Gold Daily and Silver Weekly Charts - Pigmen Rampant on a Field of Greed

There was a very obvious hit on the precious metals today. I commented on it with pictures here.

Basically the pros saw the broader population of small specs leaning into protection, and took them for a ride today. As Bart Chilton said, there are no regulators watching these markets because of the government shutdown, so you are on your own.  At least that is what he implied.

I laid out the basic market strategy at work today in the stock market commentary. I am sure the Wall Street financiers think that this shutdown will be temporary, a few fleeting days that will harm no one or nothing about which they care.

The masters of the universe who are a bit closer to the inner circle of Moloch will almost certainly have a word with their servants and retainers in the Congress, and bring them to heel after a few days.  It is all a game after all, isn't it? 

The G20 is having a meeting  of their central bankers and finance ministers in Washington DC on October 10-11.

A man hears of things that might be said at such a gathering.  It certainly caught some people by surprise when the Italian Central Bank came out and endorsed gold as a key reserve asset,  at Monday's LBMA meeting.   France and Germany chimed in, even though they are disingenuously at odds with what they say about never selling compared to what they do with leasing the metal.

An economist disciple of Greenspan unreservedly endorsed the idea of the trillion dollar platinum coin today, or more precisely 1,000 billion dollar coins so everyone important can have one for their very own.   Non-specialists may not understand all that this implies in their political zeal, but surely he must know better.  Well, it is a disgraced profession after all.

Hey why fight it?  Let's go all in for it.  The US should announce that striking piece of "monetary innovation" at the G20 meeting, so all the US' major creditors can see what a cynical act of brazen seigniorage looks like up close.  Why hide it?   After all, the whole of the law for the exceptional is to do what thou wilt.

There was some minor movement of gold out of HSBC today, and a recategorisation of some bullion in the JPM warehouse as well, following their impressive move to bolster confidence in the threadbare COMEX registered inventory yesterday.   I might post something about that later on.

We are now in October delivery.  October is not a big month for the futures, but it is an active delivery month so we will be interested to see what happens.

SP 500 and NDX Futures Daily Charts - If You Don't Know Who the Sucker at the Table Is...

There is an old poker saying that if you don't know who the sucker is at the table, it is probably you.

Quite a few people remarked their puzzlement today about the rally in stocks and the hit on the metals. It seems counterintuitive that 'investors' would embrace risk on a government shutdown and shun risk havens.

You have to understand the nature of the game in order to understand what is going on.

In the short term, this market is about as rational as a crooked roulette wheel. The market insiders can see what the broad public is holding and the numbers in which they are holding it.

Yesterday there was a big spike higher in volatility as shown by the VIX. What that means is that people were seeking safety in puts.

Pros rarely direct their bets in one direction but lean toward spreads and other things that diverge and converge, unless of course they have fixed the results somehow or have access to asymmetric information and then bigger directional bets make sense. This is how big firms achieve 'perfect' trading records, which of course would be impossible in a 'free market,' where freedom implied honesty rather than a lack of rules and oversight.

So, the smaller specs piled into puts and other downside bets ahead of the shutdown, the big insiders saw it, and they bid the markets up today to clean them out of their positions. That is what happened. Note the plunge in VIX today. As I say, 'wax on, wax off.'

Should you start 'thinking like a criminal' as some say? Better than guessing stay the hell out of options and other short term leveraged bets in this market and let the insiders try to cheat each other. Amateurs have no business in the futures or options markets.

I suspect the thinking is that the shutdown will be short lived and that there will be no consequences. That *might* be correct as it is how things often go. But I am not so sure this time will be just like that, for reasons which I will elaborate on in the gold commentary.

Have a pleasant evening.

Excess Reserves: No Government Shutdown There

And besides, the Banks own the Fed which is not a part of the government as you may recall.

And by statute the Congress must not skip a single payday or perk. So no problems there either.

Obama is meeting with the Bankers today, who will be asked to help him out with the Congress.

Is Putin coming for the G20 meeting in Washington on October 10-11? Perhaps he can mediate the deadlock amongst the keepers of the world's reserve currency.

We know he likes Super Bowl rings. Maybe he would like a souvenir billion dollar platinum coin ahead of the holiday rush.

I hear the Chinese like bright shiny things and would gladly trade their nasty Treasuries for newly minted billion dollar coins.

Where is Peter Minuit when you really need him?

'Investors' Shun Safe Havens To Bid Up Risk Ahead of US Debt Ceiling and G20 Banking Meeting

Must have been a mass shunning on cue.

I see where Obama has solicited the Bankers like Blankfein and Dimon to help to persuade the Congress.  He is meeting with them today.

It appears they have already had their persuasive hands on the markets this morning.

The government shut down includes market regulators according to CFTC commissioner Bart Chilton.  "No regulators looking at markets due to government shutdown."

Economist Brad DeLong says Obama's only alternative is raw fiat money creation, aka the trillion dollar coin.  Bring it, Brad.  lol.

Aptly enough, there will be a G20 meeting in Washington DC on October 10-11 which will include all the finance ministers and Central Bank governors.  One can only wonder might be said, especially after Italy's bold statements to the LBMA the other day. 

Gold futures tumble as investors shun safe havens
Oct. 1, 2013, 8:50 a.m. EDT

NEW YORK (MarketWatch) -- Gold futures tumbled Tuesday morning, with the traditional safe haven failing to find support as investors shrugged off a long-anticipated shutdown of the U.S. federal government to bid up equities and other assets perceived as risky..."

Chalmers Johnson: The Decline of Empire

Signs of Decay

1. Internal corruption
2. Imperial overreach
3. Inability to reform.

Central Bank of Italy: Gold Is a Key Asset For Central Banks Because It Has No Counterparty Risk

"Gold is unique among assets, in that it is not issued by any government or central bank, which means that its value is not influenced by political decisions or the solvency of one institution or another."

Salvatore Rossi, Chief of the Central Bank of Italy, 30 Sept 2013

Bam!  Grazie mille, signore.

And that is why gold is the king of assets, Bernanke you great prune.

And thanks to Gordon Brown, the Brits have bugger all.  At least the Germans have a receipt from the Fed in die keksdose.

The other major European Central Banks (France and Germany) say in the second story below that "they will not sell their gold reserves, as they can provide a level of confidence, an element of diversification and can absorb some volatility from the central bank's balance sheet."

This implies that they are not going to account for their gold at an artificially low fixed price on their Balance Sheet, as the Federal Reserve does at the ludicrously out of date price of $45 per ounce.

But it is ironic that France confirms their gold leasing activities. If gold is an item on the balance sheet, one might expect a full disclosure of encumbrances and commitments for any variable balance sheet asset to be disclosed, ne c'est-pas? You know, any counterparty risks you may have accrued for a pittance of a yield on your premiere riskless asset.

And they will get that gold bullion back once it has been melted down and shipped to China how?

"Oh what a tangled web we weave,
When first we practise to deceive."

Sir Walter Scott, Marmion

Theory founders on the rocky shoals of reality once again. This may get even more interesting than I thought, once gold breaks and run higher again.  All those shorts to cover, and lease obligations to fulfill, and no one with bullion in size wishing to sell.  Quel dommage!

Have a pleasant evening.

Banca d'Italia-Les réserves d'or: un élément clé d'indépendance

30/09/13 à 22:00  

 

ROME, Sept. 30  (Reuters) - Gold reserves are a key element of central bank independence, said an official of Banca d'Italia in a conference on Monday, undermining rumors of the sale of part of its bullion assets.

The crisis in the euro zone has triggered speculation that the central bank may have to sell some of its huge gold reserves to support its economy. Banca d'Italia has the fourth largest gold reserves among central banks in the world.

Central bank regulations prohibited this use of gold reserves [for retiring debt], but the concerns rose after a document from the European Commission claimed in April that Nicosia planned to raise about 400 million euros by sale of its gold surplus. (And see)

In a speech at the annual conference of the London Bullion Market Association, Salvatore Rossi, CEO of the Italian central bank, said that gold had a specific role in the central bank's reserves.

"Not only does it have essential characteristics that allow for diversification, particularly in financial markets that have been largely globalized, but it is also unique among assets because it is not issued by a government or central bank, which means that its value can not be influenced by political decisions or the solvency of an institution or another," he said.

"These features, combined with historical factors and psychological stress the importance of gold as part of the reserves of central banks," he said. "Gold supports the independence of central banks in their ability to (act) as the ultimate guarantor of national financial stability."

Read the entire article (in French) here

Banca d'Italia says gold reserves key to cenbank independence
Mon, Sep 30 13:23 PM EDT
By Jan Harvey and Clara Denina

ROME, Sept 30 (Reuters) - Keeping gold reserves is a key support to central banks' independence, an official from Banca d'Italia told a bullion industry conference on Monday, dampening talk that it might sell some of its holdings.

Speculation has emerged since the financial crisis hit the euro zone that Banca d'Italia might be pressured to leverage or even sell some of its huge gold reserves - the fourth largest among the world's central banks - to help prop up its economy.

Regulations covering central bank independence restrict them from using bullion reserves this way, but concerns grew after an assessment of Cypriot financing needs prepared by the European Commission showed Cyprus under pressure to sell gold to raise around 400 million euros (341.1 million pounds) to help finance its bailout.

In a keynote address to the London Bullion Market Association's annual conference, Salvatore Rossi, director general of the Italian central bank, told delegates that gold plays a special role in central banks' official reserves.

"Not only does it have the vital characteristic of allowing diversification, in particular when financial markets are highly integrated, in addition it is unique among assets in that it is not issued by any government or central bank, so its value cannot be influenced by political decisions or by the solvency of any institution," he said.

"These features, coupled with historic... and psychological reasons, stand in favour of gold's importance as a component of central bank reserves," he said. "Gold underpins the independence of central banks in their ability to (act) as the ultimate bearer of domestic financial stability."

Italy holds 2,451.8 tonnes of gold in its reserves. A slim majority of Italians polled by the World Gold Council in March believed their government should use the country's gold holdings to offset high public borrowing costs, although they did not believe they should sell them.

Italy used gold to collateralise bonds in 1974, when it received a $2 billion bailout from Germany's Bundesbank and put up 500 tonnes of metal as a collateral.

EUROPEAN BANKS WON'T SELL

Other European central banks including the Bank of France and the Bundesbank said at the conference that they will not sell their gold reserves, as they can provide a level of confidence, an element of diversification and can absorb some volatility from the central bank's balance sheet.

"We have no plan to sell gold," Bank of France Alexandre Gautier, director of market operations department, told delegates in a presentation. "We are still active in the lending market, but not retail loans. We can see some yields that are attractive, but we realise that we can't lend gold without collateral."

Number two holder Germany also said at the meeting that it will keep its 3,390 tonnes of gold. (This presumes they can find it, for now they are holding a bag of receipts for some of it - Jesse)

PRICE ACTION IMPACTS CENTRAL BANKS DECISION

Gold price volatility this year has impacted the buying decisions of emerging countries' central banks like Argentina, Juan Ignacio Basco, deputy general manager at the Central Bank of Argentina, said.

Bullion fell by $200 an ounce in two days in its sharpest slide in 30 years in April before hitting a three-year low in June and then regaining 13 percent from that level.

"It's very difficult to decide when to enter the market as we don't follow trends ... (but) the recent volatility in prices has changed the way we have look at gold," Basco said.

"That's why we have started with the product options because volatility in the market is not good for us."

Argentina slowly re-started to rebuild its gold reserves in 2000s after selling them at the bottom of the market in December 1997 to buy U.S. Treasuries. (Q. What do Argentina and England have in common?  Jess)  It currently holds 61.7 tonnes of the metal, representing seven percent of its assets.

"We are accumulating slowly ... and we have to move slowly," Basco said. "We must remember that we are like elephants." (And some are like dinosaurs. - Jess)

Read the entire story here