25 September 2015

Gold Daily and Silver Weekly Charts - A Failure of Character - Quo Vadis Domine?

"It was miraculous. It was almost no trick at all, he saw, to turn vice into virtue, and slander into truth, impotence into abstinence, arrogance into humility, plunder into philanthropy, thievery into honor, blasphemy into wisdom, brutality into patriotism, and sadism into justice.

Anybody could do it; it required no brains at all. It merely required no character."

Joseph Heller, Catch 22

"Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy, the moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days, my friends, will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves, to our fellow men.

Recognition of that falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing.

Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, and on unselfish performance; without them it cannot live."

Franklin D. Roosevelt, First Inaugural Address, March 4, 1933

Heller might have been writing about our own day, and much of the analysis and 'expert commentary' on the economy and the markets.  This is how it is in times of moral hazard, and general shamelessness among the worst.

Gold and silver drifted slightly lower in a quiet trade today.

The US Speaker of the House, John Boehner, unexpectedly has given up his place and is retiring from the Congress.

And yesterday, while reading off a set piece on the excellent quality of the economy, the chair of the Fed, Janet Yellen, appeared to suffer a bout of paralysis that was sadly disturbing.  I was hoping it was just nerves and fatigue and not something more serious like a transient stroke.

I do not wonder why anyone is feeling a little less confident about things these days, perhaps even a little fearful.  It seems at times as though the world has been turned upside down, as if the worst have taken over in their madness, and if the many good and innocent are powerless to act in their own defense.

There was intraday commentary taking note of Koos Jansen's latest analysis of Asian demand, and more specifically the buying habits of the People's Bank of China, and the London Gold market which you may read here.

As I have noted several times previously,  October is a relative sideshow as compared to both the volume and open interest of the big month of December.  But it does offer a chance for the parasitic class to play their paper games.  If it had been a more active contract one might have expected a little more of a 'gut check' today for the contract holders.  So I am still reluctant to read too much into the big rally yesterday and the slight retrenchment today and into the weekend.

Here are the volume and changes in open interest from yesterday in the first graph below. As you can see from the circled number on the right, the open interest for the coming month of December is 293,901 representing about 29,390,100 ounces of potential paper gold claims.

If one looks at the Comex inventory report on the second graph below you can see that there are currently about 161,937 ounces marked as registered 'up for sale as these prices' and a total of all gold in all the warehouses of 6,856,672 ounces, of which 6,694,735 are not offered for delivery into those contracts at these prices.

But let's be generous, and assume that JPM et al could manage to put another 500,000 up for sale near these prices and not bother about little details like price being a function of supply and demand, making the working total available for delivery at 661,937 ounces, which is a very generous assumption given the most recent levels.

If more than 2.3% of the contract holders stood for delivery, all of that generously assumed deliverable supply would be wiped out.

In fact, to put the question that Kyle Bass put to them, if something happened and only 4% of the contracts stood for delivery, that would require about 1,175,600 ounces of gold, against the 161,937 that they have on hand for sale today.

And even though it sounds like a lot, those 1,175,600 troy ounces of gold are only about 36.6 tonnes, a good week's work of physical delivery leaving the exchanges for other vaults in Asia.

Oh no Jesse you don't understand.  NO ONE stands for delivery like that on the Comex, and if they did, 'price would take care of it.'   Righto, that is what they said to Kyle Bass, and putting his common sense and fiduciary duty first he said 'just give me the gold now.'

If you are unallocated or hypothecated, given the numbers that have been estimated for physical demand in Asia against physical supply in London, you just might be walking on the wild side, taking your chances of getting your gold against some heavily lawyered up enterprises.

As I have said the other day, as foolish and greedy these jokers have proven to be, the lies will end when physical delivery fails.
"They can expand leverage [gold hypothecation, leasing, futures, forwards, derivatives] freely given the craven silence of the regulators and professional courtesy amongst the looting class. But they cannot create more physical bullion, and therein lies their limits."
No responsible trader wants to see that sort of stain on the confidence in the markets, but sadly most keep silent about the abuses that they see out of professional courtesy, and most often, out of personal fear of retribution.  They only seem to speak up when they are losing money as in the case of the outrageous market manipulation of JPM's London Whale.

This financial system is sick, and is unfortunately and at an increasing pace approaching terminal.

I think the problem is due to a simple failure or 'lack of character.'  It is an old story, and a perennial favorite of the madness of the dark powers of this world.

I have listed the traits that denote 'character' in the SP and NDX charts posting below.

Take a quick run through them, and ask yourselves, how many of those traits describe these markets, those in the leadership class, and those qualities which are most highly valued by our current culture?  Or if that is too hard, how many of them sound embarrassingly old-fashioned or quaint?

And there you may find some answers to the source of our current difficulties.  Be sure to apply them to ourselves, because 'in the end, the only real sadness is not to be a saint.'   Or at least a sinner like most of us who is attempting great things, having renounced the spirit of darkness of the world, and received the Spirit of a son or daughter of light, and is therefore able to cry out in both fear and hope, 'Father!'

Let's see what happens next week.

Have a pleasant weekend.