SP Futures Daily Chart

The SP needs to break out of this resistance, or risk falling into a trading range, with the potential downside of a broadening top that fails and breaks lower.

The unemployment claims and same store sales tomorrow will provide some input, but the eyes of traders will be on the Non-Farm Payrolls report. I have not worked up any forecasts for it yet, but there was some concern since Larry Summers was talking the number down, based on the northeastern US snowstorms.

Was he calibrating the markets view, or setting it up, in the style of Robert Rubin who like to play the markets this way? We will know in a few days.

The pit traders are looking for an upside move to 1130, and it will take some positive jobs data to get it.

But for now the question is if the rally is consolidating its gains, or weakening for a more serious correction, or even a breakdown. Since it reached our trading objective of a 50% retracement of the big decline, the resistance here is highly significant according to any number of technical schools from Richard Russell's Dow Theory to Fibonacci retracement levels.

England to Sell 3 Year Bonds - In US Dollars

“In the eyes of empire builders men are not men but instruments.” Napoleon Bonaparte

Got Gilts?


Bank of England Plans to Sell 3-Year Bonds in Dollars
By Caroline Hyde and Sonja Cheung
March 02, 2010

March 2 (Bloomberg) -- The Bank of England said it plans to sell three-year bonds in dollars to finance its foreign-exchange reserves.

The U.K. central bank hired Barclays Capital, BNP Paribas SA, Goldman Sachs Group Inc. and JPMorgan Chase & Co. to manage the issue, which will be benchmark in size, it said in a statement. The bank paid 106.2 basis points more than Treasuries when it issued $2 billion of three-year notes in March last year, according to data compiled by Bloomberg.

“The notes will likely receive good investor appetite seeing that it’s a AAA rated name,” said Trevor Welsh, a portfolio manager at London-based Aviva Investors, which manages about 10.5 billion pounds ($14 billion) of fixed-income assets. “This bond sale is purely a technical move for the bank’s foreign currency reserves.”

The Bank of England is seeking to raise funds as confidence in the U.K. currency plummets on concern no party will win an outright majority in a forthcoming general election. The pound weakened 7.6 percent against the dollar this year, the worst performer among the 16 major currencies, as traders bet a new administration won’t be strong enough to reduce the nation’s budget deficit of more than 12 percent.

“It will be interesting to see if investors require a slightly higher spread because of sovereign risk,” Welsh said. “But if so, it won’t be more than a couple of basis points.”

The central bank has issued three-year notes in March every year since 2007 to finance foreign-exchange reserves that support its monetary policy objectives, according to the statement.

"Thy glory, O Israel, is slain upon thy high places! how are the mighty fallen!"

What next. Rupees?

Gold Soars to New Record Highs in Sterling and the Euro

"Gold has traditionally been used as a safe haven in times of economic and political uncertainty, as the metal's intrinsic value is not dependent on any paper currency."

And so it begins...

It will not be easy or straightforward.

New York Times
Gold Hits Record High In Euros, Pound
By Michael Taylor and Jan Harvey
Published: March 2, 2010

NEW YORK (Reuters) - Gold rallied to a six-week high in dollar terms and hit record highs versus the pound and the euro on Tuesday, as uncertainty about Greece's debt and Britain's politics lifted demand for bullion as a hard asset.

Uncertainty over plans to tackle Greece's fiscal crisis and over what the next British election may mean for UK debt have heightened volatility in the European currencies, lifting interest in gold as an alternative asset, analysts said.

"Currency volatility is by far the biggest factor supporting gold on Tuesday," said Frank McGhee, head precious metals trader at Chicago-based Integrated Brokerage Services.

Gold has traditionally been used as a safe haven in times of economic and political uncertainty, as the metal's intrinsic value is not dependent on any paper currency...

Euro-denominated gold hit a record high of 836.72 euros an ounce, up from 823.66 euros late on Monday, while gold priced in sterling touched a record 759.86 pounds an ounce, up from 744.85 pounds.

"Gold denominated in euros has definitely outperformed the drop in euro-dollar by almost 1 percent in the last 10 days," said Mitsubishi Corp precious metals strategist Tom Kendall. "That does reflect some nervousness about stability of sovereign debt, and stability of the euro itself."

The euro rebounded from a 9-1/2-month low against the dollar as investors awaited new plans to address Greece's debt crisis.

Greek Prime Minister George Papandreou said his country was fighting for survival against bankruptcy and urged civil servants and pensioners to accept sacrifices to save the debt-burdened nation.

Fears over the fiscal health of peripheral euro zone economies have weighed heavily on the euro so far this year, knocking it down by more than 5.5 percent against the dollar.

STERLING GOLD HITS HIGH

Sterling-denominated gold rose as the British currency was driven lower by fears that the next UK general election could result in a hung parliament.

That could mean an incoming government would struggle to take the action necessary to reduce debt, analysts said.

"Markets fear the UK government will be forced to create more sterling in order to buy their own government bonds and that quantitative easing and debt monetization may continue for longer than expected," and that could lead to further gains in gold, bullion dealer GoldCore said in a note..."

Is the Sprott Physical Gold Trust in the Market Trying to Buy 10 Tonnes of Gold?

Something is powering the spot price of gold higher the past few days. Are the Chinese or some other entity claiming the 191.3 tonnes of IMF gold again?

Perhaps relatedly, Sprott Asset Management is involved with a new physical gold bullion trust now trading in the States with the ticker symbol "PHYS."

The IPO for the fund was last Friday 26 February, with a reported 40 million shares outstanding at 10$Cndn. There is no hard news yet on how much of the IPO was held by underwriters. In fact, most of the news on it is a bit dated.

Here is their website for the Sprott Physical Gold Trust, and the link to their NAV financials. Here is a link to the prospectus. This is a link to the stocks' *indicative value* which appears to be its NAV which they use in their premium calculation from their website.

As you can see, there is still some key information missing. The cash assets less expenses of the trust are not yet listed. I have not seen a detailed release on the results of the IPO yet. And more importantly, the trust lists only 13,686 ounces of gold owned, with a market value of approximately US$15 million.

According to the prospectus, the fund will store its gold in Canada, is established in Ontario and is under that jurisdiction, but will be calculating its NAV in US$. It appears to be a trust where price tracks their NAV, and not an ETF which tracks the price of some external instrument like an stock index or spot commodity prices.

The implication is that they will not be selling and buying bullion in relation to market fluctuations as actively as an ETF pegged to spot for example. So the examination of premiums and discounts to NAV will be an issue.

If the trust has sold all its units listed as outstanding, they are in a cash position of approximately $390 million. Are the underwriters still holding any of this inventory? Their prospectus commits them to holding 97% of their assets in gold bars. No certificates or derivatives. And they are only listing $15 million in current gold assets.

Nine out of ten Americans might notice that the Sprott trust needs to buy about 10 tonnes of gold, the size of most small central bank purchases, if they have not negotiated and secured delivery already. According to the Prospectus, the trust does not traffic in paper certificates and derivatives, but in good bullion only.

I am more familiar with trusts and funds taking an incremental approach in their bullion purchases, and the negotiation for delivery before the units are sold. I am not sure what the case is here. It obviously is worth watching. Spot gold has risen quite a bit since last Friday. There is not enough data to suggest a correlation. However, if the entire IPO was placed, and the current gold holdings on the web site are accurate, they need to acquire almost 10 tonnes of quality physical bullion in a market reported to be tight in deliverable quality supply.

And the purchase is large enough so that we ougbt to be able to see an inventory drawdown somewhere. I have heard the buying will be done in London, and not at the Comex. The last purchases of this size were supplied by the IMF directly.

Above and beyond the short term interest in potential physical gold buying pressure, the Trust has some promising innovations in terms of holdings and transparency as compared to some other similar funds.

What I found personally appealing, subject to additional detail, is the ability for individual unit holders to redeem their shares for delivery in as little as one bar of London bullion, at the NAV but subject to delivery fees. This will obviously have its appeal for those who wish to add bullion for retirement accounts, with an eye to taking physical delivery at some point without incurring storage fees which can be significant over time.

I will leave the detailed analysis of this trust to more capable people who specialize in analyzing ETFs and Trusts. I have to admit that the IPO completely escaped my attention, although I did know it was coming some months ago. I had read enough then to know that it met some of my personal needs, based on my holdings and age. I find it more suitable than GLD for example, which seems to be a speculative trading vehicle. I prefer the Trusts like CEF and GTU for some things, and the redemption policy of PHYS seemed to be advantageous even compared to them. But more details are required.

As always perform your own due diligence and if needed discuss your investments with a qualified investment advisor.

Disclosure: I bought some units yesterday despite not feeling comfortable yet about being able to calculate the NAV for myself, and not having some of the details regarding redemptions and the status of their holdings and the IPO. It was some months ago that I read the prospectus. The NAV was indicated yesterday at 9.49 by the company on their site from Friday, which was less than 2 percent premium at yesterday's market price, which is advantageous and more than reasonable for my purposes.