Gold Daily and Silver Weekly Charts - The MIsguided Paperati and Bifurcated Markets

"In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly.

In a depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved."

John Kenneth Galbraith

There is a short excerpt of a video interview with hedge fund titan Ray Dalio at the Council on Foreign Relations below.

I think it is priceless.   Ray lays out his thoughts on wealth and hedging with gold to the chuckles and sniggers of the pampered ruling class  in a very clear and straightforward manner.

There is also another video interview in which Dalio discusses his views with the smirking chimps from CNBC.   It is almost a scene out of Huxley's Brave New World,  with Dalio as some kind of monetary savage trying to explain reality to those who have been incubated in an artificial currency regime of King Dollar and know nothing else.

Here is why I think that this is important.

The gold market in particular seems to have bifurcated, or split into two: one market for largely paper speculation and high leverage, and another for the purchase and distribution of actual physical bullion.

Is this a problem?

Yes it is.  Because the attitude towards gold among the status quo in the West has become rigidly dogmatic, supported by years of lazy thinking and a determined campaign of ridicule and propaganda to attempt to extend the unsustainable.

You can see it emerge every so often in sites and media outlets and analysts who can be considered as creatures of the establishment, to use an older phrase, for whatever reason they may have.   Some of the economist manservants of the ruling class talk about gold with the same sneering manner that a Victorian aristocrat might have discussed the 'rights' of the peoples of India or of China.

And I do not necessarily think they are bad motives, in the dishonest sense at least.  Some may actually believe what they say, although for the most part I don't think that the fortunate care what is good or what is true, if it serves their own special interests.  This is how they have been taught to be, how life is.

If you have been brought up, bred, and bombarded with certain points of view for most of your life, it is no surprise that you may reflexively tend to adhere to and promote those views without regard to any intervening facts, past or present.  You have been programmed by your education and, dare I say it, class.  I see it all the time.

And it can sometimes lead to odd divergences in reasoning.   This is why certain Founding Fathers found it perfectly acceptable to declare that 'all men are created equal' and also own slaves.  Or to seek to curtail the rights of the non-landed and women in terms of ruling and voting.   They are running on what they knew, without proper and rigorous examination.

It is hard for someone who has come from outside that system to understand how they can rationalize such a glaring discrepancy.  But if you put yourself in their place, and honestly examine some of your own habitual thinking, it is not so hard.

Hypocrisy, maybe.  And maybe it is just the unexamined prejudices of the fortunate.   Sometimes even what seems to be an obvious truth can only be seen clearly through tears.  And we have quite a surplus of the exceptionally fortunate these days, who have been pampered and privileged by an order which care very well for them, but that seems to be passing.

A big change is what we are heading for.   We have a financial system that still holds a vast amount of gold in the central banks, including the US and Europe according to their reports at least.  And more importantly, it is on a mad increase in the East with the central banks and the people buying in ever increasing amounts.   Those who serve the power circles of New York, Washington, and London do not want to hear about it, anymore than Winston Churchill had a regard for the thoughts of Mr. Gandhi.

And despite the huge change in the global supply and demand for bullion, we have a holdover, a significant price discovery mechanism in New York and London that is increasingly diverging from the physical realities of supply and demand.

There is going to be a reconciliation of attitudes and realities at some point.  And it may be quite impressive.  The longer that the status quo and their courtiers try to maintain their modern aristocracy, like vast tectonic plates unable to move but building greater and greater pressure, the more dramatic that change may be when it finally comes.

And alas, so many of our politicians are servants, although well paid and well taken, of the moneyed interests.  So they will do nothing that would perturb their true lords and masters, if they wish to also become fabulously rich and rise within the existing system.

The thought of the harm that this careless disregard for justice and right reason is doing to a very large group of relative bystanders and innocents, whose proper role is to be protected by those who have been gifted with greater talents accompanied by oaths of office, is almost disheartening.

Speaking of the pampered paperati, the FOMC will be giving us their pronouncement on interest rates tomorrow afternoon.  It will most likely be an exercise in cognitive dissonance, no matter what they do.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - FOMC Tomorrow - Chain of Fools

“He who makes a beast of himself gets rid of the pain of being a man.”

Samuel Johnson

Stocks were on a tear higher today ahead of the FOMC announcement on interest rates tomorrow afternoon.

The economic news is coming in weakly, and I suspect that the market is guessing that the Fed will defer on their first interest rate increase of 25 basis points for a few more months.

There is probably going to be a split on the the FOMC between the hawks and those who view the Fed's mandate a bit more broadly with an eye on the real economy.   I fancy Stanley Fischer to be the leading hawk, although others will speak more loudly on it, and Janet Yellen to be the leader of the doves.  Janet I suspect is also going to serve as a scapegoat and patsy if things go badly, but that is a thought for another day.

There are quite a few who identify with the ruling class because they think it also will bring them riches and privilege.   A lot of these fellows have sold themselves because they have bought the line that the moneyed are trying to uphold freedom and liberty, whereas all they are doing is finding new rationales for their greed, cheating, and looting.  Little do their supporters realize that they, in the end, are just somewhat useful fools, in a very long chain of fools.

Personally I don't think a 25 basis point is going to make a big difference to the real economy given all the policy errors and damage that the Fed and their Bankers have already accomplished, with heaping helpings of bad decisions from the political class.

The chart formations are inconclusive, so we'll all be watching what happens tomorrow afternoon quite carefully, but especially the world's reaction and what happens in the trade going into the weekend.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Desperation, Deception, and the Elusive Denouement

"The real problem isn’t what the Fed may do, but the ultimately unavoidable consequences of what the Fed has already done. The cost of reckless Fed-induced yield seeking will likely be felt first in the financial markets as previous paper gains evaporate, while defaults on excessive low-quality covenant-lite credit will emerge over the course of the economic cycle, and the impact of malinvestment will be to limit productivity and economic growth over the longer run. This is all rather inevitable except in the eyes of those who haven’t watched and memorized a dozen adaptations of the same movie."

John Hussman, The Beauty of Truth and the Beast of Dogma

There was little to no delivery action at The Bucket Shop yesterday in both gold and silver.  Delivery and withdrawal of gold in New York seems to have become unfashionable since 2013.

As for the warehouses, they apparently continue to slowly bleed out bullion, as you can see from the reports attached.

We are all informed by very serious people that all of this means nothing.  Nothing means nothing, except whatever it is that they say that day.  Sounds like politics as usual.

There was intraday commentary about the latest public relations campaign against thinking seriously about the precious metals market at Bullion Bank Apologists and Precious Metals.

All is well.

There are a number of odd things happening in the markets.   I do not know exactly why they are happening, or what it all means.   But I do know that many of the 'explanations' for them which we hear are directed at things that are not under contention, as a dodge, and are often heavily layered with hair-splitting jargon that hits everywhere except the target.

And quite a few times they obviously and clumsily make stuff up, and then attack that to prove their points, when fear and intimidation fail.

I think we will cut this Gordian knot with a call to deliver that fails.   I think it will precipitate in the London market, maybe in Switzerland.   And other markets, like The Bucket Shop, will more likely be downstream collateral after the fact.  We might see some indications there, but not the reckoning if we arrive at the resolution that I anticipate..

I know that the wiseguys are quite confident, in thinking that no one will ever catch up to them.  They tell us so in words and actions.  But it is this very lack of reasoned judgment and moral sense that is likely to trip them up.

Maybe these jokers and their enablers are right.   But I certainly have not heard anything that would persuade me, particularly if you watch the tape during the day and see their clumsy antics close up.  No, there is no ring of truth in their words, just a slightly better form of childish rationalizations when caught in the act of doing something that they ought not to have done.

The big tickle this week is the FOMC meeting.   They would dearly love to raise rates, but are afraid of the reaction of the global equity and bond markets.

I have included the lease rates for silver and gold in two charts below, because someone asked to see them.  They are slightly elevated.   But should we even trust these figures?  When have the financial firms released numbers that were not to their short term advantage?   Libor and CDS much?   This is one of the challenges that makes such a liar out of the 'efficient markets hypothesis.'

There was some additional intraday commentary about The Corruption of the Institutions by the Powerful.   Moral behaviour is as out of fashion among the ruling elite as spats and garters, I know, except for some self-righteous Puritanism.   And there are consequences to this disordered outlook, large and in charge.

Let's see how the week unfolds, especially around the end with the mighty FOMC meeting.

Will they or won't they?  And is there any reason for a system to operate in such an obtuse manner?

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Le Cochon Danseur

The Empire State Manufacturing number this morning was a shockingly low miss on estimates.  No surprise to anyone who is looking at the real economy without the rose coloured glasses of bias.

There are plenty of poorly paying jobs without sufficient benefits that leave most Americans in the category of 'working poor.'   The vast majority of all growth is going right to the very top, and by design.

The Fed would like very much to raise interest rates by 25 basis points this week.  It is almost like popping the question to the object of your affections for a first date at this point, they have put it off for so long.

They are screwing up the courage to do it, but the market volatility has them spooked, much like the reaction one might have feared in disclosing their tender feelings, not knowing the reaction of others.

The problem is that the financial markets are just a dancing pig at this point, without a firm anchoring to just about anything, thanks to a long series of monetary and fiscal policy errors that favor the wealthy and reckless speculation, both from access to money and tax treatments.

And there has been no reform.

So like that oncoming homecoming dance, if the Fed fails to pop the question this month, one wonders what will give them the fortitude to ask the question at the Sadie Hawkins Day dance, or even the Winter Formal?

Doing anything after the Prom will be tough next year, because it is a Presidential election and the Fed has learned not to get near the third rail of political meddling.

So they linger under the bleachers, revolving in and out of the dance, partying with the juvenile delinquents from Wall Street, doing nothing real and talking smack.

And the band plays on.

Have a pleasant evening.

Bullion Bank Apologists and Physical Versus Paper Gold

I see that the apologists for the status quo are actively 'refuting' the tightness of physical gold in the London markets, largely by ignoring that and concentrating on the Comex, which they assert is 'well-stocked.'

Clever people learn from the political process to ignore the tough questions that they do not wish to answer, and to misconstrue the question into whatever it is they would rather answer, often squirming through the issues to put some proposition in the most favorable light for their firms.

So we see this in so much commentary from the bullion bank and trading house apologists this past week.  I won't dignify them by citing their names, but I think you will know who they are.

Peter Hambro's recent point was fairly clear.  It is almost impossible to obtain sizable amounts of physical gold in London which is the center of the Western physical gold trade.

"It is virtually impossible to get physical gold in London to ship to those countries now. We get permanent requests in Russia now. Would we please sell our physical gold to India and to China?

Because there is not enough physical about.  There are endless promises. And I worry that the market, the paper market, could be stamped on and people say 'sorry we're going to have a financial closeout' and it's all over. If you want to be in the gold business, you ought to be in the physical business."

 Peter Hambro

The gold apologists bravely assert that there is plenty of gold in the Comex, relative to the demand there.  Never better.  More on that later.

As I have pointed out on any number of occasions, the amount of physical gold in all of the Comex warehouses of any categories is a rounding error on the physical markets of Asia.  As I said the other day:

I am certainly not suggesting that there will be hard default at the Comex.  How could one expect that in a relatively small market that almost always settles in cash and is dominated by a few, very large insiders who are actively working both sides of the trade?    No, if there is a default anywhere, it will precipitate in a physical marketplace where bullion changes hands and form, more likely in London, perhaps even Switzerland.  And then it will cascade to all the other markets quickly.

The portion of the gold in London that is not specifically 'spoken for' and held closely is considered to potentially be part of 'the float.' 

That was the key point that the apologists are ignoring.  They ignore the physical market, and concentrate on a scenario at the Comex which is becoming almost atavistic, but still worth noting nonetheless as a kind of barometer.  Comex seems to have lost its position as a source of genuine price discovery relative to the greater market of physical demand and supply.

The Comex gold warehouses, all of them, are a rounding error on the physical gold demand in India and China alone.  The Comex serves as a diversion from the developing situation with the supply of bullion.

As you know if you frequent this site, there is an interesting phenomenon of diminished deliveries and stocks of gold at Comex that is 'for sale' that extends back to 2013.

Further, the volumes of paper contracts traded against the physical backing for them is reaching unprecedented numbers of leverage, even going back twenty or more years.

You may see this information at Record Low 'Deliverable' Gold At the NY Comex - Unusual Tightness of Supply In London.

Yes Comex is well supplied in relation to its deliveries if one is to assume that it is just a betting parlor unrelated to the physical market worldwide for which it presumably provides price discovery.  

The analyst for Mitsubishi was speaking directly to the booming demand for physical bullion in India and China, and to the current conditions in London as you can see by reading Financial Media Wakes Up to 'Physical Tightness' In London Gold Bullion Market.

And so his concerns are answered by apologists again pointing to plenty of supply on the Comex.

Anyone who questions this situation, who looks at the data, who sees the almost daily slamming of the price of gold into the London PM fix and the New York trade, is obviously a hysterical conspiracy theorist, right?  And we must do what is required to intimidate them, to shut them up.

After all, what could be odd about such a multi-year pricing pattern like this in a market that purports to genuine price discovery, not for two cities alone, but for the world?

One *could* explain this by saying that Asia is buying, and the West, particularly London and New York, are selling.  And you could cast aspersions on the foolish Orientals for wasting their money on 'pet rocks.'  All of this has been done.

That is not the point.  The point is that there is such a phenomenon, it is valid, and it tells us something that some people apparently do not wish us to think about.

Given the opaque nature of the markets, and the lack of honest disclosure and discussion of what is happening, it is difficult to engage in reasoned arguments about this, especially when the sides quickly degenerate into hysteria, name calling, and all too often in search of headlines.

 It happens on both sides of the argument, although I will confess that the paid professionals are getting rather good at it, and may confound many.  Clever boys are well taken care of by this foul and rotten financial system.  Oh you think I exaggerate?  Where have you been the last ten years?

No, this situation will be resolved by a hard failure to deliver, and most likely in London or Switzerland. The last place I will look for a clear indication of the market is at the Comex, although as Hambro was suggesting it is likely to be significant collateral damage.  That is what he said.

And then when that tide goes out, we will see who is who and what is what. And we may have to wait awhile. But given that so many major markets have been proven to have been manipulated for the benefit of a few powerful firms, even though perhaps justice has not been done and settlements made without criminal admission, I think questioning the odd events and integrity of this particular market is certainly worthwhile in the light of its recent performance.

And for my own part, the arguments that seek to 'explain' the oddness in these markets are found to be wanting at the very least, and disingenuous in far too many. But I understand that one must do what their position requires.

So tell me fellows, is London well stocked relative to gold available AT THESE PRICES?  Are we secure in the knowledge that continuing levels of demand from 'Chindia' and elsewhere will be met AT THESE PRICES?    Is the true state of the Comex and the LBMA transparent to all market participants?

The total amount of ALL gold held by ALL market participants at ALL the Comex warehouses, whether it is on offer or not, is about 218 tonnes.  That is less than one month's demand for physical bullion in China and India and India alone.   And by far the vast majority of that gold is not for sale AT THESE PRICES.

And given the leverage of paper claims everywhere, not just Comex but at the more important LBMA, and one can see that a misstep by the gambling goofballs of Wall Street could lead to quite a messy market situation.  This also is what Peter Hambro said.

Oh no, they would NEVER overextend their positions in the quest for easy money.  Who could even think that?

It is good to keep a level head, and be guided by common sense.  And I think it is all too easy to fall into the habit of either shutting up and keeping your head down, or answering ridiculous excuses with equally ridiculous assertions, and so leave the poor bewildered investor in a state of confusion.

Let's recall what Kyle Bass, who is not so easily dismissed as a 'crank' had to say.