Friday, January 20, 2006

 

Will Iran Buy Gold?

Reuters looks at what moved the US dollar today. "The dollar slid on Friday, weighed by concerns the Federal Reserve is close to the end of its dollar-boosting tightening cycle, and by higher oil prices and the inability of the U.S. currency to rise out of ranges."

"The Swiss franc, seen as a safe haven in times of increased market risk, drew some support after a senior Iranian official confirmed Iran had started transferring assets from European accounts to other foreign banks in an attempt to preempt possible United Nations sanctions over its nuclear program."

"In Tehran, a senior Iranian official on Friday confirmed comments from central bank governor Ebrahim Sheibani carried on Iran's ISNA student news agency that Iran had started transferring funds. 'Yes, Iran has started withdrawing money from European banks and transferring it to other banks abroad,' he told Reuters. There were no details on where the funds might go. The news spooked financial markets as they pondered the likely destination of Iran's funds, helping send oil above $67 a barrel and spurring the gold rally."

"Comex gold futures resembled base jumpers Friday, first they climbed to heights not seen in 25 years due to strong technicals and geo-political concerns, then jumped off a cliff on profit-taking. The other precious metals followed. The session was volatile, with a difference of $15.80 an ounce between the high and low in February gold and a tumble of 42.5 cents from the high to low in March silver."

"When the markets finally settled, February gold lost $5 an ounce to $554, while March silver slid 17.8 cents an ounce to $8.93. April platinum lost $12.50 to $1,036.20 an ounce after earlier hitting a high for the day of $1,056. March palladium managed a 5-cent gain to $277.70 but settled well down from its $286.50 high for the day."

"One trader of platinum and palladium expressed surprise at the extent of the
sell-off in all of the precious metals since. Oil is up. And usually when oil is up, gold will follow and pull the other metals up with it,' he said. 'But for some reason, gold bucked the trend today and pulled down platinum and palladium with it. It's just a crazy day.'"

"The move by Iran to transfer its assets is to preempt a potential asset freeze by the United Nations Security Council after Iran refused to relent to Western pressure to curb a nuclear program. I don't think it is possible for Iran to take money out of both the United States and Europe,' said Michael Woolfolk, senior currency strategist with Bank of New York. 'There are just not sufficiently deep or liquid markets to place these sums of money,' he added."

"A complete overhaul of Iran's reserve portfolio is highly unlikely but some of the funds could be redirected to other assets, analysts said. 'Would it surprise me that they would change their whole asset allocation dramatically? That would be more surprising,' said Alan Ruskin, chief international strategist with RBS Greenwich Capital in Greenwich, Connecticut. 'They could change some of it to something more country-neutral, like gold,' he added."

Comments:
OT - BONDS

The Fed and jeffolie are on the same Dark Side page:

WASHINGTON, Jan 19 (Reuters) - Federal Reserve Chairman Alan Greenspan fired the first shots of the year against Fannie Mae and Freddie Mac in a letter to senators calling on Congress to take aim at the mortgage giants’ $1.5 trillion investment portfolios.

“As Fannie and Freddie increase in size relative to the counterparties for their hedging transactions, their ability to quickly respond to changing market conditions and correct the inevitable misjudgments inherent in their complex hedging strategies becomes more difficult, especially when vast reversal transactions backed by their thin capital holdings are required to rebalance portfolio risks,” Greenspan said in the letter.

Jeffolie predicts DEFLATION on this Parick.net website. The whole problem is when the collateral fails through foreclosures and bankruptcy pushing the houses (collateral) into the hands of the GSE’s (Freddie and Fannie). This causes the mortgage backed bonds to fail or be seriously impaired. The hundred of trillions world wide in derivatives (hedging) based on mortgaged backed bonds will unwind destroying worldwide liquidity.
 
All the major currencies are fiat. All the kings have no clothes.

At worst, the US promise the interest and principal on its debts with more fiat dollars is a Ponzi scheme.

At best, US Treasuries and dollars represent the right to buy US goods and services.

The ever expanding money supply (M3) will not be reported - it will be hidden from view. The printing press of money, credit, liquidity, is similar to getting more credit cards. It represents expansion of credit. The actual cash, printed dollar bills mean almost nothing compared to the credits in accounts.

The world is addicted to expanding credit of fiat money. No country wants to break the addiction. When the credit collapses from the housing bubble the fiat money will be shut off just like the 3 German property funds that were shut down.

All the Kings have no clothes and they like it that way.
 
This is starting to get interesting. If Iran dumps all their dollar assets, do other dollar-holding central banks start getting nervous? Nobody wants to be the last one out the door. And the first ones out get the best exchange rates.
 
next can we look at CEF? central fund of canada.
 
Less Kuwait oil means higher prices...

According to Reuters Update [2006-1-21 2:25:16 by Stuart Staniford], the Petroleum Intelligence Weekly story :

"PIW learns from sources that Kuwait's actual oil reserves, which are officially stated at around 99 billion barrels, or close to 10 percent of the global total, are a good deal lower, according to internal Kuwaiti records," the weekly PIW reported on Friday.
It said that according to data circulated in Kuwait Oil Co (KOC), the upstream arm of state Kuwait Petroleum Corp, Kuwait's remaining proven and non-proven oil reserves are about 48 billion barrels.
Officials from KOC were not immediately available for comment to Reuters. PIW said the official public Kuwaiti figures do not distinguish between proven, probable and possible reserves.
But it said the data it had seen show that of the current remaining 48 billion barrels of proven and non-proven reserves, only about 24 billion barrels are so far fully proven -- 15 billion in its biggest oilfield Burgan.

That suggests Kuwait is at 47% of their ultimate recovery - so close to the half-way point.

Future declines are projected to be modest based on the K of just over 4%.
 
Iran's lies and cheap talk...

On Friday, Iran's Students News Agency reported Friday that Central Bank governor Ebrahim Sheibani said Iran had begun moving its foreign currency reserves from European banks and transferring them to an undisclosed location as protection against possible U.N. sanctions.

Sheibani backed away Saturday from his statement that the transfers were already underway, and Iran's Central Bank said there had been no change in its currency policy.

Estimates put Iranian funds in Europe at as much as $50 billion.
 
OT... Common sence comentary on inflation!

http://www.wrisley.com/comment.htm
 
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