NAV Premiums of Certain Precious Metal Trusts and Funds - Wall Street Glitter Gulch

"Life is a school of probabilities."

Walter Bagehot

The post-option-expiration hit on the metals arrived yesterday and today as gold was pushed back towards 1400 and silver was slammed back to 23.80, a decline of 1.20 from the recent high.

They were treading a bit lighter on gold because available for delivery is in short supply.

Inventory available for delivery took a sizable hit yesterday as there was a large transfer within the shrinking JPM vaults from delivery offered to storage.

The premiums on the Sprott funds are holding up remarkably well. The action in the miners has been fairly obvious with a price hit on that related sector preceding the bear raid on the metals.

That some analysts cannot refrain from drawing broad conclusions from such a small short term price fluctuation shows the desperation and poverty of thought in much of what passes for analysis today. Say and do anything for a raucous headline and some attention.

I almost fell out of my chair when I saw some fellow call the ten dollar decline in gold yesterday a sign that there would not be any military action in Syria. Ten dollars out of Fourteen Hundred. And they make fun of people for reading the fall of bones or chicken entrails. Freedom of speech does not demand freedom from thought.

This could be a deeper correction. Anything can happen. But typically not everything does happen, and that is why life is a school of probabilities. People fool themselves, and others, by making wild guesses, and then writing the hits in marble, and the many more misses in the sand. Well, that may work for coffee talk, but as actionable trading information it is a snare, and a death trap.

Don't get me wrong. I don't mind such chatter talk on chat boards by amateurs. Much of life is taken up in idle and largely harmless diversion and unstructured speculation. And all gamblers lie, and often shamelessly. The problem is when they lie to themselves.

I used to hang out with some of the older fellows at the Stardust's sports book, which was a marvel for the day.  We would watch basketball games and horse races, while they bet the over/under and mostly talked stuff about the old days, and who and what they know and knew.  Fun talk, but it never filtered into any of my wagers. I made some of the best returns betting against the skew of weekend tourist betting on their favorite California teams, against the odds. Gotta love those Lakers and the tourist spread.  And don't even talk about the poker tables.

Don't get me wrong. I am no god of gamblers.  No one beats the house in the long run if their bosses are doing the job right and the gamers are not cheating.   No one can beat true odds all the time. 

I knew a guy who had been the comptroller at Caesar's, who grew up in our old neighborhood back east. And he gave me a copy of Friedman on Casino Management, and set me straight.  I have won big, and lost big.  But the only truly winning bet I ever made there was thirty five years ago when I got married in a little church outside of town, in what was then the desert, but now is just another crowded suburb.

Wall Street reminds me of Las Vegas sometimes.  Pretty women, flashy callers, lousy odds, but no free drinks or cheap buffets. 

The pros and insiders in the US markets have shills and occasional enablers who go around and talk trash for them, but not on the little chatboards. That would be a waste of time and money, and there is no need for it.  There are plenty of parrots who can be taught to repeat lines in the hope of sounding wise.

I have previously mentioned the mostly unremembered testimony of A. Newton Plummer, a Wall Street 'publicist' who testified to the corruption of journalism and analysis by Wall Street money. And what made him credible was that he had a suitcase full of canceled checks to prove it.  They don't take checks or credit cards these days.   Information and high paying positions are the new coin of the realm for these sophisticates.  Journalism is approaching economics as a disgraced profession.

So let's see how the week progresses. September is not a delivery month so babies must play. But there is the problem of physical offtake of real bullion on the world markets that continues despite the antics on the paper exchange.

Deliverable Gold Falls To a New Low Of 725,000 Ounces

There was a transfer of 43,575 ounces out of the deliverable (registered) category to eligible storage with the JP Morgan warehouse, bringing the total gold in the registered category to 725,030 ounces.

Friday will be the last day for August delivery. The next delivery month will be October.

Total gold in the COMEX warehouses remained steady at about 7 million ounces.

Without higher prices it does not seem realistic to expect those with their gold stored in the warehouses to move it to registered and to offer it for delivery.

As I have said, I do not expect the problems with gold and silver to reach a climactic resolution at the COMEX in the form of a default.  That is more likely to be a secondary effect of a greater scandal or failure that will begin with the physical market, and probably overseas. 

What will trigger this reckoning?  Perhaps some large owner or even a central bank will not accept that their gold is missing as readily as the Bundesbank has done, with their gold apparently having been rehypothecated away for the profit of the private bullion banks.

Be that as it may, the leverage within the paper market is obviously at elevated levels, providing a risk factor that sets the bar for counterparty risk rather low.  This could facilitate a rather energetic short squeeze at some point.  I hear that at least one very significant market participant is positioned to benefit from such an eventuality.

Weighed, and found wanting.

Stand and deliver.

Gold Daily and Silver Weekly Charts - Though the Heavens May Fall

"When a man takes an oath, he's holding his own self in his own hands, like water. And, if he opens his fingers then, he need not hope to find himself again...If we lived in a state where virtue was profitable, common sense would make us saintly. But since we see that abhorrence, anger, pride, and stupidity commonly profit far beyond charity, modesty, justice, and thought, perhaps we must stand fast a little, even at the risk of being heroes."

Thomas More

Silver was quite volatile as the new holders of September contracts were given a wild ride last night and today, with gold largely riding on the silver surfer's wave.

The drums are playing a martial tune, and the markets wait with some anxiety.

The bears had all they could manage to keep the price of gold and silver in check today given the importance, in the short term, of the outcome of this week to them. For if they lose control now, they have little hope of making it into the year's end. 

The action around 1420 tends to confirm the neckline. This is all endgame, and delay.  And so there is less doubt in my own mind now that, for the long run, the tide has turned.

This market distortion will not stand, until those who stand entrapped within a tangled web of their own lies and misdirections, finally stand and deliver. And so we will find, at long last, that justice is satisfied.

SP 500 and NDX Futures Daily Charts - The Gathering Storm

The Biggest Wall Street Banks Are Doing Fine, Set To Beat 2009 Pay Levels

Not bad for a small set of TBTF Banks that are still being heavily subsidized by the sacrifice of the public.

But they work really hard, and have a lot of very important expenses with which to maintain their lifestyles.

"When his Golden House was finished in its ruinously prodigal style, Nero would say nothing more about it in way of appreciation except that he could at last begin to live like a human being."

Suetonius

There is something particularly indecent about a society in which the heavily subsidized, pampered princes of finance can spend more on a redecorating a single office than the average family can afford to spend on the health and education of their family over a lifetime.  And this after ruining the national economy by engaging in massive control frauds, for which none have ever been punished.

Winning...

CNNMoney
Wall Street bonuses to top 2009
By Stephen Gandel

"The nation's five biggest banks are on track to pay out $127 billion in total compensation, including at least $23 billion in bonuses, this year. That's up from the $114 billion the banks shelled out to their employees in 2009. It translates to $149,472 per full-time employee for 2013, and is roughly triple the pay of the average American. The figures come from financial filings and the calculations of a top Wall Street compensation consultant.  [That average pay is somewhat misleading because pay is highly skewed to the top.  Jesse]

In an article in Tuesday's New York Times, [Hank] Paulson said he was disappointed by the size of the bonuses banks paid in the wake of the financial crisis and subsequent bailout. The former Treasury Secretary says he was dismayed about the timing of the large 2009 bonuses. He believes the payouts turned the public against the government's Wall Street bailout, but I don't think it was ever that popular, bonuses or not..."

Read the rest here.

"Experience should teach us wisdom. Most of the difficulties our Government now encounters and most of the dangers which impend over our Union have sprung from an abandonment of the legitimate objects of Government by our national legislation, and the adoption of such principles as are embodied in this act.

Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union.

It is time to pause in our career to review our principles, and if possible revive that devoted patriotism and spirit of compromise which distinguished the sages of the Revolution and the fathers of our Union. If we can not at once, in justice to interests vested under improvident legislation, make our Government what it ought to be, we can at least take a stand against all new grants of monopolies and exclusive privileges, against any prostitution of our Government to the advancement of the few at the expense of the many, and in favor of compromise and gradual reform in our code of laws and system of political economy."

Andrew Jackson, Veto of the Second Bank of the United States
 

Gold Daily and Silver Weekly Charts - Gimme Shelter

"The great enemy of clear language is insincerity. When there is a gap between one's real and one's declared aims, one turns as it were instinctively to long words and exhausted idioms, like a cuttlefish spurting out ink."

George Orwell

There was a very obvious flight to safety in gold and silver today, although the bears were able to contain the gold run below the 1420 neckline and silver below 25 breakout for the option expiration on the COMEX today.

Stocks and the metals ignored the economic news, the 'better than expected' consumer confidence, and were focusing on war news.  Anyone who missed this must not have been watching the tape very closely.

And be sure not to miss the one chart about gold that you must be sure to remember.

Let's see what the inventory numbers look like tonight and for the rest of the week.

SP 500 and NDX Futures Daily Charts - War Jitters

Here we go again.

NAV Premiums of Certain Precious Metal Trusts and Funds

Gold and silver broke through the psychologically important 1400 level on Syrian war jitters, decoupling from the equity markets.

Gold ran up to 1420, which is the first big neckline on the inverse head and shoulders bottom.

Today is option expiration on the COMEX and the last delivery week in August.

I suspect that those new contract holders in the September contract from today's option expiry will be given a gut check at some time.

One of the Most Important Gold Charts That You Should Remember

"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."

Sir Eddie George, Bank of England, in private conversation, September 1999

Few people realize that around 2008 central banks turned from being net sellers of gold to net buyers, and began to accumulate gold reserves in a big way for the first time since the 1970's, when Nixon slammed shut the gold window.

This is based on what they report officially to the IMF. There is strong anecdotal evidence that the actual turn in buying occurred quite a few years earlier, and more in line with the rapid appreciation in price as selling declined. 

First the selling slowed and the stealth buying began, particularly in Asia and the Mideast.

There was a sea change in the gold market as central banks scaled back on their strategy of supplying official gold to the bullion banks in order to keep the price down. 

The bottom in the gold price occurred when Gordon Brown threw England's gold with a pre-announcement into the market in order to bail out any bullion banks that were caught flatfooted 'in the turn' in May of 1999.  This was the first clear sign that change was in the wind.

The Big Turn occurred in 2007 when the western central banks capitulated, and realized that they must allow the price of gold to rise, or exhaust their own gold reserves in the process. The central bank change did not cause this, although it certainly reinforces the trend. It is a symptom of the great change and the first unmistakable manifestation of the currency war.  Although astute observers could see this coming in the aftermath of the Asian currency crisis in the 1990's and the Russian default on the rouble.

Gold commentators who do not realize this significant dimension of what has occurred and account for it in their thinking have been simply left behind, lost in an outdated frame of reference. They do not see the forest for the trees.

This is about much more than gold and silver. This is about a major, an historic change, in the composition of the world's global currencies and trading system. The dollar regime that has been in place since the end of World War II is undergoing a major evolution.

If there is anything that shocks me, it is how few economists understand it, or even realize it. I suppose that is how it is when the big things occur. Most of the operational people are left staring at the old paradigms, and wondering why their models are malfunctioning.

Rather than accept the change and understand it, they get busy trying to prove that it is not happening, since they have such a vested interest in the past. And so we see the occasional hysterical outburst from the status quo, that what is indeed happening does not make sense, and is irrational. 

Their reasoning begins to take on the shrill character of propaganda as they do their duty for their powerful patrons.  And they further discredit and isolate themselves from things as they are, and from people who have eyes to see.

The Anglo-Americans will be the last to let this folly go.  And I hear there is quite a bit of official irritation with those bullion banks who do not wish to go along with them.  They prefer to get out of this while they can with their balance sheets intact, even to the extent of getting out of the business, and enduring subtle retaliation for their recalcitrance.

I cannot foresee exactly where we are going, no one can, because there are simply too many exogenous variables.  But I doubt that it will be back to where we have been.

Gold Daily and Silver Weekly Charts - Bad Economy, Big Finish

"Mark where his carnage and his conquests cease!
He makes a solitude [desert], and calls it — peace."

Lord Byron, Bride of Abydos

Gold in particular was under pressure since yesterday evening, with a concerted effort being made to hold the line on price around the $1400 level.

This is a big week for gold and silver, with COMEX option expiration tomorrow, and the end of August delivery on Friday, with available inventory at record low levels for this bull market.  There was intraday commentary on this here.

Stocks did a reversal and gold and silver popped like coiled springs when US Secretary of State John Kerry vowed that the US would respond to 'the moral obscenity of massacre in Syria.' 

Smells like teen spirit, and the invasion of Iraq.  And the markets reacted accordingly. 

The economy may be floundering, the leadership may be compromised, and the majority of those over the age of 18 within the Washington Beltway may be on the take, even if indirectly, but there is always the ability to bring the blessings of democracy and the Pax Americana to those who require it, whether they wish it or not.

Let's see how gold and the equity markets manage their way through the rest of this week.

Stand and deliver.

SP 500 and NDX Futures Daily Charts - Market Goes Out On Lows On War Woes

The stock markets did a quick reversal and went out on the lows when John Kerry, US Secretary of State, beat the war drums today on Syria.

The volume was thin and the markets were toppy to begin with, and Kerry's hawkish statements took them down tout de suite.

Pictures of an Exhibition in Policy Error - Without Oath or Honor

The growth in money supply is very strong, both in M2 and MZM, both broad measures of overall supply, each with a differing emphasis on duration.  Both are growing at around 7 percent year over year.   This is certainly in excess of the GDP, and the growth of consumer loans and bank credit, which is only growing at 2.5 percent year over year.

What is particularly disturbing is that the growth rate of real disposable income at this late stage of The Recovery™ is sub one percent, even as corporate profits, cash levels, and executive pay return to stratospheric levels for the large multinationals with large cadres of lobbyists and significant political influence through the revolving door.

I am not saying this is solely a Federal Reserve driven policy error.  Not at all.

Quite a bit of it is being driven by fiscal policy, and specifically by the Congress and a Wall Street friendly Administration.  This is not a New Deal, it is the Raw Deal.

But the failure of the Fed to act aggressively in conjunction with other regulatory agencies to reform the financial system, given the additional powers as regulator which they actively sought in the aftermath of the financial crisis for which they were a primary contributor, makes them equally culpable for the folly of this 'trickle down' approach.  And the 'hands off, see no evil' approach to widespread financial fraud and abuse that continues even today.

There is a credibility trap at work, that prevents those in leadership positions from addressing the real problems frankly and honestly. They will attempt to shift the blame and the pain to the people, but with the pay and privilege of leadership comes responsibilities and obligations, what at another time would have been lumped together as 'honor.'  

Oaths and the highest principles of the land are just pieces of paper, not allowed to stand in the way of the personal god of the day, gettin' paid.

And I think that the ruling elite have lost all sight and sense of the consequences of this in a frenzy of personal advancement and enrichment.

This is neither sustainable nor decent, and will not end well.

 

"I believe we have a crisis of values that is extremely deep, because the regulations and the legal structures need reform. But I meet a lot of these people on Wall Street on a regular basis right now. I'm going to put it very bluntly. I regard the moral environment as pathological. And I'm talking about the human interactions that I have. I've not seen anything like this, not felt it so palpably.

These people are out to make billions of dollars, and [think] nothing should stop them from that. They have no responsibility to pay taxes, they have no responsibility to their clients, they have no responsibility to people [or] counterparties in transactions.

They are tough, greedy, aggressive, and feel absolutely out of control, in a quite literal sense. And they have gamed the system to a remarkable extent and they have a docile president, a docile White House and a docile regulatory system that absolutely can't find its voice. It's terrified of these companies.

If you look at the campaign contributions, which I happened to do yesterday for another purpose, the financial markets are the number one campaign contributors in the U.S. system now. We have a corrupt politics to the core, I'm afraid to say... both parties are up to their necks in this.

...But what it has led to is a sense of impunity that is really stunning, and you feel it on the individual level right now. And it's very very unhealthy. I have waited for four years, five years now, to see one figure on Wall Street speak in a moral language.

And I've have not seen it once. And that is shocking to me. And if they won't, I've waited for a judge, for our president, for somebody, and it hasn't happened. And by the way it's not going to happen any time soon, it seems."

Jeffrey Sachs, Address By Video to a Conference At the Philadelphia Fed, April 2013

As a Reminder, Tomorrow Is Options Expiration On the COMEX

The goal line defense at 1400 gold is more understandable if one remembers that this is an important week on the COMEX.

Tomorrow is an option expiration for gold and silver, and $1400 is a psychologically important level for gold.

Round numbers like 1400 tend to attract a lot of 'buy to cover' stop orders and other types of speculative betting. So a break out through 1400 could trigger a quick run higher of another 30 or 40 dollars.

And perhaps even more significantly, this is the last week of the August delivery period, and gold is in relatively short supply for delivery. At this point a quick rise in price is likely to attract more contract holders to take delivery, rather than encourage eligible bullion holders to switch their COMEX warehoused gold to the 'registered' for delivery category.

I have included a snapshot of the calls that are subject to expiration this week in gold, and their distribution by strike price.  There are about 8,800 calls between 1400 to 1425 that will be expiring this week.

This is only a small part of the picture, but I think it is more relevant than usual for the reasons cited above.

We'll see how the price action continues through this week, for a better idea of what is happening. But it is hardly what one might call fundamentally honest and transparent.

If the cap on price seems counterintuitive you must have an old fashioned concept of what the markets are for, with such quaint notions as supply and demand and price discovery. These markets are all about power and influence, and using gimmicks and positional power and privileged information.

Sometimes when a coiled spring releases, it does so with some extraordinary power.

COMEX Registered Gold Falls To a New Low As JPM Takes a Large Delivery From Scotia Mocatta

Registered (deliverable) gold on the COMEX fell to a new low as JPM took delivery of 28,809 ounces from Scotia Mocatta.

There were a few transfers from the Eligible to Registered category with the only one of note being 4,605 ounces at Scotia Mocatta.

This is activity that occurred on Thursday.  We will have the information on Friday next week.  Let's see if the higher prices have shaken any more gold loose from weaker hands.

Next week we will see an option expiry on the COMEX for the precious metals on Tuesday,  and the end of the August delivery period on Friday.

The 'owners per ounce' remains very high at a little over 48 potential claims for every ounce of gold in the registered (deliverable) category.  It will take higher prices to move more of the gold from 'eligible,'  or stored in an approved COMEX warehouse, to 'registered,' or available for delivery.

Although it remains fairly stable at around 7 million ounces, the drop in total gold from all categories in all COMEX warehouses from over 11 million ounces at the beginning of the year is stunning.  It takes a bit of work to get that gold back into the system.  And much of it seems to have headed to other shores, and may not be coming back at any price.

I think that in their arrogance and greed, the gold cartel may have gone a bit too far in their latest pricing gambit, and painted themselves into a corner.  Higher prices may cause more accumulation of physical bullion by the ETFs, and nothing seems to halt the strong demand for physical bullion from Asia.  The writing is on the wall.

Weighed, and found wanting.

Stand and deliver.

Moyers: America's Gilded Capital and Losing Democracy to the Predator Class

"The political class has reached some kind of critical mass in the 21st century. There is something going on in Washington that needed to be called out. I do not think it can be sustained, and I think it is indecent. It is not how Americans want their government and their capital city to be."

I strongly recommend that you watch this inside look at the culture of unwarranted privilege, unprincipled greed, and self-delusional narcissism amongst the ruling elite in Washington and New York.

There appears to be nothing, up to and including pardons for serious crimes and excuses made for genocide, that cannot be bought and paid for in the Gilded Capital of the US.

Welcome to The Hunger Games.




I think Mark should talk with Elizabeth Warren, and that perhaps the voters should send more people like her to the Congress.

America’s Gilded Capital
August 23, 2013

Mark Leibovich covers Washington, D.C., as chief national correspondent for The New York Times Magazine. In his new book, This Town, he writes about the city’s bipartisan lust for power, cash and notoriety.

It’s the story of how Washington became an occupied city; its hold on reality distorted by greed and ambition. Leibovich pulls no punches, names names, and reveals the movers, the shakers and the lucrative deals they make — all in the name of crony capitalism.

Gold Daily and Silver Weekly Charts - Inverse Head and Shoulders Bottom Continues to Form

There is an inverse head and shoulder bottom forming up in gold, and even on the weekly silver chart now.

I have taken the liberty of putting some preliminary marks on the chart to show my current thinking of how it may shape up. If the formation does not continue to evolve I may change or remove them. But I thought now was the time to share my preliminary thinking from my own 'shadow chart.'

While the 100 DMA was taken out today in gold, I do not think it is all that predictive or important, except that a few traders may favor it as an indicator. There are much more powerful technical indicators at work now.

What I have labeled 'neck 1' on the gold chart at 1420 is much more important, because it not only marks the first tentative neckline of the inverse head and shoulders, but it also marks the breakout point from the short term uptrending channel in which gold finds itself now. Not to mention that it also breaks the intermediate downtrend. I have included a 'closeup' of this chart area for your convenience.

Next week is an option expiration on the COMEX. I have not followed the balance of puts and calls, because while it is still important in the short run, the paper game is quickly losing traction, as the leverage increases, and the actual pile of bullion at their disposal and their other vain imaginings become smaller and less relevant to the world of real people and things.

So lets see how it goes. Hope to see you Sunday evening, with a possible talk, or interlude of music, in between.

SP 500 and NDX Futures Daily Charts - The Necessity of Regulation To Insure Market Efficiency

"There are so many questions as to why, but each comes back to this: The markets are not set up to be 'fair and orderly' for investors; they are set up for the benefit of very fast, sophisticated pickpockets."

Jon Najarian, Blame HFT For Yesterday's NASDAQ Mess

Personally speaking, there is merit in saying that quite a bit of the blame rests with the SEC, which after all is responsible for regulating the markets and setting the 'tone' for their behavior, by action and example.

And of course the myth, promoted out of self-interest, that any and all regulation is bad, because people are naturally rational, long term in their thinking, and virtuous.   And therefore they need no governance but their own wills. Markets always and everywhere are subject to distortion and corruption by the powerful without transparency and the equal justice of independent regulation and the law.

"In questions of power, then, let no more be said of confidence in man, but bind him down from mischief by the chains of the Constitution."

Thomas Jefferson

Yes there is a balance to be struck, but reform is not to be found in the mindless tearing down of past wisdom in the name of deregulation for its own sake, except if one would prefer to have no place to stand when the cold winds of the powerful and the unscrupulous blow without impediment across the land.

NAV Premiums of Certain Precious Metal Trusts and Funds

I think that the explanation for the negative premium on the Central Gold Trust lies in its thinner liquidity.

For example so far today it has traded 90,000 units in the US, against 861,000 units for the Sprott Physical Gold Trust. A seller at 49.14 distorted the price a bit as the market slowly chipped away at the offer.

The Central Fund is more responsive to market changes, with units traded today at 734,000.

But I do think that the redemption feature at Sprott, though lightly used, makes a difference in value perception for whatever that is worth.

With the gold/silver ratio having fallen to 58 so far, it is obvious that silver's high beta has caused it to rally harder than gold at this point. That is normal and healthy for the metals overall.