"

Despite the recent significant weakness in the broader European and US equity indices, European bank stocks are only just beginning to resume their larger downtrend (as the hopes of a Draghi put remained firm until the last few days of BES debacle). As such, BofA's Macenil Curry believes, they are likely to be the catalyst for the next leg of "risk off" and in that environment EURUSD should continue to suffer.

Via BofAML,

Chart of the week: European bank stocks are rolling over

European bank stocks are resuming their downtrend. The 6 month topping formation (Head and Shoulders Top) points to further downside in the sessions and weeks ahead.

Downside targets seen to 130.52/126.83 (approximately 8%/11% lower from current levels) before renewed basing.

Stay bearish EURUSD

While intra-day and daily charts say that €/$ risks a further corrective squeeze higher, bounces must be sold.

The combination of vulnerable European bank stocks and poor price action say that €/$ should continue lower to 1.3104 and below.

Doubts creeping in over stellar zinc price run

While the aluminium price was the strongest price performer among industrial metals in July, zinc again enjoyed a stellar month, rising almost 8% over June.

The price of zinc rose to a near-three year high of $2,416 a tonne last week as the base metal continues to benefit from expected supply cuts due to the scheduled closures of Australia's Century, Namibia's Skorpion and the Lisheen mine in Ireland.

Lisheen and Black Mountain, both controlled by London-listed Vedanta, also suffered production disruptions this year, further boosting the price of the base metal.

While zinc inventories have pulled back some 30% this year warehouse stocks remain relatively high at more than 655,000 tonnes compare to the long-run average of around 500,000 tonnes since 1990.

Last week levels also ticked up for the first time in months, which saw the metal fall back below $2,400 a tonne.

Another factor clouding the supply issue is the use of commodities as collateral for trade credit in China – responsible for 40% of base metal demand. Beijing is clamping down on the practice as it tries to curb its shadow banking system and after a scandal involving such deals at a major port.

While zinc is not as widely used in financing deals as copper, some 250,000 tonnes of zinc is currently being held in Chinese bonded warehouses according to research house Capital Economics.

The latest data from the International Lead and Zinc Study Group also show that mine supply continued to increase in the first four months of this year, growing by 6.8%. Nevertheless, Australia's government commodities researcher, BREE, estimates global deficits of 190,000 tonnes in 2014 and 116,000 tonnes in 2015, as no new major mines are due to be commissioned to replace the lost output.
"People are asking questions about whether zinc has any further upside. We have been saying that the price has escaped the fundamentals. It's overextended and it's got a correction due," analyst Vivienne Lloyd at Macquarie in London told Reuters on Thursday.

On the demand side the forecast also remains positive.

China has been able to lift manufacturing activity in the country to a 27-month high with targeted stimulus measures while Europe, which buys 20% of global zinc supply, along with Japan is expected to boost demand particularly in the automotive sector and for use in value-added steel products galvanised with zinc.

Sister metal lead gained 4% in July, but has not benefited to the extent of zinc this year, despite the fact that zinc mine closures in 2015 will also negatively affect lead supply.

Why China Wants Control Of The South China Sea

A stunning $5.3 trillion in goods cross South China Sea every year, 190 trillion cubic feet of gas reserves sit below the ocean floor - enough to replace China's natural gas imports for over a century - so it is hardly surprising that the world's largest importer of oil wants control of such a critical region.

As Bloomberg illustrates in these 10 incredible graphics, everyone has a claim on the same territory andtensions are rising. “The Chinese believe they have the right to be a great power,” said Richard Bitzinger, a senior fellow at the S. Rajaratnam School of International Studies in Singapore. “What we are seeing is a hardening of China’s stance about its place in the world.”

What's at stake...

The Claims...

The Chaos...

As Bloomberg concludes,

The ambitions of China’s leaders don’t stop at the nine-dash line.

“China’s ultimate long-term goal is to obtain parity with U.S. naval capacity in the Pacific,” said Willy Wo-Lap Lam, adjunct professor at the Centre for China Studies at the Chinese University of Hong Kong. “This is a long-term proposition. At this stage the Chinese understand they don’t have the capacity to take on the U.S. head-on.”

“China is testing the limits of America’s alliance relationships in Asia,” said Storey. “By pushing and probing and essentially showing that the U.S. isn’t willing to respond to these provocations, it is undermining those alliances and hence ultimately U.S. credibility and U.S. power over the long term.”

There are two schools of thought on the eventual outcome of China’s ascendancy, according to Rory Medcalf, director of the International Security Program at the Lowy Institute for International Policy in Sydney.

One argues that dominance of the South China Sea is an inevitable outcome of China’s economic and military expansion. The other says that China will have to curb its ambitions or risk provoking a conflict, even war, which could draw in the U.S.

It’s not possible to judge which scenario ends up proving right, said Medcalf. “The story is only beginning.”

zerohedge.com

Gold Prices 1971 - 2014 in 3 Waves

The Big Picture

Ignore the hype regarding gold, bonds, booms and busts, hope and chains, "shock and awe," stock market crashes, "money honey" commentary, and ignore the politicians. Don't obsess over High-Frequency-Trading and market manipulation. Instead, focus on the big picture as shown in the following chart of monthly gold, which has been divided into 3 phases since 1971.

Larger Image

Phase 1: Gold rallied from about $42 in 1971 to over $800 in 1980, thanks to massive money printing, debts, deficits, wars, and a loss of confidence in the US dollar.

Phase 2: Gold prices crashed subsequent to the bubble of 1979-80, and then drifted lower for about 20 years. It double bottomed in 1999 and 2001.

Phase 3: Gold rallied off the 2001 low of about $255 to over $1,900 in August 2011. Since then it has corrected to under $1,200, and double bottomed in June and December 2013. Current price is about $1,300.

How Will Gold Prices Change in the next 3 - 5 Years?

Option 1: Gold prices will continue rising, erratically of course, within the green "megaphone" pattern shown above. In my opinion this option is the most likely unless we descend into a global deflationary depression and/or nuclear winter, which the politicians and bankers will do "whatever it takes" to avoid.

or

Option 2: Gold prices continue falling much like they did subsequent to the 1980 bubble high. I consider this option unlikely.

What Else Supports Option 1 - Higher Prices?

1. The rally into 2011 does not resemble the parabolic bubble blow-off into 1980. The drop in prices since 2011 looks like a correction, not a post-bubble crash. Gold was not in a bubble in 2011.
2. Interest rates today are practically zero, but in the 1980 crash era US rates were at all-time highs. Economic conditions are quite different.
3. Monetary policy today is extremely loose, but in 1980 era it was, relatively speaking, tight.
4. The stock market in 1980 had been declining or flat for over a decade, while the stock market of today has enjoyed over 5 years of practically continuous rally.
5. In 1980 confidence in the US dollar and the financial system was fragile, while today it seems (perhaps undeservedly) much stronger.
6. Technical indicators (see graph below) suggest that long-term gold prices have been bottoming during the past year. Note the other examples of "over-sold" conditions in gold prices.

Larger Image

What Else Supports Option 2 - Lower Prices?

1. Various self-serving forecasts from investment and bullion banks suggest lower prices - at least until they have sufficiently loaded up on future contracts and can massively profit from the rally ahead. I remain skeptical of such prognostications.
2. The price chart shows that gold has been falling since 2011. Some people believe it will continue falling for another 10 - 20 years. However, with ever increasing debt, bond monetization, food and energy inflation, massive Chinese and Russian purchases, and increasing political instability, lower prices appear to be an unlikely outcome.
3. The Fed and most other western central banks would like stable or lower gold prices, so their unbacked debt based paper currencies appear less weak. Maybe they can manufacture another decline in the gold prices such as during April - June 2013, but that also seems unlikely.

Conclusions

This is not 1979 or 1980 when political and economic conditions were drastically different.Perhaps a better analogy would be about 50 years ago (1964) when the Vietnam War was escalating, US citizens were angry and marching in the streets, a gallon of gasoline cost 25 cents, coffee in a restaurant cost ten cents, and a decent middle-class wage was $2.50 per hour. The subsequent 20 years were life-changing and financially difficult for many people. Consumer prices increased drastically, the purchasing power of savings was destroyed, and people lost confidence in government and the US dollar.

Gold prices will rally much higher in the next 5 years. Jim Sinclair's initial target of $3,500 seems very likely by 2016 - 2019. If the powers-that-be choose hyperinflation to deal with their massive debts, then much higher prices are "in play."

There are many other options. For example, if you don't trust or like gold, a bank will pay you 1% interest each and every year if you invest in a Certificate of Deposit.

By: GE Christenson 

Silver Prices - Megaphone Patterns

President Nixon closed the "gold window" in August 1971. That decision enabled the exponential growth of debt, paper currencies, and prices. A few examples:

Item	1971	2014
US National Debt	$398 Billion	$17,500 billion ($17.5 Trillion)
Dow Index	900	16,900
Gold Price	$41	$1300
Silver Price	$1.39	$21
Crude Oil	$2.20	$102
New Automobile	$2,700	$32,000

The process is simple and clear. Remove the gold backing from the dollar, enable the creation of nearly unlimited dollars and debt, many more dollars chase somewhat more goods, prices increase, proclaim it is "all good" and then create even more dollars and debt.

So what about silver?

Silver prices have increased but in a disorderly manner. Rather than focus on details, examine the big picture - 43 years of monthly price data in one chart - and divide that 43 year period into four "megaphone" shaped patterns on a log-scale chart. See below:

Zone 1: Silver accelerated higher from $1.39 in 1971 to about $50.00 in January 1980 - a massive bubble.

Zone 2: Silver crashed (bubbles always crash) down to $3.50 in 1991. In nominal dollars, this was a loss of about 93%. Adjusting for inflation it was even larger.

Zone 3: Silver "flatlined" for a decade and moved from about $3.50 in 1991 to about $4.00 in 2001.

Zone 4: Silver rallied post 9-11 in a new bull market from about $4.00 in 2001 to nearly $50 in 2011.

How will silver prices change in the next five years?

Door # 1: The upward slanting megaphone pattern continues and silver surges to $100 or more by 2016 - 2019.

or

Door # 2: A new megaphone pattern slanting downward (shown in red as # 5) has begun and will terminate at perhaps $6 in the 2016 - 2019 time period.

There are other choices than these two options, but it seems likely (to me) that silver prices will move much higher, while it is remotely possible that silver prices will continue their downward collapse, as represented by the above options.

The Bullish Choice - Door # 1:

1. Prices have been increasing since 1913 and rising more strongly since 1971. I see little to change this, short of a nuclear winter.
2. Global debt exceeds $200,000,000,000,000 ($200 Trillion) and is rapidly rising. We should plan on more crashes and bubbles in stocks, bonds, and currencies. Fear and a desire for safety will drive more investors into silver and gold at much higher prices.
3. The Stochastic and MACD indicators shown at the bottom of the graph show low readings that have consistently indicated bottoms in prices. Other technical indicators show similar "over-sold" conditions.
4. Silver prices are currently more than 55% off their highs. They have considerable room to accelerate higher.
5. The cost of silver production has been reported at about $20 per ounce. With energy prices increasing, that cost of production will also increase. I see little chance that silver prices will drop below $10 as the cost of production increases to $30 or considerably more.
6. Most government stockpiles of silver in the western world are gone.
7. New industrial uses for silver are discovered every day. Solar panel uses for silver will increase.
8. Many more not listed here.

The Bearish Choice - Door # 2:

(Sarcasm alert! I do not take the bearish view as a serious alternative.)

1. The governments of the US, UK, Europe, and Japan will become efficient, will wisely manage their resources and will no longer need to borrow massive quantities of their currencies in order to pay their bills. Consequently we should expect price stability or mild deflation in food, energy, and silver prices. Okay, just kidding...
2. Central banks have chosen to wisely manage their currencies for the benefit of the citizens and are "printing" in moderation because they wish to avoid dangerous increases in prices, debt, and the money supply. Okay, just kidding again.
3. "Silver-Bugs" are likely to sell their stacks of silver and buy call options on the S&P because they feel the S&P is a safer and better investment. Sorry, getting ridiculous now...
4. Too-Big-To-Fail banks and bullion banks are forecasting flat to lower gold prices through the end of the decade. Many individuals and money-managers still trust these banks and actually believe their self-serving propaganda. This misinformation negatively affects the prices for paper silver.
5. Even though silver has been money for thousands of years, it has been replaced by a superior alternative - pieces of colored paper. Back to just kidding...

Conclusions:

Over 40 years of silver prices can be represented by four zones of megaphone shaped price patterns. My interpretation is that zone 4 - a long and aggressive move upward - is still in progress. My round number target is $100 or more in 2016 - 2019. Although I hope that the powers-that-be will not choose to create hyperinflation in the US, if hyperinflation does occur, the $100 target will be easily bypassed and much higher prices will be "in play."

By: GE Christenson

European Stocks Plunge Into Red For 2014, Portugal Down 10% This Week As Espirito Santo Stock Suspended After 40% Crash.

But but but... the crisis is over and Europe is recovering? European stocks dropped 3.2% in the last 2 days - the most in 7 months - taking the broad index into the red for 2014. Portugal (remember how BES was contained) collapsed 10.3% this week (down 26% from its highs in April) to one-year lows.Europe's VIX spiked over 20 today - its highest in over 4 months.

 European stocks are red for 2014

Portugal led the decline...

• BANCO ESPIRITO SANTO SHARES SUSPENDED PENDING INFORMATION, CMVM SAYS

With Goldman bailing and the sovereign suggesting it is not willing to bailout, it appears - based on Sub debt's collapse - that a bail-in burden-sharing solution is coming.