Worst February Start Since 1933

Got your attention?

From CNBC:

Since 1971, when January was negative, the S&P 500 extended its losses into February 72 percent of the time, falling on average 2.4 percent. That ratio stands at 65 percent for the Dow and 57 percent for the Nasdaq.

 The S&P 500 settled at 1,741 on Monday, its lowest close in more than three months. In fact, it was the worst start to February for the Nasdaq on record, and the worst for the S&P since 1933 and 1982 for the Dow.

 Of course, those are just statistics from the past. The recent data is much more to be concerned with.

Mints Running 24 Hours a Day To Keep Up With Demand

I've mentioned previously that Swiss gold refiners are running flat out 24 hours a day, 7 days a week to keep up with demand from Eastern central Banks. Now Bloomberg reports that demand for gold coins around the world has increased due to lower prices in 2013.

Austria’s mint is running 24 hours a day as global mints from the U.S. to Australia report climbing demand for gold coins even while Goldman Sachs Group Inc. says this year’s price rebound will end.

Austria’s Muenze Oesterreich AG mint hired extra employees and added a third eight-hour shift to the day in a bid to keep up with demand. Purchases of bullion coins at Australia’s Perth Mint rose 20 percent this year through Jan. 20 from a year earlier. Sales by the U.S. Mint are set for the best month since April, when the metal plunged into a bear market.

Global mints are manufacturing as fast as they can after a 28 percent drop in gold prices last year, the biggest slump since 1981, attracted buyers of physical metal. The demand gains helped bullion rally for five straight weeks, the longest streak since September 2012. That won’t be enough to stem the metal’s slump according to Morgan Stanley, while Goldman Sachs Group predicts bullion will “grind lower” over 2014.

“The long-term physical buyers see these price drops as opportunities to accumulate more assets,” said Michael Haynes, the chief executive officer of American Precious Metals Exchange, an online bullion dealer. “We have witnessed some top selling days in the past few weeks.”

 This follows a recent story on US Mint demand:

  The United States Mint's bullion program delivered stellar results during the fiscal year ended September 30, 2013. A sharp increase in demand drove record sales volume of 45,862,000 ounces of gold and silver bullion. Total revenue for the segment grew by 31.8% to more than $3.2 billion with net income more than doubling to $59.3 million.

After two previous years of declines, the US Mint saw gold bullion sales rebound sharply during the year. American Gold Eagle sales grew by 51.9% to 983,000 ounces and American Gold Buffalo sales grew by 66.7% to 235,000 ounces. The increased demand was driven in part by a decline in the market price of gold. When gold posted its largest one day percentage drop in 30 years on April 15, 2013, authorized purchasers ordered more than 100,000 ounces of gold during the next three days. The jump in demand resulted in the temporary sell out of the one-tenth ounce sized American Gold Eagles.

The US Mint achieved record breaking volume in silver bullion coin sales at 44,644,000 ounces across the two offerings. Sales of the American Silver Eagle bullion coins grew by 29.2% compared to the prior year, while the lower volume America the Beautiful Silver Bullion Coins saw growth of 143.8%. Amidst high demand, the Silver Eagles remained subject to allocation from January 28 through the end of the fiscal year.

During times when demand exceeds available supply, the US Mint has used an allocation program to ration the available number of coins amongst authorized purchasers.
During the fiscal year, the average daily spot price of gold was $1,521.61 per ounce, down by 8.4% from the prior year. The average daily spot price of silver was $26.79 per ounce, down by 13.4% from the prior year.

Gold Should be at $1,900

click to enlarge

Last December I pointed out that gold has until 2011 been for 30 years highly correlated with the US money supply. If gold still followed that traditional correlation, gold should be trading around $1,900.

Its in 2011 that what had been a .84 positive correlation turned to a negative .34 correlation. To me this is a sure sign of central bank intervention.

Where is Germany's Gold?

Last July I wrote about this same subject. You may recall an interview with William Kaye who said:

Regarding that gold, which could have had the symbol of the Bundesbank on it when it arrived in Hong Kong, a leading refiner, one of the biggest in the world that deals with the People’s Bank of China (PBOC), certified that, ‘Yes, we’ve got gold available that we can deliver.  We’ve melted it down, we’ve tested it.  It may have had the Bundesbank symbol on it when it arrived, but now it’s melted down .9999 (fine) gold.’ 

COMEX Is Almost Out Of Gold

From BNN via Zerohedge:

Pointing to recent Comex futures data, Knippa says there may not be enough gold to go around if everyone with a futures contract insists on taking delivery of physical bullion. He believes gold shot through $1,900 in 2011 before plunging last year because of an explosion in the amount of gold futures contracts – setting up separate markets for “real” and “paper” gold.

“Maybe the reason gold prices went up is an expansion of that multiple of the amount of paper gold versus real gold,” Knippa tells BNN. “So maybe the market has come back down as the people who are holding the paper gold start to liquidate it.”

“But the underlying story here is that the people acquiring physical gold appear to be continuing to do that. And that’s what I think is important,” Knippa adds, noting large investors like hedge fund manager Kyle Bass are taking delivery of the gold they're buying.

Knippa points out it could take just a few people to ask for delivery of physical gold to put the Comex into default. Were this to happen, it would become clear to the world that the Comex is a "paper only" market.

You can watch the entire 7 minute video here.

Poor Holiday sales in 2013 Followed by Poor Jobs Numbers in 2014

Despite last years huge gains in stocks, holiday sales were poor, raising the question of whether the economy really is as strong as some believe. Financial Times reports:

Limited spending by US consumers produced a lacklustre holiday shopping season for many retailers, which are likely to face pressure on profits and questions over whether they should have fewer stores.

Sales at stores open for at least a year rose on average 2.3 per cent in December among the 19 retailers that reported figures on Thursday, according to Thomson Reuters. That compares with a 3.5 per cent rise in the same month last year and headline inflation currently running at 1.8 per cent.

 A sampling of recent headlines:

 Sears' sales tumble during disappointing holiday season
 Pier 1 Imports holiday sales disappoint
 Bed Bath & Beyond shares plunge after Union-based retailer reports ...
 Retailers of all stripes sing holiday blues - USA Today

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