Gold Daily and Silver Weekly Charts - Signs of the Times

"Ne respondeas stulto iuxta stultitiam suam ne efficiaris ei similis."

Prov 26:4

This is a Non-Farm Payrolls week, and it is a heavy delivery month, although as Rik Green notes the contracts standing are quite a bit less than at this time last year. Still, given the thin deliverables at these prices it should prove to be interesting.

Gold is moving from West to East, of this there is little doubt. Well, some can doubt it, but those who repeatedly deny it, or tend to dismiss it, may be saying more about themselves than they do about the market.

The more interesting question is what the markets are saying to us, and what the price, demand, and supply action are indicating with regard to the future, and the sustainability of certain noticeable trends.

The action on the Comex is interesting, but the real game is broader globally. There is a huge change underway, but unfolding slowly, in the international currency markets. If someone does not get this, then they really do not understand what is happening. There is no fault in that, because so few really understand money, and the lack of transparency is clouding, even moreso by the fog of war.

There was some movement of bullion into warehouse storage at HSBC yesterday, but otherwise little activity.  JPM seems to have the whip hand on the Comex and in the precious metals derivatives markets, but not so much in the physical markets which seem to be wiggling through the fingers of the bullion banks, and perhaps much to their dismay. 

As Ted Butler noted in his weekly review on Saturday:

"Quite literally, what JPMorgan does or doesn’t do determines the price of gold and silver. It’s easy to lose track of the big picture when one focuses on all the details. But when you step back a bit, JPMorgan is dominant in just about every detail."

Ted does an exceptionally good job of analyzing the Comex market, and I appreciate his efforts.  I do not need to agree with someone to gain significant benefit from what they have to say, provided their reasoning is based on some identifiable data and information.  Sources like this are a blessing.

I am rather reluctant to lay any wagers on JPM's motives based on this information however. It is not clear to me where their ultimate interests, as well as profits, may lie in this matter.  And for whom they may be acting, even as they seemingly take positions for their own accounts.

Unfortunately, this is the nature of the game, in times of currency wars.   Some of the TBTF Banks act as instruments of policy for their respective governments from time to time, and are certainly beholden to them.  Everything is not always as it may seem.  And so we must place our confidence where we can, and with some care.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Bounce. Dead Cat Or Something More?

Stocks caught a bounce today, but it had the appearance of bottom feeding after a stiff decline.

The factors that have been driving stocks lower have not changed. We might see some action off the Non-Farm Payrolls number on Friday, but for now the market is looking at the risks in the emerging markets, and the weakness in the larger economies such as the US and China.

In the short term the games will be played, and that is what we saw today. Let's see what happens the rest of the week before we get too worked up about this.

I did tell some of my friends to take their profits and flatten out at the end of 2013, as they had nice gains in bullish equities investments. Unless the Fed decides to put the pedal back to the monetary metal, I think the easy equity gains are done.

Have a pleasant evening.

 

NAV Premium of Certain Precious Metal Trust and Funds - 91,680 Ounces of Gold Out of Sprott

The premiums on PHYS and PSLV are back more to 'normal' levels now, although still hardly exuberant.  PSLV is at a slight premium, and PHYS is almost flat.

The deeper discounts on CEF and GTU are still there, but a bit thinner that they have been.

Since the last time I put out this chart, another 91,680 ounces of gold bullion have been redeemed from the Sprott Physical Gold Trust.

I can imagine someone rationalizing this redemption as an arbitrage deal because PHYS is selling at a slight discount to its NAV. However, given the 'friction' of the transaction, and the necessity of storing this amount of gold, it seems like a fairly small amount to be tempting for a mere arbitrage against the NAV discount, given the volumes of gold that are being taken out.

Although it is possible that PHYS has priced its redemption process too cheaply.  And there is no allowing for the desperation of a hedge fund that is willing to scrape for thin returns. This assumes they are not taking delivery to ship the gold to Asia for the premiums for physical paid there. If so, then it is not really arbitrage as I am using the term with regard to the discount to NAV, but the discount of paper to bullion.  And that is a general trend that is hard to miss.  But some do.

But one would think that playing the spread with paper and leverage, and betting that there would be a reversion to norms if the premiums fall to historically low discounts, would be a smoother and more scalable wager for any fund truly interested in paper profits. Here is a link to the distribution of PHYS premiums historically.

But this seems to be viewing a phenomenon in isolation that I think it is more correctly seen as part of a general trend, that one is foolish to ignore.

As I have shown here repeatedly, there is a general scouring of enormous proportions of the physical gold bullion from most if not all of the Western trusts and funds at these prices as set by the Comex, which unfortunately is still a price maker for the physical trade despite its own shrinking physical basis.  That is the inconvenient reality that gold imposes on the financiers:  they cannot print it into existence, except as an apparition of paper, without genuine substance.

And there are none so blind as those whose paychecks depend on their willing ignorance.  It is unfortunate, but a fact of life.

So, let's see where this grand experiment goes. I have not been keeping an eye on the short interest in the PHYS, but I think the greater problem is the price of gold overall, which does not seem to be a market clearing price in terms of the actual commodity.   And as a result, the physical bullion is flowing towards markets paying fairer prices, and finding ownership in stronger hands.

But why argue about it, especially with those whose mindset is clearly fixed in one direction? Let the tide go out, and we will see what allocated and unallocated funds are naked.   And who, at the end of the day, is actually holding what gold, and with what encumbrances, cross claims, and counterparty risks.  

So in summary, some might say that gold is flowing out of Sprott because of its discount to NAV, which I point out is miniscule, and much more adeptly gamed through the usual paper games.

Rather, gold is flowing from financialised markets to cash basis markets, from highly leveraged schemes to the vaults of stronger hands flush with paper of less confident value, and put even more simply, from West to East.

This is what happens when once again we begin to see 'peak paper.'  Yes it certainly has not failed yet, and yes, the official measures may show little devaluation from inflation and mask the enormous leverage and undisclosed counterparty risk that is still in the system, après Crash.

 And to this I say, 'in time.' 

Not everyone is investing with a two month time horizon, as is de rigueur in the City and on the Wall Street these days, and passing around their hot potatoes of dodgy paper from hand to hand as quickly as possible, before the next bell rings.

NYSE Margin Debt - Take It to the Limit, One More Time

This gang of Merry Banksters made a 1929-like policy error, as they did in 2000 for the first crash, and then followed that up by blowing yet another asset bubble in mortgage debt, and crashed it all over again, almost taking down the world financial sysem.

And now they turn around and do it for a third time, with financial paper assets.  Will they keep going until the middle class and the real economy is beaten, like pulp into the ground, and a few jokers sitting on the top of the financial pyramid own nearly everything?

What are they thinking? Who are these guys, Mortimer and Randolph Duke?

Greenspan and Bernanke: Worst Federal Reserve Policy, ever.

Watch the margin debt story unfold here.

Let's see what happens next.

Related: NYSE Margin Debt Hits an All Time High