This Time, It’s A Bubble In Rentals

Authored by Doug French via The Mises Institute,

Sin City’s projected 5,000 new apartment units for this year makes no noise nationally in the latest real estate craze. “In 2017, the ongoing apartment building-boom in the US will set a new record: 346,000 new rental apartments in buildings with 50+ units are expected to hit the market,” writes Wolf Richter on Wolf Street. That is three times the number of units that came on line in 2011.

Richter continues, “Deliveries in 2017 will be 21% above the prior record set in 2016, based on data going back to 1997, by Yardi Matrix, via Rent Café. And even 2015 had set a record. Between 1997 and 2006, so pre-Financial-Crisis, annual completions averaged 212,740 units; 2017 will be 63% higher!”

I’ve written before about the high-rise crane craze in Seattle, but that’s nothing compared to New York and Dallas, that are adding 27,000 and 25,000 units, respectively. Chicago is adding 7,800 units despite a shrinking population and rents decreasing 19 percent.

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Not surprisingly, Fannie Mae and Freddie Mac are financing this rental housing boom.wrote recently, the GSEs made 53% of all apartment loans in 2016, down from their combined 68% market share in 2012. “So, their conservator, The Federal Housing Finance Agency (FHFA), recently eased the GSE’s lending caps so they can crank out even more loans.”

Mary Salmonsen writes for multifamilyexecutive.com, “Currently, Fannie and Freddie are particularly dominant in garden apartments [and] in student housing, with 62% and 61% shares, respectively. The two remain the largest mid-/high-rise lenders but hold only 35% of the market.”

Mr. Richter warns us, “Government Sponsored Enterprises such as Fannie Mae guarantee commercial mortgages on apartment buildings and package them in Commercial Mortgage-Backed Securities. So taxpayers are on the hook. Banks are on the hook too.”

But, for the moment, it’s build them and they will come; first renters, then complex buyers. Wall Street giant “The Blackstone Group acquired three Las Vegas Valley apartment complexes for $170 million, property records show,” writes Eli Segall for the Las Vegas Review Journal. “Overall, it bought 972 units for an average of $174,900 each.”

Sales like this has developers going as fast as they can. I heard an apartment developer say Vegas has at least four more good years left in this cycle and is scrambling for new sites. In the land of Starbucks, Microsoft and Amazon, it’s thought the boom will never end. Richter writes, “the new supply of apartment units hitting the market in 2018 and 2019 will even be larger. In Seattle, for example, there are 67,507 new apartment units in the pipeline.”

However, while no one was paying attention, “the prices of apartment buildings nationally, after seven dizzying boom years, peaked last summer and have declined 3% since,” Richter writes.

“Transaction volume of apartment buildings has plunged. And asking rents, the crux because they pay for the whole construct, have now flattened.”

As usual, cheap money entices developers to over do it, and the fall will be just as painful.

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Continue to Beware the Job Numbers (Is it the Bureau of Labor Statistics or Bureau of Lying Statistics?)

The following article by David Haggith is from The Great Recession Blog:

One reason I started my own economics blog was because of how tired I was of reading government-regurgitated half truths about the economy. Nothing has changed. As Newsmax and other publications report this week that July was a bumper month for lower-wage earners, I continue to have to sift for myself through all the glitter to find the globs of buried truth. First, the dayglo report:

 

Eight years into the economic recovery, Americans on the lower rungs of the ladder are finally getting some relief in the job market, and there could be more to come.

 

Underneath a 209,000 gain in July payrolls that was stronger than forecast on Friday, significant shares of job growth were in lower-wage industries such as restaurants and home health-care services. As the overall labor-force participation rate ticked up 0.1 percentage point, the level for people age 25 or older without a high school degree surged to the highest since 2011. In leisure and hospitality, which typically carries lower pay, annual wage gains of 3.8 percent outpaced the average.

 

That’s wonderful, but parse between the lines and look for some background statistics, and a hideous picture of a continually deteriorating jobs market emerges. Parsing the lines: while the unemployment rate supposedly fell to 4.3% in July, all the job growth last month happened in part-time, mostly minimum-wage jobs. Looking deeper into statistics not included in that article, full-time jobs actually stepped backward by 54,000 in July. The headline should have been “Full-time Jobs on Retreat” because those are the jobs we care about. Part-time jobs, on the other hand, saw huge growth (+393k) (The numbers don’t reconcile because the 209k increase was from the BLS Establishment Survey of Nonfarm Payroll: The other numbers (+393k PT and -54k FT jobs) come from their “Household Survey” to give a broader picture.)

 

Said the late Henry Hazlitt, economics writer for the New York Times (back when it was in the news business):

 

 

The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups. (Mises Institute)

 

 

Looking at the effect on various groups changes the picture substantially. July saw the biggest increase in part-time jobs in almost a year, but how many of those were full-time people losing those 54,000 FT jobs and scaling down?

As a result of such a big leap in PT jobs, minor wage increases should be expected in the part-time sector. However, even those wage increases may have only been due to parts of the country that have been raising their local minimum wage — a factor that would be hard to sift out. Certainly the noted wage increase happened entirely in the sector that has been receiving a lot of talk lately on minimum-wage increases. (Seattle being a prime example of a city that voted several years ago to graduate its minimum wage up to $15 an hour — a move that is still in progress.)

I doubt the statement that wages at that level grew 3.8% annually is what it appears, although that is still a minute increase when you are talking about wages that are so small in the first place. You cannot tell for sure from the way Newsmax wrote its article, but was that 3.8% increase the actual year-on-year gain, or is that the “annualized” figure of what last month’s increase would amount to if it continues for the next twelve months? If they meant the latter, that is a case that is unlikely to actually play out.

Either way, one would expect this sector to have the largest percentage increase because you are 1) talking about the smallest wages in the first place where every 1% wage increase amounts to mere pennies and when 2) jobs are shifting from much better paying full-time jobs to lower-paying part-time jobs, giving room for companies to bump up the PT jobs. What’s not included in that insignificant wage gain (as the reason why I call it “insignificant”) is the huge loss in benefits that almost certainly corresponded with this human migration downward from full-time jobs with benefits to part-time jobs without benefits. Companies may be willing to pay a few shekels more in wages when they are saving hundreds of dollars on benefits. The transition is a net gain for the wealthy for certain.

So, that was the real story this month — full-time jobs actually declined as part-time jobs shot upward. That, to me, looks less like job improvement than like a tipping of the scale from one side of the economy to the other. What the government never measures (or, at least, it never gets reported) is the change in full-time equivalencies. Last month was probably a decline on that front also, but we cannot tell because we don’t know how part-time the part-time jobs were (three-quarter, half, one-quarter time, half a day a week?). We have no idea.

The way the figures are window-dressed in articles like this, which just parrot the government’s statistics, makes it sound like poor people finally got the boost they’ve been yearning for. Hallelujah! The wage gains are starting to trickle down! The real truth? More formerly full-time people became poorer part-time people. Oh. Sad.

This is the reporting baloney we have had to live with throughout the Great Recession and its aftermath because investigative reporting is dead. The numbers required to get the fuller picture just aren’t presented, except on alternative-media sites like Zero Hedge.

While the job market in July deteriorated significantly toward more part-time jobs, the news about jobs this month is even worse than that.

 

Insidious evil buried in the jobs data

 

The New York Fed reported the following for the past year, but you don’t see much about it in the derelict press either: Those with a high-school diploma or less saw their ratio of employed people to their population go up; while those with college educations, saw the percentage of those who are employed drop over the past year.

It would appear we’re adding a lot more bar-tenders, house-keepers and burger flippers. In fact, yes, statistics in July showed that almost all the jobs added were in those industries, which have been the hottest hiring sectors both last month and over the past seven years. “Food services and drinking places” saw the biggest increase in July’s job numbers. (That adds up since that is also an industry with a lot of part-time jobs.) No doubt, the nation needs more bartenders of late with all those people in retail who are losing jobs as 20,000 retail establishments shutter their doors this year next (many of them major retailers).

With an average wage of $13.35/hr in the hospitality sector, the 3.8% annual increase (if it actually happened and is not just an annualized projection) would be a boost of fifty cents an hour. Sure, that’s better than a peck on the head with a sharp stone … unless a lot of those people formerly had full-time jobs that paid even better and that had benefits.

Other areas where the largest gains happened were “waste services” and “health care” (due to an aging population).

Happy to take all of this a proof of his success, Trump touted July’s job report as “excellent job numbers” while noting that he has “just begun!” America is becoming great again!

 

BS from the BLS

 

Oh, but wait. There’s more. There is this tidbit, hardly mentioned everywhere, and not spelled out as it will be below ANYWHERE (except here):

The entirety of job gains in July was due to “seasonal adjustments.” The real number, without government manipulation, saw a job decline of 1.3 MILLION jobs!

Oops. (Wonder if Trump will accept the credit for that!)

As the New York Post reported,

 

The US economy lost 1.03 million jobs in July. That’s a fact.

 

But  … didn’t the Labor Department announce last Friday that July had a gain of ____ new jobs?

Sure, and the discrepancy, as I explained last Saturday and many times before that, was caused by seasonal adjustments.

 

Adjusting for seasonal oddities — like teachers leaving the workforce en masse in the summertime and retail workers getting laid off in bunches after Christmas — is normal and acceptable to economists….

 

But the devil, as they say, is in the details. Were the seasonal adjustments applied fairly and consistently in July?

 

There’s evidence that they were not….

 

Had Labor used the same 1.22 million seasonal adjustment this year that they used last year, it would have produced 65,000 fewer new jobs last month….

 

That extra 65,000 jobs comes at a time when the US economy is clearly weaker than it was in 2015 — so why increase the adjustments by 5 percent?

 

OOPS AGAIN. That article was written last year (August 2016), when the Dept. of Labor made a much bigger seasonal adjustment than in 2015, resulting in a better job figure during the election year of 2016, which raised the eyebrows of that economics reporter. (Hence the mention of losing 1.03 million as opposed to 1.3 million, but I wanted to point out a trend of something that was already looking bad in 2016.) This year the BLS did even worse in adjusting their adjustment — much worse!

Here is the trend in lying statistics:

 

  • In 2015, the Dept of Labor added 1.22 million jobs to the July number as its seasonal adjustment.
  • In 2016, it added 1.29 million jobs as its seasonal adjustment to the July number (a 6% increase in from 2015’s adjustment)
  • How many did it add in July of 2017? 1.51 million! (a 17% increase in the adjustment from 2016’s adjustment)

 

Every year, the adjustments keep getting better … for the government, regardless of weather, etc.. Now, I don’t pretend to know how the Department of Labor’s Bureau of Labor Statistics devises its seasonal adjustments, but I get suspicious when year after year, their economists have to keep moving their adjustment up in order to continue coming up with a positive jobs number. I get especially suspicious when the “adjustment” jumps so much in one year but even more so when the change in their seasonal adjustment from last July to this July was greater than the entire number of jobs supposedly added to the economy in July.

I’m not saying the BLS lies intentionally, though I wouldn’t rule that out. I just wonder how much confirmation bias there is in how they choose to adjust for seasonal factors. There is only so much BS from the BLS a guy can handle, and I think the BS Factor appears to be growing faster than the actual Labor factor.

As Hazlitt also noted,

 

Economics is haunted by more fallacies than any other study known to man…. They are multiplied a thousandfold by … the special pleading of selfish interests. While every group has certain economic interests identical with those of all groups, every group has also … interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies … will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.

 

The real truth about July, stripped of all the befuddlement, is that America got weaker, not greater:

 

  • Full-time jobs lost while part-time jobs gained. Weaker.
  • Actual job losses were over a million with all purported gains happening only within the suspect adjustments. Very weak.
  • The seasonal adjustment increased by 17% from last year’s adjustment with no stated reason as to what made this season in 2017 be so vastly different from this season in 2016 to where their adjustment to the adjustment should be three times larger (percentage-wise) than the increase the year before that! Weakness upon weakness.
  • Employment declined for those with a college education while it rose only for those with a high-school education or less. Weaker for some, better for others. Not great for any.
  • Wage gains happened only in the bottom tier of part-time jobs, which may be mostly due to mandatory minimum-wage increases. Weak.

 

Is it time for the Hallelujah chorus or the What-the-Heck curse?

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Maxine Waters: Trump Is The Most “Deplorable” Person I’ve Ever Met

Maxine Waters was, famously, the first member of Congress to call for President Donald Trump’s impeachment long before Special Counsel Robert Mueller’s investigation into whether the Trump campaign colluded with Russia began.

And though no concrete evidence has surfaced to justify impeachment or collusion, Waters has kept up her attacks on Trump, saying on MSNBC that she believes both parties will band together to fire the president once Mueller successfully produces his smoking gun – whatever it may be – which should be happening any day now, she said.

According to Waters, Trump is a “deplorable” person who should’ve triggered more red flags in the intelligence community.

“There’s been a lot of smoke. People should’ve understood there’s something wrong with him. He’s one of the most deplorable people I’ve ever met in my life. Our intelligence committees have not moved fast enough but I have my hopes on Mueller like most do. I think he’ll connect the dots and that we are nearing a constitutional crisis.”

When asked if incoming Chief of Staff John Kelly might impose some discipline on the chaotic Trump White House, Waters said “it’s not going to happen,” and that no one could discipline Trump.

“We’ve been talking about this president becoming presidential or transitioning long enough. It’s not going to happen. He’s a flawed man with no real values or no real appreciation or understanding of Government or public policy I have no real hopes that anybody will be able to restrain him or get him to change.”

Waters says she still “believes” Trump is impeachable, though she regrets being “early” to talk about Manafort and propagate some leftist conspiracy theories about skullduggery committed by Trump and his associates. Many of these allegations have largely proven to be false.

“I’ve always said that the dots have to be connected. I’ve said that I believe he’s impeachable. I know I was early and talked about Manafort and some of the others very early but of course you have to have the information you have to have the dots. I think it’s there.”

While it’s unlikely that Trump will be impeached with Republicans holding both the House and the Senate, Waters says that once Mueller can prove collusion occurred, “the patriotism of most Americans” will lead to a bipartisan effort to unseat Trump. This sounds like an incredibly naïve thing to believe.

“When the dots are connected and Mueller is able to show collusion, I’m banking on the patriotism of most Americans. They won’t be able to stand with him if it is proven that he colluded that he undermined our democracy interfered with our elections that they’re going to be able to see that this president is dangerous and I do believe that patriotism will win in the final analysis.”

She says that a few Republican lawmakers have confided that Trump is making them increasingly uneasy.

“I’ve talked with a few privately and no I have not heard yet that they’re ready to move but I have picekd up that they are uncomfortable. They’re not at this point saying they would turn against him and vote for impeachment…but I’ve heard the concern.”

Waters has a theory about the collusion. She says that sanctions and their impact on drilling in the Arctic were a central motivation in the collusion between Trump and Putin.

“I believe he tried to convince Putin that he could lift the sanctions and he convinced Putin that he had power to do that. I think it about drilling in the Arctic and about lifting those sanctions and all those people surrounding him are all tied up I the sanctions issue.”

 

“Take a look at Putin he’s disappointed. He thought this president would be able to do that and it’s going to get worse because he is a disappointment.”

A day ago, Waters made similar comments on “The View,” saying that Democrats shouldn’t stop after impeaching Trump – Vice President Mike Pence should also face impeachment.

“Do you think Pence will be better than Trump?” host Joy Behar asked Waters.

 

“No, and when we finish with Trump, we have to go and get [Pence]. He’s next,” Waters said.

Impeaching Pence, of course, would clear the way for Paul Ryan, Waters’s House colleague, to ascend to the presidency. Would he also need to be impeached?

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Oliver Stone Slams “Exceptional” America’s “Vast Stupidity” In Sanctioning Russia

In a scathing Facebook post entitled “Mid Summer Anger,” movie director (and infamous Putin interviewer), Oliver Stone lashes out at Washington’s passage of the Russia sanctions bill, suggesting that US intelligence agencies aren’t doing their job and are misleading the public in the “false-flag war” against Moscow.

Congress passed its beloved Russia sanctions last week by a vote of 419-3! The Senate followed with a vote of 98-2!!

 

 

I guess ‘American Exceptionalism’ includes the vast stupidity inherent in having two giant oceans to distance us from the rest of humanity.

 

With all the Apples and Microsofts and computer geniuses we have in our country, can we not even accept the possibility that perhaps our intelligence agencies are not doing their job, and maybe, just maybe, are deliberately misleading us to continue their false-flag war against Russia? Or for that matter, that Russia itself may not be that invested in screwing up our vaunted democracy with such sloppy malware as claimed? Especially in view of the strong statement put out by Veteran Intelligence Professionals for Sanity, a group of reform-minded veterans throwing a dose of acid on the infamous ‘Brennan-Clapper Report’ of January 6, 2017. With this report alone, much less the overt lying and leaking that’s been going on, both James Clapper (‘We don’t do surveillance on our own citizens’) and John Brennan (‘Drones and torture? None of our business’) should be investigated as thoroughly as Michael Flynn, Jared Kushner, Trump’s son, etc.

 

What’s happened to Elizabeth Warren, Barbara Lee, or any of the people who’ve displayed some independent thinking in the past? Have they actually read this report? Somebody out there in DC, please explain to me this omission of common sense. Are the Washington Post and the New York Times so powerful that no one bothers to read or think beyond them? It seems the TV stations in this country take their copy from them.

 

I accept the US decline. That’s a given — after all, compare our broken-down New York subway system with Moscow’s, as well as many other cities’ pristine and impeccable services. These sanctions, which I pray Europe can independently judge and discard, are as dumb as giving out medals to Generals who keep losing wars.

 

 

I still have this image burned in my brain of Petraeus with his 11/12(?) rows of ribbons, many looking like Boy Scout badges, surrounded by adoring Congressmen as he lied his way through his foreign policy testimony.

 

Never mind that any moment now a Dr. Strangelove-type incident can occur — with less reaction time, say 15 minutes, compared to the 1960s 2/3 hours. We are truly at the edge as Mr. P pointed out in the documentary I made. Such Roman arrogance, such blindness, calls out for another Vietnam, another Iraq. We’re screaming for some Karmic Boot up the ass. Destroying our pride would be a favor that the gods could do us.

 

I can go on — but I’m angry as you can tell. So what’s the point of going to the windows and screaming, even if I were on television? Read the report below from Sanity Inc. and pray another August (1914) passes without the war Congress, Media, and the Military-Industrial Complex are literally dying for.

 

I now fully realize how World War I started. People in power never really thought it would happen, and when it did, thought it’d be over in weeks.

 

You should know the rest of that history. It doesn’t end well.

This, of course, is not the first time Stone has pointed out the fallacies behind US foreign policy and it appears his prophetic McCarthyism on steroids perspective from December has apparently come true

I remember well in the 1950s when the Russians were supposed to be in our schools, Congress, State Department — and according to many Eisenhower/Nixon supporters — about to take over our country without serious opposition (and they call me paranoid!).

 

It was this same media who insisted on our need to go to Vietnam to defend our freedoms against the communists 6,000 miles away. And after the Red Scare finally went away for good in 1991, let us remind ourselves that It never ended. It became Hussein of Iraq with his weapons of mass destruction, and talk of the ‘mushroom cloud.’ It became a Demon, as real as any Salem Witch Trial. It was Gaddafi of Libya, and then it was Assad of Syria. In other words, as in an Orwellian prophesy, it never ended, and I can guarantee you it never will — unless we the people who can still think for ourselves in this existential matter, can say “Enough” to this demon act. “Enough,’ “go away” — laugh in their faces.

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In Maduro’s Latest Crackdown, Venezuela’s Assembly Removes Dissident Prosecutor

In Venezuela’s latest crackdown on all opposition voices, on Saturday the country’s newly convened pro-government constituent assembly removed dissident state prosecutor Luisa Ortega Diaz – the highest-ranking member of President Nicolas Maduro’s administration to break ranks with the dictator – from her job in what critics said was a blatant example of Maduro’s new dictatorship flexing its muscles. The assembly voted on Saturday to permanently remove Diaz, 59, from her post after the Supreme Court ruled on Friday evening to suspend her and send her to trial.

Since the opposition launched near daily protests in April, Ortega had become Maduro’s main challenger from within the ruling socialist movement, accusing him of human rights abuses, however until today her insolence had been tolerated by the socialist tyrant. Today that ended, when the new constituent assembly, which Ortega said was fraudulently elected last weekend, unanimously decided to remove her in its first session on Saturday. Ortega was replaced with “human rights ombudsman” Tarek Saab, a Maduro supporter.

National Guard officers had earlier surrounded Ortega Diaz’s Caracas offices. She posted photographs of the uniformed guards outside the building on her Twitter account and labeled it a “siege.”

Rechazo asedio al @MPvenezolano. Denuncio esta arbitrariedad ante la comunidad nacional e internacional #5Ag pic.twitter.com/un7QWGBGJ7

— Luisa Ortega Díaz (@lortegadiaz) August 5, 2017

The Public Ministry’s Twitter account said the guards were not allowing workers to enter or leave. Eventually, amid the chaos, she escaped on a motor bike.

Since the newly created legislative body has no checks on its powers, the decision to remove Ortega has been widely panned as an ominous sign of Maduro swerving into full-blown dictatorship, which should come as no surprise to anyone following the fast moving events in the near-insolvent country whose currency lost almost 50% of its value in the past 4 days.

“The constituent assembly is solving Maduro’s political problems, handing out quotas, and lynching institutions,” said opposition lawmaker Jose Manuel Olivares after news of Ortega’s removal.

The “blank check” assembly –  which was installed on July 30 despite opposition street protests in which more than 120 people died – also has the right to re-write the constitution, re-arrange state institutions and allow Maduro to rule by decree. Assembly members had said they would fire Ortega the first chance they got, according to Reuters.

Meanwhile, as Venezuela crumbles and implodes, Maduro continues to accuse the U.S. “empire” of waging economic war on Venezuela and refuses to allow humanitarian aid to enter the country. He says the new assembly is the only way to unify Venezuela into a peaceful, prosperous socialist state.

Former Foreign Minister Delcy Rodriguez, a hard-line Maduro loyalist, was named president of the new assembly and demonstrated just what real delustion and propaganda truly means:

There is no humanitarian crisis here. What we have is love. What we have is a crisis of the right-wing fascists,” said Rodriguez, in a fiery socialist inaugural address which made no sense and in which she paid homage to late socialist leader Hugo Chavez, Maduro’s far more capable predecessor.

* * *

Also on Saturday, South America’s trade bloc Mercosur suspended the oil rich nation indefinitely adding to international pressure on Maduro. The foreign ministers of Argentina, Paraguay, Uruguay and Brazil announced the decision in Sao Paulo, urging Maduro to release prisoners and immediately start a political transition.

Quoted by Reuters, Brazilian Foreign Minister Aloysio Nunes said after the meeting. “We are saying: Stop with this! Enough with the deaths, enough with the repression. It is not possible to inflict such torture on the people.”  Asked to comment on Ortega’s dismissal, Nunes replied with a Latin proverb: “Whom the gods would destroy they first drive mad.”

Also on Saturday, Argentina’s Foreign Minister Jorge Faurie called Venezuela a dictatorship: “It is very bad to push a brother out of the door, but it did so with conviction because we are watching a situation that causes us great pain,” Faurie said. Speaking of symbolism, the Mercosur suspension will not affect trade and migration policies to avoid worsening the humanitarian crisis, Nunes said. “Venezuelans who want to come to Brazil will be welcome.” In other words, for all the condemnations by both the US and Latin America, it remains business as usual with the oil rich nation.

Finally, earlier on Saturday, national security adviser H.R. McMaster, the U.S. said in an MSNBC interview that “democracy is over right now in Venezuela,” but dismissed the threat of military intervention there from an outside source.

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McMaster: U.S. Preparing For “Preventive War” With North Korea

The United States is preparing for all options to counter the growing threat from North Korea, including launching a “preventive war,” national security adviser H.R. McMaster said in an interview that aired Saturday on MSNBC. The comments come after North Korea carried out two tests of intercontinental ballistic missiles in the past month and after the president said he has been clear he will not tolerate North Korea’s threats to attack the U.S. with nuclear weapons.

The key excerpts (full transcript):

H.H.: Let me switch if I can to North Korea, which is really pressing. And– and remind our audience, at the Aspen Institute ten days ago, Chairman of the Joint Chiefs, Joe Dunford, said, “There’s always a military– option. It would be horrific.” Lindsey Graham on Today Show earlier this week said– “We need to destroy the regime and their deterrent.” Secretary of State Rex Tillerson said on Tuesday, I believe, to North Korea, “You are leaving us no choice but to protect ourselves.” And then the Chairman of the Chief of Staff of the Army said, “Just because every choice is a bad choice doesn’t mean you don’t have to choose.” Are we looking at a preemptive strike? Are you trying to prepare us, you being collectively, the administration and people like Lindsey Graham and Tom Cotton for a first strike North Korea?

 

H.R.M. Well, we really, what you’re asking is– is are we preparing plans for a preventive war, right? A war that would prevent North Korea from threatening the United States with a nuclear weapon. And the president’s been very clear about it. He said, “He’s not gonna tolerate North Korea being able to threaten the United States” if they have nuclear weapons that can threaten the United States; It’s intolerable from the president’s perspective. So of course, we have to provide all options to do that. And that includes a military option.

 

Now, would we like to resolve it short of what would be a very costly war, in terms of– in terms of the suffering of mainly the South Korean people? The– the ability of– of that North– North Korean regime to hold the South hostage to conventional fire’s capabilities, artillery and so forth, Seoul being so close. We’re cognizant of all of that. And so what we have to do is– is everything we can to– to pressure this regime, to pressure Kim Jong-un and those around him such that they conclude, it is in their interest to denuclearize. And there are really I think three critical things, came out of the president’s very successful summit with– President Xi of China that were different– that were different from past efforts to work with China, which has always been, you know, the– the desire, right, to work with China– on the– on the North Korean problem.

How many casualties will there be:

HH: In 1994, when the first North Korean deal with signed, the people who executed it, Gallucci, Dan Poneman, Joe Wit wrote a book. And they quoted a general saying, “If there is a conflict,” called Going Critical, “there will be a million casualties.” A million casualties. Is that still a good estimate of what happens if– preemptive strike unfolds in North Korea, General?

 

HRM: You know, one thing about war. It’s impossible oftentimes to predict. It’s always impossible to predict the future course of events. Because war is a continuous interaction of opposites, a continuous interaction between your forces and those of the enemy. It involves not just the capability to use force, but also intentions and things that are just unknowable at the outset. And so I think it’s important to– to look at– range of estimates of what could happen, because it’s clear that at war, it’s unpredictable. And so you always have to ask the question, “What happens next? What are the risks? How do you mitigate those risks?” And– and obviously, you know, war is– is– is the most serious decision any leader has to make. And so what can we do to make sure we exhaust our possibilities and exhaust our other opportunities to accomplish this very clear objective of denuclearization of the peninsula short of war?

Should Americans be concerned:

HH: How concerned should the American people be that we are actually on the brink of a war with North Korea?

 

HRM: Well, I think it’s impossible to overstate the danger associated with this. Right, the, so I think it’s impossible to overstate the danger associated with a rogue, brutal regime, I mean, who murdered his own brother with nerve agent in an airport. “I mean, think about what he’s done in terms of his own brutal repression of not only members of his regime but his own family,” McMaster added.

 

On Tuesday,  Sen. Lindsey Graham said that the president told him there would be a war with North Korea if the regime continues to try to hit America with an ICBM. Appearing on the Today Show, the South Carolina Republican Senator said that President Trump has indicated to him that the administration is prepared to strike North Korea to prevent an attack against the U.S.  Pushed on by Matt Lauer on whether a viable military option exists in the region, Graham responded: “They’re wrong.  There is a military option to destroy North Korea’s program and North Korea itself.”


The Hwasong-14 ICBM seen during its test in this undated photo released by

North Korea’s Korean Central News Agency (KCNA) in Pyongyang, July 5 2017.

As reported last Friday, North Korea claimed that its latest missiles can now strike anywhere in the United States, delivering nuclear warheads. Experts have said that the country’s missile program has greatly accelerated in recent months putting it far ahead of previous predictions about when it could launch reliable long-range missiles. Speaking to Newsweek in recent days, several experts said that an attack would be the deadliest the U.S. has ever received and potentially kill more than 100,000 people if it struck in large population centers like New York City or Los Angeles.

“I’m not going to confirm [whether the latest ICBM could reach anywhere in the U.S.] but whether it could reach San Francisco or Pittsburgh or Washington, I mean how much does that matter? It’s a grave threat,” McMaster said.

He added: “It’s impossible to overstate the danger associated with a rogue, brutal regime.”

McMaster cautioned that he was aware of the fact that any strike against North Korea could bring about a “very costly war” that would cause immense “suffering of mainly the South Korean people.”

Last month, CIA Director Mike Pompeo floated another option for dealing with the North Korea threat, saying that he was “hopeful we will find a way to separate that regime from this system.” North Korea responded by threatening swift and brutal consequences for any attempt to topple Kim.

“Should the U.S. dare to show even the slightest sign of an attempt to remove our supreme leadership, we will strike a merciless blow at the heart of the U.S. with our powerful nuclear hammer, honed and hardened over time,” a foreign ministry spokesman said.

Still, McMaster did not rule out such an attempt when asked whether it could be a legitimate tool. “I think it depends on the legal justifications for that. And this goes back to just war theory. And what is the nature of the risk? And does that risk justify acting in defense of your people and your vital interests?”

Last week, the local press reported that South Korea’s military is preparing a “surgical strike” scenario that could wipe out NOrth Korean command and missile and nuclear facilities following an order by S.Korea’s president Moon Jae-In.

The post McMaster: U.S. Preparing For “Preventive War” With North Korea appeared first on crude-oil.news.

McMaster: U.S. Preparing For “Preventive War” With North Korea

The United States is preparing for all options to counter the growing threat from North Korea, including launching a “preventive war,” national security adviser H.R. McMaster said in an interview that aired Saturday on MSNBC. The comments come after North Korea carried out two tests of intercontinental ballistic missiles in the past month and after the president said he has been clear he will not tolerate North Korea’s threats to attack the U.S. with nuclear weapons.

The key excerpts (full transcript):

H.H.: Let me switch if I can to North Korea, which is really pressing. And– and remind our audience, at the Aspen Institute ten days ago, Chairman of the Joint Chiefs, Joe Dunford, said, “There’s always a military– option. It would be horrific.” Lindsey Graham on Today Show earlier this week said– “We need to destroy the regime and their deterrent.” Secretary of State Rex Tillerson said on Tuesday, I believe, to North Korea, “You are leaving us no choice but to protect ourselves.” And then the Chairman of the Chief of Staff of the Army said, “Just because every choice is a bad choice doesn’t mean you don’t have to choose.” Are we looking at a preemptive strike? Are you trying to prepare us, you being collectively, the administration and people like Lindsey Graham and Tom Cotton for a first strike North Korea?

 

H.R.M. Well, we really, what you’re asking is– is are we preparing plans for a preventive war, right? A war that would prevent North Korea from threatening the United States with a nuclear weapon. And the president’s been very clear about it. He said, “He’s not gonna tolerate North Korea being able to threaten the United States” if they have nuclear weapons that can threaten the United States; It’s intolerable from the president’s perspective. So of course, we have to provide all options to do that. And that includes a military option.

 

Now, would we like to resolve it short of what would be a very costly war, in terms of– in terms of the suffering of mainly the South Korean people? The– the ability of– of that North– North Korean regime to hold the South hostage to conventional fire’s capabilities, artillery and so forth, Seoul being so close. We’re cognizant of all of that. And so what we have to do is– is everything we can to– to pressure this regime, to pressure Kim Jong-un and those around him such that they conclude, it is in their interest to denuclearize. And there are really I think three critical things, came out of the president’s very successful summit with– President Xi of China that were different– that were different from past efforts to work with China, which has always been, you know, the– the desire, right, to work with China– on the– on the North Korean problem.

How many casualties will there be:

HH: In 1994, when the first North Korean deal with signed, the people who executed it, Gallucci, Dan Poneman, Joe Wit wrote a book. And they quoted a general saying, “If there is a conflict,” called Going Critical, “there will be a million casualties.” A million casualties. Is that still a good estimate of what happens if– preemptive strike unfolds in North Korea, General?

 

HRM: You know, one thing about war. It’s impossible oftentimes to predict. It’s always impossible to predict the future course of events. Because war is a continuous interaction of opposites, a continuous interaction between your forces and those of the enemy. It involves not just the capability to use force, but also intentions and things that are just unknowable at the outset. And so I think it’s important to– to look at– range of estimates of what could happen, because it’s clear that at war, it’s unpredictable. And so you always have to ask the question, “What happens next? What are the risks? How do you mitigate those risks?” And– and obviously, you know, war is– is– is the most serious decision any leader has to make. And so what can we do to make sure we exhaust our possibilities and exhaust our other opportunities to accomplish this very clear objective of denuclearization of the peninsula short of war?

Should Americans be concerned:

HH: How concerned should the American people be that we are actually on the brink of a war with North Korea?

 

HRM: Well, I think it’s impossible to overstate the danger associated with this. Right, the, so I think it’s impossible to overstate the danger associated with a rogue, brutal regime, I mean, who murdered his own brother with nerve agent in an airport. “I mean, think about what he’s done in terms of his own brutal repression of not only members of his regime but his own family,” McMaster added.

 

On Tuesday,  Sen. Lindsey Graham said that the president told him there would be a war with North Korea if the regime continues to try to hit America with an ICBM. Appearing on the Today Show, the South Carolina Republican Senator said that President Trump has indicated to him that the administration is prepared to strike North Korea to prevent an attack against the U.S.  Pushed on by Matt Lauer on whether a viable military option exists in the region, Graham responded: “They’re wrong.  There is a military option to destroy North Korea’s program and North Korea itself.”


The Hwasong-14 ICBM seen during its test in this undated photo released by

North Korea’s Korean Central News Agency (KCNA) in Pyongyang, July 5 2017.

As reported last Friday, North Korea claimed that its latest missiles can now strike anywhere in the United States, delivering nuclear warheads. Experts have said that the country’s missile program has greatly accelerated in recent months putting it far ahead of previous predictions about when it could launch reliable long-range missiles. Speaking to Newsweek in recent days, several experts said that an attack would be the deadliest the U.S. has ever received and potentially kill more than 100,000 people if it struck in large population centers like New York City or Los Angeles.

“I’m not going to confirm [whether the latest ICBM could reach anywhere in the U.S.] but whether it could reach San Francisco or Pittsburgh or Washington, I mean how much does that matter? It’s a grave threat,” McMaster said.

He added: “It’s impossible to overstate the danger associated with a rogue, brutal regime.”

McMaster cautioned that he was aware of the fact that any strike against North Korea could bring about a “very costly war” that would cause immense “suffering of mainly the South Korean people.”

Last month, CIA Director Mike Pompeo floated another option for dealing with the North Korea threat, saying that he was “hopeful we will find a way to separate that regime from this system.” North Korea responded by threatening swift and brutal consequences for any attempt to topple Kim.

“Should the U.S. dare to show even the slightest sign of an attempt to remove our supreme leadership, we will strike a merciless blow at the heart of the U.S. with our powerful nuclear hammer, honed and hardened over time,” a foreign ministry spokesman said.

Still, McMaster did not rule out such an attempt when asked whether it could be a legitimate tool. “I think it depends on the legal justifications for that. And this goes back to just war theory. And what is the nature of the risk? And does that risk justify acting in defense of your people and your vital interests?”

Last week, the local press reported that South Korea’s military is preparing a “surgical strike” scenario that could wipe out NOrth Korean command and missile and nuclear facilities following an order by S.Korea’s president Moon Jae-In.

The post McMaster: U.S. Preparing For “Preventive War” With North Korea appeared first on crude-oil.news.

McMaster: U.S. Preparing For “Preventive War” With North Korea

The United States is preparing for all options to counter the growing threat from North Korea, including launching a “preventive war,” national security adviser H.R. McMaster said in an interview that aired Saturday on MSNBC. The comments come after North Korea carried out two tests of intercontinental ballistic missiles in the past month and after the president said he has been clear he will not tolerate North Korea’s threats to attack the U.S. with nuclear weapons.

The key excerpts (full transcript):

H.H.: Let me switch if I can to North Korea, which is really pressing. And– and remind our audience, at the Aspen Institute ten days ago, Chairman of the Joint Chiefs, Joe Dunford, said, “There’s always a military– option. It would be horrific.” Lindsey Graham on Today Show earlier this week said– “We need to destroy the regime and their deterrent.” Secretary of State Rex Tillerson said on Tuesday, I believe, to North Korea, “You are leaving us no choice but to protect ourselves.” And then the Chairman of the Chief of Staff of the Army said, “Just because every choice is a bad choice doesn’t mean you don’t have to choose.” Are we looking at a preemptive strike? Are you trying to prepare us, you being collectively, the administration and people like Lindsey Graham and Tom Cotton for a first strike North Korea?

 

H.R.M. Well, we really, what you’re asking is– is are we preparing plans for a preventive war, right? A war that would prevent North Korea from threatening the United States with a nuclear weapon. And the president’s been very clear about it. He said, “He’s not gonna tolerate North Korea being able to threaten the United States” if they have nuclear weapons that can threaten the United States; It’s intolerable from the president’s perspective. So of course, we have to provide all options to do that. And that includes a military option.

 

Now, would we like to resolve it short of what would be a very costly war, in terms of– in terms of the suffering of mainly the South Korean people? The– the ability of– of that North– North Korean regime to hold the South hostage to conventional fire’s capabilities, artillery and so forth, Seoul being so close. We’re cognizant of all of that. And so what we have to do is– is everything we can to– to pressure this regime, to pressure Kim Jong-un and those around him such that they conclude, it is in their interest to denuclearize. And there are really I think three critical things, came out of the president’s very successful summit with– President Xi of China that were different– that were different from past efforts to work with China, which has always been, you know, the– the desire, right, to work with China– on the– on the North Korean problem.

How many casualties will there be:

HH: In 1994, when the first North Korean deal with signed, the people who executed it, Gallucci, Dan Poneman, Joe Wit wrote a book. And they quoted a general saying, “If there is a conflict,” called Going Critical, “there will be a million casualties.” A million casualties. Is that still a good estimate of what happens if– preemptive strike unfolds in North Korea, General?

 

HRM: You know, one thing about war. It’s impossible oftentimes to predict. It’s always impossible to predict the future course of events. Because war is a continuous interaction of opposites, a continuous interaction between your forces and those of the enemy. It involves not just the capability to use force, but also intentions and things that are just unknowable at the outset. And so I think it’s important to– to look at– range of estimates of what could happen, because it’s clear that at war, it’s unpredictable. And so you always have to ask the question, “What happens next? What are the risks? How do you mitigate those risks?” And– and obviously, you know, war is– is– is the most serious decision any leader has to make. And so what can we do to make sure we exhaust our possibilities and exhaust our other opportunities to accomplish this very clear objective of denuclearization of the peninsula short of war?

Should Americans be concerned:

HH: How concerned should the American people be that we are actually on the brink of a war with North Korea?

 

HRM: Well, I think it’s impossible to overstate the danger associated with this. Right, the, so I think it’s impossible to overstate the danger associated with a rogue, brutal regime, I mean, who murdered his own brother with nerve agent in an airport. “I mean, think about what he’s done in terms of his own brutal repression of not only members of his regime but his own family,” McMaster added.

 

On Tuesday,  Sen. Lindsey Graham said that the president told him there would be a war with North Korea if the regime continues to try to hit America with an ICBM. Appearing on the Today Show, the South Carolina Republican Senator said that President Trump has indicated to him that the administration is prepared to strike North Korea to prevent an attack against the U.S.  Pushed on by Matt Lauer on whether a viable military option exists in the region, Graham responded: “They’re wrong.  There is a military option to destroy North Korea’s program and North Korea itself.”


The Hwasong-14 ICBM seen during its test in this undated photo released by

North Korea’s Korean Central News Agency (KCNA) in Pyongyang, July 5 2017.

As reported last Friday, North Korea claimed that its latest missiles can now strike anywhere in the United States, delivering nuclear warheads. Experts have said that the country’s missile program has greatly accelerated in recent months putting it far ahead of previous predictions about when it could launch reliable long-range missiles. Speaking to Newsweek in recent days, several experts said that an attack would be the deadliest the U.S. has ever received and potentially kill more than 100,000 people if it struck in large population centers like New York City or Los Angeles.

“I’m not going to confirm [whether the latest ICBM could reach anywhere in the U.S.] but whether it could reach San Francisco or Pittsburgh or Washington, I mean how much does that matter? It’s a grave threat,” McMaster said.

He added: “It’s impossible to overstate the danger associated with a rogue, brutal regime.”

McMaster cautioned that he was aware of the fact that any strike against North Korea could bring about a “very costly war” that would cause immense “suffering of mainly the South Korean people.”

Last month, CIA Director Mike Pompeo floated another option for dealing with the North Korea threat, saying that he was “hopeful we will find a way to separate that regime from this system.” North Korea responded by threatening swift and brutal consequences for any attempt to topple Kim.

“Should the U.S. dare to show even the slightest sign of an attempt to remove our supreme leadership, we will strike a merciless blow at the heart of the U.S. with our powerful nuclear hammer, honed and hardened over time,” a foreign ministry spokesman said.

Still, McMaster did not rule out such an attempt when asked whether it could be a legitimate tool. “I think it depends on the legal justifications for that. And this goes back to just war theory. And what is the nature of the risk? And does that risk justify acting in defense of your people and your vital interests?”

Last week, the local press reported that South Korea’s military is preparing a “surgical strike” scenario that could wipe out NOrth Korean command and missile and nuclear facilities following an order by S.Korea’s president Moon Jae-In.

The post McMaster: U.S. Preparing For “Preventive War” With North Korea appeared first on crude-oil.news.

How Many Gold Bars Do London Vaults Hold

This week for the first time – in the name of “transparency” – the London Bullion Market Association unveiled that as at 31 March, 2017 there were 7,449 tonnes of gold, or 596,000 gold bars, valued at $298 billion sotred in the vaults around London as well as $19 billion in silver. Only the gold hoard at Fort Knox and among Indian households said to account for more than the LBMA’s inventory, which clears just over $18 billion in gold daily. Most London gold is stored in the Bank of England, with the rest in private vaults, including those operated by HSBC and JPMorgan, both profiled previously (here and here).

The Bank of England holds most of the gold and silver in London, or over 60% of the total gold, and already publishes some details of its holdings. The new LBMA data supposedly also reveals how much private custodians, HSBC, JP Morgan, and ICBC Standard Bank among them, keep in their vaults.

The publication of vaulting statistics marks the first step toward the LBMA’s promise of greater transparency, which will eventually be enhanced further by trade reporting that is set to also be published later on.
respectively.

As UBS strategist Joni Teves writes, this addition to the available pool of information helps various market participants, as well as regulators, have a better assessment of market activity in precious metals. For instance, comparing the newly released vaulting statistics with trade flows allows for a better understanding of the movement of metal and the dynamics between investment and physical demand. Combined with other indicators of market length, such as Comex net longs and ETF holdings, it also enables market watchers to have a better gauge of market positioning. The data released so far confirms relatively limited investor participation this year – perhaps as a result of a broad shift toward cryptocurrencies as the new “safe” currency, at least among some age groups. Bank of England (BoE) data, which extends further back to 2011, confirms that investor positions have declined considerably from the peak during the height of the bull-run and that there’s room for gold exposures to grow from here.

As LBMA data series extends up ahead, we should get an even better picture. All in all, changes in gold holdings as illustrated by LBMA and BoE reinforce a positive stance on gold.

Courtesy of UBS, below we present extended observations on what the LBMA data reveal, and the implications for the broader gold market in general, as well as investing in the precious metal in particular.

Never ‘too much of a good thing’ with market data

The London Bullion Market Association (LBMA) and the London Precious Metals Clearing Limited (LPMCL) have released data on gold and silver inventories sitting in London vaults (loco London gold and silver), a move that is consistent with wider developments in the industry towards greater transparency. This addition to the available pool of information helps various market participants, as well as regulators, have a better assessment of market activity. Comparing the newly released vaulting statistics with trade flows allows for a better understanding of the movement of metal and the dynamics between investment and physical demand. Combined with other indicators of market length, such as Comex net longs and ETF holdings, it also enables market watchers to have a better gauge of market positioning. The publication of vaulting statistics marks the first step towards more transparency in the industry; trade reporting that is set to also be published later on should further enhance this. Having data on loco London gold and silver trading volumes would allow for better comparisons of trading activity and interest across various regions. As far as market analysis is concerned, there’s no such thing as ‘too much of a good thing’ when it comes to information that provides additional insights.

The LBMA and the LPMCL first announced the plan to publish gold and silver vault holdings in May. The data published today represents aggregated data collected from the Bank of England (BoE) and seven other custodians that offer vaulting services, and covers end-period holdings of gold and silver from July 2016 to March 2017. Going forward, this data will be published each month, with a three-month lag. The data includes gold and silver in the form of large bars, kilo bars or coins, but excludes jewellery and other private holdings held in vaults that are not part of the London clearing system. These statistics only include gold and silver that is held physically in London, defined by the LBMA as “held within the environs of the M25”. This metal underpins the daily trading and clearing activities in the London bullion market.

London continues to be a key gold trading centre globally, with an average of $18.1bn worth of gold cleared each day in March 2017, according to LBMA net daily clearing statistics. Clearing data is different from turnover data, so until we get LBMA trade reporting statistics, comparing London market activity against that of other regions remains challenging. But to somehow put things into context for now, it probably still helps to note that the average daily turnover of physical gold spot contracts on the Shanghai Gold Exchange is over $1bn, while an average of about $32bn worth of gold futures trade on Comex each day.

Estimating investor gold holdings in London

One of the recurring questions that gets asked by clients and various market participants is on the level of gold or silver holdings or the level of investor positioning. This has always been very difficult to answer. The market has had to rely on third-party estimates of above-ground holdings, such as those provided by Thomson Reuters GFMS, the World Gold Council or Metals Focus. Other ways that we’ve tried to address this type of question is to look at Comex net long positions and ETF holdings. Now, with the availability of vaulting statistics, we can add another dimension to the analysis. We can start by saying that 7,449 tonnes or 239.49 moz of gold and 32,078 tonnes or 1,031.32 moz of silver were sitting in London vaults as of end-March.

For gold, we can take the analysis further: as the BoE also publishes gold vault holdings data separately, we are able to split out – at least in aggregate – what is held in other vaults. This is not possible for silver as the BoE does not provide silver custodial services. The BoE provides gold custody services primarily to central bank customers to help them get access to London gold market liquidity, although it also holds some gold custody accounts on behalf of certain commercial banks that support central bank access to the liquidity of the London gold market. On the assumption that the BoE custody service primarily caters to central bank customers, it’s probably fair to say that 1) the bulk of BoE gold represents official sector holdings and 2) gold held in other vaults is likely to be more investment-related. To be sure, this is somewhat simplistic in that, as mentioned earlier, the BoE also offers custody accounts to certain commercial banks, while at the same time it is also possible for central banks to hold their gold in non-BoE vaults.

To put some context around this, let us consider for illustration’s sake that about 80% to 90% of BoE gold holdings are accounted for by the official sector. Let us also consider for simplicity that the vast majority of gold held in commercial vaults represents investor holdings and only a negligible amount comprises official sector gold accounts. These simplistic assumptions would therefore imply that over the past year, an average of about 96.68 to 110.92 moz ($119-139 bn) of investment-related gold was held in London. These inventories would include metal held on behalf of ETFs. Based on our database of gold ETFs, we estimate an average of around 48.78 moz or about $60bn worth of gold was held in London vaults to back ETF shares during the same period. Taking these ETF-related holdings into account would then leave roughly around 47.90 to 62.14 moz or about $60bn to $78bn worth of gold in unallocated and allocated accounts as available pool of liquidity for OTC trading activities.

While we now have a starting point with the vaulting statistics, a breakdown of the type of gold holdings remains unavailable. As such, the discussion above and the charts and tables below are presented here to provide some context. Nevertheless, despite these limitations, the data still somehow supports the broad assumption on how loco London gold stocks may be split between official sector and investor holdings. For instance, the data shows that gold held at the BoE appears to be more stable relative to gold held in other London vaults, such that changes in total loco London gold over the past nine months have been driven more by changes in non-BoE gold. Intuitively, it would make sense for investment-related gold holdings to be more volatile relative to official sector holdings. Central banks hold gold as part of their official reserves and also serve monetary purposes, typically having much longer.

While we now have a starting point with the vaulting statistics, a breakdown of the type of gold holdings remains unavailable. As such, the discussion above and the charts and tables below are obviously only presented here to provide some context. Nevertheless, despite these limitations, the data still somehow supports the broad assumption on how loco London gold stocks may be split between official sector and investor holdings. For instance, the data shows that gold held at the BoE appears to be more stable relative to gold held in other London vaults, such that changes in total loco London gold over the past nine months have been driven more by changes in non-BoE gold. Intuitively, it would make sense for investment-related gold holdings to be more volatile relative to official sector holdings. Central banks hold gold as part of their official reserves and also serve monetary purposes, typically having much longer time horizons.

Matching ETF data against total loco London inventories

Gold and silver held in London vaults that back shares in exchange-traded funds (ETFs) are also included in the statistics, regardless of where the ETF is listed. In general, this means that although gold or silver ETF shares may trade on exchanges elsewhere, as long as the metal is held physically in London, these would be considered loco London and form part of the LBMA’s monthly statistics. For instance, the largest gold ETF is listed and trades on the New York Stock Exchange (NYSE), but its designated custodian ultimately holds the underlying metal in its London vaulting facilities. Similarly for silver, the ETF with the largest holdings trades on the NYSE, but some of the metal underpinning the shares is allocated in London.

We estimate that as of last week there are around 68.65 moz of gold and about 687.57 moz of silver held in ETFs globally. Our database of gold and silver ETFs suggests that, using average gold and silver prices over the past year, about 48.78 moz of gold worth about $60bn and about 427.67 moz of silver worth about $8bn are likely to be held in London to back ETF shares. This is obviously a rough estimate that’s provided here only for indicative purposes.

Looking at changes in ETF holdings vs changes in total vault holdings between July 2016 and the end of the first quarter this year shows that the trend is broadly similar for gold, yet divergent for silver. Considering the period as a whole, the divergence continues for silver with total holdings up by 8% or 79.89moz, but ETFs down 3% or 12.06 moz. For gold, the change in total stocks vs the change in ETFs also diverges when the entire period from July 2016 to March 2017 is taken into account – total loco London gold inventories increased by a modest 2% or 5.34 moz but ETF holdings were down 8% or 3.87 moz.

Given the data series is quite short, it is challenging to form any strong conclusions at this juncture. We expect that as the series extends in time we will be able to gather more insights from these flows. Intuitively, divergences in total London gold stocks and ETF holdings could reinforce other indicators that suggest declines in ETF shares do not always reflect net exit from gold or silver exposures. Instead, outflows from ETFs could represent a switch to different forms of exposure such as allocated or unallocated accounts.

Tracking gold trade flows vs changes in London stocks

Comparing total gold holdings data with UK gold import and export flows confirms a strong link between the two, regardless of whether one is using UK trade data or what may be implied by Swiss Customs statistics. This is intuitive in that net inflows of gold into the UK should understandably translate into a build in holdings, while net outflows would suggest a reduction in overall levels. In addition to UK trade statistics, Swiss data on gold flows from and to the UK is also a useful indicator of how much gold is leaving or entering London vaults. Given Switzerland’s key role in global gold refining, it is an important hub for the movement of metal and essentially acts as an interface between investment demand in Western markets and consumer demand in Asia. Combining Swiss and UK trade data with London vault holdings allows for a more complete picture.

Periods of strong physical demand out of key markets such as India and China could attract the movement of large investment bars sitting in London vaults to Switzerland for conversion into kilo bars. These gold kilo bars would subsequently be shipped to physical buyers in Asia and ultimately be converted into jewellery or other investment products to meet consumer demand. Net outflows of gold from the UK should coincide with declines in vault holdings in this case. In fact, this scenario occurred back in 2013: as the Fed’s taper tantrum led to a sharp rise in US real rates, gold collapsed by 29% as investors exited gold exposures. In turn, the sharp drop in the gold price made it very attractive for physical buyers, especially in the context of a decade-long bull market. Investor gold positions held in London vaults – whether OTC or ETF-related – were being heavily liquidated. This metal then made its way to Switzerland, was converted into kilo bars, and shipped to Asia to satisfy the surge in demand in China, India as well as other parts of the region.

Interestingly, LBMA data shows that in Q3 last year, the opposite occurred – the UK was a net importer of gold and vault holdings increased. This coincided with weak physical demand for most of last year, which was more than offset by a pickup in investment interest. Given strong demand from the investor community, gold still managed to rally 8% in 2016 (and as much as 30% from trough to peak) despite the weak fundamental backdrop. Towards the end of the year, market forces became conducive for gold to once again leave London vaults and be shipped out of the UK. Investors unwound positions in anticipation of the first Fed rate hike, while at the same time, seasonal and regulatory factors in key markets boosted physical demand, allowing buyers in Asia to absorb the liquidation from Western investors. Demand out of China kicked in heading into year-end, in anticipation of the Lunar New Year holidays, while the demonetisation of highvalue banknotes in India led to a knee-jerk spike in demand. So far this year, physical markets have been more stable, while investment demand has been positive yet broadly more subdued. As mentioned earlier, the data tends to reflect this, with changes in loco London gold holdings relatively  limited during the first quarter of 2017.

A marginal benefit of this link between vault holdings and trade flows is that there is a shorter lag in trade data reporting. This means that trade statistics should help market watchers anticipate changes in loco-London inventories before getting confirmation a couple months later from the LBMA report.

Insights on investment activity

Looking at the entire data series from July last year to March this year, an observation that’s worth noting is the modest 2% increase in total gold holdings equivalent to around 166 tonnes. This change is likely a function of investor liquidations in Q4 2016, as markets anticipated a Fed rate hike, which has since reversed but at a subdued pace. This also coincides with ETF flows – heavy liquidations towards the end of last year have been succeeded by net inflows this year, but volumes lag considerably compared to the same period in 2016.

More importantly, according to LBMA data loco London gold holdings during Q1 this year were relatively flat. This coincides well with the broadly limited investor participation in the gold market that we have been highlighting. Many investors are keeping an eye on the gold market and continue to appreciate gold’s value as a diversifier in a portfolio, yet few have been actively involved in putting on meaningful, strategic positions. Subdued investor participation has been an important factor holding gold back, in our view, in spite of supportive macro factors.

Subdued investor activity has been apparent in speculative positioning data indicated by the CFTC Commitment of Traders Report as well as gold ETF flows. In June, sentiment towards gold understandably came under pressure given the rise in real rates – not just in the US but also in Europe – and the seemingly hawkish shift in tone among central banks (see Gold falls as real rates rise). As of early July, CFTC data showed that gold net longs on Comex had fallen to the lowest levels since January last year. Despite the rebound in gold prices in recent weeks, net speculative positions on Comex have remained very lean. Meanwhile, gold ETFs marked the first month of net outflows in July. Although gold ETF holdings are up on a net basis year-to-date, the increase is much more subdued at only 107 tonnes compared to over 598 tonnes during the same period in 2016. Changes in gold positioning on Comex and ETF holdings coincide with the subdued changes in loco London gold inventories.

As mentioned earlier, the data shows a larger increase in silver vault holdings vs gold. Relative speculative positioning between gold and silver on Comex similarly shows a stronger build in investor positions in silver than gold, at least during the first half of the year. Given silver’s large industrial demand component, it initially attracted some attention on the back of growth and risk optimism amid the reflation theme. This translated into persistent gains in Comex investor positioning, which reached a fresh all-time high in May. Yet as fiscal stimulus hopes faded and reflation trades were unwound, so did the interest in silver. Comex positioning has since given back about 81% from the highs, mainly driven by a strong increase in gross short positions, which have been reaching record highs in recent weeks. It would be interesting to see Q2 and Q3 data on loco London silver holdings to find out whether OTC positions followed a similar trend. Loco London silver holdings could potentially be relatively more robust than what Comex speculative positions imply. Silver ETF holdings have generally been resilient over the past few years, despite heavy liquidations in gold ETFs, which could mean that silver OTC positions could also show a similar sense of stability.

Finding clues on positioning from BoE gold data, for now

Given that only limited historical data is available, it is difficult to put total London gold inventories fully into perspective. For instance, we cannot compare current levels versus the amount of gold and silver held during the peak of the bull run nor during the trough reached at the end 2015. However, for gold we can look to BoE vault holdings, which go back to 2011, for some hints. Based on LBMA data, the BoE accounts for the bulk of loco London gold inventories, representing about 68% of the total on average over the period covered. As the LBMA data series extends up ahead, we should be able to have a better idea of how closely linked trends in BoE and non-BoE gold are, and in turn get a better perspective on investor positions.

The amount of gold held at the BoE was at a high of 6,250 tonnes or 200.50 moz in February 2013 and fell to a low of 4,693 tonnes or 150.87 moz in March last year. As of end-Q1, levels are about 8% or 12.49 moz higher at 163.36 moz, but still considerably below the highs. As we argued earlier, the BoE’s gold holdings likely mainly reflect official sector positions. Some central banks manage their gold reserves more actively than others while there have been a few such as the Bundesbank which have repatriated gold held in various foreign locations over the past few years. These flows are likely also reflected in the BoE’s data. Nevertheless, the BoE does hold some gold custody accounts for certain commercial banks. To the extent that non-official sector gold holdings influences these flows, the trends should be broadly similar to changes in loco London gold held in other vaults. The trend in gold holdings would in this case be consistent with our view that exposure to gold has been reduced considerably from the highs during the peak of the bull run. And although investment interest has been revived over the past year and a half, levels of exposure likely remain limited by historical standards. Much leaner positioning is one of the key factors supporting gold this year and suggests that there is ample room for positions to be rebuilt against a backdrop of benign rates, soft dollar and lingering uncertainties.

The post How Many Gold Bars Do London Vaults Hold appeared first on crude-oil.news.

How Many Gold Bars Do London Vaults Hold

This week for the first time – in the name of “transparency” – the London Bullion Market Association unveiled that as at 31 March, 2017 there were 7,449 tonnes of gold, or 596,000 gold bars, valued at $298 billion sotred in the vaults around London as well as $19 billion in silver. Only the gold hoard at Fort Knox and among Indian households said to account for more than the LBMA’s inventory, which clears just over $18 billion in gold daily. Most London gold is stored in the Bank of England, with the rest in private vaults, including those operated by HSBC and JPMorgan, both profiled previously (here and here).

The Bank of England holds most of the gold and silver in London, or over 60% of the total gold, and already publishes some details of its holdings. The new LBMA data supposedly also reveals how much private custodians, HSBC, JP Morgan, and ICBC Standard Bank among them, keep in their vaults.

The publication of vaulting statistics marks the first step toward the LBMA’s promise of greater transparency, which will eventually be enhanced further by trade reporting that is set to also be published later on.
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As UBS strategist Joni Teves writes, this addition to the available pool of information helps various market participants, as well as regulators, have a better assessment of market activity in precious metals. For instance, comparing the newly released vaulting statistics with trade flows allows for a better understanding of the movement of metal and the dynamics between investment and physical demand. Combined with other indicators of market length, such as Comex net longs and ETF holdings, it also enables market watchers to have a better gauge of market positioning. The data released so far confirms relatively limited investor participation this year – perhaps as a result of a broad shift toward cryptocurrencies as the new “safe” currency, at least among some age groups. Bank of England (BoE) data, which extends further back to 2011, confirms that investor positions have declined considerably from the peak during the height of the bull-run and that there’s room for gold exposures to grow from here.

As LBMA data series extends up ahead, we should get an even better picture. All in all, changes in gold holdings as illustrated by LBMA and BoE reinforce a positive stance on gold.

Courtesy of UBS, below we present extended observations on what the LBMA data reveal, and the implications for the broader gold market in general, as well as investing in the precious metal in particular.

Never ‘too much of a good thing’ with market data

The London Bullion Market Association (LBMA) and the London Precious Metals Clearing Limited (LPMCL) have released data on gold and silver inventories sitting in London vaults (loco London gold and silver), a move that is consistent with wider developments in the industry towards greater transparency. This addition to the available pool of information helps various market participants, as well as regulators, have a better assessment of market activity. Comparing the newly released vaulting statistics with trade flows allows for a better understanding of the movement of metal and the dynamics between investment and physical demand. Combined with other indicators of market length, such as Comex net longs and ETF holdings, it also enables market watchers to have a better gauge of market positioning. The publication of vaulting statistics marks the first step towards more transparency in the industry; trade reporting that is set to also be published later on should further enhance this. Having data on loco London gold and silver trading volumes would allow for better comparisons of trading activity and interest across various regions. As far as market analysis is concerned, there’s no such thing as ‘too much of a good thing’ when it comes to information that provides additional insights.

The LBMA and the LPMCL first announced the plan to publish gold and silver vault holdings in May. The data published today represents aggregated data collected from the Bank of England (BoE) and seven other custodians that offer vaulting services, and covers end-period holdings of gold and silver from July 2016 to March 2017. Going forward, this data will be published each month, with a three-month lag. The data includes gold and silver in the form of large bars, kilo bars or coins, but excludes jewellery and other private holdings held in vaults that are not part of the London clearing system. These statistics only include gold and silver that is held physically in London, defined by the LBMA as “held within the environs of the M25”. This metal underpins the daily trading and clearing activities in the London bullion market.

London continues to be a key gold trading centre globally, with an average of $18.1bn worth of gold cleared each day in March 2017, according to LBMA net daily clearing statistics. Clearing data is different from turnover data, so until we get LBMA trade reporting statistics, comparing London market activity against that of other regions remains challenging. But to somehow put things into context for now, it probably still helps to note that the average daily turnover of physical gold spot contracts on the Shanghai Gold Exchange is over $1bn, while an average of about $32bn worth of gold futures trade on Comex each day.

Estimating investor gold holdings in London

One of the recurring questions that gets asked by clients and various market participants is on the level of gold or silver holdings or the level of investor positioning. This has always been very difficult to answer. The market has had to rely on third-party estimates of above-ground holdings, such as those provided by Thomson Reuters GFMS, the World Gold Council or Metals Focus. Other ways that we’ve tried to address this type of question is to look at Comex net long positions and ETF holdings. Now, with the availability of vaulting statistics, we can add another dimension to the analysis. We can start by saying that 7,449 tonnes or 239.49 moz of gold and 32,078 tonnes or 1,031.32 moz of silver were sitting in London vaults as of end-March.

For gold, we can take the analysis further: as the BoE also publishes gold vault holdings data separately, we are able to split out – at least in aggregate – what is held in other vaults. This is not possible for silver as the BoE does not provide silver custodial services. The BoE provides gold custody services primarily to central bank customers to help them get access to London gold market liquidity, although it also holds some gold custody accounts on behalf of certain commercial banks that support central bank access to the liquidity of the London gold market. On the assumption that the BoE custody service primarily caters to central bank customers, it’s probably fair to say that 1) the bulk of BoE gold represents official sector holdings and 2) gold held in other vaults is likely to be more investment-related. To be sure, this is somewhat simplistic in that, as mentioned earlier, the BoE also offers custody accounts to certain commercial banks, while at the same time it is also possible for central banks to hold their gold in non-BoE vaults.

To put some context around this, let us consider for illustration’s sake that about 80% to 90% of BoE gold holdings are accounted for by the official sector. Let us also consider for simplicity that the vast majority of gold held in commercial vaults represents investor holdings and only a negligible amount comprises official sector gold accounts. These simplistic assumptions would therefore imply that over the past year, an average of about 96.68 to 110.92 moz ($119-139 bn) of investment-related gold was held in London. These inventories would include metal held on behalf of ETFs. Based on our database of gold ETFs, we estimate an average of around 48.78 moz or about $60bn worth of gold was held in London vaults to back ETF shares during the same period. Taking these ETF-related holdings into account would then leave roughly around 47.90 to 62.14 moz or about $60bn to $78bn worth of gold in unallocated and allocated accounts as available pool of liquidity for OTC trading activities.

While we now have a starting point with the vaulting statistics, a breakdown of the type of gold holdings remains unavailable. As such, the discussion above and the charts and tables below are presented here to provide some context. Nevertheless, despite these limitations, the data still somehow supports the broad assumption on how loco London gold stocks may be split between official sector and investor holdings. For instance, the data shows that gold held at the BoE appears to be more stable relative to gold held in other London vaults, such that changes in total loco London gold over the past nine months have been driven more by changes in non-BoE gold. Intuitively, it would make sense for investment-related gold holdings to be more volatile relative to official sector holdings. Central banks hold gold as part of their official reserves and also serve monetary purposes, typically having much longer.

While we now have a starting point with the vaulting statistics, a breakdown of the type of gold holdings remains unavailable. As such, the discussion above and the charts and tables below are obviously only presented here to provide some context. Nevertheless, despite these limitations, the data still somehow supports the broad assumption on how loco London gold stocks may be split between official sector and investor holdings. For instance, the data shows that gold held at the BoE appears to be more stable relative to gold held in other London vaults, such that changes in total loco London gold over the past nine months have been driven more by changes in non-BoE gold. Intuitively, it would make sense for investment-related gold holdings to be more volatile relative to official sector holdings. Central banks hold gold as part of their official reserves and also serve monetary purposes, typically having much longer time horizons.

Matching ETF data against total loco London inventories

Gold and silver held in London vaults that back shares in exchange-traded funds (ETFs) are also included in the statistics, regardless of where the ETF is listed. In general, this means that although gold or silver ETF shares may trade on exchanges elsewhere, as long as the metal is held physically in London, these would be considered loco London and form part of the LBMA’s monthly statistics. For instance, the largest gold ETF is listed and trades on the New York Stock Exchange (NYSE), but its designated custodian ultimately holds the underlying metal in its London vaulting facilities. Similarly for silver, the ETF with the largest holdings trades on the NYSE, but some of the metal underpinning the shares is allocated in London.

We estimate that as of last week there are around 68.65 moz of gold and about 687.57 moz of silver held in ETFs globally. Our database of gold and silver ETFs suggests that, using average gold and silver prices over the past year, about 48.78 moz of gold worth about $60bn and about 427.67 moz of silver worth about $8bn are likely to be held in London to back ETF shares. This is obviously a rough estimate that’s provided here only for indicative purposes.

Looking at changes in ETF holdings vs changes in total vault holdings between July 2016 and the end of the first quarter this year shows that the trend is broadly similar for gold, yet divergent for silver. Considering the period as a whole, the divergence continues for silver with total holdings up by 8% or 79.89moz, but ETFs down 3% or 12.06 moz. For gold, the change in total stocks vs the change in ETFs also diverges when the entire period from July 2016 to March 2017 is taken into account – total loco London gold inventories increased by a modest 2% or 5.34 moz but ETF holdings were down 8% or 3.87 moz.

Given the data series is quite short, it is challenging to form any strong conclusions at this juncture. We expect that as the series extends in time we will be able to gather more insights from these flows. Intuitively, divergences in total London gold stocks and ETF holdings could reinforce other indicators that suggest declines in ETF shares do not always reflect net exit from gold or silver exposures. Instead, outflows from ETFs could represent a switch to different forms of exposure such as allocated or unallocated accounts.

Tracking gold trade flows vs changes in London stocks

Comparing total gold holdings data with UK gold import and export flows confirms a strong link between the two, regardless of whether one is using UK trade data or what may be implied by Swiss Customs statistics. This is intuitive in that net inflows of gold into the UK should understandably translate into a build in holdings, while net outflows would suggest a reduction in overall levels. In addition to UK trade statistics, Swiss data on gold flows from and to the UK is also a useful indicator of how much gold is leaving or entering London vaults. Given Switzerland’s key role in global gold refining, it is an important hub for the movement of metal and essentially acts as an interface between investment demand in Western markets and consumer demand in Asia. Combining Swiss and UK trade data with London vault holdings allows for a more complete picture.

Periods of strong physical demand out of key markets such as India and China could attract the movement of large investment bars sitting in London vaults to Switzerland for conversion into kilo bars. These gold kilo bars would subsequently be shipped to physical buyers in Asia and ultimately be converted into jewellery or other investment products to meet consumer demand. Net outflows of gold from the UK should coincide with declines in vault holdings in this case. In fact, this scenario occurred back in 2013: as the Fed’s taper tantrum led to a sharp rise in US real rates, gold collapsed by 29% as investors exited gold exposures. In turn, the sharp drop in the gold price made it very attractive for physical buyers, especially in the context of a decade-long bull market. Investor gold positions held in London vaults – whether OTC or ETF-related – were being heavily liquidated. This metal then made its way to Switzerland, was converted into kilo bars, and shipped to Asia to satisfy the surge in demand in China, India as well as other parts of the region.

Interestingly, LBMA data shows that in Q3 last year, the opposite occurred – the UK was a net importer of gold and vault holdings increased. This coincided with weak physical demand for most of last year, which was more than offset by a pickup in investment interest. Given strong demand from the investor community, gold still managed to rally 8% in 2016 (and as much as 30% from trough to peak) despite the weak fundamental backdrop. Towards the end of the year, market forces became conducive for gold to once again leave London vaults and be shipped out of the UK. Investors unwound positions in anticipation of the first Fed rate hike, while at the same time, seasonal and regulatory factors in key markets boosted physical demand, allowing buyers in Asia to absorb the liquidation from Western investors. Demand out of China kicked in heading into year-end, in anticipation of the Lunar New Year holidays, while the demonetisation of highvalue banknotes in India led to a knee-jerk spike in demand. So far this year, physical markets have been more stable, while investment demand has been positive yet broadly more subdued. As mentioned earlier, the data tends to reflect this, with changes in loco London gold holdings relatively  limited during the first quarter of 2017.

A marginal benefit of this link between vault holdings and trade flows is that there is a shorter lag in trade data reporting. This means that trade statistics should help market watchers anticipate changes in loco-London inventories before getting confirmation a couple months later from the LBMA report.

Insights on investment activity

Looking at the entire data series from July last year to March this year, an observation that’s worth noting is the modest 2% increase in total gold holdings equivalent to around 166 tonnes. This change is likely a function of investor liquidations in Q4 2016, as markets anticipated a Fed rate hike, which has since reversed but at a subdued pace. This also coincides with ETF flows – heavy liquidations towards the end of last year have been succeeded by net inflows this year, but volumes lag considerably compared to the same period in 2016.

More importantly, according to LBMA data loco London gold holdings during Q1 this year were relatively flat. This coincides well with the broadly limited investor participation in the gold market that we have been highlighting. Many investors are keeping an eye on the gold market and continue to appreciate gold’s value as a diversifier in a portfolio, yet few have been actively involved in putting on meaningful, strategic positions. Subdued investor participation has been an important factor holding gold back, in our view, in spite of supportive macro factors.

Subdued investor activity has been apparent in speculative positioning data indicated by the CFTC Commitment of Traders Report as well as gold ETF flows. In June, sentiment towards gold understandably came under pressure given the rise in real rates – not just in the US but also in Europe – and the seemingly hawkish shift in tone among central banks (see Gold falls as real rates rise). As of early July, CFTC data showed that gold net longs on Comex had fallen to the lowest levels since January last year. Despite the rebound in gold prices in recent weeks, net speculative positions on Comex have remained very lean. Meanwhile, gold ETFs marked the first month of net outflows in July. Although gold ETF holdings are up on a net basis year-to-date, the increase is much more subdued at only 107 tonnes compared to over 598 tonnes during the same period in 2016. Changes in gold positioning on Comex and ETF holdings coincide with the subdued changes in loco London gold inventories.

As mentioned earlier, the data shows a larger increase in silver vault holdings vs gold. Relative speculative positioning between gold and silver on Comex similarly shows a stronger build in investor positions in silver than gold, at least during the first half of the year. Given silver’s large industrial demand component, it initially attracted some attention on the back of growth and risk optimism amid the reflation theme. This translated into persistent gains in Comex investor positioning, which reached a fresh all-time high in May. Yet as fiscal stimulus hopes faded and reflation trades were unwound, so did the interest in silver. Comex positioning has since given back about 81% from the highs, mainly driven by a strong increase in gross short positions, which have been reaching record highs in recent weeks. It would be interesting to see Q2 and Q3 data on loco London silver holdings to find out whether OTC positions followed a similar trend. Loco London silver holdings could potentially be relatively more robust than what Comex speculative positions imply. Silver ETF holdings have generally been resilient over the past few years, despite heavy liquidations in gold ETFs, which could mean that silver OTC positions could also show a similar sense of stability.

Finding clues on positioning from BoE gold data, for now

Given that only limited historical data is available, it is difficult to put total London gold inventories fully into perspective. For instance, we cannot compare current levels versus the amount of gold and silver held during the peak of the bull run nor during the trough reached at the end 2015. However, for gold we can look to BoE vault holdings, which go back to 2011, for some hints. Based on LBMA data, the BoE accounts for the bulk of loco London gold inventories, representing about 68% of the total on average over the period covered. As the LBMA data series extends up ahead, we should be able to have a better idea of how closely linked trends in BoE and non-BoE gold are, and in turn get a better perspective on investor positions.

The amount of gold held at the BoE was at a high of 6,250 tonnes or 200.50 moz in February 2013 and fell to a low of 4,693 tonnes or 150.87 moz in March last year. As of end-Q1, levels are about 8% or 12.49 moz higher at 163.36 moz, but still considerably below the highs. As we argued earlier, the BoE’s gold holdings likely mainly reflect official sector positions. Some central banks manage their gold reserves more actively than others while there have been a few such as the Bundesbank which have repatriated gold held in various foreign locations over the past few years. These flows are likely also reflected in the BoE’s data. Nevertheless, the BoE does hold some gold custody accounts for certain commercial banks. To the extent that non-official sector gold holdings influences these flows, the trends should be broadly similar to changes in loco London gold held in other vaults. The trend in gold holdings would in this case be consistent with our view that exposure to gold has been reduced considerably from the highs during the peak of the bull run. And although investment interest has been revived over the past year and a half, levels of exposure likely remain limited by historical standards. Much leaner positioning is one of the key factors supporting gold this year and suggests that there is ample room for positions to be rebuilt against a backdrop of benign rates, soft dollar and lingering uncertainties.

The post How Many Gold Bars Do London Vaults Hold appeared first on crude-oil.news.