Gold Daily and Silver Weekly Charts

Intraday commentary on the rehypothecation Ponzi scheme in the metals here.

 

Tomorrow will be a quiet trading day in the afternoon as the US heads into a three day weekend.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Buy the Dip, Skip

World markets sold off hard overnight, but the irrepressible center of the empire managed to rally off the stock lows today on 'better than expected new home sales, and other economic indicators in line.

VIX ticked up a bit, but all is well in a market marked to fantasy.

The US has a three day weekend, so tomorrow is expected to be quiet, particularly in the afternoon when the adults head out early to their shore homes leaving junior and the algos in charge of the world.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds - Rehypothecation Ponzi

Thin premiums remain the order of the day for the gold and silver holding trusts and funds.

Citi analyst Tom Fitzpatrick sees gold appreciating $2,000+ from here.  I think quite a bit of that sort of move could happen more quickly than most might imagine.

I think quite a bit of this recent gold action is taking place on the public stage, but is being driven by private talks amongst the monetary powers that be.

There should be little doubt that a replacement for the US dollar reserve currency is being seriously considered.  Especially after the manner in which a few doubtful words cast by Bernanke about QE was able to send world markets into a swoon overnight.

There are those who would discredit gold and silver as being too volatile for inclusion in a basket of currencies that would become the international trading unit of exchange.

And at the same time, there is a strong move by some countries to back their currencies in gold at least partially.  They have to proceed carefully because if the price is set too low, the Western banks would swoop in and arbitrage it heavily. 

One thing that is lacking today for gold and silver are reliable price setting mechanisms that are not subject to manipulation and fraud by those who hold little of the metal itself, or who have re-hypothecated it many times over.

"Hypothecation is the practice where a borrower pledges collateral to secure a debt or a borrower, as a condition precedent to a loan, has a third party (usually an affiliate) pledge collateral for the borrower. The borrower retains ownership of the collateral, but it is "hypothetically" controlled by the creditor in that he has the right to seize possession if the borrower defaults. A common example occurs when a consumer enters into a mortgage agreement, in which the consumer's house becomes collateral until the mortgage loan is paid off.

Rehypothecation is a practice that occurs principally in the financial markets, where a bank or other broker-dealer reuses the collateral pledged by its clients as collateral for its own borrowing.

You may find this article by modern monetarist Peter Stella to be interesting:   What Economists Need to Know About the Modern Money Creation Process

In it Mr. Stella describes how the banking system routinely pledges the same piece of collateral over and over again without a properly risk adjusted diminution of value. No wonder the housing market is in such a mess, with the concept of title to property having been reduced to a financialized abstraction.

"In the traditional money creation process, collateral consists of central bank reserves; in the modern private money creation process, collateral is in the eye of the beholder. Here is an example.

A Hong Kong hedge fund may get financing from UBS secured by collateral pledged to the UBS bank’s UK affiliate – say, Indonesian bonds. Naturally, there will be a haircut on the pledged collateral (i.e. each borrower, the hedge fund in this example, will have to pledge more than $1 of collateral for each $1 of credit).

These bonds are ‘pledged collateral’ as far as UBS is concerned and under modern legal practices, they can be ‘re-used’. This is the part that may strike non-specialists as novel; collateral that backs one loan can in turn be used as collateral against further loans, so the same underlying asset ends up as securing loans worth multiples of its value. Of course the re-pledging cannot go on forever as haircuts progressively reduce the credit-raising potential of the underlying asset, but ultimately, several lenders are counting on the underlying assets as backup in case things go wrong."

If you think that this has not been done in the gold market you are kidding yourself.  Rehypothecation is not an aberration but a fundamental principle of the modern money creation process. It is what attracts the 'hot money' because it offers the opportunity to keep levering up. And this is why gold and silver have found little favor, if not intense dislike, amongst the modern financiers, except in its most diluted paper form, because it resists their attempts at ponzification.

As an aside, the re-hypothecation of collateral is still a massive problem in the banking sector.  The same collateral has been pledged innumerable times.  If any of the collateral should fail, as we had recently seen in the housing sector, the domino effect becomes the great bank-killer as balance sheets turn to shredded paper. 

And this is why the entire banking system seized when Lehman failed, because they did not know whom they could trust, since they were caught up in a daisy chain of control fraud. 

One solution is for a non-profit oriented entity to come in and buy the dodgy paper with public money, to pledge to expose no crimes, and to provide cheap money to the banks to keep their game of musical chairs going.  But that still does not restore honesty and stability to the system.  Indeed, while the scheme continues to generate outsized easy profits for the participants, going slowly on reform is the order of the day.  No matter how one might choose to rationalize it as prudent caution.

How ironic that what had been called real money 'since the time of Alexander the Great' is shunned and denigrated by those in the modern money business.

“Gold has worked down from Alexander's time... When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory.”

Bernard M. Baruch

These are interesting times for those who enjoy studying money, aberrant human behaviour, the changing fashions of ideas, and incredible madness of crowds.

Note:  From time to time I do have positions of size in some of the instruments listed below.  I do not take positions in GLD and SLV.  That is a personal choice, and not an endorsement or advice.

Gold Supply and Short Positions on the Comex: Option Expiration Next Week

"Let Ahab beware of Ahab."

Herman Melville, Moby Dick

As a reminder, next Tuesday the 28th is an option expiration on the Comex in the precious metals.

The set up in the market is interesting. I wonder who, net-net, is really holding the big physical short underpinning that inverted pyramid of paper?

Qui est le trompeur trompé?

"A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
'Tis like the writing on the wall...

"When other hands the scales shall hold,
And they, in men's and angels' sight
Produced with all their bills and gold,
"Weigh'd in the balance and found light!"

Jonathan Swift, The Run on the Bankers


"He who sells what isn't his'n
Must buy it back, or go to prison."

Daniel Drew

Gold Daily and Silver Weekly Charts - Could It Be Any More Obvious

"First they ignore you, then they laugh at you, then they fight you, and then you win."

Mohandas K. Gandhi

Intraday commentary here.

Each market operation to keep the precious metal prices lower sends more bullion out of the hands of the western Banks and into stronger hands in the East.

Why would they do this? What is their game plan?

There isn't one.   They are just trying to 'muddle through.'

They are doing what they have been doing, and hoping for something to happen before they run out of fuel, and crash and burn. 

Or better yet, abandon the plane and passengers, take all the cash they can carry, and bail.

SP 500 and NDX Futures Daily Charts - Rough Seas Ahead

 Early today the markets soared on initial indications from Bernanke of Quantitative Easing, for as far as the eye can see.

Then Bernanke's response to some questions cast some clouds, and the markets reversed sharply. 

Make no mistake.  There is little underpinning the equity market except for monetary froth.

Rough seas ahead. Batten down the hatches.

Ben is pouring oil on troubled waters.  But it may not be enough, or even hazardous in its own right.

Liz Warren Grills Jack Lew on Too Big To Fail

Original source and commentary is at Mother Jones

Warren nails it in the last minute of the tape. The US lack of serious reform is a risk to the world economy.

Obama is a thoroughly modern manager: part Herbert Hoover, and part Richard Nixon.  

Silver Rally Hit By Ruthless Selling

Bernanke's QE remarks sparked a flight to the metals and short covering as the silver shorts temporarily lost control of the trade.  There will be QE of many sorts, as far as the eye can see.

This was quickly met by renewed waves of ruthless selling by the Anglo-American financial cartel.

Silver has since returned to its pre-rally price of 22.75.

The suppression of gold was even more brutal with a plunge on selling, and a gap lower, even on the one minute chart.

The premiums for real metals continue to be high compared to the paper prices set in London and New York.

Gold and silver are flowing from West to East.  With each purchase, the Banks are being stripped of their bullion.

They can keep this up, until the people, in their increasing confusion and misery, finally realize that the emperor has no clothes.   And then comes change, and one would hope, reform. A generation forgets, and the next remembers and relearns the lessons from the past.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

This is what happens when an artificial tyranny finally falls. First it is the actions of individuals, then a movement, and finally a swiftly moving avalanche.

Freedom is not an objective or a prize to be won and kept at last; freedom is a way of life, a continuing commitment to truth, and to equal justice for all.

Revolutions decay into tyrannies, and over slow time are renewed again. The human spirit is resilient, as long as at least one person can stand for the truth and with peaceful but determined resolve say, 'You may own the world, but you don't own me.'

“Stand up for what you believe, even if you are standing alone.”

Sophie Scholl

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

Bernanke's words have inflamed the equity market, and driven a flight to the much suppressed metals as the shorts lost control of the market.

I still believe that stagflation is the most likely forecast, but the world is getting a stronger whiff of pure monetary inflation from the central banks, despite the best efforts of the financiers and their apparatchiks to suppress it.

Stagflation is a weird kind of beast. I remember when economists said that it was not possible, until reality showed them differently. And then it was possible because of an exogenous shock, caused by the oil boycott and cartel. And now they may recognize it as the result of policy errors in support of the one percent and their financial cartel.

The illusion is powerful, but the world sees.

Gold Bar Premiums In China Hit Record Highs On Lower Paper Gold Prices

These are frightened, desperate men who are trapped in a web of their own lies. They see no way out, and so will continue on doing the same things, over and over, until something breaks. And then will come the deluge.

Gold Daily and Silver Weekly Charts - Capping the Gains - Racketeering

Bernanke gives his Congressional testimony tomorrow morning.

FOMC minutes will be released in the afternoon.

The stock market is at bubble levels.  And the real economy is languishing.  I find it almost incredible how the economists can blithely ignore another bubble once again. 

Speaking of Blythe, have we heard any more about the FERC charging JPM with manipulating the energy markets in the manner of Enron?   Perhaps the CFTC is still in a snit that other agencies are making them look bad by doing their jobs.

It is interesting to see that prosecutors are considering charging SAC under the RICO statutes.

I can think of a few more candidates who could be investigated for racketeering in the markets.

The buck used to stop at the top.  And so might the subpoenas.  Although CEOs and Presidents seem to be remarkably uninformed about the things that their organizations do when push comes to shove.

And so it is unlikely that they will get any closer to the heart of the money frauds. That is the credibility trap.

Here is an update on the $1.1 Billion gold shipment from the US to South Africa. 

SP 500 and NDX Futures Daily Charts - Weak Rally Tuesday

Excelsior.

Bubble valuations and little regard for economic fundamentals.

Gold Daily and Silver Weekly Charts - Twentieth Century Fox - RIP Ray Manzarek

Silver and Gold plunged on the Globex Sunday open yesterday as a large number of silver contracts were dumped at market.

Commentary on this was given here and here.

The metals were slow to recover until this morning, and then took off, going out near the highs in a classic short squeeze.

The physical offtake of bullion from the world markets into strong hands is getting intense.

It is far too early to say if this is any kind of a bottom. We have not even broken the down trend yet.

Bernanke gives his testimony to Congress on Wednesday, and tomorrow is the newly traditional 'rally Tuesday' for stocks if the bulls can shove the overbought SP 500 any higher.

The US commodity futures markets are a bucket shop. It is a shame that they have any influence at all on real world prices.

RIP Ray Manzarek, Keyboards, The Doors

'The Architect'

SP 500 and NDX Futures Daily Charts - Pause Ahead of Bernanke's Wednesday Testimony

There is no major economic news scheduled for tomorrow. Let's see if the wiseguys can keep the 'Rally Tuesday' trend going.

Zimbabwe Ben will be testifying to the Congress on Wednesday morning, and the FOMC minutes from the May 1 meeting will be released.

VIX is subdued, and the SP 500 cash is overbought.

Gold and Silver Futures Hourly Charts - Sharks With Laser Beams

There is not much doubt in my mind that the antics we saw in the silver, and to a lesser extent gold, markets last night were a classic hit and run, Dr. Evil market play.

It is not particularly sophisticated, more like a brazen street con, or a smash and grab.  But it does require a complacent regulatory environment, and a certain regard for fellow insiders who are in a position to see what has happened and raise objections with regulators and the exchanges.

One hits a quiet market with a very large 'sell at market order' and runs the stop loss orders on long positions.  And also triggers margin selling by longs.  But given the four minute turnaround it looked more like stop loss busting.

As the sell orders and any associated selling abates, which is generally rather quickly, the trader quietly buys back contracts and gets long 'on the cheap,' and allows the market to run higher and book a profit.

The point of this is not to manipulate the price lower and keep it there. The objective is to take out long positions in a quiet period and put them in your own pocket at below market prices.

This is one of the classic market cons and one of the reasons why prior reforms had instituted the 'uptick rule' on short selling. That rule has been eliminated and the regulating of naked short selling is a bit of a joke.  It is also why some are asking for 'position limits,' but this plea is falling on highly compromised ears often numbed by the revolving door between politics and finance.

So what next. Gold and silver were at extreme oversold position in terms of sentiment, Comex registered gold ounces, and chart technicals. The usual price suppression scheme was not going to keep going with the huge amount of physical offtake in the markets working against it.

So the smart money started covering the 'ancillary shorts' in cross markets such as mining companies, and went long in anticipation of a forced bottom.

There could be another bout of steady price suppression once this oversold condition is worked off.  It really depends on what had triggered this long effort to push the prices lower despite rising physical demand. 

Today Goldman Sachs says it sees 'more downside.'  You may recall that it was a 'short gold' call by Goldman that started this downside ball rolling through support some time ago.

Last night there were some related shenanigans in the Yen trade, but certainly did NOT look like a panic sell off by legitimate metal longs, although I am sure it will be portrayed that way by some. And I doubt it was a margin call either, except as the price plunged from calculated selling.

Although I would certainly appreciate any hard evidence that the CFTC could offer on this. In a better world we would not have to guess at how the prices of key commodities are being set, and shoved around the plate by those scavengers who are not involved in the real world process of demand and production.

That Banks who are on an ongoing public subsidy, and utilizing depositor funds, in order to game the markets and disrupt the real economy for their own profits is almost beyond belief, unless you have a knowledge of the history of central banking in the US.

And if they have a hand in implementing official financial policy for the Fed/Treasury, it would be understandable why they are untouchable when they engage in extracurricular activities like the market operation last night.  Or the coming moves in the equity market that could 'blow your mind,' as we used to say.  All these fellows know is 'more.'

Most of the discussion has been on the gold market, but I continue to think that the real chronic problem in the metals market is arising from the silver market where there is a real fear of a delivery default, or an uncoverable short position by a TBTF.

But in general this looks like another sign of the pathological environment on Wall Street and in Washington. 

In the target period only the NY Globex Market is open and volume is very light.

Chinese Gold Imports Through Hong Kong Year Over Year

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

Negative premiums.

The Gold/Silver ratio is extremely high at 62.4.

Silver Market Sunday Evening Follies

A large number of silver contracts were dumped on the Comex open on Sunday evening, a very quiet market period.

This ran the 'stops' and the price.

A similar number of contracts were then bought back at a lower price.  And then the market was roiled, but started to recover from a very obvious price smackdown. 

It is a little hard to see it on the 15 minute chart which just looks like a lot of selling.  I hear that 2500 contracts traded in 15 minutes is a near record for an off hours session.

The action is much easier to see on the 5 minute chart below that.

This looks very much like the Dr. Evil strategy which the banks and funds like to use when the regulators are turning a blind eye.

I have included a 15 minute gold chart just for comparison sake.

If this was selling by a trader with an eye to raising cash, that trader should be fired.  If it was done by a trader seeking to manipulate the price of the market, the CFTC should be able to find out fairly easily and publicly fine them.  But don't hold your breath for that to happen in the US.

The price of key commodities are being set by what is little more than a bucket shop.

The world sees this, and is appalled.

Sunday Afternoon Listening - These Are the Words I Would Say

Registered Gold At the Comex

The extreme lows in registered inventory tend to mark the beginnings of major advances higher.

Comparison of the 1976 Gold Bull Market and Today

This is making the rounds on twitter.

Please note that I have not yet had the time to check this for accuracy.

I am playing 'nurse' for my wife who has returned from surgery at hospital.

And I am doing a poor job of it, I should say. Or as she says. lol.


Postscript:  First, thanks to all your good wishes.  The similarity of individual people from all over the world never ceases to amaze me.  And when one strikes that chord, we see we are not alone after all.

Secondly, it appears that this comparison is valid.  And thanks to those who went back and compared the data.    I should add that I think we can see similarities in movements like this, a correction in a bull market, a pause before an advance.

I do think however, that extending the similarities over time causes much trouble.  Market movements are influenced by secular events, and there was a great deal going on in the latter part of the 1970's.  While things do 'rhyme' the tune these days is being played on a very different set of instruments.

And I also believe that this is no natural correction, but a manipulation of markets in the midst of a 'currency war.'