01 September 2015

The Investment of the Millennium: 'Pet Rocks'

"Gold has worked down from Alexander's time.

When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory."

Bernard M. Baruch

Who would have thought it?

So why haven't the precious metals been 'working' since they spiked higher in 2011?

"We hypothesize that, having learned from the misadventures of the 1960s, the policy elites, well-versed in the practice of financial engineering and market manipulation, would have seen no need to dump stocks of government gold reserves onto the market, 1960s style, to keep the price in check. 

Instead, synthetic gold, sourced in pyramids of credit extended to bullion bankers by central banks with little or no claim on physical substance, have provided a more efficient, better-camouflaged form of intervention. COMEX synthetic gold and related over-the-counter derivatives are traded in macro strategies implemented by hedge funds, high-frequency trades, and commodity funds in pair trades with interest-rate, currencies, equity futures, or even more exotic offsets. The volumes traded are huge, and bear little resemblance to actual flows of physical metal. 

We suspect that shorting gold has come to seem like a riskless proposition as long as there is confidence in the Fed. Synthetic gold is the perfect substance for a carry trade: an easy borrow with very low carrying cost and little upside basis risk. Such a hypothesis, in our opinion, does much to explain the incongruity of a declining gold price while fundamentals for paper currency, and the U.S. dollar in particular, obviously deteriorate; while demand for physical gold has exceeded new mine supply for several years running; and while above-ground 400-ounce .995-gold bars located in London, New York, and other financial capitals (in cohabitation with speculative trading activity in paper markets) have steadily dwindled and disappeared into Asian financial centers reformulated as .9999 kilo bars."

Tocqueville Gold Newsletter 2Q 2015

The physical market at some point is going to come bearing consequence for the schemes of the financiers.

I suspect that when the 'riskless proposition' of shorting gold starts to more visibly unwind, most likely under some significant duress, we are going to see what kind of rot has been concealed, and the bottom feeders that have thrived on it, as when the tide goes out.

This unwinding started in the spike in the metals after the financial crisis of 2008, but was held off by massive 'currency interventions' to 'save' the Western financial system in 2011.

Gold rose in 2009 from about +150% to +775% at the end of 2010.

The real longer term consequences of reckless monetary policy and irresponsible financial deregulation and a tolerance for massive frauds are still ahead of us.

Perhaps I am incorrect in this.  But nothing I have seen in the data makes me believe so.

Gold is still flowing in large numbers from West to East, and the central banks are still net buyers.

And once the bull market in metals resumes, which I believe that it will, the upside will be similar to the increase which was seen in the years from 2009 to 2011.

Change is coming.  That is the only certainty.  At some point I may be sharing some more thoughts about how this change might manifest it, and what forms the new 'closing of the gold window' may take.

Gold Daily and Silver Weekly Charts - Non-Farm Payrolls On Friday

"The existence of cash — a bearer instrument with a zero interest rate — limits central banks’ ability to 'stimulate a depressed economy.'  The worry is that people will change their deposits for cash if a central bank moves rates into negative territory."

Financial Times, The Case For Retiring Another 'Barbarous Relic'

Since the Nikkei bought the Financial Times earlier this year one wonders if they are able to interpret the real meaning of their own editorial policy.  Could anything be more blatantly repugnant than the above?

'Negative rates' is a euphemism for the slow but steady confiscation of all savings, a broader 'bail in.'  It is designed to drive people into financial paper assets and consumption. It is all about the elimination of safe havens, of places to hide from gross incompetence and wealth transfers.

Negative interest rates are the signature moment in the decline of a republic and the rise of corporate feudalism.   They take our wealth at no cost or effort for themselves, and lend it back to us at interest and without risk, being assured of a continuing supply of subsidy from their central Bank.

There will be quite a bit of economic news at the end of the week, including a Non-Farm Payrolls report for the month of August.

Gold is in an interesting position here, as can be seen on the chart.

The Bucket Shop was quiet, except for a small but steady stream of bullion out of their warehouses for both metals.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Danger Zone

"Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.

When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin!

Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out."

Andrew Jackson, in a meeting with the Bankers, February 1834

Stocks sold off again, losing a little more than half of the recent rally which they enjoyed after the initial plunge in global equities.

It is foolish to talk about 'fortress America' and the imperturbability of the exceptional.  The derivatives market alone makes the entire financial system an accident waiting to happen.

The Fed has obviously, and in a calculated manner, allowed a financial asset paper bubble to be created in the long and almost unbroken run up in financial paper after the financial crisis of 2008,  and stood idly by watching a growing imbalance and inequality in the economy which they also helped to create.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

Median wage, and aggregate demand.

Maybe it is time to build a wall. Not a wall between the US and Mexico, or even the US and Canada.

Maybe it is a time to build, or rather to rebuild, a wall between the public money and their savings and the gambling Bankers of Wall Street, who keep the profits and give the public their losses.

Have a pleasant evening.

31 August 2015

Gold Daily and Silver Weekly Charts - Charts Undecided - Goldman Takes A Little More

"Don't get involved in partial problems, but always take flight to where there is a free view over the whole single great problem, even if this view is still not a clear one."

Ludwig Wittgenstein, Notebooks, Nov 1914

We say goodbye to August, and the active month for gold at The Bucket Shop, and welcome the first stirrings of September, which promises to be much more interesting for silver.

Prices were heavy for the metals most of the day, with silver showing a little more perkiness, but gold doggedly hanging on to close for a slight gain.

We have an interesting, if yet undecided, chart formation on the daily gold chart in a potential cup and handle formation that, if activated and confirmed, will target a minimum objective of around $1,255 and even a likely test of the big prior support from the trading range at $1,270.

To put this potential formation to 'work' gold must continue to hold its successful retest of 1120 on the 'handle,' and move to take and break the top of the cup at 1170.   This is no mean feat, since gold is being pressed upon so heavily by the meddlers in the forex crosses.  Despite the propaganda, it most certainly is a currency of the world.

Silver is just coming into its own and September will most likely to provide some fireworks for the beta rocket, depending on which way the black swans start coming home to roost.  We have already seen the first deliveries taken for September, as noted on the clearing report below, of about 835,000 ounces.

I keep hearing stories of retail shortages and premiums that are certainly interesting.  I will be more interested if we start seeing some pressures at the wholesale level.

Gold went out quietly, with Goldman stopping another 49 August contracts for their 'house account.'

I am hearing some talk about leaner times for gold bullion supplies at the LBMA for this booming physical gold market in Asia and India.  There is certainly not much bullion up for sale at these prices in NY. Perhaps the bullion banks will use a quiet September to regroup and reform, if they get a quiet month that is.

Better not to try and guess, and look ahead too much however.   These pool operations, which we are almost certainly seeing now in my judgement, take a long time to reach their natural conclusion.  But they always seem to get there one way or the other.

So perhaps we can use this time to get our own houses in order, to put our pieces on the board where we are sure that we will have them if things get more interesting.  I certainly would not wish to put them in an unallocated pile in some vault managed by the status quo, since possession is nine-tenths of the law to these jokers, as we saw with MFGlobal's default.

I am ambivalent about the miners here, mostly because I am in the position of owning some, which I have not done for quite some time.  But silver is too temping with its 77:1 ratio to gold, and the absolutely beaten down into the ground place of some fairly tempting mining stocks.

Oh well, let's see if we can get something more substantial to hang our hats on, like the activation of a chart formation or some especially bullion friendly news for a change.  The gold trolls were out in force today on the financial networks, so we will have to see what this means if anything.

There was a greater than usual amount of information about the metals posted over the weekend, so you may wish to scroll down and have a look if you have not done so already.   There are quite a few odd little things happening that seem to be missed by most.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - September Song

"The ideological and physical hold of American imperial power, buttressed by the utopian ideology of neoliberalism and global capitalism, is unraveling. Most, including many of those at the heart of the American empire, recognize that every promise made by the proponents of neoliberalism is a lie. Global wealth, rather than being spread equitably, as neoliberal proponents promised, has been funneled upward into the hands of a rapacious, oligarchic elite, creating vast economic inequality.

The working poor, whose unions and rights have been taken from them and whose wages have stagnated or declined over the past 40 years, have been thrust into chronic poverty and underemployment, making their lives one long, stress-ridden emergency. The middle class is evaporating. Cities that once manufactured products and offered factory jobs are boarded up-wastelands. Prisons are overflowing. Corporations have orchestrated the destruction of trade barriers, allowing them to stash $2.1 trillion in profits in overseas banks to avoid paying taxes. And the neoliberal order, despite its promise to build and spread democracy, has hollowed out democratic systems to turn them into corporate leviathans."

Chris Hedges, The Great Unraveling

US stocks came in a bit shaky this morning, but managed to rally back up close to unchanged during the day.

Alas, it was not to be, and stocks sold off in the afternoon, going out on the close at or near to their lows.

This is the 50% retracement area here from the recent big decline last Monday.

Stocks need to own this level, and start climbing back up to at least retest the prior big support area that had formed the bottom of the longer trading range.

If we get too sharp a rally higher that fails, let's say around a Fed rate hike in September or October, then it might be Katy-Bar-The-Door time, because a rally that fails after a steep decline in a long trend rally to these kinds of lofty heights is, in the words of classic technical analysis, 'bad news.'

But lots of things can happen between now and the end of the year.

I would feel better if I thought that the powers-that-be were doing anything close to some real solutions for the economy, and not just playing extend and pretend with an unsustainable quiet riot of upper crust looting and malfeasance.

But that is not in the cards it seems.  And most things tend to fill one with concern.

But nevertheless, let's see what happens.