2012 February 06 | timiacono.com

What’s Another Day in the Greek Debt Saga?

The Greek government is again trying the patience of their creditors, namely, the European Commission, European Central Bank, and IMF, as Prime Minister Lucas Papademos announced at least another day’s delay in securing government approval for the latest Greek bailout deal, required to forestall a messy sovereign default next month.

An agreement has been “imminent” for two weeks now on what are believed to be “very large haircuts” on Greek debt  that seem to get bigger with each day that goes by without a deal in what, so far, appears to be a very successful “Blazing Saddles” style of negotiating.

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Which Way Next for Precious Metals?

[Following are excerpts from the current issue of the Weekend Update at Iacono Research.]

After marching steadily higher early in the week, gold and silver saw their biggest one-day losses in more than a month on Friday as hopes for more Fed money printing were dashed after the better-than-expected labor report. Still, both metals maintain impressive gains for 2012 after a disappointing end to 2011 as more attention is focused on demand in China and actions by central banks, two of the most important price drivers in recent months.

After rising above $1,760 an ounce for the first time since November, the spot gold price ended the week 0.7 percent lower, down from $1,737.30 an ounce to $1,725.90, as the silver price surged past the $34 mark before reversing course, ending the week down 0.9 percent, from $33.99 an ounce to $33.67. The gold price is now up 10.2 percent for the year, but down 10.3 percent from its 2011 high, and silver has risen 20.8 percent in 2012, down 32.0 percent from its peak last spring.

We’ll find out soon enough if Friday’s sell-off was anything more than a one-day event.

Clearly, there have been many good reasons for the price of precious metals to head higher over the last month – demand from China, loosening monetary policy by central banks, and increased gold purchases by central banks topping that list – and many technical analysts have been shocked by the ease which previous resistance levels have so quickly been surpassed and now function as support. Up until Friday, technical factors were unquestionably positive, but, with the late-week reversal, some now argue that the metals have come too far, too fast and the Friday correction will continue.

[To continue reading this story, please visit Seeking Alpha.]

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The Rise of Central Bank Balance Sheets

Referenced in this Cumberland Advisors commentary by David Kotok on the subject of central banks and gold was the graphic below depicting how the balance sheets of major central banks around the world have changed since the world changed back in 2008.

If you were to extend the chart to the left, you’d see that bank assets rose modestly for decades while the many economic/financial imbalances were being built up as the end of “The Great Moderation” signaled the beginning of “The Great Central Bank Intervention”.

In all, there are a dozen or so more images in this depressingly good collection of charts(.pdf) at Cumberland that will make you wonder anew where this is all headed.

Monday Morning Links

MUST READS
Bailout talks to resume in Greece – BBC
Greece lets another deadline slip in bailout poker – Reuters
Greek Leaders Wrestle With Spending Cuts Demanded for Rescue – Bloomberg
A Few Thoughts on the Employment Situation – The Big Picture
Seasonal Factors & January’s Encouraging Labor Report – Capital Spectator
Larry Summers on the Labor Force Participation Rate – Bruce Krasting
Why the 8.3% jobless rate is phony and what it means for Obama – The American
Another Unemployment Rate Fairy Tale – Real Clear Markets
Cashless Society: BofA Refuses Cash for Mortgage Payment – Activist Post
The Big, Big Business of Super Bowl XLVI – Fiscal Times
Things Are Not O.K. – Krugman, NY Times
Wonder Dog – NY Magazine

MARKETS/INVESTING
Oil below $97 as traders eye Greece – AP
Gold slips on Greek bailout talks – Reuters
Kuwait: Oil may hit $160 amid tension – AFP
The End of Wall Street As They Knew It – NY Magazine
Stocks: All eyes on Greece – CNN/Money
Gas Boom Goes Bust – The Oil Drum
Stocks hmmm — gold maybe? – MarketWatch
Central Bank Demand Driving Gold Higher: CEO – CNBC
Gold prices may correct, but trend remains up – Commodity Online
Notes on Risk Management – Warts and All – Hussman Funds

ECONOMY/WORLD/HOUSING/BANKING
Economic conditions improving – Econbrowser
A Bleak Outlook for Long-Term Growth – NY Times
Hussman’s, ECRI’s recession warnings invalidated – Bonddad Blog
French socialists’ Latin revolt against Germany – Telegraph
China’s hard landing odds, updated – FT Alphaville
Yet Another Make-Or-Break Week For Europe – Dollar Collapse
A messy monetary policy suits the world just fine – Telegraph
IMF: China growth could halve if Europe crisis worsens – Reuters
A Lost Decade-Plus for San Diego Home Prices – Piggington
Foreclosure Deal Deadline Arrives as States Must Choose Whether to Sign On – Bloomberg
Apparently the Bank Transfer Day was about moving cash TO large banks – Sober Look
Another Experiment? – Fed Watch

 
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