30 July 2015

Gold Daily and Silver Weekly Charts - Non-Farm Payrolls Next Week - 116:1 and No Fear

"Greed is the inventor of injustice as well as the current enforcer."

Julian Casablancas

I will be interested to see how traders square up tomorrow ahead of the weekend.

Here is 'the lay of the land' as we head into the month of August next week.

The first chart shows just how silly the trading at The Bucket Shop has become.

The next shows the results of the attempts to knock down the open interest at Comex.  It has succeeded a bit, but these lower prices taken to shake out the bulls are not enticing many to put their actual bullion up for delivery. 

Deliverable stocks are at a low and therefore the 'leverage' of paper potential claims to available bullion is still rather high at 116:1.

Sentiment has gotten silly low with the momentum boys piling on, and activating their opinion bots to enhance their trade.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Triumph of the Swill

"Pride goes before a destruction, and arrogance before a fall."

Prov 16:18

This was a fairly lackluster day in US equities.

Sentiment is now back to somewhat complacent as the VIX has fallen back to a 12 handle.

I picked up a little VIX today.  I may buy more if we see some additional fluff to the upside.

This is probably not going to last, and is marking a top of sorts.  Whether this is a major top or just a passing intermediate term thing I cannot tell.

The forces of crony capitalism are ready to stick a fork in the rest of the world, and start carving off chunks for themselves.

When a people begin to consider themselves exceptional, above all others, you know that the downfall is just around the corned.  It may be considered the 'German disease' by some, but we are all susceptible to it.

Have a pleasant evening.

29 July 2015

Gold Daily and Silver Weekly Charts - Gold Is the Statist's and the Con Man's Bête Noire

"I have one other issue I'd like to throw on the table. I hesitate to do it, but let me tell you some of the issues that are involved here. If we are dealing with psychology, then the thermometers one uses to measure it have an effect. I was raising the question on the side with Governor Mullins of what would happen if the Treasury sold a little gold in this market.

There's an interesting question here because if the gold price broke [lower] in that context, the thermometer would not be just a measuring tool. It would basically affect the underlying psychology.

Now, we don't have the legal right to sell gold but I'm just frankly curious about what people's views are on situations of this nature because something unusual is involved in policy here. We're not just going through the standard policy where the money supply is expanding, the economy is expanding, and the Fed tightens. This is a wholly different thing."

Alan Greenspan, Federal Reserve Minutes from May 18, 1993

If you take a look at the Fed minutes over the years you will see that Bernanke's response to the Congress that the FOMC does not think about gold is just prevaricating nonsense.

At this point I am getting curious why the Fed in particular would wish to see the price of gold kept down.  And I don't say this too lightly, but it would take a serious effort to ignore the blatant and heavy handed public relations campaign downplaying the value of gold, in the face of increasing physical demand around the world, and the undeniable fact that for the first time in several decades the central banks of the world have turned from being net sellers to net buyers.
As we see from the minutes above most clearly, the Fed was watching gold carefully for indications of monetary inflation.  And this was during the long bear market in gold in the 1990s when central banks were still routinely and openly selling gold to keep the price lower.

Why would the Fed, if indeed they are involved or more likely fully aware, like to see an indicator of inflation supine while they are laboring mightily to convince people that there is a recovery in the economy so that they can get off the zero bounds and raise rates?   Wouldn't a rising price of gold give them some credibility in such a move?

Or is this 'a wholly different things' as then chairman Greenspan said above?   Are we at that kind of moment that Eddie George, the governor of the Bank of England, talked about in late 1999, culminating in the infamous Brown's Bottom when England's financiers sold her gold on the cheap, presumably to bail out the Banking speculators.
"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. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K."
This current pool operation is indeed odd, unless one subscribes to the idea of a currency war pitting the US dollar status quo against the emerging economies who wish to find alternatives to what they feel is an abusive, almost neo-colonial form of monetary repression and at times a facility for plunder.

Although as I have mentioned before, I have a very open mind to the notion that some of the shenanigans from the last decade put some official sector and too big to fail jokers 'over their skis' in the precious metal markets, to the extent that Eddie George's abyss was starting to yawn like the Grand Canyon again. I never like to attribute to bad policy what can be just as easily attributed to purely stupid and short-sighted personal concerns and greed.

August looks to be a littler more interesting at The Bucket Shop. There were some more dribbles out of the warehouse, and the 'leverage' of claims is probably still well over 100:1. I'll have a look at it when mon ami Nick puts out his latest.

Fundamentally speaking, if we dare do such a thing in such dodgy markets, the demand for physical silver is increasing in 2015 while the supply is contracting, resulting in a projected deficit for the year.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Failure to Achieve Liftoff, GDP Tomorrow

There was intraday commentary about the FOMC statement here.
Even though The Recovery does not warrant it, I am still of the same mind I have been, that the Fed will raise 25 basis points in September unless the wheels are falling off the global financial system and/or the economy.  It is purely an inward-looking policy thing, and they are falling all over themselves to prepare the markets and to justify their actions. 
The Fed wants to get off the zero bound so they have room to maneuver when the next financial crisis comes, most likely from the bursting of their latest financial assets bubble.  The Fed is a servant to the Banking system.
The SP managed to gain some ground after an initial flip flop.  I was disappointed that a purchase of some powered up VIX did not get filled at the announcement when they smacked VIX lower to clear the stops and then ran it the other way.  You have to be pretty aggressive to get past the HFT spoofing and front running at times like these.  It never really did get back to a cheap buy. 
Let's see how the Advance GDP number for Q2 looks tomorrow.
This is an artificial market, so 'policy considerations' and private greed will most likely continue to trump any reasonable estimation of 'investment' and 'price discovery.'
Have a pleasant evening.

FOMC Statement for July 29, 2015 - Lords of the Small Council

The Fed did nothing, but continued to smooth the way for some rate hikes.

The hikes have little to do with the economy or The Recovery™.   Or what George Mason Prof Tony Sanders aptly calls The Bartender Recovery of part time service jobs and very low real median wage growth that is losing ground to housing prices and inflation.

The Fed would like to get off the zero bound so that they have room to cut the next time the financial markets crash because of regulatory capture and gross policy errors that have allowed the financial sector to mutate and distort its role in the real economy.

So barring a market meltdown I would expect a 25 basis point increase in September. I don't think that there is unanimity behind this decision on the FOMC. I suspect Yellen is more dovish than other members, probably led by monetary technician Stanley Fisher, having a more hawkish lean not so much from an economic standpoint as from the practical standpoint of banking system technocrats.

Release Date: July 29, 2015

For immediate release

Information received since the Federal Open Market Committee met in June indicates that economic activity has been expanding moderately in recent months. Growth in household spending has been moderate and the housing sector has shown additional improvement; however, business fixed investment and net exports stayed soft.

The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggests that underutilization of labor resources has diminished since early this year. Inflation continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey‑based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate.

The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.
The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.