Gold Daily and Silver Weekly Charts - Blow the Man Down

After the bell, the newly restored US government announced that we would have the delayed Non-Farm Payrolls report next Tuesday.

And Forbes says No, JPM Is Not Instituting Capital Controls.

Ted Butler has a very insightful piece on how he thinks JPM is managing the silver market.  I suggest that you read it when you can.  I read it on his subscription site the other day, and I am glad he has made this one public.

Gold and silver had a nice rally higher today. It would have been much more enjoyable if it was not in the wake of a heavy handed and totally obvious price takedown.

But it appears that the takedown did its work for the wiseguys. GLD has disgorged over four tonnes of gold bullion this week, and voila, HSBC, the GLD custodian, was able to post 83,000 ounces of gold bullion to storage yesterday. 

There was also an adjustment of 12,000 ounces of gold from the eligible to the deliverable category.  So, crisis averted with the total gold in the Comex warehouses back within spitting distance of 7 million again. 

Or is it. 

I think we are seeing a very obvious endgame strategy here.  The drawdowns in GLD stick out like a sore thumb, with no other ETF bullion category matching it. 

When the time comes, you may have some trouble if you want to get your bullion out of those warehouses, as they start putting up the yellow police tape around them. 

Until then its smooth sailing for the Bankster, right?

But give us some time and we'll blow the man down.

Have a pleasant evening.

SP 500 and NDX Daily Charts - Around Kap Hoorn, and Into Uncharted Seas

Huzzah!

The SP 500 hit a new all time high today, driven by exuberance over the pushing of the debt ceiling and budget debate into the future.

The Dow did not fare as well, being weighed down by IBM that showed rather poor earnings results. It is a 'real economy thing.'

We don't have much in the way of dependable economic data yet, since the government has just come back to work, and the ranks of the unemployed might be swelled by those impacted by the shutdown, so we will have to watch this carefully.

I am not so rosy in my outlook for the economy, and think that the SP 500 is rather richly priced at a trailing PE of over 16, but it really is a QE thing.

The Fed is pumping money for all it is worth, expanding its purchased assets at a steady $80+ billion per month. The economic data will most likely be rather poor for 4Q, but that will be dismissed because of the shutdown.

So it looks like it is onwards and upwards. Let's sail round the Horn and into the blue Pacific.  But be forewarned, I see some rough seas across the next horizon.

I have not been short stocks for quite some time, occupying my leisure time playing the wiggles in gold and silver. But I am now getting an itch to start looking for a short entry point, but slowly. There is a notorious tendency for suckers to short new highs, and especially new all-time highs. And that does not often prove advantageous.

So let's make haste slowly, as the old Romans used to say, and enjoy this brief respite in our sea of troubles.

Have a pleasant evening.

Matières à Réflexion for Thursday, 17 October - Larry Summers Flinches At Gold Question

Alas, Google has repeated its error of the other week. It must be tinkering with a library of code, fixing some things and breaking others. The lowly system test process is always underrated and under-appreciated, but crucial to large scale software development.

I have notified them and expect they will correct this, but for now, here is the news. I will update during the day.

The Extraordinary Promise of the Greenwald-Omidyar Venture - CJR

Fed Could Begin to Taper From December - FT (Yes and the Banks could begin to act with moral goodness and honor.)

What To Expect During the Budget/Debt Cease Fire - Reich

China Ratings Agency Downgrades US Debt

GEAB N°78 The de-Americanisation of the World Has Begun

Thirty Million People Are Slaves - Half In India

Dollar Status In Doubt After Washington Antics

Why Regulators and Clients Can't Break Audit Oligopoly

Nobel Foundation Seeks Donations As Hedge Funds Are Not Sufficient

Mario Draghi Comments On Central Banks and Gold To Le Café friend Tekoa Da Silva

Or perhaps more apropos, Mario Draghi on why you should own gold.

Tekoa Da Silva: “Dr. Draghi, what are your thoughts on gold as a reserve asset? You have central banks like China, Russia, increasing their reserves, especially over the last ten years. Germany for example asking for some of their holdings back from New York. It [gold] doesn’t produce any income unless it’s leased. So why do you think they would want that, and what value does it offer in your opinion?”

Dr. Mario Draghi: “Well you’re also asking this to the former Governor of the Bank of Italy, and the Bank of Italy is the fourth largest owner of gold reserves in the world, which is out of all proportion to the size of the country.

But I never thought it wise to sell it, because for central banks this is a reserve of safety, it’s viewed by the country as such. In the case of non-dollar countries it gives you a value-protection against fluctuations against the dollar, so there are several reasons, risk diversification and so on.

So that’s why central banks which have started a program for selling gold a few years ago, substantially I think stopped…most of the experiences of central banks that have leased or sold the stock of gold about ten years ago, were not considered to be terribly successful from a purely money viewpoint.”

NAV Premiums of Certain Precious Metal Trusts and Funds - Oh, Snap!

The ratio of gold/silver remains rather high at 60.

Gold and silver are up today pretty much in lockstep. Silver may make up some ground if the afterburners kick in.

The premiums are holding well, but hardly exuberant to say the least.

COMEX Gold Warehouses Continue to Bleed Out As 'Owners Per Ounce' Climbs Back Over 53

"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.   Therefore at any price, at any cost, the central banks had to quell the gold price, manage it."

Sir Eddie George, Bank of England, reported in private conversation, September 1999

We saw more significant action in the Comex warehouse complex yesterday. 

A total of almost 4,000 ounces left the greatly diminished deliverable category, bringing it down to 717,666 ounces.    The ownership per ounce for each of those deliverable ounces is back up to 53.

Over 50,000 ounces left the Comex complex overall, taking the total amount of gold bullion there to 6,859,476 ounces.

As you know the gold bullion has been coming out of the ETFs in particular, and it is not showing up in the Comex warehouses.  There is widespread speculation and anecdotal evidence that this gold is being used to fulfill deliveries in Asia, after being refined into 400 ounce bars.  I do not think that it is likely to come back anytime soon.

There was a great deal made today of a letter that was sent out by JPM, limiting cash withdrawals by customers significantly and eliminating overseas wire transfers completely.  I have heard from some well-heeled individuals who are pulling their cash out in response to this.

I do not think this is a sign of government capital controls.  It is more likely involved with the trouble that JPM had gotten into with the OCC over their lack of compliance with regard to anti-money laundering measures.  As you may recall they received a 'cease and desist' order in January over this and have been under stricter surveillance since then.

Sometimes Banks engage in campaigns to migrate customers out of old platforms and less desirable accounts into more profitable account programs.  I did not see a message in their indicating that, but it is a possibility.  

It could also be a short term cash problem at the bank.   Perhaps there is some perceived risk there that the general public is not yet aware.  I find that a little hard to believe, but it seems more likely than a move to more general capital controls by the government.  If another big bank or two institute similar rules then maybe there is a little heat there worth our notice.

When it comes to metals, this market is just a mess.  I am appalled at the manner in which the CFTC and the CME have been conducting their roles as overseers.  These big market sells in quiet periods are almost unbelievable in their frequency and brazen effect on price.  

Are some bullion banks in trouble with their positions again?   It seems like something very odd is going on, and we know that when the banks get too badly offsides the market, the central banks are often willing to extend themselves to help them 'for the sake of the system.'

Gold forwards have gone negative again.  This represents tightness in the short term supply of physical bullion.   There have been massive drawdowns in Comex deliverable gold and the ETFs this year, without anything at all like it in silver, platinum, or palladium which have held steady or gained over the same time period. And no one seems to notice.  Le monde autour est sourd, bien entendu!

I suspect that those who see nothing unusual at all in this, and are seasoned watchers and traders in precious metals, are probably whistling past the graveyard.  It will take higher prices to free up more gold to be available for delivery, and that will make it harder to keep tapping the ETFs to obtain physical supply with which to satisfy Asia.  It is quite the predicament.

And there remains the fact that the Fed told the Bundesbank that they may have the return of the German people's gold, but not for seven years.  This obviously suggests that the gold might otherwise be occupied, spoken for, and encumbered.

There may be a reckoning when the smoke clears, and the quantities actually available to buyers readily on the shelves are revealed at last.

Weighed, and found wanting.

Stand and deliver.

Gold Daily and Silver Weekly Charts - Bart Takes a Bow - Capital Controls

Cap, cap, cap again today as the antics in Washington had the metals left with a subdued trade while stocks jumped in response to ... a delay in financial Armageddon to the beginning of next year, or not. We'll have to wait for the firm details.

It does not do much for the floundering real economy, but the Street won't think about that until après ski.

We finally saw some meaningful activity in the Comex warehouses. I will write about that later this evening.

Several people have asked me about a letter from JP Morgan Chase about international wire transfers and dollar limitations and if it is related to capital controls.  Capital controls are actions by government to limit the movement of capital across its borders.

Since we do not yet know what prompted this move by JPM, a number of things are *possible.*  However it would be odd to embark on a policy of capital controls by starting at just one bank.

More likely this is related to the 'cease and desist' order presented by the OCC on JPM from earlier this year with regard to holes in their money laundering detection system. 

There could also be some particular problem at JPM that might provoke a number of withdrawals from overseas, a sort of 'run on the bank because of something that happens there.  But that is not likely, but it certainly would not be considered that a more general policy of 'capital controls.' 

But hey, speculation is more fun. Wow, capital controls are here. At only one bank. I wonder how you would get around that? 

Getting back to the metals, I don't know how long they can keep this up, but today I got the sense again that the tape is winding under this very heavy-handed price suppression. When it moves, it could be eventful. But until then we sit patiently, counting blessing and reminding ourselves of what is really important. It is certain that we will not be taking any physical gold and silver into the next world, but perhaps the unpaid debts of fraud may adhere to those who have accumulated them.

Bart Chilton made a surprise visit to Bloomberg television today, taking a bow for obtaining JPM's acceptance of their $100 million fine for the London Whale. It appears that Bart and a skeleton crew are still on active during the shutdown. One might wonder, if they are not watching the markets during this difficult period, what exactly are they doing? Besides the occasional television appearance, because the one riot one Ranger rule applies to that.

Here's a modest suggestion. Pick up the phone and ask the Comex to identify the party who dumped umpty ump tons of paper gold in a quiet market and triggered the stop logic last Friday. That's a start.

The action in the metals markets is almost eerie. The big sells in quiet periods, the growing open interest in the face of paper selling and decline of deliverable inventories seems blatant, brazen, and strange.

Have a pleasant evening.