Gold Daily and Silver Weekly Commentary - Year End Paint Is Dry, Metals Rebound

"You get tragedy where the tree, instead of bending, breaks."

Ludwig Wittgenstein

There was intraday commentary on the metals here.

I have included the CME metals depository data below. There were no additional deliveries noted on the 31st. There could be a little more action ahead, but January is a 'non-active month.'

The bifurcation of the precious metals market between paper and physical bullion is widening into a yawning gap. I do not know what will end this, but I suspect that it will end unexpectedly and quickly, and is likely to be noticeable.

Happy New Year. Welcome back.

SP 500 and NDX Futures Daily Charts - New Year Wobble

"Those among the rich who are not, in the rigorous sense, damned, can understand poverty, because they are poor themselves, after a fashion; they cannot understand destitution.

Capable of giving alms, perhaps, but incapable of stripping themselves bare, they will be moved, to the sound of beautiful music, at Jesus’s sufferings, but His Cross, the reality of His Cross, will horrify them.

They want it all out of gold, bathed in light, costly and of little weight; pleasant to see, hanging from a woman’s beautiful throat."

Léon Bloy

Last week a number of people asked what I thought about a certain wealthy New Yorker's comments on Pope Francis and his apparent 'lack of love for the rich.'  I had to look this quote up by Bloy in order to provide a suitable answer. 

While the short term technical may look good, the underlying economic fundamentals are disastrous.

But the real economy can keep doing what it is doing and be blithely ignored, while appearances matter more than the reality of the suffering that they will cause.

And for what? What?

NAV Premiums of Certain Precious Metal Trusts and Funds - Breaking Bad

There is a blizzard moving into the northeastern US this evening.

It may affect tomorrow's trade in equities.

I had put a decent short position on in the closing minutes of 31 December.  I have taken most of that off the table here and now.

I am long gold and silver bullion.

To my mind, prices were pushed to some short term extremes for the year end tape painting.

I tend to agree with much of Ted Butler's recent analysis titled 2013: The Year of JP Morgan.   If it becomes publicly available I will link to it.  For now it is by subscription only.

Ted thinks that JP Morgan is the major mover in the Comex gold market, executing market corners first to the short and then to the long side over the course of 2013.

They most likely have some privileged knowledge of the market structure and official policy, and perhaps even semi-official support in this, if nothing else than by indirect acquiescence, or turning a blind eye if you will.

Below is a recent video about gold buying in India.  China, southeast Asia, and the Mideast offer similar stories, except that the governments there are not trying to restrict purchasing to please the Western bankers.

Hubris Is the Basis of Tragedy

To the extent that any very serious people take note of this, it is to ignore it, and then deride it. History shows that those who represent fading and unsustainable regimes tend to ignore what is happening, then turn stridently against any opposition to their will by both words and actions. And finally, they lose.

There are some very good reasons why China and India and quite a few of the new emerging economies are seeking safe havens from the dollar. It is not because 'they hate our freedom.' It is not because 'they are ignorant of modern economics.' It is not because 'they are a bunch of gold bugs.'

It is because the Western financial system is a shell game of frauds, and remains largely unreformed, run by and for insiders. Recognition of a fraud first arises at the periphery.

And the dollar has become a major vehicle for exporting these frauds to the rest of the world through the mispricing of risk and the brazen manipulation of price discovery, in many financially related markets. How can anyone continue to ignore and even deny this pervasive and ongoing corruption in the markets?

If you do not understand this, you will probably be able to understand little of what is going on now, and will understand little of what may likely happen over the next few years. I would expect there to be quite a bit of disinformation put forward about it.

To paraphrase Upton Sinclair, sometimes it is difficult to get a man to understand what his career path and his wallet encourages him not to see.

Sometimes, but thank God not always, when flawed characters face a crisis they start breaking bad.  And overcome thereafter by greed, pride, and the will to power, they do not know when  to stop. 

And so they hurl themselves over into the abyss, and take a number of good people with them.

"Who are you talking to right now? Who is it you think you see? Do you know how much I make a year? I mean, even if I told you, you wouldn’t believe it.

Do you know what would happen if I suddenly decided to stop going into work? A business big enough that it could be listed on the NASDAQ goes belly up. Disappears! It ceases to exist without me...

You clearly don’t know who you’re talking to, so let me clue you in. I am not in danger. I am the danger. A guy opens his door and gets shot, and you think that of me? No! I am the one who knocks."

Walter White, Breaking Bad

Gold Daily and Silver Weekly Charts - 2013

And it is.

The Lord bless you and keep you.

May the Lord let his face shine upon you, and be gracious to you.

And may the Lord look upon you kindly, and grant you peace.


See you next year.

SP 500 and NDX Futures Daily Charts - The Men Who Sold the World

"Whoever wishes to come with me, let them put aside their own selfish interests, and take up their cross, and follow me.

For whosoever wills to keep their life for themselves shall lose it; but whosoever puts aside their life for My sake, and that of the Gospel, shall save it.

What therefore is the profit in it, if you gain the whole world, but lose your self?"

Mark 8:34-36

Gold and Silver ETF Inventory Changes For 2013 - 942 Tonnes of Western Gold Gone

The drain of gold from the Western ETFs and Funds is apparent.  About 942 net tonnes have been removed.  This compares to the 856 tonnes that had been removed as of mid-December.   That is quite a bit of bullion moving out in just a few weeks.

But even more notably, this is in sharp contrast to silver, which has had about 992 net tonnes added.   On a percentage basis silver has had a worse price performance this year compared to gold, so ascribing this to investor preference seems a bit thin. 

This is certainly an interesting phenomenon.  It will be worth remembering I suspect.

There seems to be little question that the gold market is being manipulated by some big players.   And there is certainly quite a bit of precedent for this manipulation.  The bigger questions are the motives, and the course of the endgame, this time.   All manipulations end, eventually. 

As an aside, I would like to address a recurring pet peeve of mine.  The financial spokesmodels will often look at the drawdowns in the GLD inventory and say, 'investors were dumping gold today.'  

Where were they dumping it, into the ocean? 

All this gold, that no one seemingly wants, and yet the New York Fed cannot find enough bullion to return Germany's gold, and for seven years.  What about the gold they hold that no one has yet asked about?

No, the gold has been moving from the custody of GLD as Authorized Participants, aka the usual suspects, redeem bullion from the ETF, and send it elsewhere. 

Where does this all lead?  Follow the yellow brick road, or more appropriately, the river of gold.  Judging from the overall import and export numbers, it is quite the golden river, flowing from west to east. 

It is caught in the tide of history, as are we all. 

These figures are from 12/31/2012 through 12/30/2013 and are courtesy of Nick Laird at Sharelynx.com.

Gold Daily and Silver Weekly Charts - Year End

Very light volumes and a bit of 'profit taking' although I would tend to say this is painting the short positions up for the year end close.

I include a chart below that shows the 20 biggest stock short positions on the Toronto Stock Exchange. You can see how the miners fit into this picture.

There was no meaningful inventory movement in the Comex warehouses on Friday last.

January is a non-active month, whereas February may once again stress the ability of the Comex to maintain its vestiges of actual precious metals delivery.

This 'feels' like a bottom action here.  But in times of 'currency wars' I will tend to wait for confirmation before getting too excited about anything.

But with the fiat meisters of the status quo DeLong and Krugman chirping so loudly, it may not be as good as a fat lady singing, but it might be close.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Year's End

Perhaps a little more paint on the tape for the sake of bonuses, and then we are done.

Little volume today and even less tomorrow. Mostly squaring of portfolios.

Have a pleasant evening. VIX did tick up a bit as I thought it might but nothing of significance yet.

 

Gold Daily and Silver Weekly Charts - Tottering Into Year End

"Oh what a tangled web we weave,
When first we practise to deceive!"

Sir Walter Scott, Marmion


“The arrogance and brutality of empire are not repealed when they temporarily get deployed in a just cause.”

Michael Kazin

When governments intervene in markets, other than occasionally and transparently in currency and interest rate markets in pursuit of clear policy, I do not see how they can expect investors to maintain the confidence in their policies and actions.

It is understandable that such actions in commodity markets may be occasionally necessary to help to manage the impact of some exogenous crisis.  This is the right and proper role of a government in responding to the needs of their people in the face of natural disasters, wars, and other exceptional events.

But when interventions become a routine and necessary component of central bank policy, there should be no question that the economy is being maintained in an unstable and untenable equilibrium, and that forces of imbalance are being allowed to accumulate that will result eventually in a market dislocation and a further crisis, that often will be worse. 

When the temporary becomes permanent, and the discretionary becomes required, then the winds of great change will begin to blow, and what has been hidden, however long, will be revealed.

SP 500 and NDX Futures Daily Charts - VIX - A Warning On the Equity Market

It is the end of year, and the market volume is light, almost as light as the regulatory oversight.

Stocks are drifting higher as the paint is lightly stroked across the tape. VIX is quite low and I have included a Year-To-Date look at it below for you to gauge it more effectively. That is not to say it cannot remain low for a period of time as we have seen in this market during the year. 

It is too bad the major VIX ETFs, and short stocks ETFs, are designed to lose money over any extended time period.  One will have to find some other way to seek safety or a contrarian event without trying to precisely time the market.  What that might turn out to be I can only say what I tend to think about it, having no crystal ball of my own, alas.

As you know I have said it looks like the Fed is blowing an asset bubble in financial assets, for the purposes of a 'trickle down' recovery. Since then some others, more renowned and less easily ignored like Jim Grant, have said the same thing. And I do believe it is absolutely true.

This policy choice, to which the 'scholar-gentry' are trying to accommodate themselves because it feels so good for their own situations, is going to have some consequences. I suspect those consequences are going to start showing up next year.

Confidence, once lost, is hard to regain. Sometimes those in power can be so effective in bullying others to their views, along with their choirs of careerist supporters, that they can take a bad trend much too far beyond the sustainable to a false equilibrium. This is what we have seen in both the tech stock bubble, and the collateralisation of housing related debt bubble. And the reversion from it comes unexpectedly and with some release of energy.

I am fairly persuaded that we will see the same thing again, sometime in the next two years. We will likely see a 'market break' to confirm this first, a small one in the new year and another in spring. This is difficult to time because of the Fed's blatant attempt in support of the markets.

What will precipitate it, what the particular 'trigger event' will be I cannot say, but I am sure that it will be the result of this horrible policy decision fostered by the Federal Reserve and the administration of making the rich richer, in the hopes of making all boats rise, or as Galbraith noted, 'feeding the sparrows with the hay that passes through the horse.'

Have a pleasant evening.

NAV Premiums of Certain Precious Metals Trusts and Funds - Skoyles and Max Do Handbags

A bit of a surprise in the premium on Sprott Silver which is carrying a slightly negative premium and on a par or a bit lower than gold. That is unusual historically except when they are engaging in a secondary offering.

Sentiment is about as low as I have seen it in a long time. It brings out and emboldens the trolls and perma-bears and shills for sure, but even the stalwarts are flagging it seems.

And you know what that can mean.

For those with a long time horizon, I cannot help but reiterate, 'this too shall pass.' As you know I became interested in gold, and a few years later silver, when I began studying asset bubbles and money in the late 1990's. Compared to some periods in gold and silver this is not pleasant, but not all that unusual. It is a fairly stiff correction in what looks to be a bull market based on identifiable fundamentals. If anything concerns me at all it is the 'currency war' aspect of this, and the zealous overstepping of 'very important people' in blind pursuit of their utopian ideologies.

I also include an interview that Max Keiser does with Jan Skoyles.  It is a bit light in the seasonal shopping spirit. I particularly enjoyed her premiere interview with Ben Davies.   As an aside, when I was in my traveling prime I used to shop frequently at Harrods, and have a suitable veneration for their Food Halls.

However, I have to say that Aldi is a 'budget store' with remarkably good quality, and it does not surprise me that Jan hears that the quality of their mince pie is even better than Harrods. I first encountered them in Germany, and am pleased to see them popping up in the States on the east coast especially. A very workable arrangement for the staples indeed, and the occasional nice surprise from Deutsche Küche brand.

But we tend to 'shop local' whenever feasible, no matter where we might be, from people who actually make and do the things themselves. I have had some great times exploring the local markets around the world with my wife, who is the real subject matter expert on all things shopping and on value in general. It seems as though every good thing I have, or am, has come through her. Together we make a better person than either of us would be alone, looking out and facing the world together. To me this is the essence of a good relationship.

And sometimes there are little overlooked gems to be found, even in your own back yard, if you but take the time to look for them. We search them out, and give them our patronage and attention whenever possible. This applies to both shops, and people.

Joyeux Noël

“...God is light, and in him there is no darkness at all” (1 Jn 1:5). Yet on the part of the people there are times of both light and darkness, fidelity and infidelity, obedience, and rebellion; times of being a pilgrim people and times of being a people adrift.

In our personal history too, there are both bright and dark moments, lights and shadows. If we love God and our brothers and sisters, we walk in the light; but if our heart is closed, if we are dominated by pride, deceit, self-seeking, then darkness falls within us and around us. “Whoever hates his brother – writes the Apostle John – is in the darkness; he walks in the darkness, and does not know the way to go, because the darkness has blinded his eyes” (1 Jn 2:11).

On this night, like a burst of brilliant light, there rings out the proclamation of the Apostle: “God’s grace has been revealed, and it has made salvation possible for the whole human race” (Tit 2:11).

The grace which was revealed in our world is Jesus, born of the Virgin Mary, true man and true God. He has entered our history; he has shared our journey. He came to free us from darkness and to grant us light. In him was revealed the grace, the mercy, and the tender love of the Father: Jesus is Love incarnate. He is not simply a teacher of wisdom, he is not an ideal for which we strive while knowing that we are hopelessly distant from it. He is the meaning of life and history, who has pitched his tent in our midst.

The shepherds were the first to see this “tent”, to receive the news of Jesus’s birth. They were the first because they were among the last, the outcast. And they were the first because they were awake, keeping watch in the night, guarding their flocks.

Together with them, let us pause before the Child, let us pause in silence. Together with them, let us thank the Lord for having given Jesus to us, and with them let us raise from the depths of our hearts the praises of his fidelity: We bless you, Lord God most high, who lowered yourself for our sake. You are immense, and you made yourself small; you are rich and you made yourself poor; you are all-powerful and you made yourself vulnerable.

On this night let us share the joy of the Gospel: God loves us, he so loves us that he gave us his Son to be our brother, to be light in our darkness.

To us the Lord repeats: “Do not be afraid!” (Lk 2:10). And I too repeat: Do not be afraid! Our Father is patient, he loves us, he gives us Jesus to guide us on the way which leads to the promised land. Jesus is the light who brightens the darkness. He is our peace. Amen.

Francis I, First Christmas Sermon

Gold Daily and Silver Weekly Charts - Merry Christmas!

"God bless us, everyone."

Charles Dickens, A Christmas Carol

Please do not forget the poor this year, for whom Christmas is often sadly just another cold and dreary day. For they are many, and their plight can condemn or redeem us.

Have a pleasant holiday.

See you later this week.

SP 500 and NDX Futures Daily Charts - Viva La Barracuda

“Hubris calls for nemesis, and in one form or another it's going to get it, not as a punishment from outside, but as the completion of a pattern already started.”

Mary Midgley


"The United States has the best, deepest, widest, most transparent capital markets in the world which give you, the investor, the ability to buy and sell large amounts at very cheap prices. That's a good thing and I wish Paul Volcker understood that."

Jamie Dimon


"'My name is Ozymandias, king of kings:
Look on my works, ye mighty, and despair!'

Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away."

Percy Bysshe Shelley, Ozymandias