February 18, 2018

Plunging US dollar boosts gold’s safe-haven demand

The yellow metal was trading at $1,354.65 an ounce as of 10:20 GMT on Thursday, after enjoying its best trading day on Wednesday since June 24, 2016.

Gold price could smash $10,000 on crashing dollar other factors – Jim Rickards

“Higher US inflation combined with the US dollar exhibiting zero correlation to higher interest rates amidst burdening duel deficits (trade and budget) should play out favorably for gold markets,” the head of trading APAC at foreign exchange OANDA, Stephen Innes, told Reuters.

The US dollar hit a 15-month low on Thursday, trading at 106.30 yen. The dollar index, a measure of the greenback against a basket of six major currencies, fell 0.5 percent to 88.66.

“I think we could see significant US dollar weakness through the first half of the year,” Bill Baruch, president of Blue Line Futures, told the Street. “The real move in gold is yet to come. I think we could see prices above $1,400 an ounce later this year.”

Analysts say concerns over Washington’s possible pursuit of a weak-dollar strategy and the growing US fiscal deficit weighed on the greenback. Inflation fears boosted gold, which is considered as a safe haven against inflation.

According to Fawad Razaqzada, technical analyst at City Index, gold prices have managed to hold on to crucial retracement levels despite the recent pullback. “That tells me that the buyers are in control of this market and prices are going higher,” he said.

Looking at the long-term picture, Razaqzada said gold has risen higher for three consecutive years with prices last month hitting a 1.5-year high.

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UK points finger at Russia for ‘malicious’ cyberattack that paralyzed global firms

‘Petya’ reaches Australia, Cadbury plant freezes production

“We categorically reject such accusations, we consider them unsubstantiated and groundless. This is nothing more than the continuation of the Russophobic campaign lacking any evidence,” presidential spokesman Dmitry Peskov told journalists on Thursday.

With no specific evidence provided for the allegations, UK intelligence claimed that the Russian military was responsible for the attack, citing a statement by Britain’s Foreign Office. According to the document, the UK decided to publicly charge Russia to show neither London nor its allies “will not tolerate malicious cyber activity.”

“The UK’s National Cyber Security Centre assesses that the Russian military was almost certainly responsible for the destructive NotPetya cyber-attack of June 2017. Given this is the highest level of assessment and the broader context, the UK government has made the judgement that the Russian government was responsible for this cyber-attack,” the statement says.

The NotPetya cyberattack devastated computer networks of major global corporations worldwide. Companies like the delivery service FedEx, container-ship giant Moeller-Maersk, pharmaceutical firm Merck, French construction firm Saint-Gobain, British advertising company WPP Group, and many others fell victims of the virus. Security experts said the worm appeared to stem from Ukrainian tax software.

The accusations by the UK Foreign Office represent the first time a Western government has publicly pointed the finger at Moscow. Earlier, only Ukraine accused the Kremlin. They also claimed that Ukraine bore the brunt of the attack.

British officials said the attack was aimed at Ukrainian financial, energy, and government sectors.

“The attack masqueraded as a criminal enterprise but its purpose was principally to disrupt. Primary targets were Ukrainian financial, energy and government sectors. Its indiscriminate design caused it to spread further, affecting other European and Russian business,” the UK Foreign Office claims.

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Russia inks huge energy deals with Saudi Arabia, challenging US dominance in Gulf region

In Riyadh meetings this week between Saudi and Russian officials, major energy deals were sealed, changing the regional constellation dramatically. At the same time, the geopolitical shift of the century now starts to bear fruit.

Russia gets $41.5 billion boost from OPEC deal

Russia has directly offered to invest in the upcoming Aramco IPO, supporting the efforts of Saudi Crown Prince Mohammed bin Salman (MBS) to diversify the economy of the kingdom. During the meetings, not only new Saudi investment deals in Russia were sealed, but also the commitment of several Russian investment parties in the Aramco IPO. 

After weeks of receiving a hell of a beating in the press (analysts started to doubt that it would ever happen), not only positive news has come from the NYSE and LSE, but also — as expected — from Russian institutions.

Kirill Dmitriev, CEO of the main Russian sovereign wealth fund, Russian Direct Investment Fund (RDIF), stated in Riyadh that he expects that a Russian and Chinese joint investment fund, working in conjunction with several major Russian banks, will be part of the Aramco IPO. He also indicated that other Russian financial institutions and investors are very interested to take a part of the 5 percent of Aramco being offered in the IPO.

These statements are a significant boost for MBS and his IPO advisors, as the participation of a Russia-China investment fund also shows the interest of Chinese parties in the stakes. While Chinese parties are expected to be willing to hand over tens of billions, Dmitriev’s statements have widened the scope. Russian and Chinese parties will not only involve the expected oil and gas companies, but others as well.

Read more on Oilprice.com: Goldman: Investors Grow Wary Of Another Oil Price Rally

In addition to the Aramco IPO, the warm relationship between Moscow and Riyadh, already displayed in the current production cut agreement between OPEC and non-OPEC, now also reaches a level targeted by Putin and MBS last year: a full-fledged investment relationship focusing on the Russian oil and gas sectors, including LNG. The latter has been likely to happen since mid-2017.

Russian sources close to the Kremlin stated to the press that Saudi Aramco, which was already invited before to take part in LNG projects in Russia, will enter into a major investment scheme for Arctic LNG-2. Last year, Saudi Energy Minister Khalid al-Falih said that Aramco was invited to invest in the Novatek-led venture. It could be a slip of the tongue, but al-Falih stated at the same time that [this investment deal] would become a part of Aramco’s gas strategy. With a targeted capacity of 18 million tons per year, the project is expected to be onstream in 2023.

The IPO and Artic LNG-2 news partly overshadowed the fact that other major energy deals were also made. Dmitriev told the press that the RDIF, Saudi sovereign wealth fund Public Investment Fund (PIF) and Aramco will soon sign other investment deals.

One of these other deals is investment in Russia’s Eurasia Drilling, a major independent driller. It’s a dream come true for Russian drillers, as they’ve been vying for on- and offshore drilling projects in Saudi Arabia for years, but without success. Even attempts by Putin-linked Gazprom Drilling to enter the Saudi market haven’t been successful until now.

Investment streams aren’t just flowing one way, as Russian parties want to enter the Saudi downstream sector. Russia’s largest petrochemicals giant, Sibur, has a $1 billon deal in the kingdom.  In October 2017, Riyadh and Moscow set up an $1 billion energy investment fund.

The creeping-yet-steady cooperation between the former adversaries should be continuously assessed. Even though several Russian oil oligarchs have said that they see Russia soon leaving the OPEC deal, current investment discussions block any hasty decisions.

Read more on Oilprice.com: Is History Repeating Itself In Oil Markets?

Russia and Riyadh also have other common interests, mainly related to regional Gulf-based issues, such as Syria, Iran and Iraq. The opening offered by the young Saud Crown Prince MBS is valued by Putin, as it gives Moscow a direct inroad to oil and gas market price setters, while also undermining the historical US dominance in the region. 

Since oil and gas are linked to stability or war, the current Russian-Saudi cooperation is also based on these different angles. Energy cooperation will be linked or intertwined with future security arrangements and defense contracts. Aramco’s IPO, LNG and OPEC are paving the way for a possible bearish position in the Kingdom of Oil.

This article was originally published on Oilprice.com

Article source: https://www.rt.com/business/418852-russia-energy-deals-saudi-arabia/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

This stock market is ‘nuts,’ parallels with 2008 crash — investment manager

He said investors continue buying despite the current consensus that central banks are moving towards a tighter monetary policy, and the correction seen last week.

Global markets tumble after another massive US stock sell-off

When asked if he would be buying anything at this point, Toogood said: “Not really, to be honest, not a lot. It’s going to be one of those markets where you’re going to, I suspect, get a bear market and it’s going to be the reality of how far does it go down before (incoming Federal Reserve Chair) Powell co. reverse QT (quantitative tightening) and start saying OK we need to be the supportive mechanism again.”

The investor, whose firm has $15.3 billion of assets under management, said he would accept that the correction was “a normal behavior if everyone wasn’t already all invested.”

“Everyone is in, so who’s the buyer? It’s very 2007-2008. It’s very similar to that pattern and I don’t see why you’d get excited,” he added.

Global stock markets have calmed down, shaking off the recent turmoil. The Standard Poor’s 500, the US benchmark, recovered after suffering its worst week in over two years.

“You’re breaking some very major levels in most markets outside of the US still, and that is very, very significant. That is the test of where you’d think a bear market is coming; I still do, just on valuation alone. I think this market is nuts,” said Toogood.

Stocks hit several all-time highs prior to the global financial crash in 2008, with the Dow Jones closing at a high despite warning signs of the upcoming turmoil in markets.

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Russia gets $41.5 billion boost from OPEC deal

Due to the higher oil prices as a result of the pact, Russia’s federal budget has received so far $29.41 billion (1.7 trillion rubles) more, Russian Energy Minister Alexander Novak tweeted on Tuesday. The oil companies – a combined $12.11 billion (700 billion rubles) more since the beginning of 2017.

The higher revenues are the result of the $15-$20 increase in oil prices, compared to the price of oil before the deal between OPEC and a dozen non-OPEC nations led by Russia was signed, the minister said.

Russia is cutting 300,000 bpd as part of the pact with OPEC, and although there have been voices and speculation that some Russian companies are unhappy with the agreement that hampers their production expansion plans, Moscow has been keeping its end of the deal so far.

Russia’s crude oil production in January was basically flat compared to December 2017, after rising production at foreign firm-led projects compensated for small declines at the two major Russian oil producers, Rosneft and Lukoil.

The oil price rally earlier this year has caused many to wonder whether Russia and/or some OPEC members could ditch the deal because they wouldn’t want oil prices too high—a scenario that could incentivize US shale production too much.

US production is beating previous growth expectations, while minister Novak said in an interview with Russian news agency Interfax that the goal of the OPEC-Russia deal in bringing the oil market back to balance had been two-thirds achieved.

Asked how the cartel and allies will exit the deal, Novak said that it should be gradual and will likely take several months—between two and five months—to avoid a sharp increase in production that could again result in oversupply.

This article was originally published on Oilprice.com

Article source: https://www.rt.com/business/418745-russia-opec-deal-revenues/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Citibank tightens squeeze on crypto trade in India

“[There have been] concerns, both globally and locally, including from the Reserve Bank of India, cautioning members of the public regarding the potential economic, financial, operational, legal, customer protection and security-related risks associated in dealing with bitcoins, cryptocurrencies and virtual currencies,” Citibank said in an email to customers.

According to VG Kannan, CEO of the Indian Banks’ Association, it wouldn’t be surprising if other Indian banks follow suit, as the government and the central bank have been issuing cautionary notices asking investors to stay away from cryptocurrencies.

Indian banks squeeze bitcoin payments and withdrawals

“Even if banks were to justify this as necessary to mitigate their risk, I would find such a view to be very conservative and unjustifiable, which leads me to think that this is arm-twisting,” Anirudh Rastogi, managing partner at law firm TRA, which represents several cryptocurrency businesses, told the Quartz.

Some observers, however, are less concerned about the latest ban. Most purchases are done through internet banking, not using debit or credit cards, said Ajeet Khurana, head of the Blockchain and Cryptocurrency Committee.

India’s Finance Ministry said this month that cryptocurrencies were considered illegal in the country, and the government fully intended to stamp out their use. It has called bitcoin and other cryptocurrencies a Ponzi scheme, “which can result in [a] sudden and prolonged crash, exposing investors, especially retail consumers, [to] losing their hard-earned money.”

Some lenders have suspended the withdrawal and deposit facilities at several cryptocurrency exchanges, triggering panic among investors. The Indian Income Tax Department raided bitcoin exchanges across the country, seeking to identify cryptocurrency traders. The raids were conducted because of alleged tax evasion by exchange customers.

India has a big share of the cryptocurrency market, accounting for around 10 percent of all bitcoin transactions.

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Investors flee bond market as fears of ‘crash’ grow

It shows that, along with reducing their fixed-income exposure, 60 percent of professional investors see inflation and troubles overall in the bond market as the biggest threat of a “cross-asset crash.”

Investors have also reduced their bond portfolios to a net 69 percent underweight – the lowest since the survey began two decades ago. The research polled 196 people with $575 billion in assets under management.

Global markets tumble after another massive US stock sell-off

Last week’s dramatic stock market sell-off has raised concerns of an impending bear market. A spike in bond yields sent the benchmark 10-year Treasury note to a four-year high.

According to the survey, fears of a breakdown in the bond market did not push investors to stocks. The portfolio level dedicated to equities fell to a net 43 percent overweight – a 12 percentage-point drop, which was the biggest move in two years.

“While this month’s survey shows that investors are holding on to more cash and allocating less to equities, neither trait moves the needle enough to give the all clear to buy the dip,” said Michael Hartnett, chief investment strategist at BofAML.

The survey also showed that investors grew more pessimistic overall amid the market turmoil after expressing positive sentiment for months. They indicated that the bull market will likely peak with the SP 500 at 3,100. Some 70 percent of the respondents believe the global expansion is in the “late cycle,” the highest reading in 10 years.

Meanwhile, 91 percent still think a recession is unlikely and remain long in cyclical sectors including tech, banks, energy, emerging markets, Europe and Japan. Optimism over profits is at its highest level in seven years.

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Russian banks ready to switch off SWIFT – official

“Certainly, it is unpleasant, as it will prove a stumbling block for companies and banks, and will slow down work. It will be inevitable to deploy some aged technologies for information transfer and calculations. However, the companies are technically and psychologically ready for the shutdown as this threat was repeatedly voiced,” Dvorkovich said, as quoted by TASS.

He added that the measure may have a negative impact on corporations working in the US and Europe.

“In general, disconnecting Russia from SWIFT would be a crazy step on the part of our Western partners. It is obvious that for the companies which work in Europe and the US it would be harmful. And this applies not only to the shutdown of the service,” he said.

The potential disconnection of Russia from SWIFT has been under discussion since 2014, when the EU and the US introduced the first round of international penalties against Moscow over alleged involvement in the Ukraine crisis and the reunification with Crimea.

At the time, the European Parliament called for strong actions against Russia, including expelling the country from money transfer services. However, the Society for Worldwide Interbank Financial Telecommunication regarded the recommendations as violating rights and damaging for businesses.

In 2017, Russia’s Central Bank Governor Elvira Nabiullina told President Vladimir Putin that the banking sector had been provided with all the necessary conditions for operating lenders and payment systems in case of disconnection from SWIFT. According to the regulator, 90 percent of ATMs in Russia were ready to accept the Mir payment system, a domestic version of Visa and MasterCard.

The Mir payment system was introduced in 2015 after clients of several Russian banks (SMP Bank, InvestCapitalBank, Russia Bank and Sobinbank) were unable to use Visa and MasterCard due to the sanctions.

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America on its way to $30 trillion debt by 2028 as military expenditure soars

America’s $20 trillion debt ‘should keep people awake at night’

According to the White House Office of Management and Budget, the national debt will hit $29.9 trillion by 2028. The deficit will be equal to 101 percent of America’s GDP, the Watchdog Committee for a Responsible Federal Budget forecasts. The country’s current debt stands at a record $20.6 trillion – its highest level since shortly after World War II.

If current laws stand, widening budget deficits will increase that debt sharply over the next 30 years, with the deficit reaching 150 percent of GDP in 2047, the Congressional Budget Office (CBO) predicted last year.

Under the new budget, President Donald Trump is requesting a record $686 billion for the Pentagon – a 13-percent increase compared to the 2017 budget.

“We’re going to have the strongest military we’ve ever had, by far,” said Trump, adding that “we took care of the military like it’s never been taken care of before” in the current budget.

The American debt has been soaring independent of party politics. Under the previous administration of Democrat President Barack Obama, the US deficit nearly doubled, rising by about $9 trillion to just under $20 trillion, according to the website USdebtclock.org.

Last week, Moody’s warned that it could downgrade US ratings over “meaningful fiscal deterioration.” SP downgraded the US back in August 2011.

“The recently agreed tax reform will exacerbate and bring forward those pressures,” Moody’s analysts wrote.

In January, one of the largest ratings firms in China, Dagong Global Credit Rating, cut the US sovereign rating from A- to BBB+, putting the American economy on par with Peru, Colombia and Turkmenistan.

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China about to throw down the gauntlet to the petrodollar

The petroyuan is seen as Beijing’s challenge to the US dollar, the dominant global currency in oil contract settlements.

China about to knock out petrodollar by trading oil in yuan

The contract could reportedly be launched on March 26 on the Shanghai International Energy Exchange (INE). The exchange has recently received the approval from China’s State Council.

In December, the INE announced a successful completion of the fifth dry run in yuan-backed oil futures contract trading. It said that 149 of its members traded 647,930 lots in the rehearsal with a total value of 268.2 billion yuan. The exchange said the system met the listing requirements of crude futures after the exercise.

The Chinese government announced plans last year to start a crude oil futures contract priced in yuan and convertible into gold. The contract will enable the country’s trading partners to pay with gold or to convert yuan into gold without the necessity to keep money in Chinese assets or turn it into US dollars.

Since the 1970s, the global oil trade has almost entirely been conducted in US dollars. The largest energy consumer, China, is interested in having oil contracts in its own currency. Beijing wants to create an Asian crude oil benchmark that would better reflect pricing for the oil imported and consumed in the world’s top importing region Asia. It expects the new benchmark to rival North Sea Brent and US West Texas Intermediate.

Analysts say the success of the yuan oil futures contract depends on the Chinese regulation of the market, which could divert international investors from bringing huge volumes into the contract.

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