SP 500 and NDX Futures Daily Charts - IBM to the Rescue On October 29

Weak economic news was a drag on stocks for most of the day.

During the trading day IBM announced a big addition to their stock buyback program.

IBM helped to push the Dow and the SP higher, and turned a poor day into another drift higher.

Tomorrow we will get the FOMC rate decision.

Nothing new is expected.

Today was the 84th anniversary of Black Tuesday, 29 October 1929.

Paper Gold Versus Physical Gold

Thanks for this from a tweet by KoosJansen and a stalwart Floridian reader.

What leverage?  Who said anything about leverage?

Lars Schall's Matterhorn Interview with John Butler On Gold

This is Part 2 of his interview. Part I can be seen here.

This is speculative of course, but I found it to be very interesting. Lars does a good job of drawing out the thoughts of his interviewee, and stepping out of the way and allowing them to expand on their thoughts.  

I had not been familiar with John Butler and while I may not agree with the likelihoods of some of the outcomes I respect his thinking very much.  He puts a bit more flesh on the theory of a hyperinflationary crisis.

I do not agree with his analysis of the euro breakdown.  I think it was inherently unsustainable for the reasons I have outlined in the past.  A currency that spans a broad area of varying economic needs must include a political union with 'transfer payments' to allow for the loss of monetary policy.

I do agree that the euro must evolve.

Gold Daily and Silver Weekly Charts - Quiet Comex Option Expiration

The metals were quietly today, as the early overnight rally in gold was leaned on most of the afternoon.

Let's see if they get hit tomorrow on the day after option expiration or on an FOMC day on Wednesday when nothing is expected to happen.

Prices in the metals are set at the margins. Prices in most markets are set at the margins.

I say this because some people have questioned why the relatively small amount of gold available for delivery on the Comex can matter to price.  They say that because it is such a small percentage of all the gold that has ever been mined, and in their model gold never gets used and is always there.

Well, its a two edged sword. How can dumping in a quiet market what is a relatively small percentage of all the gold that has ever been mined knock the price down? And conversely how can a spot shortage of gold on the same market cause the price to rise?  There might be a clue in there somewhere.

It is because all the gold that has ever been mined is never up for sale at one time and at the current price. Supply and demand work on what has been offered (supply) against the current desire for acquisition (demand). All the gold, silver, diamonds, water and anything else that might exist does not matter if you are trying to buy at a certain time and place at a certain price.  A higher price tends to make more supply available, all other things being equal.  Is that so hard to understand?

I think people get somewhat stuck on the idea that there is an offtake of silver for industrial use, but not so much for gold. That is awkward thinking based on a false assumption.

Silver is more actively brought to market through mining and recycling than gold.   Silver is often a byproduct of base metal mining.   And while silver has a heavier industrial component, gold has a heavier monetary component.

You may not believe that gold is monetary, but for about the past four or five thousand years enough people have thought so to have set a fairly reliable trend in that direction. 

Gold is a monetary metal, the premiere monetary metal. And it is obviously coming back into its own after a long bear market and a regime in which gold was out of favor by a group, the Anglo-American banking cartel, that was promoting other alternatives.  As I have shown several times that has changed.  

And I think for several reasons the structure of the gold market looks like an accident waiting to happen, with a significant price dislocation to the upside. And not so much for silver, although I like both, because no central banks are accumulating silver for monetary purposes as far as I am aware. So, it may not make sense to you in particular, but history does not seem to be leaning in your favor.

Speaking of the Comex, there was almost no movement in or out of the warehouses on Friday.

Have a pleasant evening.