“Depart from me, you accursed. For I was hungry and you gave me no food, thirsty and you gave me no drink, a stranger and you did not welcome me, naked and you did not clothe me, sick and in prison and you did not comfort me.' They answer, 'Lord, when was it that we saw you hungry or thirsty or a stranger or naked or sick or in prison, and did not care for you?' He answered, 'Truly I tell you, as you did not do it to one of the least of these, you did not do it for me.’” Matthew 25:40-46
There were 48.86 tonnes of gold withdrawn from the Shanghai Gold Exchange for the week ending 27 November.
Year to date, there have been a record 2,362 tonnes of gold withdrawn, far in excess of any other year at this time.
What is the reason for this? Why is there such a strong movement in the 'Silk Road' countries to continue to buy gold in large volumes? What can the central banks of the West do about this?
Gresham's Law informs us of the why's and the what's of this phenomenon.
"When an official market or cartel overvalues one type of money or asset and undervalues another with respect to its fair market value and risks, the undervalued money or asset will leave the country as best it can, or will disappear from circulation into hoards, while the overvalued money or assets will flood into circulation."
And so it is that gold is flowing from West to East.
More of the same sort of pricing games with 'synthetic' paper gold will only increase the flood of bullion into Asia. The price must be allowed to float according to the market.
There were no deliveries of gold at The Bucket Shop, and no movement of gold in their domestic warehouses. There was the usual chunk of bullion delivered out of the Brink's warehouse in Hong Kong, more than all the registered for delivery gold in New York in a single day.
Do you get the feeling that gold bullion is under a kind of informal lockdown in the New York market? I can see why one might think so.
There was a bit more action in silver deliveries this month, thanks in most part to CNT which is using their warehouse to handle their wholesale business. However, yesterday there was only the usual slow leakage of silver bullion out of the other warehouses. JPM is still sitting on a sizable hoard.
The dollar gained back a little bit of the enormous hit it took yesterday in the DX index. That seemed counter-intuitive to some, since it was on the day when the Lady Yellen indicated the strong bias to raising interest rates, as opposed to Draghi and the ECB who cut, and are pledged to do 'whatever it takes.'
Let's see if gold and silver can turn this thing around and follow through next week.
And for everyone, have a wonderful weekend. Winter is coming, but with it the holidays of light to the world, and a hope that we will be sustained beyond our expectations, and that all things will be made new.
And in proper respect for the holidays, and for all the tender mercies which we have received and perhaps already forgotten, please remember the poor and the unfortunate, who may rarely take a holiday from the hardness and desperation of their lives. Be a light to them, as you would have the Lord be a hope and a light to you.
Now I am really glad that I shed all my index shorts and VIX longs yesterday.
Santa Claus will not be denied, and will be visiting bonuses on all the little girls and boys on Wall Street.
As by now I am sure you have heard, we had a 'goldilocks' jobs number today, good enough to ensure a Fed rate increase in December, or week after next to be more precise, but not so hot that the carefully set expectations of about 50 basis points, probably in a two step and then a pause, would be set aside.
This is likely to be a very slow, and very shallow rate hiking cycle. Why?
Because it is being done largely for policy purposes, a point which I have been nagging about for too long now. Unless something really changes, this is the worst excuse for a recovery one can imagine, if you are looking at the broad swath of the consuming public, and not the top five percent.
The geopolitical and exogenous risks remain elevated.
Let's see if they can break this sucker out, up and away, which is what they would like to do, in a kind of a last hurrah. And the devil take the consequences, and the hindmost.
The SP 500 MUST set a higher high, then stick it and break out to activate the big double bottom or 'W' formation on the charts.
“If you shut up truth and bury it under the ground, it will but grow, and gather to itself such explosive power that the day it bursts through it will blow up everything in its way.”
Émile Zola
The above quote was on the header of this blog the other day.
I mentioned that gold was oversold and that sentiment was at a washed out low.
The question to ask is not, why is gold going higher today? It is obviously a short squeeze that was set up and fueled by a concerted effort to push the prices much lower to unsustainable levels for the past two weeks. I think there were multiple motivations for this.
For some, it took the luster off gold as the ECB and other central banks continue printing money, fruitlessly, but they do. And for others, it was a chance to knock down the December open interest, given the excessive number of claims on a shrinking supply of deliverable bullion.
Silver has been moving freely at The Bucket Shop, thanks in large part to CNT, but physical gold has been in a virtual lockdown. I include the scorecards for this 'active' month of December below.
The real question to ask is why do we permit such blatant price rigging and market manipulation, without regard for the real world consequences?
I will not say that this is 'over.' The markets have not suddenly become transparent and honest. And the hedge funds and some individuals are getting a punishing lesson in that this morning, being suckered into a bad bet by the usual jokers and their enablers, who spread stories designed to manipulate sentiment.
But increasingly there is a recognition, of almost one person at a time, that this pricing is heading towards a dislocation because of a long term action to control it against the market trend.
If Gresham's Law has any validity at all, and I firmly believe that history shows that it does, and if the markets stay 'free' enough to allow people to buy and sell things at anywhere near a voluntary price, then gold is going to continue to flow from West to East, and will not cease until the gold rigging ceases its operations.
"When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation."
Real gold is flowing from West to East. And what it is leaving behind is a pile of 'synthetic' gold positions and IOUs.
While I am glad to see this rally, I will get excited when gold starts going up 100$ at a time, mostly overnight.
And you do not wish to be on the wrong side of that when it comes, although there is little enough security in this world, when lawless men are allowed to have their way. And that raises the all important question of our time, of transparency and reform.
Gold and silver had some nice bounce backs today, with the dollar falling sharply on what seems to be a 'sell the news' phenomenon with regard to US interest rates, and the cut in rates by the ECB.
As usual, The Bucket Shop delivered no gold. And there was the usual seepage of actual bullion out of their associated warehouses.
I see others are pondering the unscheduled exit of Ms. Harriet Hunnable from her post as the Executive Director of precious metals at the CME which I highlighted here yesterday. I would rather not speculate about this further, until we obtain a little more information. But it did appear noteworthy.
As for interest rates, which is the big tickle of the day, the betting that the Fed will raise rates in December is a rising tide.
Speaking of the Fed, apparently there is an eyebrow-raising study from Duke University that suggests that the Fed is a leaky sieve of non-public information to a select group of insiders. The Fed has not commented on this, issued a denial, or otherwise taken it up. One leaves that sort of dirty lifting to the servants, and of those the Fed has many. It never hurts one to be able to operate on a relatively riskless, cost plus budget. It attracts a fair amount of sincere admirers, sycophants, and aficionados.
I am not suggesting anything nefarious here necessarily. And I am not sure that they are either. It may just be more of an accepted custom unknown to those unsophisticated ingénues like you and I who do not regularly rub elbows with the ruling elite in their halls of power.
Evidence shows that Congress and their staffs tend to traffic in insider information with some regularity as a kind of droit du seigneur for all confidential information. After all, information is power, and a medium of exchange in Washington and Wall Street. So why would those with their fingers on the very buttons of monetary power be an exception?
And besides, how can the Fed possibly make any decisions without first conferring and consulting with their true masters, the Big Money Banks of Wall Street? The Banks. Our modern Prometheus. Can anyone suspect that those paragons of virtue and selfless efficiency could possibly be doing anything irregular in the markets to further their own monetary interests?
I have written about this phenomenon, which is the major impediment to meaningful financial reform, intraday here.
There was a little noted piece out by my friend Hugo Salinas-Price titled The Crumbling World Order and Who Will Pick Up the Crumbs that I am still mulling over, and reading it in conjunction with a few other things in a similar vein. I am thinking quite a bit these days on how the evolution of the international monetary regime may progress.
I am certain that you have heard that the Chinese renminbi will be included in the upcoming SDR basket. You may have tracked the progress of that development here over the last three years or so.
And as the old BTO song goes, 'baby, you ain't seen nothing yet.'
Someone needs to save capitalism from the financial class, in the worst way.
Given the pervasive corruption and greed, there are only one or two candidates that I think have the potential to do it, two real outsiders if you will, with two very different perspectives on reform: Rand Paul and Bernie Sanders.
But that is just my take on things. I realize it is off-putting to those who have sworn their allegiance to some currently fashionable ideology like eliminating the rules to cure rule-breaking, or giving the powerful abusers even more power and discretion in the hopes that they would become tired of abusing us, and let slip a few more crumbs from their groaning tables of abundance.
I would dearly like to see Elizabeth Warren in at least a Cabinet position in the next presidency. But perhaps that sort of genuine impulse to change must wait for another financial crisis, so that the public will become more focused on the things that matter, rather than a steady diet of bread and circuses.
Let's see how the Non-Farm Payrolls report comes out tomorrow.
And let us see what new distractions might be run up the flagpole, to take our minds off things above our station, like financial and political reform.
Let us pray for those whose hearts are hardened against His grace and loving kindness by greed, fear, and pride, and the seductive illusion and crushing isolation of evil.
We pray that we all may experience the three great gifts of our Lord's suffering and triumph: repentance, forgiveness, and thankfulness. And in so doing, may we obtain abundant life, and with it the peace that surpasses all understanding.
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