Gold Daily and Silver Weekly Charts - Life Imitates High School, Or Monopoly

Very little of consequence occurred at The Bucket Shop today.

Gold had the usual rise and then smack down into the London PM fix and the New York open, just to give the sleeping pit crawlers a wake up call, and then bounced along 1180 support for the rest of the day.   Silver was pretty much a copy cat, or vice versa.

There were no deliveries made for the precious metals at the Comex yesterday.  As Dr. Zoidberg says, 'what a surprise!'

And as you can see on the domestic warehouse reports below, little happened except for the slow rim-leak of bullion outbound.

Hong Kong was quite a different matter yesterday.  So much so that it merited some intraday commentary About 38% of All the Comex Gold in Hong Kong Left the Warehouses Yesterday.

In the course of finding yet another excuse not to go out and take care of the leaves again, I took some time to write an open letter to Mr. Paul Krugman titled,  An Open Letter to Paul Krugman on the 'Republican Lust For Gold.'

Perhaps I should have said, 'so-called lust for gold.'

I mean, besides Rand Paul and his father, there may be an abundance of lust for certain things among the GOP and the Wall St Democrats for that matter, but not much of it is for the betterment of the common people and their experiences with money and markets.

In fact, one might be excused if they think that in practice there is little difference between the 'establishment Republicans' and the 'Wall Street Democrats' except for names of the billionaires who sign their paychecks.

And what flaming liberal Democrat took us OFF the gold standard for the dollar with regard to  international monetary settlements and valuation, and unilaterally slammed the gold window shut?

Richard Nixon.  Oh yeah, that Republican. Like most of the ruling elite no lust for gold there: just power.

Let's see if gold and silver can hold their levels here.

And let's see if the financiers can once again 'pass go' and collect their big fat bonuses without blowing up any new markets, or institutions, or countries between now and the New Year.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - This Is Why We Can't Have Nice Things

Wow. I was expecting a decline down to these very key support levels, which as you may notice are just about where you would like to see them step in a 'cup and handle' or W bottom.

But the wiseguys certainly did not waste any time getting here.

Tell me, what happened this week that changed the entire complexion of the equity market, which rose in an almost unstoppable manner from a hard bottom back to challenge the all time highs in a matter of a few weeks?

What new wisdom did the trading desks and the algos discern that turned sentiment on a dime from mindless greed to panic and fear?

Or was this the usual 'wash and rinse' that one might expect in a market dominated by relatively unregulated behemoths who feel free to shove prices around like a pinball machine, all the better than to consume the public with, my dears?

Well, take heart young bulls.  IF the market can stop and make a stand within a little leeway to the downside, then it has a good chance of doing this all over again and providing the one percent with yet another 'Santa Claus rally' and a 'Merry Christmas' to them.

I took all my short positions and VIX long off.  I don't remember if I mentioned that.  Now we will see what this latest attempt by the financial community to baffle the world is all about.

I would give that a 50-50 at least at this point, and cannot quite see things going much lower, unless they are really of a mind to take it all the way down, and bring it all the way back up in December, lets say on the news that the Fed did not have the stones to raise rates after all that.

Nomi Prins does not think that they will.  And I respect her judgement.  But having missed their window, and being preoccupied with doubts about their whacky QE and Twist programs that have accomplished almost nothing except ghosting the middle class and upsetting the balance of power in the republic, I really hesitate to put anything past their busy little financial engineering hands.

We will sacrifice all, our lives, liberty and sacred honor, for the Banks.

Have a pleasant weekend.

About 38% of All the Comex Gold in Hong Kong Left the Warehouses Yesterday

Perhaps it went out for some dim sum.  TTFN, but be right back!

Roughly 21 tonnes, or 685,652 troy ounces of gold in .999 fine kilo bars, was withdrawn, net of a small deposit of 27,328 ounces, from the Brinks warehouse in Hong Kong yesterday.

To put that into some perspective, that is the same amount of all gold in the entire JPM warehouse in the US.

Now compared to the Comex US, in which very little gold bullion actually changes hands or goes anywhere, that is a huge number.  But Hong Kong is typically seeing large inflows and outflows of gold.  Because that is how the precious metals market has been manifesting in Asia since about 2007: not with endless chains of paper just changing hands in a grand game of liar's poker, but with the physical exchange of bullion.

And most of that bullion leaves the warehouse and does not come right back, as Koos Jansen has explained repeatedly about the operations on the Shanghai Gold Exchange.  It is being accumulated on the mainland, and this probably does not include the PBOC official purchases.

The point of this is that the price discovery in New York is becoming increasingly distinct from the actual physical supply and demand flows of bullion which are taking place in Asia.  As I have said, gold is 'trading like a modern currency' without respect to its nature as a commodity bound by physical supply.  The Fed et al. can print money, but they cannot print bullion.  That is the point of it.

And that is a potentially dangerous development, especially with respect to a commodity that is being traded at a leverage in excess of 200:1.  And in the face of shrinking inventories of gold available for delivery at current prices in both New York and London.

I have put the most recent report for all the US warehouses registered with Comex below that of Hong Kong.

As the Comex told Kyle Bass, 'price' will take care of any imbalances.  Yes, just as smoothly and seamlessly as it did when the price of highly levered and risky paper corrected back to reality in 2008.  Ba-boom!

Are you kidding me? That is what Kyle Bass said, not me.  'Just give me the gold.'

And if people should choose to stand for physical delivery given the relative scarcity, how much of a price adjustment might be required if they could even find any to be had without an onerous delay and in sufficient numbers?

At the A&P?

How many people, once again, are going to be allowed to walk blindly into another financial buzz saw caused by reckless gambling on Wall Street?   Are we willing to repeat the folly of MF Global on a grand scale?  Will the rest of the world be so cowed by the Banks as its investors?

An Open Letter To Paul Krugman On the 'Republican Lust for Gold'

"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage."

John Kenneth Galbraith, Age of Uncertainty

This is a response to Mr. Krugman's recent column as it was featured at Economist's View titled, Republican Lust for Gold

I am not in favor of a return to a gold standard.

I am a reasonably well-educated, politically progressive professional, a likely supporter of Bernie Sanders as an economic reformer and an opponent of endless war, and certainly not the 'Wall Street Democrats.'   I believe that the current 'debate' over the place of gold in the economy is breaking along ideological lines to the point of a religious fervor and intellectual blindness, on both sides.

I think of gold as an alternative store of wealth, which without any sanctions from the state pro or con can serve a very useful purpose. It gives people a 'choice.' It can act as a barometer of sentiment. And it serves a purpose, especially in times of pervasive fraud in the financial asset markets, as an asset without mispriced or even hidden counterparty risk if held directly.

And if you think that the problem of pervasive fraud has been fixed you are sorely mistaken.

If a system cannot stand the criticism offered by something which it cannot and probably ought not to control, then perhaps the fault is in the system, and not in the critics.

And while we are on the topic, what by any stretch of the imagination do you subscribe the issue of 'gold' to the Republican establishment? Who shut the gold window in 1971? One of the few things that Chairman Greenspan said is that statists from both sides of the aisle despise and fear gold because it constrains them in their quest for discretionary power. And he was right.

The current 'stimulus' is a massive failure because it has been trying to save a broken and largely unreformed financial system, rather than provide stimulus and support to the vast majority of the participants. It is the consequence of placing the highest priority in means and methods, because they are 'ours.' Our method, our model. First and foremost. Because we fear for our credibility.

And so the participants who are complicit in the fraud and those who are invested politically in the models and methods both become ensnared in a 'credibility trap,' and what Mike Lofgren has called 'the anti-knowledge of the elite.'

Unfortunately, Gresham's law is still works. Gold, and to a lesser extent silver, are flowing 'en masse' to Asia in almost astonishing numbers of tonnes each month. The numbers are there, little publicized and noted in the prestige media, but almost shocking. It has not yet made its way fully into official reporting mechanisms, even so called 'industry organs.'

Mr. Krugman, nine out of ten Americans will notice that the vast peoples of Asia and the Mideast are not 'Republicans.'   The central banks of the world are hardly 'Republicans,' but they became net buyers of gold around 2007.

No, they are not the easily mocked Republicans.

But they are looking for a safe alternative to a monetary and financial system that is going off the rails, again.  The modern hypothesis that all money is purely arbitrary is only feasible if one has the ability to make their purely arbitrary valuations stick.   That is the Faustian bargain with the will to power, the endless war of the monetary relativists.

Would we make enemies of the whole world for the sake of a corrupt and unsustainable financial system? Alas, some would, and are doing so even now.

As I am sure you know, once a force like Gresham's Law goes into effect, which it already has, it can quickly turn into a torrent of consequences.  Will we continue to argue until that event is upon us, as we did with the prevalent fraud in the housing bubble that was created by the same perpetrators who have continued to rig markets even until today?

The dogmatic modelist and political hack sees China and India and other nations buying gold and says, 'We must stop this! Control it!' The thinker sees a sea change in the monetary markets and says, 'we must understand why this is happening, and what we may be doing to provoke it. And if we are doing something wrong, then correct it.'

No I do not support the gold standard, not at all. It would be entirely inappropriate for a patient still in the ICU to be prescribed a regime of hard exercise and strict diet. And the corruption in this system is capable of corrupting anything, even an external standard.

Given the proper regulation, transparency, and judgement, a paper currency can emulate the steadiness of a gold standard while allowing for more latitude in times of distress. Do you really believe that we have held to that prescription with our serial bubbles, frauds and crises?

But I do feel quite strongly that the current policy of constant market intervention in the West, which is obviously happening to anyone who is capable and experienced in watching trade patterns, is going to tear a hole in the facade that this sick series of policy errors is becoming.

If one takes even a cursory look at the trade flows of gold, one can see that the flows into Asia and the Mideast are relentless, and growing. And the decline of 'free float' in the UK and US in particular is striking. The numbers are difficult to discover, but some have taken on that task.

The leverage and shuffling of free bullion around to dull the interest in leverage is approaching 300 to 1 in NYC and 200 to 1 in the 'physical' LBMA market in London is the kind of obvious error that one looks back at from the wreckage and says, 'What were they thinking?'

We made a mistake. A big one.  We have tolerated a farcically ineffective program of 'reform' and a massive top down stimulus focused on the 'system' with an austerity for the public that is going to rip a tear in the social fabric which will take years, and a significant amount of pain, to mend.

It is going to happen, no matter what models or arguments you may wish to stick your head in. I am not trying to argue a point. I am trying to encourage people to at least look at what is happening, and to stop comforting themselves with obviously faulty numbers and metrics from a system that has stopped serving most participants in favor of a powerful few.

This is going to end badly. I was more demure when we had similar discussions here like this prior to the housing bubble collapse. 'And no one could have seen it coming.'  Because their eyes were closed and they comforted themselves with what they wanted to hear.

There is, at some point, going to be a dislocation in the international currency and bond markets.   And it will be noticeable, unless we change our ways and embrace honesty, transparency, broader equity, and reform.

It will not come from the political process, because that has also been broken by the power of big money.  That has become so painfully obvious that the only way to continue to justify it is to declare corporations to be 'people' and bribery to be 'free speech.'

People may think of themselves as 'Keynesians,'  and what the 'other side' thinks about Keynes is admittedly mostly an ideologically tainted caricature.  But first and foremost what made Keynes effective was his practical focus on the desired results and not to a preconceived model which crushes out the better part of reality in its understandable and unfortunate inadequacy that is common to all 'models.'  Keynes was an independent thinker who was confident enough to occasionally change his mind without worrying overmuch about his credibility, and not an acolyte of some constraining school of thought made dogma. 

No, rather than a 'gold standard' now I think gold should stand alone, and be allowed to speak whatever truths it may. As for any use of it by nations, let them make what use of it as they wish. It is a tool. But once they make it 'official' they cannot seem to keep from trying to cage it, and control it. But by then it is merely collateral damage of a growing corruption and fraud of finance, rarely without an accomplice in monetary economics.

At some point the thought leaders will have to rise above their own political enthusiasms and personal aspirations and begin to honestly and openly address what is going wrong. And then perhaps we may begin to push for the return of some of the basic principles hammered out in the 'New Deal' which we so foolishly allowed to be weakened and then overthrown in the 1990s, and even until now.

And, Mr. Krugman, that was a decidedly bipartisan effort. And the players and their enablers who brought us that misery are still active, unabashedly, in the highest circles of power.