Gold and silver rebounded sharply this morning as the provincial parliament of Crimea voted unanimously to become a part of Russia. A public referendum is set for March 16th, a week from Sunday. Doubts have been cast on the sincerity of the vote, since at least 16,000 Russian troops are patrolling the streets, and have seized military bases and government buildings. The prime minister for this Crimean parliament was chosen only last week, behind closed doors. The deputy prime minister said that Crimea will expel all Ukrainian troops from the region and seize all military bases.
The European Union was already set to meet today to show support for the pro-Western Ukrainian government in Kiev, while Putin still claims that ousted president Yakonovych, who is residing in Moscow, is the legitimate leader of Ukraine. Russia, as their largest source of natural gas, holds too much economic power over western Europe for any response to be more than symbolic. France has a contract to build warships for the Russian Navy, and British and German companies and banks have billions of dollars invested in Russia.
President Obama has ordered a ban on visas and a freezing of assets of “individuals and entities involved in threatening Ukraine’s sovereignty”. Yakonovych and his inner circle, who are accused of looting billions of dollars from the Ukrainian treasury, are included in this order.
Platinum and palladium are holding on to yesterday’s gains. As we reported yesterday, labor talks in South Africa between platinum miners and workers have broken down once again, and existing stockpiles are close to being exhausted. Platinum closed up $17 in New York yesterday, and palladium closed up $10. China today reinforced its commitment to combating life-threatening pollution in its large cities. The coal and steel sectors, which have a large amount of excess capacity and are the among the worst polluters, will see old plants shut down in favor of newer, cleaner factories.
In Europe, the European Central Bank kept rates at historic lows, instead of dropping them to zero. ECB president Mario Draghi said that while inflation was lower than he would like, there is no danger of deflation. The Bank of England also stood pat on its monetary policy.
In the U.S., the Fed’s “Beige Book” of economic conditions reported “modest to moderate growth” — a phrase used by the Fed to signal conditions favorable to a continued drawn-down of its purchases of bonds and mortgage-backed securities on the open market, which now stand at $65 billion a month.
First-time jobless claims for last week showed the 26,000 fewer people lost their jobs than in the week before, with 323,000 new applications for unemployment benefits. The four-week rolling average of claims dropped 2,000 to 336.500. Tomorrow will see the release of the government’s official non-farm payrolls report. The ADP private sector payrolls reports, which doesn’t count government jobs, said that 139,000 new jobs were added to the economy in February, below expectations, and January’s numbers were revised significantly lower.
If push comes to shove over the Ukraine, the West could collapse the Russian economy in only a few days with serious sanctions. Putin knows this, and is hurling threats left and right to dissuade this from happening. No matter what the cost is, though, he has to hold on to the Russian naval base at Sevastopol, or he will be thrown out of power. This is the only naval base Russia owns that is not frozen over in the winter, and is vital to protecting Russian interests in the Black Sea and Mediterranean.