Gold Daily and Silver Weekly Charts - The Usual 3 AM NY Time Bear Raid

Gold was hit hard by a selling flurry around 3 AM Eastern Time, with most of the selling timed to events in London.

Check out the plunge in gold lease rates on 2 February in the last chart.

Silver proved to be more resilient.

If and when the metals brokers and their pyramid of leverage breaks, be careful about any holdings you may have that are mingled with theirs, otherwise your victory may be marred by a loss of funds related to the collateral damage of a default and a financial reorganization.

I hope for the best, but if there is another financial dislocation in the markets it is going to be quite ugly. They are running a little low on scapegoats and patsies, and the pain to be distributed will be great.

SP 500 and NDX Futures Daily Chart - Watch For a Divergence in VIX

Another light volume day saved the market from rolling over, which it seemed ready to do early on.

I think it is time now to take a maximally defensive position, which for me at least means hedged gold bullion positions and cash. The bullion hedge is to guard against a liquidation event as opposed to an equity correction.

If volumes stay light the wiseguys can keep lifting this up, burning the shorts. So do not get ahead of this, but keep your powder dry if you trade, and if not, start packing up in advance of a move to higher ground.

MF Global: 'Select Parties' Received the Customer Funds in the Last Week of Business

Hail to the Real Chief

It sure is taking them a long time to spit this one out, isn't it?   We stole your money, we own the system, and there is nothing you can do about it, you pipsqueaks, so just STFU and take what we choose to give you. 

Given the timing and the likely parties involved, these transfers, even when they do not involve the theft of customer funds, with the withholding of third party cash transfers by the intermediaries, done among insiders in the last week of a bankruptcy, have the appearance of a fraudulent conveyance.

Given that quite a bit of this money was undoubtedly held by MF Global's bankers, who were almost certainly aware of and may have helped to precipitate the bankruptcy, we might even have a criminal conspiracy to defraud the customers and other creditors in addition to the civil actions appropriate in a fair and unbiased bankruptcy proceeding.

There is also some evidence that certain customers were privately warned by the bankers, or perhaps even parties in the company itself, a few weeks in advance, and were able to withdraw their funds from the company before it failed. Some right wing money men come to mind, among others.

This suggestion by the trustee that the MF Global personnel took the customer money unknowingly, ie. by mistake, would be hilarious if it was not being used to describe so malicious and unspeakable lapse in stewardship by the privileged, wealthy people in stealing the livelihoods from farmers and cattle ranchers among others.

What surprises me almost more than anything is that these jokers are willing to risk bringing down the financial system for a measly billion dollars, which is a fraction of what they take in personal bonuses in a good year. Is this some sort of perverse adherence to the Ferengi rules of acquistion? "Once you have their money, never give it back."

If this stands, then nothing, no assets, held by the Anglo-American financial system are safe. When the next crisis comes, they will take what they want, starting with foreign holdings, working their way up the power and influence pyramid from there. And you can talk to the back of their hand if you don't like it.

Reuters
MF Global shortfall worsened as bankruptcy neared
Mon Feb 6, 2012 2:18pm EST

Feb 6 (Reuters) - The trustee liquidating MF Global Holdings Ltd's broker-dealer unit said the shortfall in commodity customer accounts began five days before the company's bankruptcy and grew in the days leading up to the Chapter 11 filing.

James Giddens, the trustee for MF Global Inc, said in a statement that his investigation has revealed that MF Global personnel might not have known of the shortfall at the time.  (Anyone in the business must be rolling on the floor laughing at this one. Oops, sorry, we inadvertently took the customer money by mistake, a simple $1.2 billion error, and its too late to give it back to the right persons. But we're dreadfully sorry for our innocent mistake. - Jesse)

He said he has traced a majority of cash transactions, totaling more than $105 billion, made in the last week prior to MF Global's bankruptcy on Oct. 31, 2011. Giddens said he is working with third parties to seek more complete information about transfers to "select" parties prior to that bankruptcy.

Giddens also said it is unknown when he will be able to make more distributions to former customers.

Net Asset Value Premiums of Certain Precious Metal Funds - Sprott Places Gold Offering at Premium

Sprott Physical Gold Trust Announces Completion of Its Follow-on Offering of Trust Units
Feb 3, 2012

TORONTO, Feb. 3, 2012 /CNW/ - Sprott Physical Gold Trust (the "Trust") (NYSE: PHYS / TSX: PHY.U), a trust created to invest and hold substantially all of its assets in physical gold bullion and managed by Sprott Asset Management LP, today announced that it has completed its follow-on offering of 20,000,000 transferable, redeemable units of the Trust (the "Units") at US$15.19 per Unit for gross proceeds of US$303,800,000 (the "Offering").

The Trust will use the net proceeds of the Offering to acquire physical gold bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering. The net proceeds of the Offering per Unit are greater than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering, as required under the trust agreement governing the Trust.

At today's prices this offering will pull about 176,000 ounces of gold off the public market.

In the reverse of what we saw with silver, the big follow on offering for the Sprott Physical Gold Trust priced out at a premium to its NAV and its market price. I think that is not possible with silver because of the huge premium that the Silver trust often carries. The Gold Trust premium is normally in the 3-4% range.

Sprott placed the entire gold offering fairly quickly, having announced it last week.