Gold Daily and Silver Weekly Charts - Is There a Run on JPM's Gold Vault, and Why?

Waiting for this economic recovery is like Waiting For Godot.

Wall Street is Pozzo and Bernanke is Lucky.

Harvey Organ provides the following commentary tonight:

"However the big news was the huge drop in JPMorgan's customer account by a whopping 217,844.96 oz. Its customer inventory rests tonight at its nadir of 136,380.611 oz or 4.24 tonnes. Its dealer inventory remains at 413,526.284 oz. but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory."

Zerohedge comments: JPM's Vault Gold Drops 28.4% Overnight, Slides to Record Low

In the meantime the precious metals keep coiling, coiling, coiling...

The chart below is from Mike Kosares: The Connection Between Quantitative Easing and Gold

and from Gene Arensberg...

SP 500 and NDX Futures Daily Charts - Rampus Interruptus

The central bank of Japan gave the world the jitters overnight in their decision on how to proceed with their own version of QE.

The attempt to rally stocks back up off the lows was not successful and the rally faded into the close.

There is a short term downtrend here that has not yet been broken. It is going to be caught between the downtrend and support between 1640 and 1615 on the June futures, which will be rolling over to the next front month of September later this week.

Mark Blyth - Austerity: The History of a Dangerous Idea

Adjust to the accent and speed of delivery if you must, what he has to say is worth hearing and he is quite informative in an entertaining and lively way.

I think it is fair to say that the purpose of his talk is to demonstrate why austerity is a corrosive policy choice. And he does this quite well. In doing so he tends to ignore the roots of the financial crisis, emanating as they did from New York and London in this talk, the distortions caused by regulatory policy changes in the financial system, and the systemic frauds that followed. He does touch on this at the very end in the Q&A which is heartening.

It is not equivalent to say that because austerity is bad, therefore stimulus must be good. If only the world were so linear and simple.

The corruption of the regulatory and political process by Big Money is the bigger long term issue. Therefore he appears to take a more mechanically optimistic, model based view of a US recovery, which I think is unfortunately not correct.

I hate to say on such thin evidence but the talk sounds conventionally Keynesian. He also gives unnecessarily short shrift to the regulation of the growth and quality of credit expansion, but that is probably unfair based only on this talk. I intend to read his book after I listen to this a few more times.

I think we will see a repeat bubble and collapse in the US as we did in the tech stock and housing bubble cycles unless reform occurs. Or the long run trend of inequality will become so severe that the political system will evolve. He speaks of Germany's role in Europe quite a bit, but barely touches on China.

He used Germany's growth out of the depression as a positive model of state activism to cure unemployment. But he ignores the school of thought that this growth never became organic, and was much like a Ponzi scheme. To keep growing it had to expropriate wealth, much of it from the Jews, and engaged in wars of aggression to obtain even more resources that it could not otherwise procure. So National Socialism never really became self-sustaining. I suppose it cold have done so by engaging in the export of goods rather than of bombs and bullets, but that never quite seems to work out either. Think the industrial policies of Germany and China today.

This example has to do with government sponsored stimulus and economic management without reform, and an unhealthy concentration of power, and the the two seem to go together.

He also does not address the currency wars, and imbalances in world trade flows because of governmental policies, which are one of the greatest economic macro changes in our generation. In the past they often have been resolved by military war and the rise of empires. So we will have to see what comes next in this particular iteration of conflicts of interests.

I am not saying Mark Blyth is wrong. I am merely saying that he does not address these things because they lay a bit outside his chosen topic which is the short term dilemma being faced in Europe and the UK. I find his style refreshing and his thought process and ability to tie things together fascinating. I have listened to any number of lectures on the history of economics, and his is one that informs while not making one's eyes glaze over. And for me that is high praise. I wish I knew Mark Blyth well enough to discuss these things over a few beers. He seems like a great guy.

If one is comparing the US to Europe I would grant that it certainly looks better because their system is inherently unstable and not sustainable. And the theme or purpose of his book and talk are that austerity is doomed to failure. And I agree. But I also think that stimulus is also going to fail, unless the system that caused the problems is changed through meaningful reform.



h/t Yves

Gold Daily and Silver Weekly Charts - Forms of Expropriation as a Negative Effect on Wealth

In this video interview Jim Rickards comments on Roubini's Recent Comments on Gold.

Jim takes down Roubini's comments point by point and very well. I thought he was a bit easy on Roubini, but he may have missed the mark on interest rates.

I think the 10 year rate is completely inappropriate in deriving real interest rates against short term inflation.  And the official and even 'market-based' measures of inflation are distorted in ways that can be easily demonstrated by John Williams for example.   So I thought that was a bit disingenuous on James Rickard's part.  Short term rates are very negative and this is an easily observed phenomenon and result of QE.  They are merely expanding that effect along the yield curve.

Gold is not correlated to inflation per se. It is correlated to  negative interest rates and expectations of inflation, two concepts which are related.   Negative rates are the result of expansive monetary policy.

And most importantly, in the final analysis gold is correlated to the perception of all monetary risks as a negative effect on wealth, whether that be from inflation, or any other forms of the use of money and the terms of the financial system as a means of expropriation of wealth.

This is so fundamental that I cannot believe that economists do not realize it.  Or why they just ignore it.  It is written across the history of the past four thousand years. 

The bad money drives out the good, and good money is sound money that is not easily taken away or reduced by the entanglements of fraud or official debasement.

Think about it.  Inflation, negative interest rates, floating Money Market Funds, bail-ins,  non-quantifiable counterparty risks, seizure of illiquid and non-transportable real assets, and even systemic fraud are all risk effects on individual wealth. 

People seek safe havens in time like this.  And those who are expropriating wealth, for whatever reason, have a disdain for gold and silver equal to their disdain for the rights of individuals to preserve themselves from their own exploitation.

The financiers have not only completely 'screwed things up' in their greed, but they seek to take the losses out of the wealth of the innocent whom they had an obligation to inform and protect in the first place.  This is deceitful, low, and truly despicable.

Luckily, and this is most definitely not out of spirit of altruism, there are large and powerful entities out there in the form of sovereign countries and organizations and people outside the Anglo-American system, who are also going to resist the demands of expropriation and exploitation of their own sovereign wealth. 

Thankfully there is not a 'one world government' although the collusion of nationless oligarchs is troubling.

Corrupt and desperate people have been down this road many times before,  in trying to make other people pay the price for their own malfeasance and illicit gains.  That they seek to do so by perverting justice and the fundamental protections of government is nothing new either.  This is the continuing threat of which the people have been warned since the very founding of the American republic.

The system must be reformed from the financialized control fraud which it has become over the past twenty years.  And to do that, the country must face some hard truths about the real source of the problems which we are facing, the corruption and concentration of power,  the corrosive effect which money has had on political discourse and governance, and what must be done to restore a balance to the real economy and the general welfare of the entire nation, and not just for a fortunate and powerful few.  

SP 500 and NDX Futures Daily Charts - Where Are the Customers' Yachts?

The financialization of everything will continue until no one knows the value of anything, until they are otherwise informed.

NAV Premiums of Certain Precious Metal Trusts and Funds

The Gold/Silver ratio is at a high point given its recent history.

I think there are signs of speculative excess to the downside. The professionals seem to have been covering their short positions in gold and to some extent silver.

The disappointment one feels with the regulators at the CFTC and the SEC does not seem to be misplaced given recent revelations of a lack of integrity and honor amongst corporate management and government officials overall. There is always an element of society without shame. Unfortunately it has risen into the halls of power. This is an age where corruption, greed, pride, and selfishness are not only tolerated, but have become fashionable as a mark of the fortunate few.

Unfortunately this is not a recent trend, but an extension of a trend that has been in place for some time. It will change, and when it does, there will be a greater hope for a sustainable economic recovery.

CFTC Gold and Silver Bank Participation Report - Ted Butler's Comments

The US Banks have gotten net long of gold in this last report.

The charts below are from Sharelynx.com.

Here is what Ted Butler of Butler Research had to say about this report today:

"Since the BPR of February 5, the US bank category position (in effect, almost exclusively JPMorgan) has swung by a net 100,000 contracts, from net short 70,000 contracts to net long 30,000 contracts (all rounded). There has never been a move of such magnitude before. Over that same time, the total net commercial short position (in the COT) declined by 113,000 contracts, meaning that JPMorgan accounted for almost 90% of the entire commercial decline. It is not possible for that extreme degree of concentration and market share not to be manipulation, pure and simple.

And here’s the manipulative icing on the cake – JPMorgan was able to flip a net short position in COMEX gold of 50,000 contracts in February to a net long position of 50,000 contracts on a gold price decline of as much as $350. I would submit that the singular purchase of 10 million ounces of gold (worth the equivalent of $15 billion) within four months on a greater than 20% price decline could only be accomplished if the price was manipulated lower by the purchaser. No other explanation would be possible...

JPMorgan’s emergence as the big COMEX gold long changes the dynamic of the gold market. In addition to conclusively proving that this is the most crooked and evil financial institution ever to exist, it confirms the extremely bullish set up for the gold price...

Of course, if JPMorgan can continue to accumulate inventory on lower prices, we will get lower prices temporarily. But having JPMorgan confirmed as being on the long side of gold is a game changer. That’s why I continue to throw money out the window on silver call options."

I read Ted twice a week for color commentary on the metals markets. Its a subscription service. I tend to take some confidence from what he says about the bullish set up because several other things that I watch carefully are inclining to show the same setup for a serious short squeeze on the funds.

He also had quite a bit to say about silver, which is his area of special interest and unsurpassed expertise, but you will have to subscribe to read that.

I took my first silver position in a while on Friday and expanded my gold position on that weakness.

C. A. Fitts On Debt, Centralization, Money, Equity Markets, Currency Wars, and Gold

Catherine Austin Fitts served as managing director and member of the board of directors of the Wall Street investment bank Dillon, Read & Co. Inc., as Assistant Secretary of Housing and Federal Housing Commissioner at the United States Department of Housing and Urban Development in the first Bush Administration, and was the president of Hamilton Securities Group, Inc., an investment bank and financial software developer.

Fitts has a BA from the University of Pennsylvania, an MBA from the Wharton School and studied Mandarin at the Chinese University of Hong Kong

The discussion gets particularly interesting after the 9 minute marker.

For your convenience here is a written summary of the main points of this interview.

I agree with much although it is important to remember that there are quite a few assumptions underlying it.

People are being 'conditioned' to prefer equities over other risk management products like bonds and commodities.

And this is not so simple a task because there is not one world government and one currency. We must never forget that this is where quite a few of the oligarchs, who are already thinking of themselves as borderless, are trending.

And as we all should always remember there are black swans and fat tails.

The word for today is enantiodromia. It pairs nicely with hubris.

In their pride people who have too much power and not enough restraints can go to far and achieve an effect that is unexpected and even the opposite of what they had intended.

Weekend Reading

"God has created me to do Him some definite service; He has committed some work to me which He has not committed to another. I have my mission. I may never know it in this life, but I shall be told it in the next....

I am a link in a chain, a bond of connexion between persons. He has not created me for naught. I shall do good, I shall do His work; I shall be an angel of peace, a preacher of truth in my own place, while not intending it, if I do but keep His commandments and serve Him in my calling.

Therefore I will trust Him. Whatever, wherever I am, I can never be thrown away. If I am in sickness, my sickness may serve Him; in perplexity, my perplexity may serve Him; if I am in sorrow, my sorrow may serve Him. My sickness, or perplexity, or sorrow may be necessary causes of some great end, which is quite beyond us. He does nothing in vain.

He may prolong my life, He may shorten it; He knows what He is about. He may take away my friends, He may throw me among strangers, He may make me feel desolate, make my spirits sink, hide the future from me --still He knows what He is about."

John Henry Newman, Meditations and Devotions

Max Keiser and Alasdair Macleod On the Physical Gold Market

Gold Daily and Silver Weekly Charts - 'When the Music Stops'

The metals were hit with a fairly determined bear raid today for two reasons:

a) it was a Non-Farm Payrolls day with a weak number (as I suggested last night)
b) it was a Friday.

In the late stages of a system in decay, there is a great deal of formula and ritualization in what were once considered meaningful actions.

That is it. Nothing more, nothing less.   It was as expected.   Nothing has changed.

People underestimate the depths of greed and uncaring selfishness that predominate in the cultures on Wall Street and, unfortunately, in the government and even universities.    And the love of many will grow cold...

They know what they are doing.  They do not care.   To the extent that they bother to look ahead, they think that when the time comes, they will stick you with their losses.

This evening's Commitments of Traders shows that the four largest commercial traders (banks) are now net LONG gold. With the Comex registered inventory at record lows which generally precede a strong rally the setup is interesting.

Have a pleasant weekend.

h/t Dave in Denver

SP 500 and NDX Futures Daily Charts - 'We Can't Help Ourselves'

I do not know what spin the financial channels put on it, but the Non-Farm Payrolls report was mixed to weak, and enough so to show that all this talk of QE tapering, at least based on a sustainable broad-based economic recovery, is nonsense.

I don't think people quite understand the environment on Wall Street and in Washington as it has become over the past fifteen years.

At least not yet.

NAV Premiums of Certain Precious Metal Trusts and Funds - Heart of Darkness

The expected bear raid in precious metals occurred as the Non-Farm Payrolls report for May was released.

The report was mixed, although the headline number was somewhat deceptive. I cannot stress enough that the individual monthly numbers have more value for spin and speculation than for real analysis. It is the trends that are important.

Having said that, the headline seasonally adjusted number came in a little on the high side. But that was achieved with an equally significant downward adjustment in the prior month, so it was pretty much a wash. Jobs growth remains sluggish.

The unemployment rate ticked up.  The manner in which unemployment is measured does not work well in a period of protracted unemployment where those whose benefits expire are eliminated from the count. Labor Participation Rate is a much more meaningful measure.  And that measure is not good.

Hardly anyone mentioned the fact that hourly earnings came in flat, at zero growth. There will be no sustained recovery until the wage situation improves for those who provide the bulk of consumption for GDP.

The Birth Death model came in spot on at 205,000 jobs added to the raw number. The average of May for the prior two years is 208,000. I think this Birth Death model is just a further means of 'adjusting' the number. It does not appear to be based on any empirical data.  At least they break it out so we can keep an eye on it.

I see where Steve Schwarzman, the CEO of Blackstone, has founded a scholarship program for promising Western students to pursue their business degree in China to gain insights from their management models and business methods. It is being pretentiously likened to the model of Cecil Rhodes' famous scholarship program at Oxford that spawned Bill Clinton. I wonder what the section on warehousing workers in mind-numbing firetraps will be called.

It was a little embarrassing to see Wesley Clark and Colin Powell, some of the political celebrities who feed at the Blackstone watering hole, rolled out for a favorable endorsement.  One shrinks a bit, if they can recall the last time Mr. Powell was utilized to provide an endorsement, then at the UN, for another, greater act of foreign adventure based on shaky premises. How are the mighty fallen.

The students will be housed in a special unit at Schwarzman College with extra care given to the filtration of the air and the water, and unfortunately, the Internet. I wonder if it will be called Kurtz House.   

“We penetrated deeper and deeper into the heart of darkness.”

Joseph Conrad

Comex Registered Gold Inventory Continues Its Decline - Fat Tails

Comex registered gold levels continued their decline to the sub 1.5 million ounce level.

As you know tomorrow is Non-Farm Payrolls day in the US.

The trading desks typically like to hit gold and silver with a bear raid on a day like that, especially if there is a whiff of QE to come.

There is quite a bit of gold sitting in the eligible category at the Comex. Let's see what it will take to get the owners of that bullion to consider parting with it.

There are 2,950 gold contracts remaining open for June, for the equivalent of 295,000 ounces.  So there is certainly plenty of room for the wiseguys to keep pressing their luck. Although we must remember that as easy as it may be to transfer bullion from the eligible to the registered category, the reverse of that process is also present. Owners of eligible bullion may change the status of their bullion to 'not offered for delivery' or eligible, not registered.

While the music keeps playing, they must keep dancing, as former CEO Chuck Prince of Citigroup said during the run up to the recent financial crisis in 2007.

There are a total of 374,891 gold contracts open now representing 37,489,100 ounces.  Of those 214,870 contracts are open for the next active delivery month of August representing 21,487,000 ounces.

The average daily volume of trading is about 165,000 contracts, representing 16,500,000 ounces.

Very few contracts are ever taken to delivery. The price setting mechanism for the global gold market these days is largely a paper exercise involving little actual metal ever changing hands.

While this facilitates speculative interests, it is hard to rationalize how this depth of liquidity and volatility, without ties to fundamental anchors of supply and demand in the real world, provides any real benefit to producers and consumers who wish to obtain products and hedge risks.

I think that the exemptions that were granted to some institutions which are neither legitimate producers and users of the commodities, or representatives of producers and users, has financialized the markets to an extraordinary degree.

The lack of effective position limits and disclosures for the basis of very large positions, specifically in the silver market for example, is setting up a potentially volatile situation. And that is surely visible to other organizations and entities around the world.

To continue to ignore this is probably not a wise policy.  A single announcement by a large organization or even a foreign entity could have a deleterious effect on the quality of confidence in these highly leveraged markets that deal in products with real world consequences.  A loss of confidence is easier to avoid than to repair.

There is big money to be made with leverage.  And that causes reforms to be resisted, and regulators to bend to the political and ideological pressures of the monied interests.

These things can go on like this for quite some time.  And they normally do, in normal times.

Let's see what happens.

Gold Daily and Silver Weekly Charts - Coiling

Non Farm Payrolls tomorrow.

Gold and silver popped today as the Short Yen-Long Dollar carry trade unwound, and traders sold Dollars and bought Yen.

I include the West Texas Intermediate Crude chart below. As you can see it is tightening into a trading range I like to call a 'coiling pattern.'

Watch for a break out in either direction.

SP 500 and NDX Futures Daily Charts - Yen Carry Trade Dipsy Doodle

There was some significant technical action today as currency traders bought yen and sold the dollar in an unwinding of the big Dollar-Yen carry trade.

This sent stocks reeling to the lows around their 50 Day Moving Average, but they bounded back to gain ground again into the close and went out near the highs.

Tomorrow is Non-Farm Payrolls. That will set the tone into the weekend.

Bad is good, good is bad, and in-line is a tossup, but watch the revisions for the prior two months.

NAV Premiums of Certain Precious Metal Trusts and Funds - Coiling Ahead of the Non-Farm Payrolls

They generally like to hit the metals on a Non-Farm Payrolls day.

Let's see if that pattern repeats. Stocks will likely move inversely to the report beyond some middle ground.

A great jobs report and stocks will likely falter some on fears of QE weakening. A weak report and stocks will likely rally back up into the trend channel on the QE gravy train express.

An in-line report and the market is up for grabs, which usually means higher these days. Expectations are for 160,000 net jobs added, with 175,000 coming from the private sector. Watch the revisions of the prior two months. They like to spin it there with upward revisions that take the edge off any misses in the headline.

Gold may not move inversely to stocks as it has been doing again recently.

I don't think the precious metals market will return to fundamentals until the paper gold/silver scheme falters.  Even a spike rally now is likely a cynical move to free up bullion for the short term so that the next wash and rinse cycle of manipulation can begin again without forcing the Comex into a default.

 

Ralph Nader On the Fed's Gamble, Failed Two Party System, Corporate Power

It would interesting to see some strong third party efforts emerge with progressive agendas.

We know that the Republicans are owned by the monied interests, and that Clinton-Obama leased out the Democrats to them.

The two parties may as well change their names to Big Oil/Defense versus Big Finance, with their only common ground being the ascent of the corporatocracy: all the rights of the individual, few of the restraints and obligations.

Simon Johnson: The Wall Street Takeover and the Next Financial Meltdown

Is the crisis over? No

Have we fixed the underlying problems? No

This video is from 2011. The answers remain the same.

TBTF is a government subsidy, a cartel, and a distorting factor on markets.

This is not about economics or the analytics anymore. This is about politics, this is about power, this is about the money.

Simon Johnson is one of the few economists that are making any real sense of what happened, and what therefore is likely to happen next.   I find his thoughts quite persuasive, at least on this particular topic of the roots of the crisis and the nature of the likely solutions with regard to bank regulation.

Gold Daily and Silver Weekly Charts - Tilt

There is an intraday commentary here that is essential to understanding how I view the current gold and silver markets.

At least for my own purposes I have pretty much made up my mind what is going on.  I summarize it in some detail in that commentary linked above. 

The world is sorting out the global currency regime, but money crosses many lines including those of political power and the distribution and creation of wealth.

For the short term, expect the unexpected. These markets are tilted.  Most if not all of them.  Those who have benefited enormously from the status quo are resisting change will all their might.  They fear the revelations of their duplicity as well as the removal of their sinecures.

There are big changes underway, enormous changes that will impact the world and be talked about and discussed for the next few hundred years.

So do not be disappointed if you do not quite understand them.  Most of the people confidently speaking about them do not understand them either.  Or in all too many cases, they understand what is happening, but their paychecks depend on their saying something else.  And quite a few are blinded by greed, fear, and a false sense of who they really are.

More people are starting to understand than the media lets on.  US Bullion Coin Sales at 'Unprecedented Levels'

The really big things in life are never understood well, except at a distance.  Trust breaks over a long period of time, but confidence collapses quickly.