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An interesting discussion about the opening of the China-based Pan Asia Gold Exchange and its potential impact on the global gold, silver, and currency markets.
My own expectation is that it will be met by concentrated gaming from the paper trade on the various exchanges, until things eventually sort themselves out and the market finds a truer price discovery based on actual supply and demand.
I suspect there will be an initial surge, and then a great push back, and finally a tug of war until the paper trade capitulates and leverage is resolved. Do not forget that this leverage and the existing imbalances were built up over a period of twenty years, and they have only been ten years in the unwinding so far, and are caught up in what I have called the currency wars.
The timing will be highly dependent on the context of the other markets and sovereign debt. I suspect that once the financiers are done messing about with Europe, they will turn once again to Asia.
I concur with Andrew's analysis of how the short side leverage will break down. One may choose not to participate in the metals investment, but I think it is becoming almost insane to short it, except perhaps on a day trade. The danger of a market dislocation is becoming too large for all but the TBTF firms to bear.
And although the percentage gains may ultimately be greater in the instruments such as miners, with of course the commensurate increased risk, I think bullion will continue to lead the way, since the reform of the naked shorting of equities will be dependent on changed demanded as the result of a breakdown first in some other market scheme, like the metals paper manipulation with the excessive use of leverage and the abuse of market pricing.
And although the Comex seems to be the focal point of all this discussion, there are some things that suggest that scandals may rock the London and even the Canadian exchanges and their banking systems, reaching perhaps to the higher levels of government. There seems to be a new Triangle Trade in fraudulently misrepresented financial instruments going across the Atlantic, which includes the Caribbean and some of the other tax havens.
Andrew Maguire Interview on King World News.
Gold soared this morning on a flight to safety from the European debt crisis.
Then suddenly it started dropping sharply around 10:30 NY time.
What could have happened?
Oh, the Bloomberg is reporting that Obama will be addressing the nation in a Press Conference around 11:00 AM.
It doesn't get much more obvious than this.
As the news commentators just noted, gold is flat and the Treasuries are rallying, so why worry?
My stock index shorts from Friday are doing well as this overextended rally continues to pull back. I took a portion of them off the table as the SP futures reach down to support around 1312. I also took the miners off in the first hour, and trimmed back the bullion plays a little after that.
I suspect the major players will reach some agreement on the debt ceiling by July 22, and throw a portion of the American public under the bus, to everyone's relief that a horrible crisis has been averted, while largely maintaining the real status quo and the primacy of the Wall Street monied interests.
It's MMT all the way. Not only Modern Monetary Theory, but Modern Management Theory, and the management of perceptions is everything in the Potemkin economy.
Later: I am watching Obama speak now, and it's pure theater. He said he wants a 'fair and balanced' solution. He is posturing quite a bit, but obviously concerned with giving his Republican colleagues cover with the more vocal wing of their constituency.
I have great sympathy for him, as he has inherited a terrible mess created in large part by his predecessors. The pigmen and their comrades are in a feeding frenzy, and the social fabric is stretched thin. Enough is never enough for them as they are addicted to greed and the will to power.
A bright fellow no doubt, but unseasoned by things like family, tradition, and the personal experience of hardship: a great story teller, a rationalizer, a perpetual outsider, and a thoroughly modern relativist. You have to keep your eye on what he does, rather than what he says. But that is a given with all modern managers.
No wonder gold and silver were hit so hard. They are the untarnished standards that stubbornly resist all rhetoric and relativism.
"...Surely, there is at this day a confederacy of evil, marshalling its hosts from all parts of the world, organizing itself, taking its measures, enclosing the church of Christ as in a net, and preparing the way for a general apostasy from it. Whether this very apostasy is to give birth to Antichrist, or whether he is still to be delayed, we cannot know; but at any rate this apostasy, and all its tokens, and instruments, are of the Evil One and saviour of death.
Far be it from any of us to be of those simple ones, who are taken in that snare which is circling around us! Far be it from us to be seduced with the fair promises in which Satan is sure to hide his poison!
Do you think he is so unskillful in his craft, as to ask you openly and plainly to join him in his warfare against the truth? No; he offers you baits to tempt you. He promises you civil liberty; he promises you equality; he promises you trade and wealth; he promises you a remission of taxes; he promises you reform...
He shows you how to become as gods. Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."
J.H.Newman, The Times of Antichrist
The divergence between gold and the broad stock indices is highly encouraging that the precious metals have put in at least a short term bottom, and may threaten to break out over the next couple of weeks.
This is still a very slow time of the year, and seasonally weak for precious metal investments. But favorable winds are just around the corner.
On a breakout, the intermediate target for gold will be around $1755, with some pauses and at least one larger pullback along the way.
