Commodity Futures Trading Commission

Price action in the foreign exchange market.  Discuss.

Two days ago we suggested that "they better pray there is no short squeeze." Today, following the just released latest CFTC Commitment of Traders data which showed that the Comex gold short position grew once again to a new all time high of 79,416 shorts, all prayers are now off. If we may be so bold as to we suggest, the time has come to upgrade to the sacrificial slaughtering of at least a lamb on the altar of Saint Ben, because even the tiniest hint of a forced cover will now result in the biggest rip your face off levered short squeeze seen in the history of the yellow metal. Maybe throw in an ink cartridge or two for good measure...

It is likely that the very aggressive selling in illiquid Asian markets overnight was by a large hedge fund or bank or a combination of hedge funds and banks with deep pockets. Reuters quoted an analyst at a Japanese bank who said that silver’s price falls were due to one “unidentified investor”.

A look mostly at prices in the currency market and the outlook.   

• Controversies give Obama new governing headaches (Reuters)
• About that Capex... BHP to Rein In Investment, Chief Says (WSJ), considers returning cash to shareholders (FT)
• Bloomberg users’ messages leaked online (FT)
• Japanese mayor sparks China outrage with sex-slave remarks (Reuters)
• Economists Cut China Forecasts (WSJ)
• U.S. oil boom leaves OPEC sidelined from demand growth (Reuters)
• U.S. banks push back on change in loan loss accounting (Reuters)
• Fed’s Plosser Says Slowing Inflation No Concern for Policy (BBG)
• Watchdog probes 1m US swap contracts (FT)
• Used Gold Supply Heads for ’08 Low as Sellers Balk (BBG)
• Ex-BlackRock Manager Said to Be Arrested in U.K. Probe (BBG)

There was a time three months ago, when "beating" German confidence served as an upward stock and EURUSD catalyst not once but twice in the same week. One would therefore assume a German confidence miss, such as with today's German ZEW, which barely budged from 36.3 to 36.4 on expectations of a rise to 40.0, with the current situtation dropping from 9.2 to 8.9, on expectations of a rise to 9.8, should be risk negative. Well, it wasn't: it is the new normal after all, and in fact the EURUSD jumped in a kneejerk reaction at 5 am, rising over 1.3000, albeit briefly, assisted by ZEW members saying that respondents do not see a further ECB rate cut - well, of course not - they are Germans, and Draghi isn't. Perhaps the news of a better than expected Eurozone Industrial Production print, which rose from 0.3% to 1.0%, on expectations of a more modest increase to 0.5%, is what catalyzed the subsequent drop in both the EUR, and US stock futures. The IP strength was driven by Germany, Spain and Netherlands offset be decline in France and Italy. 

The dollar rallied in the second half of last week, but looks set to consolidate first before extending the rally.  The yen was not the weakest major currency.  That dubious honor goes to the Australian dollar.  

Gold has been hovering in the middle of a trading range for the past few trading sessions, while the most recent FOMC statement has been price supportive of precious metals and gold in particular.  While this is true, many economists have lowered their core 2013 inflation forecasts from 2% - 2.1% to 1.5% - 1.75% due mainly to the less aggressive indicators for the inflation of consumer basics. 

Just six weeks after the US Treasury decided enough-was-enough with this upstart non-fiat, non-controlled-by-TPTB currency (and applied money-laundering reglations), US financial regulators are now looking for supervisory control over Bitcoin. As The FT reports, CFTC's Bart Chilton notes "it's not monopoly money - real people have real risk in these instruments," and  that regulating the controversial cyber-currency "is sure something [CFTC] needs to explore." Chilton's remit to regulate this "shadow currency" is predicated on it becoming a basis for derivative contracts as opposed to purely transactional (akin to the monitoring of physical oil transactions that can influence crude futures.) Since the Treasury's March decision, at least three North American companies have had their accounts seized by the banks but while this attempt to control the virtual currency follows the ECB's 'ponzi attack' last year, the 'regulators' may note that, "even if US regulations make it hard for Bitcoin businesses to operate in the US, that doesn’t mean it will make it difficult for people to use Bitcoin as a currency in the US. Bitcoin is a world currency."

The day many have predicted would come, has finally arrived: 100% initial margin on gold. For now it is just one Futures Commission Merchant, in this case ex-CBOT traders Crossland LLC (motto: "Where Speed And Service Matter"), but tomorrow it will be another, and another.

One of the New Normal responses to allegations, first started here in 2009 and subsequently everywhere, that all HFT does is to frontrun traditional market players (among many other evils) now that its conventional and flawed defense that it "provides liquidity" lies dead and buried, is that "everyone does it" so you must acquit because how can you possibly prosecute a technology that accounts for over 60% of all market volume and where if you throw one person in jail you would throw everyone in jail. Today we learn that this indeed may be the case, and not only at the traditional locus of HFT frontrunning such as conventional exchanges for stocks such as the NYSE or even dark pools, but at the heart of the biggest futures exchange in the US, the CME where as the WSJ's Scott Patterson explains frontrunning by HFT algos is not only a way of life, but is perfectly accepted and even smiled upon.

The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There's no price the big banks can't fix. Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything.

Yesterday's #Hash-Crash has brought the tough reality of just how entirely mechanized the so-called equity 'markets' have become in the US to every mom-and-pop who watch nightly news. Mainstream media is even discussing the correlations between JPY carry trades and equity indices now as CNBC's Rick Santelli notes "the high-speed casinos our markets have become". All things we have discussed for years. But there is one potentially fascinating insight from the ongoing robotization of the TBTF banking sector - Wall Street jobs are now at an all-time record low. Once again, it would appear, that cost-cutting demands (and a government backstop and huge subsidy no matter how bad the things are that you do) trumps any job creation. As Joe Saluzzi explains to CNBC's Rick Santelli in this excellent clip, the "liquidity is fickle" - the fake-tweet was a mere catalyst, he added, "we see these flash-crashes every day." The benefits for the major exchanges far exceed the conflicts of interest of these so-called "market-makers" who front-run their clients millisecond by millisecond.

Let's get down to the facts of the recent banker gold & silver paper price smash and the lies about the banker gold & silver paper price smash being propagated by the mass media and banking shills like Paul Krugman so everyone can understand why this smash will blow up in the face of the very bankers that executed it at some point down the road. Retail individuals AND global institutions all around the world are finally beginning to understand that physical ownership of gold and silver is how to counter banker fraud & intervention into the gold and silver markets and this realization is going to produce massive blowback.

Since prevailing fringe theory is that JPMorgan and the other bullion banks 'control' the price of gold, we thought it would be interesting to hear yet another explanation for last week's monumental precious metal market events... from the horse's mouth...