The Seigniorage Of The Precious Metal Mining Stocks Fails As Gold Falls To $1,754 … And The World’s Leading International Banks Trade Lower Once Again
Report on Seigniorage, for August 24, 2011
1) … News of the European Financials, EUFN.
Open Europe reports Germany and IMF not keen on Greco-Finnish collateral deal as Finland threatens to pull out of Greek bailout if collateral deal is vetoed. Confusion continues to reign over the status of the Greco-Finnish collateral deal, with Finnish Prime Minister Jyrki Katainen suggesting yesterday that his country could withdraw from the second Greek bailout if they did not receive any collateral guarantees, he said, “It is our parliament’s decision that we demand it as a condition for us joining in”. German Chancellor Angela Merkel reportedly said, in a meeting with her governing Party, “It can’t be that one country gets extra collateral,” casting further doubt on the Finnish position. FAZ reports that Merkel also ruled out the use of gold as collateral as requested by some members of her party. Additionally, the IMF opposes the deal since it challenges its status as senior creditor, according to the WSJ.
EuroIntelligence reports EU consumer confidence registers sharpest fall in 20 years, the purchasing managers survey shows a contraction in eurozone manufacturing. and Greek finance ministers gives banks until Sep 9 to decided on their participation.
The European Commission’s consumer confidence indicator fell 5.4 points to -16.6 in August, the sharpest fall in 20 years, according to the Financial Times, while the latest purchasing managers survey for the eurozone showed the manufacturing sector is contracting, with the index falling from 50.4 in July below the critical level of 50 to 49.7. The composite level remained unchanged at 51.1. The good news is a reacceleration of private activity in France. The article says the eurozone was still a long way from a recession. And EI also reports Greek finance ministers gives banks until Sep 9 to decided on their participation. Greece has given private sector creditors until Sept 9 to decide on how they want to participate in a bond swap, Reuters quotes Greek bankers and finance ministry officials. By that time, banks will have to respond to a letter of inquiry from the finance ministry. A final commitment is due by mid-October.
Wall Street Journal Real Time Brussels Blog reports Herman Van Rompuy speaks on seigniorage. “We could only have euro bonds the day when there is truly a real budgetary convergence, the day when everyone is running a balanced budget or practically a balanced budget. That’s when we could have a euro bond. But not before.”
2) … Precious Metal Mining Shares Lose Their Seigniorage as Gold falls to $1,754.
Bloomberg reported that Gold Tumbled The Most Since December 2008 Falling to 1,754 on Wednesday August 24, 2011. Gold plunged in New York, heading for the biggest drop in 18 months, on speculation that financial markets may be stabilizing, eroding the appeal of the precious metal as a haven. Bullion has tumbled more than 5 percent in two days, erasing gains in the past two weeks that sent the metal up as much as 16 percent since Aug. 5 to a record $1,917.90 an ounce yesterday. On Aug. 16, Wells Fargo & Co. said rising speculative demand from investors had pushed the market into a “bubble that is poised to burst.” “This is liquidation from a crowded trade,” Adam Klopfenstein, a senior market strategist at MF Global Holdings Ltd. in Chicago, said in a telephone interview. “In the short run, there’s more optimism and that doesn’t bode well for gold. Investors have been using gold more as a fear barometer than a proxy for inflation.” Gold futures for December delivery plunged $72.30, or 3.9 percent, to $1,789 an ounce at 12:11 p.m. on the Comex in New York. A close at that level would be the biggest loss since Feb. 4, 2010.
The chart of gold mining stocks relative to US Treasuries, GDX:EDV, shows that the HUI Precious Metal Mining Shares, and the US Treasuries always make market turns lower together.
The gold mining stocks, GDX, are once again loosing their seigniorage.
The junior gold mining stocks, GDXJ, are loosing their seigniorage at a faster rate than their larger peers.
Silver Wheaton, SLW, has turned lower.
The silver mining stocks, SIL, can no longer preserve wealth.
The worlds leading banks, once guarantors of carry trade investing, are once again loosing their seigniorage.
The world government bonds, BWX, are turning lower in value