Precious Metals

Further proof of manipulation of gold and silver prices - if any were needed - came overnight as  Switzerland’s financial regulator (FINMA) found “serious misconduct” and a “clear attempt to manipulate precious metals benchmarks” by UBS employees in precious metals trading, particularly with silver.

"The behaviour patterns in precious metals were somewhat similar to the behaviour patterns in foreign exchange," FINMA director Mark Branson said in a conference call with journalists. He said that as UBS has precious metals and foreign exchange desks under combined leadership, it was not surprising to find similar behaviour. "But we have also seen a clear attempt to manipulate fixes in the precious metal market."

"FINMA has also instructed UBS to limit bonuses for traders of foreign exchange and precious metals to 200 percent of their base salary for two years."

The horror, the horror.

With the USDJPY repeatedly hitting 116.00 as a result of the same pair of headlines hitting either Reuters, the Nikkei or Sankei every 6 or so hours for the past 3 days, namely that Japan will delay its sales tax hike by almost two years, and that Abe is preparing early elections, perhaps the algos realized they were pricing in the same event about 4 times in one day, and unable to break the 7-year-high resistance level, slid dropping nearly 100 pips to just over 115 at least check, which may well be today's "tractor" level, which in turn has also dragged down both European stocks and US futures. But the thing that made the vacuum tubes really spark is that at a press conference yesterday in Beijing, Abe was quoted as saying that he "has never made any reference to the dissolution of parliament", this came after the chief cabinet secretary Suga saying that the decision on whether or not to go to the polls would be Abe’s only.

Chris Martenson is an economic researcher and futurist, specializing in energy and resource depletion, and co-founder of PeakProsperity.com. As one of the early econobloggers who forecasted the housing market collapse and stock market correction years in advance, Chris rose to prominence with the launch of his seminal video seminar, The Crash Course, that interconnected forces in the economy, energy, and the environment that are shaping the future, one that will be defined by increasing challenges as we have known it. Chris’s insights are in high demand by the media as well as academic, civic, and private organizations around the world, including institutions such as the U.N., the U.K. House of Commons, and the U.S. State Legislatures. So with that we’d like to welcome Mr. Chris

With the bond market closed today due to Veteran's Day and the correlation and momentum ignition algos about to go berserk without any parental supervision, it was only a matter of time before some "stray" headline sent first the carry pair of choice, i.e., the USDJPY, and subsequently its derivative, the Emini, into the stratosphere. And sure enough, just before 3am Eastern, it was once again Reuters' turn to leak, only this time not about the ECB but Japan, as usual citing an unnamed "government official close to Abe's office", that Prime Minister Shinzo Abe was likely to delay a planned sales tax increase.

• JAPAN MORE LIKELY TO DELAY SALES TAX INCREASE, REUTERS REPORTS

Which of course is a repeat of what Reuters said 2 days ago but since it came on the weekend, the momentum ignition algos didn't notice. The result was an instant surge in the USDJPY, which shortly thereafter touched on 116.00 the highest level in 7 years, and is up now 200 pips since yesterday as the obliteration of Japan's economy proceeds, in turn pushing European stocks, and shortly, the S&P, higher

For the moment capital markets appear to be adapting to deflation piece-meal. The fall in the gold price is equally detached from economic reality. While it is superficially easy to link a strong dollar to a weak gold price, this line of argument ignores the inevitable systemic and currency risks that arise from an economic slump. The apparent mispricing of gold, equities, bonds and even currencies indicate they are all are ripe for a simultaneous correction, driven by what the economic establishment terms deflation, but more correctly is termed a slump.

Manipulation of markets can work effectively in the short term. However, in the long term prices will be dictated by the global supply and the global demand of 7 billion people, many in Asia who believe in gold as a store of wealth. Not to mention, sovereign central banks including the People’s Bank of China and the Russian central bank - who also believe in gold as an important monetary asset.  

Once again today we see spurious ECB members sending more mixed messages about ECB actions in the near future (and really only impacting precious metals by the look of it. Having said just a month ago that ECB QE would only be undertaken in strict adherence with mandates and treaties, and warning that QE would strain the ECB's risk-bearing ability; today Luxembourger announced that ABS QE would start next week and Sovereign QE is an option if things get worse. One bank, at least, will be overjoyed... as ABN AMRO wrote this morning that that the ECB needs to bid more aggressively for covered bonds to encourage the street to sell to them. Roughly translated is: "we front-ran your program based on entirely non-economic rationales and now it's "fuck you, pay me" time." Unintended consequence #34527, "whatever it takes" means buying everything at the worst possible prices and forcing EU taxpayers to carry that over-paying risk.

In 2013; a chain of events led to what was (at the time) the greatest stampede into gold in human history. It began with the Cyprus Steal, the West’s first “bail-in”. This led to the realization (by the Smart Money) that no paper assets were safe any longer, within any Western financial institution or market.

Just as "orange is the new black", I think that "oil producers are the new gold miners." It doesn't sound quite as good, but here's my point:

EURCHF is rapidly falling towards its 1.20 peg level - not seen since September 2012 (when the SNB described the "massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development.") It appears the CHF buying pressure is based on traders betting on the Swiss Gold Initiative (SGI) referendum on Nov 30th - if it were to pass, the SNB would be forced to choose between buying gold or giving up on the peg (and allowing even more "massive overvaluation" of the swissy). For now, it seems EURCHF is the best indicator of SGI risk as precious metals remain unimpressed by the potential demand. Of course, as ForexLive notes one trader's comments, "even if the gold vote goes against them they can still hit the print button to infinity," to defend the peg; though that may just viciously impact the cost of the physical gold they would be forced to buy.

• Obama urges China to be partner in ensuring world order (Reuters)
• China Sees Itself at Center of New Asian Order (WSJ)
• Xi Dangles $1.25 Trillion as China Counters U.S. Refocus (BBG)
• China's Xi, Japan's Abe hold landmark meeting after awkward handshake (Reuters)
• Revenue Softness Worries Stock Investors (WSJ)
• How BOJ’s Kuroda Won the Vote for Stimulus Expansion (WSJ)
• Bonus Season Brings More Pain for Traders (WSJ)
• Russia’s Military Encounters Risk Clash in Europe (BBG)

By continuously intervening in all of the markets, the Fed has destroyed the information transmission system that is built into freely trading markets. Time is starting to run out for ability of the U.S. to keep kicking the can of collapse down the road. We’ve come full circle, only with China in the Midas throne this time around.  Eventually the world is going to revert back to a gold-backed currency system.  When this happens, the U.S. will be required to demonstrate that it possesses the amount of gold that it reports to own. The only caveat here is that we believe that the U.S. will start WW3 before it’s forced to reveal the truth about its empty gold vault. That’s how broken our system really is…

And then there was the precious metals market: a market which all the Keynesian fanatic paper bugs said was immune from manipulation, be it of the central or commercial bank kind, even with every other market clearly exposed for perpetual rigging either by hedge funds, by prop desks, by HFTs, or central banks themselves. Sadly this too conspiracy theory just was crushed into the reality of conspiracy fact, when moments ago the FT reported that alongside admissions of rigging every other market, UBS - always the proverbial first rat in the coalmine, to mix and match metaphors- is about to "settle" allegations of gold and silver rigging. In other words: it admits it had rigged the gold and silver markets, without of course "admitting or denying" it did so.