The Mess That Greenspan Made - Part 40

Me Again

The subject of yesterday’s World Gold Council report on gold demand in China and the misleading take on that subject at Reuters was the primary topic of discussion yesterday when I chatted with Cory Fleck and Al Korelin over at the Korelin Economics Report.

The World Gold Council report can be found here, the Reuters story here, and my take on the wide gap between the two at Seeking Alpha here in a report that provided all the detail behind some of the things that were covered during the interview.

The .mp3 file is again available here at the blog – just click on the image to the right – or you can go directly to this page over at KER.

It wasn’t much fun for gold investors yesterday as, on the one-year anniversary of last year’s tax day smack down (as detailed in this item over at Mining.com), the gold market was hit a gain with the familiar combination of bearish calls by U.S. investment banks and heavy selling that seemed designed to trigger stop loss orders and exacerbate the decline that the heavy selling prompted.

It looks like precious metals have been able to hold firm at their lower levels in overnight trading, however, what we see today is anyone’s guess.

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More evidence that the mainstream financial media often gets it wrong when reporting on precious metals in general and gold in particular when it comes to reporting on anything other than its price comes via this story at Reuters on Tuesday.

It seized on a few comments at the tail end of a World Gold Council report to craft the sensationally bearish China may have 1,000 tonnes of gold tied in financing – WGC which was not only misleading, but violated some very important rules about context.

Author A. Ananthalakshmi, who according to her page at Reuters has recently dealt exclusively with the mundane, day-to-day reporting on the gold market until this offering, exorcises all of the grey area out of the following paragraph found on page 56 of the World Gold Council’s 57 page report:

The use of gold for purely financial operations is a form of demand that represents a small part of the much wider growth in shadow banking, which while entirely legal, is considered a grey area. Not surprisingly, there is little hard data on the shadow banking sector but J.P. Morgan recently estimated it at RMB46tn (US$1.7tn), equal to about 84% of China’s GDP. No statistics are available on the outstanding amount of gold tied up in financial operations linked to shadow banking but Precious Metals Insights believes it is feasible that by the end of 2013 this could have reached a cumulative 1,000t, equal to a nominal value of nearly $40bn.

It is then offered up as simply this at Reuters:

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

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The Commerce Department reported(.pdf) that U.S. housing starts rose 2.8 percent last month, from an upwardly revised seasonally adjusted annual rate of 920,000 in February to 946,000 in April, however, this was below the consensus estimate of 955,000 that was expected, at least in part, due to better weather in the spring after a severe winter.

After jumping in February in anticipation of warmer temperatures in most parts of the country, permits for new construction actually declined last month, falling 2.4 percent from a downwardly revised rate of 1,014,000 to 990,000.

Both measures of U.S. homebuilding activity came in below consensus estimates that were a bit higher than they would otherwise have been, working on the assumption that there would be a larger spring bounce than usual, however, that was not to be.

On a year-over-year basis, permits for new construction – a key leading indicator for the industry – rose 11.2 percent, however, housing starts are actually lower than a year ago, down 6.4 percent, in what was the widest contraction in almost three years.

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Wednesday Morning Links

MUST READS
China’s 7.4% growth beats forecast – BBC
China growth dips as property fears rise – Washington Post
As Credit Dries Up, Smaller Companies in China Feel the Pinch – NY Times
Armored vehicles in eastern Ukraine raise Russian flag – MarketWatch
Rivals show force in eastern Ukraine before talks – Reuters
Is Vladimir Putin Another Adolf Hitler? – Forbes
Ukraine Says Russia Exporting ‘Terror’ Amid Eastern Push – Bloomberg
Rebuttal for Rajan: Bernanke Defends U.S. Policy in Visit to Mumbai – WSJ
It’s Official: America is an Oligarchy and NOT a Democracy – Washington’s Blog
Peterson’s Guide to Financial Blog Commenters – Aleph Blog
How Much Trading Should There Be? – Bloomberg
The problems of HFT, Joe Stiglitz edition – Salmon, Reuters
Get Used to It: The Rich Do Get Richer – Fiscal Times

MARKETS/INVESTING
Stocks close higher as volatility returns – USA Today
Global shares up on China relief, Ukraine strains remain – Reuters
Stumbling S&P 500 Reaches Worst Stretch of Election Cycle – Bloomberg
Some advisers are getting a head start on selling stocks this year – MarketWatch
Bonds shine again as Great Rotation gives way to Asset Reflation – Reuters
Treasuries Fall as Stocks Gain Before Housing, Factory Reports – Bloomberg
Gold steadies above $1,300/oz, supported by Ukraine tensions – Reuters
Mainstream Gold Analysis: Out of Touch, Out of Context and Off the Mark – SCI
Goldman Sachs Is Highly Motivated To Low-Ball The Price Of Gold – SRSrocco Report
SGE Withdrawals Equal Chinese Gold Demand, Part 3 – In Gold We Trust
Year to the day of $200 shocker, another strange gold price plunge – Mining.com
Can gold confound the markets and hit $1,400? – CNBC

ECONOMY/WORLD/HOUSING/BANKING
Has inflation in the US bottomed out? – Sober Look
Losing Benefits Isn’t Prodding Unemployed Back to Work – FiveThirtyEight
About That “Strong” March Retail Sales “Bounce” – Contra Corner
UK unemployment falls to 6.9 percent – Telegraph
US Treasury declines to name China as currency manipulator – China Daily
What the Heck is Going on With US Treasuries In Belgium? – Testosterone Pit
British house prices increase by 9.1 pct in February – xinhuanet
Housing Market Slow to Hit Its Normal Spring Stride – WSJ
SoCal Home Sales at 6-year Low; Median Price Rises to 6-Year High – Dataquick
Out of Ammo? The Eroding Power of Central Banks – Spiegel
More Rounds of BOJ Easing May Be Needed – WSJ
The IMF is Dead Wrong on Low Interest Rates – Mises

 
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