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US Copper Imports Climbed to 2-year Peak in March

Reuters, May 17

After back-to-back monthly declines in the first two months of the year, copper imports recovered in March as a sustained recovery in manufacturing helped boost demand for the metal.

U.S. copper imports climbed to a two-year peak in March, snapping back-to-back monthly declines in the first two months of the year, as demand for the metal grew with a sustained recovery in manufacturing.

As inbound shipments of copper broke higher, aluminum imports sputtered, falling 20 percent in the first quarter — a trend that could continue in the coming months as the combination of production restarts and sky-high prices on the London Metal Exchange (LME) deter consumer appetites.

Data from the U.S. International Trade Commission last week showed March copper imports jump to 66,166 tonnes, up more than 30 percent from the 50,494 tonnes recorded in February.

March copper imports stood at their highest level since March 2009, when 79,975 tonnes were shipped into the country.

Aluminum imports amounted to 311,062 tonnes during the quarter, down 20 percent from the 389,539 tonnes recorded during the first three months of 2010.

“It’s a positive sign on the demand side of the equation as far as the U.S. is concerned,” Bill O’Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey, said of the copper figures.

“I think it falls in line with what you might expect from the data we have seen … manufacturing has been pretty decent for a number of months.”

Business at U.S. manufacturers expanded faster than forecast in April, buoyed by growth in exports and a need to replenish inventories.

The Institute for Supply Management said U.S. factory activity eased to 60.4 in April from 61.2 the previous month, a touch higher than economists’ forecasts.

Manufacturing has been at the heart of the U.S. economic recovery, offsetting the negative impact from the prolonged downturn in housing and construction, main end-use markets that account for nearly half of U.S. consumption.

“Manufacturing is picking up while the housing portion of the economy remains woeful,” said Sterling Smith, an analyst for Country Hedging Inc. in St. Paul, Minnesota.

“Any sort of vigor is coming from manufacturing.”

Don’t be Fooled, This Gold Cycle is not the Same as 1980

By David Levenstein, May 17

Sometimes cycles have the habit of repeating themselves, but in the case of gold, the differences between the current situation and the early 1980s are significant.

Gold prices were generally range bound between $1525 and $1480 during last week as the US dollar extended its recent gains. Commodities remained weak even though selling momentum eased a bit. Crude oil prices continued to slide and silver dipped to a new low. The CRB commodities index also extended recent declines and fell as low as 333.50.

Now that the price of gold has dropped by around $85 an ounce, many market participants are suggesting that gold was in a bubble just as it was in 1980 – and is headed much lower.

Firstly, I would like to mention, that while certain cycles have a habit of repeating, there is no guarantee that they will. If they did, making money in the markets would be the easiest thing in the world. All you would need to do is measure the time period between cycles and trade accordingly. And, if anyone has tried that, you will see that there is no truth in that assumption. The main reason being, in order for a cycle to repeat, all the underlying fundamentals impacting on the market should be the same as the previous cycle. In most instances it is almost impossible for the fundamentals to be exactly the same as they were previously, but when they are very similar the probability of a repeating cycle is relatively high. For, example a country defaulting on its debt will likely have the same impact on their currency as another country defaulting on their debt. Getting back to my point about the gold price now and in 1980, let me say categorically that as far as I am concerned there are no comparisons and therefore we should not expect the same conclusion.

For most of 1979 the price of gold was trading below $300 an ounce. The price of the yellow metal traded between $240 an ounce and $280 an ounce for the first five months of the year. Then, during the month of June it broke through the key resistance of $280 and by mid-July prices had hit $315 an ounce. Then, after pulling back to $280 an ounce the price had a parabolic move from $280 an ounce all the way up t0 $875 five months later. The price of gold had moved more than three times in less than 6 months. This is a parabolic move. Since 2000 when the current bull market began we have not seen one parabolic move. In fact the rises have been very gradual but consistent. This is one major difference. But, when we study the fundamentals between these two time periods we can see without absolute clarity that there is nothing similar.

The parabolic move in gold in 1980 was caused by a series of events. There was a hostage crisis involving American captives in Iran, an invasion of Afghanistan by the Soviets, oil prices were escalating almost weekly, and so were gold and silver prices, in one of the greatest currency panics ever to hit the U.S. dollar. Inflation was nearly 10% and increasing, and the worldwide perception was that the dollar was under siege.

Beginning in September 1979, the price of gold began to surge almost daily. The financial press reported frenetic trading in gold and other precious metals. The Iran hostage crisis was a diplomatic crisis between Iran and the United States Fifty-two US citizens were held hostage for 444 days from November 4, 1979 to January 20, 1981, after a group of Islamic students and militants took over the Embassy of the United States in support of the Iranian Revolution.

Sixty-six Americans were taken captive when Iranian militants seized the U.S. Embassy in Tehran on November 4, 1979, including three who were at the Iranian Foreign Ministry. Six more Americans escaped and of the 66 who were taken hostage, 13 were released on November 19 and 20, 1979; one was released on July 11, 1980. The remaining 52 were released on January 20, 1981, at the very moment that Ronald Regan had completed his inaugural speech after having been sworn in as President of the United States to replace Jimmy Carter.

Then, on December 23, 1979, Soviet military units occupied Kabul, the capital of Afghanistan and by December 28th, the Soviet Union seized control of Afghanistan.  The initial Soviet deployment of the 40th Army in Afghanistan began on December 24, 1979 under Soviet premier Leonid Brezhnev. The final troop withdrawal started on May 15, 1988, and ended on February 15, 1989 under the last Soviet leader Mikhail Gorbachev.

Inflation in the US had been on the rise in the late 1970s and had risen to an all-time high of around 15% by January 1980. Gold prices had been rising with inflation as measured by CPI though the rise in inflation wasn’t the primary reason for the gold price spike in Jan 1980.

In an attempt to curb inflation, Paul Volcker, the Federal Reserve Bank Chairman at the time, increased interest rates from around 13% to 20%. The federal funds rate, which had averaged 11.2% in 1979, was raised by Volcker to a peak of 20% in June 1981. The prime rate rose to 21.5% in ’81.

In those years, currency trading was not what it was today and the euro had not been conceived. The way people communicated in those years was completely different. There was no internet, and, in fact, the fax machine had not been invented. All communications were done telephonically and or by telex, something that today’s generation have probably never heard of. And, not many people knew anything about China.

In the current bull market, things are completely different. The price of gold has been driven higher mainly due to the declining values of the major currencies in particular the US dollar. But, the other major currencies such as the euro, the Yen and sterling don’t look all that healthy either. Budget deficits are spiralling out of control and government debit is simply exploding. As governments continue with their loose monetary policies they simply continue to debase their currencies. This is not the first time they have done this, but this time around, the size of debt is just unimaginable. And, gold is simply fulfilling one of its traditional roles as a hedge against the declining values of fiat currencies.

Today the currency market has become the largest market in the world. Anyone can participate and trading can be done instantaneously so long as one has access to the internet.  China has become the second largest economy in the world from being number eleven in 1980. It has also become the largest the producer of gold in the world and soon it will be the largest consumer of gold in the world. Numerous central banks are adding gold to the reserves and at the same time diversifying away from gold.

If you think the gold price is a bubble and headed lower, then you obviously believe that the dollar as well as the other major currencies are going to strengthen and that there are no monetary problems in the world. And, you believe that global  government debt as well as burgeoning budget deficits are completely overstated. You also do not see the value of gold in such times and will probably invest in US Treasuries as a safe haven asset. I say good luck to you. I am sticking with the precious metals in particular gold and silver.

TECHNICAL ANALYSIS

The price of gold is approaching the support level of the upward trend as well as the support of the medium-term 50 day MA. A flat Elliot Wave ABC correction would see support at around $1470. With all these technical indicators converging at the $1470/$1480 level, I expect to see a rebound in prices relatively soon.

Source

Peter Schiff – Raising the Roof on Debt

By Peter Schiff, May 17

Today the U.S. government officially borrowed beyond its $14.29 trillion statutory debt limit. And even though the Obama administration has assured us that accounting gimmickry will allow the government to borrow for another few months, the breach has given seeming urgency to Congressional negotiations to raise the debt ceiling. Republicans are making a great show of acting tough by linking their “yes” votes with promises for future budget cuts (that could even slow the rate of debt increases at some uncertain point in the future). But as we go through the process, many novice observers may wonder why we have a debt ceiling at all when our government has never shown the slightest inclination to respect its prior self-imposed limits.

The ceiling was first imposed in 1917 as part of a deal that passed the Liberty Bond Act that funded America’s entry into the First World War. To make it easy for the Treasury to sell those bonds, Congress also amended the Federal Reserve Act to allow the Fed to hold government bonds as collateral. But given the potential for unchecked Federal deficits, Congress sought to limit taxpayer exposure to $11.5 billion.

The problem was that Congress never passed a law to prevent future Congresses from raising the ceiling. And even if it had, that law could have been rewritten by future legislation. Sure enough, when the Second World War rolled around the debt limit was raised frantically, leaving it at $300 billion by 1945. But believe it or not, after the War ended, the limit was actually reduced to $275 billion. 

Despite the costs associated with the Korean War, the next increase did not come until 1954. And over the ensuing eight years, the ceiling was raised seven times and reduced twice, finally getting back to $300 billion in 1962. Since then, Congress has voted to raise the ceiling 74 times without a single reduction. 

Practically speaking, a ceiling that is raised automatically is no ceiling at all. Given that, why not dispense with the pretense? The reason is politics. No Congressman wants to be on the record voting for unlimited debt, yet most are willing to rail against fiscal recklessness while raising the ceiling every time it’s reached. Any Congressman who gives lip service to a balanced budget Amendment but votes to raise the debt ceiling is a hypocrite.  No one needs constitutional help to hold the line on the debt right now! 

But epic levels of Federal red ink and the approach of the 2012 elections have raised the stakes. Despite the newfound urgency, nearly all Democrats and a very large chunk of Republicans argue that failure to raise the ceiling will be tantamount to economic suicide. They argue that such a rash move will cause the U.S. to default on outstanding debt obligations, thereby sending interest rates sharply higher across the board. Higher interest rates they argue would cripple the economy and permanently increase debt service costs. As a result, they predict capping debt now will precipitate a far deeper economic contraction than what we have already seen in the last few years.

Few see the inherent absurdity in the notion that taking on more debt improves the economic health and creditworthiness of the United States. I would argue for the much simpler idea that more debt weakens a nation’s financial position. More importantly, capping U.S. debt at current levels means bringing a future crisis into the present where it can be dealt with in practical terms. This is something that nobody in Washington actually wants.

If we do today what we have failed to do in the past, we very may well default on a portion of our debt. No doubt our creditors will suffer. But such near term pain will lead to a quicker and healthier recovery. Out of control Federal spending will have to be dealt with now. A downgraded credit rating will make it harder for the United States to continue borrowing, and as a result should be viewed as a blessing in disguise.  

A reduction in debt levels is good economics. Remember, taxpayers will have to repay with interest anything the government borrows now. The more the government borrows, the larger it grows, and the larger it grows, the weaker the economy becomes. The less money the government borrows, the more that is available for the private sector to borrow to increase production and create jobs.

Failing to raise the debt ceiling will force Congress and the President to tell the truth to Social Security and Medicare beneficiaries who have been promised more than taxpayers can deliver. They will have to concede that so-called government “trust funds” are mere accounting gimmicks, and that benefits will need to be cut if the programs are to be solvent. They will have to tell the truth to our creditors that the U.S government has borrowed beyond the ability of its citizens to repay. And lastly, the stark reality will force the government to tell the truth to Federal employees whose salaries and benefits are unsupportable given our fiscal weakness.

But, on the other hand, if we raise the debt ceiling, we can postpone the crisis into an indefinite future. All of these tough choices could be avoided. Government pay and benefits will flow unabated, and our creditors will continue to get their interest payments now. But in the future, the value of principal repayments and government benefits and paychecks will lose purchasing power. That’s because if we keep raising the ceiling indefinitely, we risk destroying our currency. But the long slow death of a currency and the ebbing of a nation’s economic vitality doesn’t make for huge headlines.  

It is for that reason I am 100% confident that Congress will do the wrong thing and raise the debt ceiling for the 75th time in 50 years. In the end there will be some kind of phony compromise with each side claiming victory.  But while the politicians celebrate another dodged bullet, the U.S. economy will continue to be shot full of holes.

This article is written by Peter Schiff of Europac and with their kind permission, O B Research has been privileged to publish their work on our website. To find out more about Europac, please visit:

KWN Blog: Hugo Salinas Price – QE in US Will Lead to Utter Destruction

May 17

As our subscribers know, we always link to and recommend reading/listening to Eric King. The quality of the people he interview is truly great and one of the contributers is multi-billionaire Hugo Salinas Price. When asked about the Mexican central bank purchasing 100 tons of gold Salinas Price remarked:

“Well I think the central bank (of Mexico) is watching what the Federal Reserve has been doing with utter amazement because we have been down that path before and it led to our ruin. So maybe they are saying, ‘We better have a little bit of gold because what is going on with quantitive easing is really hair-raising.’ I must imagine that is the motive because they don’t think that what is being done is going to lead anywhere but where it lead us in the past, and that was to utter destruction.” Read more…


Tveksamma nyheter från Orvana

Vår tolkning av dagens uppdatering och lånesituation är tillsvidare att detta är ett par negativa besked.

Vi har helt uppenbarligen en seg uppstart vid UMZ som fördröjer cashflow. Bolaget verkar därför se ett behov av att ha en ytterligare “check-kredit” på 15 musd. I sig inte någon allvarlig situation men det sätter fokus på hur det går med uppstarterna.

Dagens andra nyhet är utspädning till huvudägarens förmån för att lösa upp kontraktssituation på ägarsidan. Låter komplicerat men är i princip att Orvana varit “underbevakat” från Kanadas mäklarfirmor då dessa “analytiker” i princip bara bevakar bolag där dom kan få göra private placements där dom tjänar pengar.

Vi uppfattar det alltså som att Orvana vill kunna göra private placements för att förbättra bevakningen av bolaget.

Vår uppfattning är att bolaget vandrar fel väg, detta utifrån den information vi har idag.

Vi kommer fortsätta bevaka informationen som kommer ut från bolaget samt vid ev. diskussion med bolaget föra fram vår kritik mot upplägget med Fabulosa och ev marknadsförande PP.

Vidare kommer vi föra fram åsikten att bolaget måste bli bättre i sin kommunikation gentemot marknaden vad gäller de två uppstarterna.