SP 500 and NDX Futures Daily Charts

We get the third estimate of US Second Quarter GDP on Thursday but otherwise the domestic news is light, and US markets are being dominated by sovereign debt concerns in Europe.

Gold Seasonality and a Convergence of Events at the End of November 2011

"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. It was very difficult to get the gold price under control but we have now succeeded.

The US Fed was very active in getting the gold price down. So was the U.K."

Sir Eddie George, Bank of England, September 1999


"That day the U.S. announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."

Paul Volcker, Nikkei Weekly 2004


“Central banks stand ready to lease gold in increasing quantities should the price rise.”

Alan Greenspan, US Federal Reserve Bank, 24 July 1998

As an aside, the lease rates for gold went negative about four days before the recent bear raids in the metals markets began.  This was most likely due to an excess of fresh supply being offered on the markets by the Western central banks. The bullion banks saw this and dropped their bids to take full advantage of the knowledge of this operation, or more properly, subsidy.

The central bank gold is leased to the bullion banks, like the market makers at the LBMA. Among these are JPM, GS, HBSC, BofA, DB, and Barclays. The gold is then sold into the bullion markets in London, or used as collateral for leveraged paper transactions.   With a lag, this additional supply affects the futures and ETF trades with additional leverage in New York.

The week of Nov 21 may be one of particular interest to US investors in precious metals.  The cross currents may make it even more volatile than this August with its 'Night of the Long Knives.'  Or perhaps the banking metals bears have their eyes to the future and are pre-emptively striking now.

If this theory is correct, at some point this market operation will fail, and the price reaction, not to speak of the political scandal, may be memorable. It is not clear to me that we will see it coming on the charts, but one can hope. Personally I think China and Russia will use this as a bargaining tool if they are not doing so already. What's the old line about selling them the rope? Brought to the brink for the sake of a relatively few bankers' bonuses.

There is a an option expiration for December 2011 contracts that week, on November 22. December is a big delivery month, so fireworks are always expected. And we are entering a seasonally strong period for the precious metals.

The US 'Super-Committee' to resolve the debt crisis will be facing a November 23 deadline to vote on a plan which they will present to the Congress and the President on Dec 2.  This will avoid triggering 'automatic cuts' to take place in 2013. 

November will be the real kick off month for the US presidential elections.

On November 22 the US will release its first estimate of 4Q GDP.

On November 23 the Fed will release its latest FOMC Minutes.

The November Jobs Report will be released the following Friday on December 2.

And of course, November 24 begins a four day holiday weekend for Thanksgiving, including the famous 'Black Friday' for US retailers.

Super-Committee Timeline

Oct. 14: House and Senate committees must submit recommendations to the committee by this date.

Nov. 23: Deadline for the committee to vote on a plan with $1.5 trillion in deficit reduction.

Dec. 2: Deadline for the committee to submit report and legislative language to the president and Congress.

Dec. 23: Deadline for both houses to vote on the committee bill.

Jan. 15, 2012: Date that the “trigger” leading to $1.2 trillion of future spending cuts goes into effect, if the committee’s legislation has not been enacted.

Thank You for the Pleasant Surprise

My friend Dominique on the Côte d'Azur‎ sent this to me, and it took me a little while to figure out why. So many things are going on.

I am stunned, surprised by joy.   Thank you for your patronage.

Et merci à tous mes amis du café.


This is from The Big Picture by Barry Ritholtz. I assume he was too much the gentleman to allow his own blog to be included in the voting. It would certainly have been either number one or two. He and Yves are giants in the blogosphere alond with ZeroHedge, Calculated Risk, and Mish among others.

And yet there are so many places with special knowledge to frequent, from the hardy fare of LeMetropoleCafe, the cabaret atmosphere of MaxKeiser, and the classic cuisine of iTulip and EconomistsView, as well as those listed on the left hand side of this blog. We can all count ourselves to be very lucky for this creative environment. Let us hope that it will last through the currency war, and that the lights will remain on.

Gold Daily and Silver Weekly Charts - Night Bombing Raid - Silver +4.50 from Low - LBMA

Gold December futures fell to 1535 and Silver to 26.15 in the overnight session as a determined night bombing raid took them down in the least liquid period of the 24 hour trading day, with the low being reached around 2 AM New York time.

Silver Dec futures are now at 30.78 in New York, virtually unchanged from their open at 30.85, or up over $4.50 from the low.

Gold is at 1623 now, or up $88 from its overnight low.

The December SP 500 Futures had bottomed at 1116 around the same early morning hours, and are now at 1158 or about 42 point from the overnight lows.

Gold has NOT yet broken the short term downtrend, marked with a sharply declining blue line on the chart.

Tomorrow is option expiration on the Comex as we might have expected. I would hope that long term investors would take advantage of these price drops by locking in physical bullion purchases when they can.

However, it is hard to do this with the leverage and margin requirements on Comex especially on the overnight globex trading session. How can an average trader hope to maintain a position? And that is the basis of their schemes.

"It is not immediately clear at this juncture who was selling or why - but in placing such a huge order into the market when the least number of market participants were active tells you that they were out for dramatic effect.

Anyone looking to offload significant amounts of metal at the best possible price would have done so when both London and New York were both open - this would have ensured they would have hit the market when it was most liquid and ensured they got the best price for their sale.

Clearly finessing gold into the market was not their motive - they wanted a statement."

Ross Norman, Sharps Fixley

The interplay between the LBMA 'physical market' and the New York 'futures markets' is fairly obvious. The leverage on the LBMA physical market for gold and silver, as opposed to the London Metals Exchange which trades base metals, is reputed to be around 100 - 1. So any 'run' on the metals will stress the system.

According to their website the LBMA market markers are some of the largest Too Big to Fail banks including UBS, Société Générale, Merrill Lynch (BoA), Credit Suisse, Barclays, Goldman Sachs, JPM, HSBC, The Bank of Nova Scotia ScotiaMocatta, Deutsche Bank.