Stocks and Precious Metals Charts - Currency Wars

 

"We looked into the abyss if the gold price rose further.  A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.  Therefore at any price, at any cost, the central banks had to quell the gold price, manage it.  It was very difficult to get the gold price under control but we have now succeeded.  The US Fed was very active in getting the gold price down.  So was the U.K."

Edward 'Steady Eddie' George, Governor Bank of England 1993-2003, from Reg Howe v. BIS, JPM et al.

"The general hypothesis I have put forward over a period of time at this café is that with the spike in the price of gold up to $1900, the central banks of the West became greatly concerned, and opted for a lower price, and a more orderly rise.   And so the price of gold was smacked down into a trading range between $1540 and $1780 through the various price and market operations of some central and bullion banks in what we can think of as a gold pool.

As you may recall, the great sea change was that central banks turned from being net sellers to net buyers of gold, slowly over a ten year period from 2000-2010 approximately.   This change of policy was not uniform, but driven largely from the emerging and re-emerging nations.  It ought not to surprise us.  No fiat currency has survived for so long in historical terms, and even fewer as the world's reserve currency, unless backed by an unassailable empire.  They will fall to Triffin's Dilemma, and the decay of power to self-serving and short-sighted corruption.

Forces similar to those that are working against the EU monetary union, without a comprehensive political union, are working against the dollar global reserve currency, on a much larger and slower paced scale.  This is why a global currency issued and controlled by one central entity tends to presume (and aspire to) a one world governance, or at least a cohesive governance of a rather large piece of it. It is not incidental to their financial goals.

The gold pool can rehypothecate and leverage physical gold by multiples into paper, and outright create it with naked short selling.  And they can sell this paper in bulk at whatever they wish in the markets which they control.  And they can use positional advantage and their media to bully boy anyone who dares to question this into silence.  But they cannot print gold bullion and deliver it to Asia (et al.), which quite frankly does not care what they say.

In general this is what is referred to at the divergence between the paper and physical gold markets.   It is what happens when 'semi-official' forces endeavor to set an artificially low price in a market that involves some physical commodity which is in a somewhat limited supply.   It tends to become more limited as a result.

But the supply of paper gold is not limited in the short term, especially where things like position limits and leverage are given the wink and a nod behind a wall of opaque obfuscation.  

So this is why I think things will unravel in a manner similar to the London Gold Pool's operation which sought to set and maintain an artificially low price.   How exactly this will unravel is a matter of much conjecture.  I doubt it will break at the source of the paper gold, given the power the insiders have over the rules and information there.  Rather, there is more likely to be a strain at some physical delivery source that will cause the current pool to back up the price higher to some more sustainable level.  What that will be I cannot say.

What is driving this current dynamic is what is called the 'currency war,' which is shorthand for a difference of opinion amongst the world powers over the existing global currency trade regime."

Jesse, 22 January 2014

“Crime, once exposed, has no refuge but in audacity.”

Tacitus

"Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise."

Alan Greenspan, Congressional Testimony, July 24, 1998

Paper gold is a derivative, an often non-collateralized claim that may not be available from a counterparty in the present moment.  In the NY-London markets gold is estimated to be traded at a leverage of over 100 to 1, with the individual paper chits called gold having a very ephemeral attachment to any underlying physical bullion, bearing a significant burden of unallocated risk.

As noted fund manager Kyle Bass observed, 'The [gold] exchange is a fractional reserve exchange, and they think that price will solve everything.'

By its very nature a fiat currency is a projection of political and economic force.  And as it expands beyond reasonable bounds, confidence and volition may waver, and force and fraud and compulsion will increase.

False flags of war can be economic policy (too often a euphemism for greed and lust for power) as well as diplomacy by other means.

Sometimes when things are happening that don't seem to make sense, it may be a lack of a general understanding of the bigger picture, the players and the issues and motivations behind the scenes, that is the cause of our confusion.

And often normal, hard-working human beings are not able to fully comprehend the sort of petty vanity and greed that motivates the hubris of prominent servants of the darkness of the world.

Stocks were rallying for whatever rationale this morning after a fairly predictable consumer price dataset this morning.

The Dollar plunged on the news as you can see from the first chart below.

Sometimes looking at things cross markets is the only way to see what is happening.

Producer price index tomorrow.

There are geopolitical flash points are the world, any of which could provoke a serious exogenous event effect on the world financial markets.

Some of this may be by intent.  But most often it can be explained by pride, greed, and lack of foresight, which are often close companions in human political arenas and worldly affairs.

For we wrestle not against flesh and blood alone, but against principalities and powers, and the rulers of darkness of this world, and wickedness in high places.

Recklessly wicked and destructive things, which the normal human being finds it almost inconceivable to consider.

Have a pleasant evening.

Stocks and Precious Metals Charts - The FOMC Punch and Judy Show - Non-Farm Payrolls Tomorrow

“The tyrant is a child of pride, who drinks from his sickening cup recklessness and vanity, until from his high flown crest he plummets headlong into the dust of hope."

Sophocles, Oedipus Rex


“So much for Caligula the Emperor; the rest of this history must deal with the Monster."

Suetonius, The Twelve Caesars

Stocks were digesting their recent gains today, while glorying in the weak economic data.

It was announced today that Trumpolini intends to nominate Herman Cain as a Fed governor.  This easily tops his most recent nomination of Stephen Moore, who was at least nominally qualified despite being a certified Art Laffer collaborating supply-sider.

Thank God Trump does not own a favorite horse.

Having this many knuckleheads managing the world's most powerful currency and providing significant regulatory oversight to the US economy may be unintentionally very good for gold.

This reminds us of the need for checks and balances, and oversight as a restraint on the abuses of authority.  While it is tempting to unleash the power of nearly unrestrained fiat money in order to solve short term problems, one must consider who might one day be wielding such dangerous, highly discretionary power.

Speaking of restraints on reckless behaviour, gold and silver were hit hard and early, but managed to recoup their losses and actually finish higher on the day.   They closed higher as did the Dollar.  One might have thought it was a furtive, early move by some towards safe havens.

Sooner or later a crash is coming, and it may be terrific.

Non-farm payrolls report tomorrow.

Have a pleasant evening.

Nova Scotia Apparently Backing the Meager Action in Comex Gold - Gresham's Law

Gresham's law is an economic principle that states that when an official market or cartel overvalues one type of money or asset and undervalues another with respect to its fair market value and risks, the undervalued money or asset will leave the country as best it can, or will disappear from circulation into hoards, while the overvalued money or assets will flood into circulation.

Let me stipulate up front that when it comes to the global gold market, the Comex has actual gold flows that are so meager compared to the amount of trading which occurs on paper that I have said it is starting to look like The Bucket Shop.

And in recognition to the disclaimer statement that appears on all of their documents, the exchange makes no claims and accept no liability that any of these numbers are accurate. They are taking the originators of these numbers at their word, some of which are Banks which have recently been shown to be serial offenders when it comes to their financial dealings, pricing, and representations.

As of Wednesday, only 171,613 ounces (5.13 tonnes) were 'up for delivery.'   In a global market where the daily deliveries are measured in metric tonnes, that is a very small amount.

In terms of overall active Comex contracts, that represents a paper to physical leverage of roughly 263 to 1, compared to a historic trend of about 24:1.

And as I looked things over, I was struck by the fact that of those meager ounces available, 101,312 (3.2 tonnes) were from the vaults of Nova Scotia, or roughly 60% of the total.

That struck a chord in my memory, so I looked over the list of deliveries for the month of October.

Of the pathetically small amount of 240 contracts, or 24,000 ounces (.75 tonnes) delivered in the entire month, 17,600 have come from the 'house account' at Nova Scotia.

And the 'takers' of those few ounces have been the 'house accounts' at JP Morgan and HSBC.

So what I am trying to prove with all this?  Nothing.   I am merely showing an interesting trend change that has gone largely overlooked, except in some notable exceptions of the 'smart money.'

And I am documenting some facts for those who have a mind to see them, and to establish a record that people can refer to when these jokers blow up yet another market through their reckless obsession with gambling large.

It shows that in a world of global gold flows, very little is moving in the Comex warehouses, and the little that is changing hands seems to be moving between the houses of three of the big bullion banks.

And it tend to support a hypothesis that the gold trading in London and New York has taken on the character of currency crosses, and lost their ties to the physical commodity nature of the product.  This divergence may be convenient for the management of the price, and for easy profits for those managing the game.

But it has longer term consequences which will eventually come back to shock the markets.  Where have we seen these types of divergences among risk, valuation, and the underlying realities before?  In just about every financial fraud and following crisis in the modern era at least.

So remember this when the next crisis comes, and the distraction, dissimulation, and duplicities are put forward, and the search for non-consequential scapegoats is underway. And you are expected to bail out these jokers once again 'to save the system.'

I am fairly confident that all of this will come to pass if things do not change, and serious reform and enforcement of the rules of the markets are not undertaken.  So far the changes we have are largely cosmetic.  In a plutocracy big money manages the government and the media;  they have bought and paid for it.  And eliminating government only serves to eliminate the middleman.  Transparency and reform are the only sustainable answer.

The big action in the precious metal bullion markets is in Asia.

And gold and silver bullion are steadily flowing from West to East because of a mispricing of valuation and risks.   And the reason for the stunning drop in physical trading activity in the West is because in a manifestation of Gresham's Law,  the hypothecated paper metals are driving out the bullion out of the market.

This is a trend, and it has significance to those who are willing to see it.

CME Is Delivering Hundreds of Tonnes of Gold Into the Markets, Almost Unnoticed

What, The Bucket Shop?  

Are they truly delivering 'tonnes' of gold into markets where people actually take delivery of the bullion and withdraw it from the warehouse?

Stop the presses.  Man bites dog.

 

Yes they seem to be.   Just not in the United States.

The CME has opened a futures market in Hong Kong and from reading the documents and looking at the warehouse reports it appears to be a market of 'physical delivery.'

And are they ever delivering as you can see below.  Since March they seem to have delivered 257 tonnes of gold bullion into Hong Kong.

 

I went over this a bit last night with Nick Laird, the Aussie data wrangler from near the Great Barrier Reef, who tends to ride herd on all things precious metals at Sharelynx.com.

 

Now there may be a hook in this somewhere.  We would have to determine how easy it is to roundtrip the metal in and out, even if that does not seem to be the way they do their gold business in Asia.  We do not know who is really playing on that exchange.  It could be the usual suspects.  Or it might be a new source of additional demand we must track into China.

 

But it certainly bears watching.

 

NAV Premiums of Precious Metal Trusts and Funds - Why There Is No Recovery

 

Another 7,285 ounces of gold bullion were redeemed from the Sprott Physical Gold Trust.

My friend Arby had an interesting observation.  I have not checked it out specifically.  I thought Australia was in second place, but I have not looked at the latest figures for 2014.

 

But if the numbers are generally right, which they seem to be, it gives us some idea of the magnitude of what is going on.

US 52 WEEKS gold mine production 2014 (estimate from Mineweb) ... ...    210 tonnes

China first 3 WEEKS gold imports 2015 (calculated by Koos Jansen)      .... 202 tonnes

The largest producer of gold is China, second Russia, third USA.

The two largest producers are net importers of their world leading mining output.  The third largest producer is a net exporter.

 

And then there's Australia, but I'm not sure that they even know what they're doing as one of the attendant nations.

 

No matter what the exact numbers and who makes the most, gold is flowing from West to East. 

Anyone who does not understand this is missing one of the most dramatic monetary phenomena of this century.

I wonder who will blink first in this 'suicide squeeze.'  Because that is what this latest gold pool is becoming.

Speaking of monetary phenomenon, the professor of numbers and all things housing Tony Sanders notes that Mortgage Bonds Have Underperformed the Worst Since 2008 on Refi Risks.

 

As part of a different discussion, I noticed the other week that the Fed stepped up purchases of agency mortgage debts considerably since they 'ended QE' and own a boatload of them.

 

Janet and Bill Dudley must be running handcarts up and down Wall and Broad Streets telling the Banks to, 'bring out your dead.'

 

Fan and Fred buy them, and the Fed buries them.   With nothing going to the people whose homes are being foreclosed.   

And finally,  Zerohedge reminds us this morning that the numbers indicate that the biggest flows of capital into the US equity markets are from.. wait for it... companies using their profits to buy back their own stocks, by far.

 

So the Fed is using its ability to print money to buy bad debts from the Banks which they created to cheat their customers, and companies are using the outsized profits they are obtaining through government subsidies and underpaying their workers to buy back their own stock and enrich their upper management. 

 

And as Wall Street On Parade reminds us this morning, the corporatized media, owned by a handful of corporations, is cheerleading all this, and is very much captured by the crony capitalist culture.

 

And people wonder why there is no recovery.  Who says they want one, when this new normal is paying off for a privileged few so well.  And they get to buy even more of the remaining productive assets on the cheap.

 

That's trickle down stimulus, par excellence.

 

Related:  The Big Lie:  5.6% Unemployment

 

 

Gold Daily and Silver Weekly Charts - Audacious Oligarchy - Ten Tonnes of Gold Taken Out of JPM

"When, O Catiline, do you mean to cease abusing our patience? How long is that madness of yours still to mock us? When is there to be an end of that unbridled audacity of yours, swaggering about as it does now?

Marcus Tullius Cicero,  In Catilinam I

There was little of note in the Comex delivery report but there was a sizable withdrawal of gold reported from storage at the JP Morgan warehouse, about a third of the total at ten tonnes.   Let's see if that turns up anywhere, or is another fat finger.   An individual event is of less matter than the significance of the trend.  And the trends are apparent.

Wall Street is drawing pictures on the Comex price charts, and there are those who will keep their heads down and continue to read them as if it is business as usual.  They will not look at the reports from the new markets in Asia.  They will ignore the uncomfortable and the unfamiliar.  They are oblivious to the approach of change.  Quite a few do not look at all.

They do not understand what is occurring in the world's financial and monetary structures. They only know what they have seen in their short lifetimes, and in their familiar places.  And they often do not respect what they do not understand.  Well, this is what makes a market interesting.

Gold is moving from West to East.  And therein lies both risks and opportunity, to those who will have an eye willing to see it.

There is a Comex option expiration next Tuesday the 28th, and an FOMC rate decision on the 29th.  It might be a hard week for the metals bulls. 

Let's see what happens.

Have a pleasant evening.