01 December 2015

Gold Daily and Silver Weekly Charts - Masters of the Universe Ascendant

"Think of gold as an irredeemable bond that pays no interest, but has no credit risk, where the issuer is God or the universe itself."

Charlie Morris, formerly of HSBC Global Asset Management

The economic news came in badly this morning, with the ISM Index coming in much lower than expected, following the path of the Chicago PMI.

The big tickle this month is the much anticipated Fed meeting at which they are expected to raise rates 25 basis points off zero.  There is no real economy reason for them to do this, with the US recovery wavering and parts of the world slipping into recessions with high unemployment.

But as we know, the Fed would like to get their rates off zero, so they can cut them again when their latest asset bubble collapses and we have another financial crisis.

Gold and silver had a bit of a relief rally today, as the US Dollar was off a bit.  It is still grossly overvalued to support a real economic recovery.

And, at long last, we are in the precious metals active month of December!

We saw that rare animal, a 'delivery' of gold at The Bucket Shop warehouses, with Nova Scotia tossing up 36 contracts from their house account, to be taken mostly by the house accounts at HSBC and JPM.

Do you notice how the bullion banks seem to be shepherding the scarce deliverable bullion amongst their own house accounts?

And that is a far cry from silver, which saw one of the biggest one day deliveries last Friday, in case you did not notice from the delivery report posted here last night.

And we followed that up yesterday with some customers from ABN Amro, Goldman, and Merrill puking up their bullion, to be snatched up by the house accounts of HSBC, JPM, and Nova Scotia.

The deliverable gold in the warehouses continues on the low side at about 121,000 ounces available to be delivered at these prices.  This does not mean the Comex will default.  This does not pose any particular conundrums either.  It just fits the pattern of Comex as The Bucket Shop, with its gold trading being mostly paper trades settled in cash with little actual bullion involved, in sharp contrast to silver.

If a large customer actually stood for delivery of gold bullion and would not accept cash, I would expect JPM to cover them out of their own warehouse and house account as they did a few months ago.  It only takes a phone call or some key clicks to change the status of eligible bullion.  Some people are losing the sight of this.

There is significance in these low inventories, but not always what people would make of them.
What is of serious significance, and hard for the bullion bank apologists to deny, gold bullion has been flowing in large numbers from West to East for some time now, at least since 2007 but with a growing intensity since 2013.

I am fully convinced that unless the gold market is reformed at some point it will suffer a dislocation which will be blamed on 'foreign speculators' or some rogue traders in some Asian hothouse, something risible like that.

Non-farm Payrolls on Friday.  Let's see if the markets and the Fed get the numbers they would like, each for their own purposes.

I had a less than good-natured query regarding my discussing gold and silver.  And here is how I respond.

The reason I enjoy watching the precious metals here follows from my premise, based on both theory and observation,  that we are in an historic sea-change in the international monetary regime that has been in place since the end of WW II.  It was set in the Bretton Woods Agreement, and was then unilaterally revised by Richard Nixon in 1971 into a fiat dollar reserve currency regime which some call Bretton Woods II.

That change has been happening slowly but surely, picking up some steam in the late 1990's with the Asian and Russian currency crises.  The world's central banks became net buyers of gold around 2006, and the pace of the flow of gold and silver bullion from the West to the East gained considerably around 2013, and continues today.

Forgive me if I choose not to ignore these sorts of things.  Gold and silver have something to tell us about that, if we will just look at those markets and the flows of bullion with an open mind.

I know that it is fashionable these days, in the ascendancy of the self and personal will, to pick and choose and create our own realities, and facts to support them.  But, alas, history suggests that people who do so will ultimately be served a banquet of consequences.

Have a pleasant evening.