Gold Daily and Silver Weekly Charts - Flight to Safety, Papier-mâché Gold Story Fraying

"The paper gold in the London Bullion Market takes the familiar forms that bankers have turned into profit machines: futures, options, leveraged trades, collateralised obligations, ETFs . . . a storm of exotic instruments...

But one day the ties that bind this pixelated gold may break, with potentially catastrophic results.   So if you fancy gold at today’s depressed price, learn from Buba and demand delivery."

Neil Collins, Financial Times

And if and when this reconvergence of appearance and reality does happen, I would look for the news to break over a weekend, or otherwise suddenly, like a thief in the night. 

There was intraday commentary on this remarkable piece of mainstream paper-physical gold divergence thinking here.

Silver was under pressure, but gold had some follow through from yesterday as stocks sold off hard on expectations for the emerging markets. So what we saw was a continuation of a flight to safety, that saw some currencies falling hard against gold and the US dollar.

This can said to be the start of a trend. Again, I would like to see more follow through in both stocks and precious metals, with the usual reversals, before I get too excited about this. Although gold seems to be putting some interesting ink on the chart formations.

The good news on Bloomberg TV today was that Jamie Dimon, banker extraordinaire, is receiving a 74% pay increase this year, from $11 million to $20 million.   I am sure most Americans will be enjoying The Recovery™ just as well.

There were some rather large movements in the Comex warehouses yesterday.  A little over 349,000 ounces of gold bullion came out of the eligible category for parts as yet unknown, with most of that coming from JPM, and somewhat less from Scotia.  The details are in the report below.

A little over 5,000 ounces at Brinks were recategorized from eligible to deliverable.  This does not help much as the registered, or deliverable, category remains shockingly low at a bit over 375,000 ounces with the heavy delivery month of February only weeks away. 

But there is plenty of gold in the eligible categary, even with today's withdrawals, and higher prices can certainly tempt profit-motivated holders to sell some of that.

I just noticed the Deutsche Bundesbank put out a self-congratulatory press release on having wrapped up phase one of their repatriation of some portion of their nation's gold. Well done Buba.

I do not want to make too much of this, but I do think it is a matter of time before some of the ongoing charades in the economy and financial system fall apart.  And once they do, it may happen at a much faster pace than we might imagine, or that those masters in the universe at Davos would otherwise allow.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Another Big Slide on Global Growth Jitters

"There was a strange temper in the air. Unsatisfied by material prosperity, the nations turned fiercely toward strife, internal or external. National passions unduly exalted in the decline of religion, burned beneath the surface of every land with fierce if shrouded fires. Almost one might think the world wished to suffer. Certainly men everywhere were eager to dare."

Winston Churchill

Despite the confidence exuding from Davos, stocks were selling off fairly hard as the paint that was applied to the tape at the end of 2013 came peeling off in chunks of profit taking.

VIX spiked up hard, as punters sought safety in puts and bid them up.

Ok Daniel-san, this was 'wax off' to the end of year 'wax on.'

What do we do next?

Next week is a big earnings week, and after some global follow through I suspect we will see stocks taking their cues from the corporate results. And so we might expect a volatile week.

I have included the US economic calendar for next week below. 

Have a pleasant weekend.

Inside London: 'Demand Delivery For the True Price of Gold'

Buba is the nickname for Deutsche Bundesbank, the central bank of Germany.

I nearly fell out of my chair when I read a description of the divergence between the paper and physical gold markets from the Inside London column of the Financial Times.

"But one day the ties that bind this pixelated gold may break, with potentially catastrophic results. So if you fancy gold at today’s depressed price, learn from Buba and demand delivery."

And this in the prince of mainstream financial publications.   Quick, alert the spinmeisters for Davos man that the natives are growing restless.  

As the fellow says, one day the ties that bind the actual and the traded commodity will snap. So if you fancy gold at today's depressed price,  take delivery.

"In June last year the average volume of gold cleared in London hit 29m ounces per day. The world’s mines are producing 90m ounces per year. The traded volume was many times the cleared volume.

The paper gold in the London Bullion Market takes the familiar forms that bankers have turned into profit machines: futures, options, leveraged trades, collateralised obligations, ETFs . . . a storm of exotic instruments, each of which is carefully logged, cross-checked and audited.

Or perhaps not. High-flying traders find such backroom work tedious, and prefer to let some drone do it, just as they did with those money-market instruments that fuelled the banking crisis. The drones will have full control of the paper trail, won’t they?

There’s surely no chance that the Fed’s little delivery difficulty has anything to do with the cat’s-cradle of pledges based on the gold in its vaults?

 

...But one day the ties that bind this pixelated gold may break, with potentially catastrophic results. So if you fancy gold at today’s depressed price, learn from Buba and demand delivery."

Read the entire article in the Financial Times here.

Gold Daily and Silver Weekly Charts - Do It To Me One More Time

Gold and silver had a nice upside pop today, running up to resistance on gold, and the miners finally showed some spirit.

Watching gold and bonds move higher in unison suggests that we were seeing either an asset reallocation out of equities, or more likely an old fashioned 'flight to safety.'

This precious metals market needs follow through more than ever, to break the downtrend which is an intermediate trend. We have some semblance of an inverse head and shoulders on the chart, little formations of them nested in larger formations, like fractals.

Let's see another up move like today's, and a few more times to confirm it.

There was no movement in the Comex gold warehouse, typical for the non-active month of January.

Have a pleasant evening.

 

SP 500 and NDX Futures Daily Charts - Wash and Rinse

China's economic growth numbers had the markets wobbly this morning, and stocks moved lower in what looked like a technical trade. Existing Housing was off a bit, but not enough for a sell off.

And they bought the dip. In days like this, it is not so much the initial reaction to news that matters, but rather the reaction of traders to the reaction, and this market is about as cynically bullish as they come.

So what next. Until the VIX gets some real upside legs and serious support is broken to the downside, shorting is for scalping. The Fed's float of liquidity has the markets pointed north, although there may not be a lot of substance underneath them.

It is a dangerous situation, but if anything the Fed and their friends have shown a propensity for rolling the dice-- with other peoples' money.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Stasis

There was some intraday commentary that I will recommend for your reading:  Where We Are At in the Global Precious Metals Markets - A Framework.

It is a short summary of what I think is driving the precious metals market, particularly gold, but certainly including silver. It seeks to include quite a number of events over the past twenty years that may not make sense in isolation, but certainly can come together as an understandable whole in some framework such as the one which I propose. There are certainly others.

There was no movement in or out of the Comex gold warehouses yesterday.

I have to specially thank Grant Williams for the kind words which he had for Le Café in his newsletter, Things that Make You Go Hmmmm.

"Well, one of the most respected names in the bullion markets is that of Arthur Cutten, proprietor of Jesse's Café Américain (if you follow gold and silver but don't have that page bookmarked, I'd recommend you do so right now.) In a post he wrote in March 2010, Arthur asked a pertinent question [about AIG]"

It is nice to be recognized for something you care about from someone whom you respect.

I showed this to she-who-must-be-obeyed, and in response she recounted some of her favorite excerpts from His Mistakes and Shortcomings in six volumes which she has maintained over the past 41 years. 

Many of them are sins of omission,  according to her judgement, and 'stupid things all men say and do' for which I therefore am not personally responsible.  But alas, the rest are spot on.

So I can assure you such effusive compliments will not go to my head. 

But I may have a Manhattan tonight as a personal bonus for having done something right.  And besides, its my 62nd birthday, and it's the little things that make life worth living.

The Dude abides.

Have a pleasant evening.