Fed Stress Tests “Rattle Banks Around The World”

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Published : March 28th, 2014
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Category : Market Analysis

Today’s AM fix was USD 1,295.75, EUR 944.15 and GBP 779.68 per ounce. 
Yesterday’s AM fix was USD 1,295.00, EUR 942.09 and GBP 779.14 per ounce.

Gold fell $8.50 or 0.65% yesterday to $1,292.50/oz. Silver remained unchanged at $19.75/oz.  


Gold in U.S. Dollars, 1 Month - (Thomson Reuters)

Snapping its four-day losing streak, gold prices recovered very marginally today. Traders said there was a revival of buying by retailers at these lower levels and this contributed to a marginal recovery in gold prices.

Gold in Singapore, which normally sets price in the important Indian gold market, rose 0.4% to $1,296.80 an ounce and silver by 0.8% to $19.86 an ounce. Among other precious metals, palladium gained nearly 1% today to $765/oz but is lower for the week.

Gold remains near six week lows and is on track for a second straight weekly decline. Gold has dropped about $100 an ounce from a six-month high in the last nine trading sessions despite increasing concerns about the U.S. and global economy.

There remain concerns that the manipulation of gold prices being investigated by the FSA and Bafin may be ongoing and a factor in recent price weakness.

Gold’s technical position is now negative and the close below $1,300/oz yesterday opens up the possibility of further falls to $1,270/oz and $1,200/oz. The sharp drop in prices in the last few days should bring physical buyers back into the market and support gold.


Gold in U.S. Dollars,  5 Year - (Thomson Reuters)

Demand for gold in Japan surged 500% in the last month as Japanese buyers bought ahead of a sales tax increase and due to concerns about Abenomics and the ongoing debasement of the yen.

A man who has been a trader for 33 years and works at a foreign-owned brokerage told the Financial Times that the tax increase represented a “good opportunity” to buy more gold as he was worried about holding too many yen-denominated assets.

“I plan to hold it for a long time until there is a good time to sell, when the yen collapses or something,” he said.

The surge in Japanese demand is small in tonnage terms in a global context and small vis a vis huge demand from India & especially China and from central banks but shows increasing concerns regarding currency debasement

Fed Needs To “Stress Test” Itself As Balance Sheet Balloons To $4.3 Trillion
Yesterday, the Federal Reserve’s stress tests led to jitters in financial markets and in the words of the Financial Times “rattled banks around the world.” Citigroup’s share price was hammered and fell 5.4%

The aftershock of the stress tests was felt beyond U.S. shores for the first time. The U.S. subsidiaries of Royal Bank of Scotland, Santander and HSBC all failed on “qualitative” grounds, which includes failing to project losses rigorously when contemplating a severe recession or market meltdown.

The Fed said that the banks management practices or capital cushions are not robust enough to withstand a severe economic downturn. Not surprisingly, the banks themselves accused the  stress tests as being “opaque”.

Twenty five other banks took part in the Fed's annual "stress test" and received a green light for their planned dividend payouts and share repurchases. Bank of America and Goldman Sachs initially fell short of minimum capital requirements. However, they met the standards after reducing their planned dividend payments and share buybacks over the past week.

The banks now have 90 days to address the weaknesses and risks identified by the Fed and resubmit their dividend and share buyback plans.

The Fed's decision was part of the annual checkup it requires of banks with more than $50 billion in assets. Banks must now undergo tests to ensure they can endure shocks like those that upended the banking system and led to the massive government bailouts in the 2008 financial crisis.

In what the Fed sees as the extreme scenario, the test assumed a rise in the 6.7% unemployment rate to 11.2%, a 50% drop in stock prices and a decline in home prices to 2001 levels. All of which appear a strong possibility given debt burdened state of the tapped out U.S. consumer and the poor fundamentals of the U.S. economy.

Indeed real levels of unemployment in the U.S. are likely well over 11% already.


St Louis Federal Reserve

It is important to note that if the Federal Reserve’s assets were marked to market, it itself is insolvent.

The Fed's balance sheet has ballooned to $4.3 trillion from $800 million in the past five years as the central bank has electronically created trillions of dollars in order to buy their own government bonds and mortgage-related bonds in a radical and indeed reckless attempt to kick the can down the road and prevent a systemic event or a recession or depression.

The Federal Reserve is likely to suffer significant losses on its Treasury holdings once interest rates rise from historic lows. Indeed, the researchers at the San Francisco Fed have recently called for "stress tests" on the Fed itself and it’s assets and income, an echo of the central bank's annual exercise for the nation's largest banks.

Educate yourself about the threat bail-ins pose to your livelihood by reading:
Bail-In Guide: Protecting your Savings In The Coming Bail-In Era (10 pages)
Bail-In Research: From Bail-Outs to Bail-Ins: Risks and Ramifications (50 pages) 

Data and Statistics for these countries : China | India | Japan | Singapore | All
Gold and Silver Prices for these countries : China | India | Japan | Singapore | All
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Mark O'Byrne is executive and research director of www.GoldCore.com which he founded in 2003. GoldCore have become one of the leading gold brokers in the world and have over 4,000 clients in over 40 countries and with over $200 million in assets under management and storage.We offer mass affluent, HNW, UHNW and institutional investors including family offices, gold, silver, platinum and palladium bullion in London, Zurich, Singapore, Hong Kong, Dubai and Perth.
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Anybody able to shed a light on a "situation" like this.
In 2009 I buy a .... 2009 Ultra High Relief Eagle at 1189 USD
PCGS grades it at MS70-PL. Can't help it. Going for +-6000$ now on Ebay.
Somebody tried to convince me that one has to pay tax on the difference between 1189-6000. ????? in the US. Is that true ?
I'll sue them that they... whom ? ( class action suit) brought this price up. They never asked me they were allowed.

☺ ALT1 definitely
"A man who has been a trader for 33 years and works at a foreign-owned brokerage told the Financial Times that the tax increase represented a “good opportunity” to buy more gold as he was worried about..."
You keep your gold . I keep mine. Until the moment is there.
"A man who has been a trader for 33 years and works at a foreign-owned brokerage told the Financial Times that the tax increase represented a “good opportunity” to buy more gold as he was worried about holding too many yen-denominated assets."

“I plan to hold it for a long time until there is a good time to sell, when the yen collapses or something,” he said."

Yah, that sounds like a plan. Wait until the value of the yen collapses and then sell your gold to buy lots and lots of yen or some other worthless currency.
This poor dude hasn't a clue. Think about the tax liability is your currency drops by just 90% and then you sell your gold (or silver).
The light is NOT on and the attic in his brain housing group is empty.
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"A man who has been a trader for 33 years and works at a foreign-owned brokerage told the Financial Times that the tax increase represented a “good opportunity” to buy more gold as he was worried about holding too many yen-denominated assets." “I plan t  Read more
overtheedge - 3/28/2014 at 4:41 PM GMT
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