SP 500 and NDX Futures Daily Charts - It's All About Monetary Policy In the Financialized Economy

As you may have heard the Fed will decide whether to get off the zero bound this week, or not.

The economy does not call for it. This nonsense about a 'tight labor market' is mainstream media baloney, with the Labor Participation Rate so low, and wage growth stagnant.

No the Fed wants to raise rates as I have said to give themselves some policy room to deal with this latest financial paper assets bubble which they have helped to create, both by commission and omission.

They will most likely raise at either the September meeting this week, or at one of the two occasions they will have before year end.

I suspect strongly that they would like to do two 25 basis points raises before next fall's presidential elections.

The Fed fears the stock and bond markets. That is the only thing that would keep them on the sidelines.

And this is another strong indication of our the financialisation of the economy has co-opted common sense and a regard for the well-being of the public at larger, rather than the financially dependent one percent.

The broader stocks in the SP look like a 50-50 bet, but the NDX is in a formation that is more bullish 'if it works.'

Have a pleasant evening.

Hitting the Wall - Record Low 'Deliverable' Gold At the NY Comex - Unusual Tightness of Supply In London

“The City itself lives on its own myth. Instead of waking up and silently existing, the city people prefer a stubborn and fabricated dream; they do not care to be a part of the night, or to be merely of the world. They have constructed a world outside the world, against the world, a world of mechanical fictions which contemn nature and seek only to use it up, thus preventing it from renewing itself and man.”

Thomas Merton, Raids On The Unspeakable

Here are the current numbers and some recent history on the registered (deliverable) gold bullion inventories held at all of the Comex warehouses in the US.  One must view these number within the context of the greater world market for precious metals.

There is much more gold that is privately held in storage in these warehouses that is of an eligible form to be sold if the owner should choose to do so.

Last month JPM was notable for choosing to sell bullion at current prices in large numbers.  So I would imagine that as we move into active delivery months that JPM may be worth watching.

It is correct to say that very few contracts for gold bullion in NY actually result in anything more than a speculative trade,  some wager.   The last I heard only a very small number of contracts, on the order of a few percent, resulted in 'delivery.'

The current total of all registered gold is 182,611 troy ounces, or roughly 5.68 metric tonnes.

There are a total of almost 8 million ounces of eligible gold in all the US Comex Warehouses.  I have included that chart at the end.   So some will say, 'see, there is more than sufficient gold in the warehouses.  This is all nonsense.'

And to that we may respond, yes, but at what price?  That gold is presumably private property and not for sale at these prices, except for 182,611 ounces of it.

Anyone who discusses the dynamics of supply and demand in a purportedly 'free market' without even a nodding consideration to the notion of price as a factor is making no sense.

Why show you all this?    Some say it means nothing, that I do not understand the markets.  Well, perhaps that is true.  Then what harm is there in allowing people to see what has happened for themselves.

As you may recall, Goldman was seen taking a large delivery of gold for their house accounts in August.  And the amount of gold posted at the Comex 'for sale' at these prices is at historic lows.  How can one not wonder at this?

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.'

There have been recent observations by people such as Peter Hambro that it is becoming almost impossible to obtain physical bullion in London at these prices, only endless promises.  Even the financial media seems to have realized that there is a tightness in the physical supply of gold.

And yet, with all this the price discovery seems to go on as usual undaunted, divergent from the underlying physical supply issues, except for an increasing leverage of claims to ounces, and backwardation in pricing so that a premium must be paid for actual physical delivery.

This is a very dangerously developing situation, the kind that leads to market dislocations.

There are new calls for the increased 'monetization' of gold, by hypothecating existing bullion to satisfy third party collateral shortfalls.  This is a weak form of purchase, a 'rental' that promises to replace what has been further sold, perhaps in  multiples, with the product itself being refined into a different format and purity, and then shipped overseas.

And the supply of readily available gold seems to be quietly withdrawing from the markets.

Comex Potential Claims Per Ounce of Registered (Deliverable) Silver

Although we have been watching the gold potential claims per deliverable ounce quite closely, we have not been reviewing the situation in silver.

As I have mentioned before, the situation with silver on the Comex is quite a bit different than with gold.

Thanks in large part to CNT, a large wholesale of silver bullion to the US Mint among others, the Comex silver warehouses often see large amounts of withdrawals of bullion for use by the buyers.

In the case of gold, the function of the gold in those warehouses seems to perform more of a collateral arrangement, with the physical delivery exchanges being located in London and in Asia.

So it is no surprise that the potential claims per ounce of silver, although a bit elevated of lat at 15 to 1, it is relatively modest compared to the 230 to 1 ratio of gold.

Gold Daily and Silver Weekly Charts - Heart of Gold

"Capable of giving alms, perhaps, but incapable of stripping themselves bare, the comfortable will be moved to the sound of beautiful music, at the thought of Jesus’s sufferings, but His Cross, the reality of His Cross, will horrify them.

They want it all out of gold, bathed in light, costly and of little weight; pleasant to see, and hanging from a beautiful woman’s throat."

Léon Bloy


"Beware the leaven of the Pharisees, which is hollow hypocrisy. There is nothing covered that shall not be revealed, and hidden, that shall not be made known. Whatever has been said in the darkness shall be heard in the light: and what has been whispered behind closed doors shall be shouted from the roof tops."

Luke 12:1-3

There will be quite a bit more economic data released next week compared to this holiday shortened trading week we have just seen.

The big event will be the FOMC rate decision on Thursday the 17th.

This has become more of a psychological issue than a substantial policy action.  25 basis points will not be making or breaking anything, but it does signal a 'change' in the long period of easy money, policy errors, and financial bubbles which we have seen since the big bailouts of the one percent and Wall Street since 2008.

Can you believe that this was over seven years ago, and here we still are, muddling along?

The draining of gold from West to the markets of the East continues, and physical bullion is becoming remarkably 'tight' particularly in that bastion of bullion, the storied vaults of London.

'Free gold' is unemcumbered physical bullion that can be utilized for immediate physical delivery.  It is more commonly called 'the float.'  And there is just not enough of it to go around, to cover the growing demand of Asia, much less the multiplicity of claims.

Rather than suggest higher prices, it is surprising how many supposed marketeers are calling on governments and NGOs to start 'monetizing their bullion' more aggressively.  As you may recall this is how these fellows got into their current problems in the first place, after the Banks showed them how easy it was to hypothecate their bullion, to increase it on paper for short term returns but longer term losses.

Now isn't that something.

The financial system is sick, and incapable of repairing or reforming itself.   The problem is that it has also badly infected the political and professional classes.

These things happen from time to time.  It seems almost common when one glosses over history, ignoring the dull periods of honest families and their progress, skipping along from crisis to cataclysm, most oftenly fomented by the folly of proud and selfish men.

Please remember the poor, and those who have no one to care for them.

People can too often fall in love with an almost paganistic fascination with the words, the ritual, the glamour and the shine of the outward trappings and the gleam of the gold on their altars. But in their misapprehension they do not want anything to do with the message which they can for a time ignore, but without which what they do has no meaning, no significance, no substance, nothing. Without love it is all just a vanity.  This is 'the leaven of the Pharisees,' which is hypocrisy.

The Lord calls to us, not in the palaces and halls of power, but in the markets, on the streets, in the news of the day, across the noise and bustle of the crowds, as He also called us, with a look or a motion of His hand, when He walked among us on the earth.   He is to be found, not reposing in the glory and grandeur of great wealth, but among His saints, the poor in spirit, the least of these.

There is no Christmas without the acceptance of His will and the journey to Bethlehem, no joyous Easter without the agony in the garden and the Cross.

Rather than for a vault filled with riches, let us strive then for a 'heart of gold' of our own.  The former is subject to decay, diffusion, and loss;  but the latter is with us, and will be ours, forever.

I may have a few updates to post later about the events in the markets of Asia, and the general decline of the 'float' of deliverable bullion in the West.

Otherwise, have a pleasant weekend.  See you Sunday evening.

SP 500 and NDX Futures Daily Charts - For the Times, They Are A-Changin'

FOMC Meeting next week on the 16th and 17th.

The Fed wants to get off the zero bound, but needs to do it in such a way that they are not blamed for the next financial crisis, while ironically preparing to fight it.

They will most likely raise 25 to 50 basis points this year, or 25 this year and 25 next year.

Since next year is a presidential election year the politics of that will inhibit any policy actions after June or perhaps a bit earlier, unless some exogenous event compels them.

I have lightly sketched the symmetrical triangle on the SP futures chart for your ease of viewing.  The markets will likely go with whatever direction they can break out and confirm from this.  There already has been one false breakout that retraced intraday.

I see so much impetus in the polls that the voters are rejecting the status quo, particularly those icons of privilege Bush and Clinton.

Let's see if this becomes a trend that the political establishment and their mainstream media cannot control.

As for now, winter is coming, if we can but feel it in the cooling of the evenings. The season, and the times, are changing.

Have a pleasant weekend.

Comex Hong Kong Sees Biggest Daily Gold Withdrawal at 19.17 Tonnes - Mr. Float Goes to Asia

In Hong Kong when you buy gold and take it out of the exchange warehouses it is called a withdrawal.

In other words, you do something with your bullion besides letting it sit around in some exchange warehouse to be passed around and hypothecated 230 times.

The other day at the Hong Kong Comex Metals Exchange 19.17 tonnes of .999 gold kilobars were taken out.

That is about 616,329 troy ounces.  Taken out by buyers in a single day.  That is a new record for the young exchange.

I hear they have quite a few over-the-counter dealers now, whose mission it is to faciliate the offtake of physical bullion.

Maybe that is why the Comex Hong Kong exchange trading volumes are so low, but the physical offtake levels are so high.  They are serious about their business.

Not bad but still not as much as Shanghai does, overall.  See the second chart.

It is almost like the New York - London float of unencumbered gold bullion available for delivery is— melting away.