NAV Premiums of Certain Precious Metal Trusts and Funds - Stay Right, Sit Tight

“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.

Stay right, and sit tight.

Gold Daily And Silver Weekly Charts - Falling Dollar, Hidden Risks

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.

In case you have not noticed, gold is rather oversold, and the sentiment indicator is 'washed out.'

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.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Stocks Fall On Economy, Rate Hike Prospect

Stocks were in selling mode today, as the markets gave back last weeks Thanksgiving holiday rally.

As you will note, the SP 500 failed to strike a higher high in this rally, setting it up for a rollover retracement.

As of the close today I have taken off the longs in volatility and the shorts on the SP index.  I may be premature in this, but if I wanted to be aggressive about this I would be trading the futures on a short term, as was my style for many years.

So tomorrow is the big Non-Farm payrolls report.  I expect that may have some potentially perverse effects, depending on how the market wishes to interpret this data in the light of the Fed's policy change with regard to ZIRP.

I am finding this whole hullabaloo about a 25 basis point increase a little puzzling.  I doubt anyone thinks that this is a routine change and the beginning of an aggressive cycle of rate increases, with the economy still languishing in a zombie like 'recovery.'

And it appears that a zombie recovery is sufficient for the Fed.  This article claims that Yellen says that adding 100k jobs per month would be sufficient.  If she really said this, then things are much worse than I had thought.  I am almost speechless.

But the risks in the market are vastly mispriced, and the overall constitution of the markets are hardly 'robustly,' being more like meringue than a solid foundation with which to support a real economy.

Have a pleasant evening.

Duke U. Study Suggests The Fed Consistently Leaked Non-Public Information to Select Insiders

This excerpt from a Duke University study is just in from my friend Professor Anthony Sanders at George Mason University, who writes at Confounded Interest.

In reading the paper I did not necessarily get the sense that this was a nefarious form of communication.  More like the kind of collegial exchanges of information that are so common to the revolving door nature of our modern financial regime.  There are two sets of rules, and two methods of handling things.  And insiders never speak ill of the actions of other insiders.

This is the 'money shot' from the abstract of the paper which is tracks the distribution of stock market gains over the FOMC information cycle:

"High return weeks do not line up with public information releases from the Federal Reserve or with the frequency of speeches by Fed officials.

Systematic informal communication of Federal Reserve officials with the media and the financial sector is a more plausible information transmission mechanism. We discuss the social costs and benefits of this method of communication."

And in related news, the Congress has just used its power to block an investigation of its own insider trading.  Again.

Remember this blog post from 2011?  Credibility Trap: US Congressmen and Their Staffs Regularly Engage In Insider Trading

It is hard to escape the credibility trap as a plausible explanation for the lack of serious financial reform and transparency in a system that has been shown to be plagued with a lack of sound regulatory oversight, price manipulation, and corruption in almost every major market.

I would certainly hope that there is a different explanation for what appears to be systematic insider trading since at least 1994.

Here is what Tony has to say about this Duke University paper at his blog:

Fed Consistently Leaked Non-Public Information to Selected Insiders

Researchers at Duke University and the University of California at Berkeley point to quantitative evidence that The Fed consistently leaks non-public information about its meetings, driving an investment pattern that has led to market gains.

Here is the paper: 292092121-Stock-Returns-Over-The-FOMC-Cycle

Here are stock returns over the FOMC cycles. Notice anything unusal?

And here are the 5 day returns with bootstrapped confidence bands.

Gold Daily and Silver Weekly Charts - QE Bunga Bunga with the ECB - Deliverable Gold Leveraged 325:1

"A nation's economic salvation does not lie in the amount of money its rich inhabitants can squander recklessly.   A nation's economic salvation lies in the amount of money its inhabitants can save and invest after providing themselves with all the necessaries and all the reasonable comforts of life."

B. C. Forbes


"Ordinarily, the financial risk in a market, and hence the risk to the economy at large, is limited because the assets traded are finite. There are only so many houses, mortgages, shares of stock, bushels of corn or barrels of oil [or bars of gold and silver] in which to invest.

But a synthetic instrument has no real assets. It is simply a bet on the performance of the assets it references. That means the number of synthetic instruments is limitless, and so is the risk they present to the economy. Synthetic structures referencing high-risk mortgages garnered hefty fees for Goldman Sachs and other investment banks. They assumed an ever-larger share of the financial markets, and contributed greatly to the severity of the crisis by magnifying the amount of risk in the system.

Increasingly, synthetics became bets made by people who had no interest in the referenced assets. Synthetics became the chips in a giant casino, one that created no economic growth even when it thrived, and then helped throttle the economy when the casino collapsed."

Senator Carl Levin

If the Fed, the Congress, and the professional enablers and courtiers to the power of money understood these simple, yet profound truths of the economics of a stable and sustainable society, we might hope to enjoy the long awaited recovery, and peace and prosperity, that has eluded so many in the West for far too long.

Gold was slammed lower with the London PM fix and the opening of trading in New York this morning, down to test the 1050 level on the spot price.

Silver managed to hold on to the 14 handle.

The CME precious metals director will be leaving effective December 11.

Tomorrow Mario Draghi and the ECB may reveal some stimulus plans for the Euro area. They are likely not to be stimulative of the real economy, but favorable to the financial sector. If it is something in the QE line of recreational monetary drugs, it will be interesting to watch them do it, given the predominance of negative yields in the tonier Euro area bonds.

Janet Yellen gave a rousing speech today to lay the groundwork for a Fed rate increase in December. It was so painful to watch that it roused me to catch up on some shows on my DVR. I almost feel sorry for her, having to clean up the messes in the real economy left by Greenspan and Bernanke.

There were no gold deliveries at The Bucket Shop yesterday. What a surprise. There were some more takes in silver however, and those are shown below.

The warehouses continued to show a slow leakage, with some actual buying and selling and using of bullion taking place in silver, but little to none in gold.

The potential claims or 'leverage' per ounce of registered gold has hit a new all time high of 325:1, despite a marked decline in the open interest.

I hear that the hedge funds and mo-mo players are at a 14 year historic short interest.

There was intraday commentary about some of the precious metal trusts and funds here.  One highlight is the marked decline in Western gold bullion inventories, a phenomenon not really seen with silver that has also experienced price declines over the same period.

When these jokers blow up the global markets again, and I am reasonably confident that they will, I hope that if they hold out their hands for another bail-in that someone slaps the cuffs on them.  I doubt it, but it is still a worthy aspiration.

Once again Hillary has sidestepped the questionable entanglements of the monetary sort which she maintains with Wall Street by citing their admiration and gratitude for her brave and decisive actions in the aftermath of 9/11. 

Non-Farm payrolls are on Friday.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Nearly Fearless, Into Uncharted Waters - Sustainability

The SP 500 stocks were trading somewhat weakly most of the day, on better than expected ADP employment number and other economic data that looks to provide the Fed with a fig leaf to raise rates this month.  And of course on energy market weakness.

The NDX was green much of the day, as techs are near the heart of the latest bubble valuations.  There is no good reason for it, other than 'stories' in tech carry more credibility with the gullible than pitches that are risibly unrealistic in more mundane areas of the economy.

And then Janet came out in a widely regarded speech today that strongly suggested that 'now is the time' for the Fed to increase rates.  Yellen:  Economy 'Ripe' For a Rate Increase

Nothing particularly new was said, or done, or learned, but stocks sold off a bit, and went out near the close.

Tomorrow the ECB may surprise us to some extent with QE.

Let's keep an eye on that.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds - Another Gold Redemption

There was another gold redemption from the Sprott Physical Gold Trust of 16,467 troy ounces.

However one may wish to account for this, it is noteworthy that there have been no similar redemptions from the silver trust.

This is consistent with the overall experience of Western funds and trust which have been seeing the outflows of gold bullion for the past couple of years, but not of silver.

As you may recall, I have formed the hypothesis that the trading at the Comex in 'synthetic gold,' or highly leveraged paper gold claims, is creating a situation in which risk of a failure to deliver at current prices in the broader, global gold markets will be more likely to occur than in a well-managed and regulated market.

Or more bluntly, the price rigging of gold at The Bucket Shop is setting up the gold market for a severe dislocation when the artificial pricing scheme collapses.

I doubt it will be acknowledged as a 'fraud' since it involves systemically 'important' financial organizations and the acquiescence of bureaucrats caught up in a credibility trap.

The negative estimated cash balances on both Sprott funds continued to increase. One might assume that the Sprott funds have decided that now is not a good time to sell metal to raise funds.

Prior posting from the 27th of November 2015