Overview of the price action in foreign exchange and outlook for the week ahead.
Gold has surged 4.9% in dollar terms so far this week and is headed for its biggest weekly gain in one-and-a-half years. Gold has recovered in all currencies and is up by 4.8% in euro terms and 3.7% in sterling terms.
Therefore, gold has recovered nearly half of its recent sharp decline and is now just 7% below its price ($1,560/oz) prior to the futures induced sell off on April 12th and 15th.
The paper price of gold crashed to $1,325 in the wake of this huge trade. It is now hovering around $1,400. Our first reaction is to suggest that this is only an aberration, and that the fundamentals of the depreciating value of paper currencies will eventually take the price of gold much higher, making it a buying opportunity. But what we can't predict is whether big players might again deliver short-term downturns to the market. The momentum in the futures market can make swings surprisingly larger than the fundamentals of currency valuation would suggest; but the fundamentals will drive the long-term market more than these short-term events. The fight between pricing from the physical market for bullion and that from the "paper market" of futures is showing signs of discrimination and disagreement, as the physical market is booming, while prices set by futures are seemingly pressured to go nowhere. In short, we think this is a strong buying opportunity.
Why the Western Banking Cartel’s Gold and Silver Price Slam Will Backfire - And How You Can Protect Yourself from the BlowbackSubmitted by smartknowledgeu on 04/22/2013 04:27 -0500
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.
Is the dollar trending or is it moving broadly sideways?
The $20 billion gold futures sale and concentrated selling of gold futures on the COMEX on Friday and Monday is far more likely to be “nefarious” than the gold fixings in London. The CFTC’s track record to date has not been great and regulatory capture remains a real risk with the CFTC seeming to be reluctant to hold Wall Street banks who may be involved in price manipulation in the futures market to account. After the Libor revelations, it is surprising that there is not more scrutiny and hard questions asked of banks and regulators in this regard. Separately, large institutional fund manager Blackrock said that there was “no visible central bank activity” as the gold price plunged. They said that gold's fundamentals remain strong and that the fall in price was driven by an outflow of "hot money" and that gold prices are now near the marginal cost of new supply which should provide strong support at these levels and lead to higher prices again.
Buy PHYSICAL Gold. NOW: The Discount of a Lifetime: Or Why You Must Abandon the Fake Paper Gold MarketSubmitted by Gordon_Gekko on 04/17/2013 06:00 -0500
It's time to go in for the kill. Buy as much physical Gold as you can.
It is the yen, not the dollar, that is the key currency in the foreign exchange market.
The downside technical correction in the dollar that we have been anticipating appears to have begun against most of the major currencies. The drift lower against the yen over the past month has ended, and although we are skpetical of the impact of the stimulative monetary and fiscal policies in Japan, technically it is difficult to resist the momentum for additional yen weakness.
As previously reported, former Goldman prop trader and MIT-grad Matt Taylor, 34, handed himself over to authorities earlier today and subsequently pled guilty in Federal Court to one charge of wire fraud "saying he exceeded internal risk limits and lied to supervisors to cover up his activities." He subsequently posted bail in the amount of a $750,000 bond with two co-signers. His sentencing hearing is set for July 26, when he faces a prison sentence between 33 months and 41 months and a fine of $7,500 to $75,000. He will likely get the lower end of both wristslaps, and come out from minimum security prison, that is assuming he even spends one day inside, to some cash stashed away in an offshore bank account (not Cyptus) courtesy of his many years manipulating massing the market first at Goldman and then at Morgan Stanley. And manipulating massing he did, because courtesy of Reuters we now know the full details of his transgressions.
I asked the question: is Bitcoin money? (It's price sure is rising parabolically like silver in 2011) In brief, I said no it’s an irredeemable currency. This generated some controversy in the Bitcoin community. I took it for granted that everyone would agree that money had to be a tangible good, but it turns out that requirement is not obvious. This prompted me to write further about these concepts.
It all looked great as we held the overnight rampathon (driven by EURJPY fiddling) into the US open and yay verily, the media was celebrating (and kept their exuberance going til the close with the Dow at another all-time closing high). The S&P was amusingly (and oh so humanly) bid 7 points vertically into the close to ensure a VWAP close in the futures (and another new closing high for the S&P) as the Nasdaq bounced perfectly off unchanged from Cyprus levels. But away from that idiocy, things were not so great. Builders were battered out of the gate (-2.4% on the week); The Dow Transports never saw green all day dropping 1.3% (and now down 3% post-Cyprus) and while the broad Russell 2000 opened gap up (like the rest) it was slammed slower all day and ends -2% from pre-Cyprus (while the Dow, S&P, and Nasdaq hold 0.5-1% gains). Silver was monkey-hammered (on no news whatsoever - and record US Mint demand) down 4% on the week and gold slipped ending -1.3% (even with the USD retracing yesterday's weakness to close unchanged on the week). Treasuries drifted higher in yield with 7Y underperforming (but only unch on the week). VIX compressed but remains considerably dislocated from stocks' exuberance.
For the start of a quarter, volume was very weak today (but to be somewhat expected given the holiday) and despite two valiant algo-driven attempts to save the day, the S&P and Nasdaq ended back below its pre-Cyprus levels. The 'magical' Dow ended only a smidge lower on the day as the 'real' markets were all weak. Builders led the drop today but financials (especially the majors) continue to be monkey-hammered (Citi and MS now down 8% post-Cyprus). AAPL also stood out with its biggest drop in 10 weeks as the 50DMA breakout appears to have foxed many fast-money types. The USD faded on the day but provided no juice for stocks as the JPY strength hurt FX carry. VIX made higher highs on the day - hitting 14% as Treasury yields in general slipped 1-2bps. Gold ended unch, Silver down1.6% and Oil's afternoon strength supported some algos under the S&P. Today's equity weakness appears as much a catch-down from last week's disconnects as a possible reflection of the fact that US macro data has seen its worst 3-day run in 9 months.
Below are portions of a comment letter submitted by R.T. Leuchtkafer to the SEC on April 16, 2010, just 3 weeks before flash crash. The second paragraph in the excerpt below, unknowingly describes exactly how the flash crash was started. The letter goes on to alert the SEC on the dangers of High Frequency Trading (HFT), phantom liquidity and other concerns.
An overview of the technical condition of the major currencies. See why we anticipate a heavier US dollar in the week ahead.