China To Stop Publishing SGE Gold Withdrawals

And now… today’s Pfennig for your thoughts…

Good day, and a wonderful Wednesday to you!

The currencies are for the most part up a tiny bit vs. the dollar this morning, but in reality we’re watching the currencies trade in tight ranges with traders not willing to go out on any limbs ahead of the Fed’s FOMC Meeting today. Gold is down $3, after a nice rally yesterday, and the price of oil is only a penny different from yesterday morning’s price.. It does appear that no one wants to push the envelope ahead of the FOMC Meeting, that will end this afternoon.

Do these guys really think that the Fed might hike rates at this meeting? Really? Come on, people (traders) you know in your heart of hearts that the Fed isn’t going to hike rates now! So, what’s the problem here? Get off your duffs and get to work! Oh, what’s that? You want to hear what the Fed has to say first? OK. I get that, because this statement following the rate announcement is going to be worth the price of admission (which is free, but let’s not that get in the way of good line!).

What will the Fed opt to focus on? Will it be the market turmoil that has existed since they last met and raised rates? Or, will it be the slowing economy? Or, will it be a case where they attempt to spread confidence in the economy? I’ll bet you dollar to a Krispy Kreme that they opt for door # 3.  It’s been their M.O. for over a year now, they can’t just dump that and move on to something else, right?

The question will be this: will the markets swallow the bait, hook, line and sinker from the Fed this time? Or has the Fed become much like the boy who cried wolf, but instead of warning about danger that was made up in his head, the Fed keeps talking about  strong economy and rising inflation that is made up in their heads.

Ooh, are you sure you want to say that, Chuck? Why, yes I am! I don’t think I called anyone a dolt, or said that what they were doing was lacking mental strength, I simply said what I said and I have the economic data prints to prove my point!

The Reserve Bank of New Zealand (RBNZ) meets today too, but later in the day for us, early in the morning for them.  There’s nothing that has gone on in New Zealand lately that would warrant the RBNZ to cut rates. Of course in this day and age with Central Banks playing currency war games, no one knows for sure what’s on Central Bankers’ minds. Shall we play the game, Joshua?  And just like the made for movies Thermal Nuclear War, that ended with no one winning. The currency wars will find the same result. Right Joshua?

For those of you who got lost in that last paragraph, I was just having some fun with the thought of “currency war games” , which got me thinking of the movie from the 80’s titled; War Games and the Computer which was WOPR, had software that would simulate a Nuclear War and the software’s name was Joshua. So, there you go!

The Aussie dollar is one of the better performers this morning, albeit in a tight range, after Aussie 4th QTR CPI moved higher than expected. Aussie consumer inflation as measured by CPI rose 0.4% in the QTR, moving the year on year total to 1.7%…  Still below the 2% limit of the Reserve Bank of Australia (RBA).

You know, “back in the day” seeing inflation at 1.7% would be cause to celebrate, because it would be “under the target”, but these days, these days I sit on cornerstones and count the time in quarter tones, no wait! These days the markets will take the view that the there’s more work to be done to get CPI to 2%… UGH!

There was some news from China overnight that’s pretty interesting. The head of the Chinese Statistics Bureau is under investigation for corruption. Hmmm… you don’t think that this is going to be China’s way of announcing a data discrepancy, by having one person fall on a sword? I kind of see it going this way. China can come clean, and have a scapegoat to take the blame.

I guess we’ll have to wait-n-see with this, but I doubt the Chinese officials made public the news of the investigation without having something up their sleeve.

Speaking of the Chinese… the Chinese renminbi was allowed to appreciate at the fixing again overnight, this time a bit larger than the appreciation the night before. Do you think that the Chinese have figured out that the Fed rate hike was a mistake and there won’t be any future rate hikes for now, and that they can back off the depreciation/devaluating of the renminbi? That’s how I see it.

Boy, I had better get this finished before I fall asleep! Elvis is singing I can’t help falling in love with you on the iPod and I almost nodded off. There will be no sunrise watching this morning, as it’s raining outside. UGH, so I can just go back to sleep, and not miss anything outside! HA!

Gold is giving back $3 of its gains yesterday that brought the shiny metal to $1,120. Gold researching guru, Koos Jansen, issued a new report that’s very troubling to me. I’ll let Koos tell you about it from the www.bullionstar.com website, “China to stop publishing Shanghai Gold Exchange (SGE) withdrawals.” He went on to say, “this is a disaster for the gold community, and takes away the last bit of transparency in the gold market.”

Oh no! Tell me it’s not true, Shoeless Joe! I agree with Koos on this, folks. the posting of these withdrawals were important to the gold community in that they provided us with information about physical demand, and allowed us to have a good educated guess as to how much gold the Chinese were adding to their reserves each month!

The U.S. Data Cupboard printed some interesting data yesterday. The S&P/Case-Shiller Home Price Index (HPI) showed the 20-city year on year increase of 5.83%… In some cities, home prices have reached higher levels than before the Housing Meltdown. That’s crazy stuff folks. And speaking of crazy stuff… Consumer Confidence bounced higher in January from an index number of 96.3 to 98.1.

You know, they used to say that this Confidence data was nothing more than taking the pulse of the stock market. But something has to have changed over time with this data, because the stock market, while rallying yesterday, has been a real mess so far this year. But everyone is confident because the Fed hiked rates, and the Fed wouldn’t do that if things were not good, right?

Today’s Data Cupboard has, of course, the FOMC Rate Decision this afternoon, but the appetite for that entree will be December New Home Sales, which should be half-way decent due to the fact that home buyers were rushing to get closed before the Fed rate hike took place. Of course there was no need to rush, for if you just simply waited for the dust to settle, you would have found mortgage rates still very low.

This came to me yesterday in my daily email from MarketWatch, and I thought it to be interesting. Here’s the title: China Warns Soros Against Declaring War Against Its Currency, and it can be found in its entirety here. And of course here’s the snippet:

Not long after billionaire George Soros forecast a so-called hard landing for the Chinese economy, Beijing fired back by calling out the high-profile investor, warning him of betting against its currency, according to media reports Tuesday.

‘Soros’ challenge against the renminbi and Hong Kong dollar is unlikely to succeed, there is no doubt about that,’ said a government official in an opinion piece widely cited by several media outlets.

The article headlined, “Declaring war on China’s currency? Ha Ha,”

Chuck again. The guys gets lucky with his attack of the British pound sterling back in 1993, and he is forever thought of as a guy that can ruin any currency’s chances. Longtime readers know what I always say here, and that is the markets have deeper pockets than a Central Bank. But when you’re talking about China, that thought has to change somewhat. China has deep pockets folks. About $3.5 trillion in reserves.

Time to get out of your hair for today, I hope you have a wonderful Wednesday!

Regards,

Chuck Butler
for The Daily Reckoning

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