In a week that has been marked by astonishing mainstream media headlines, BFI Capital’s CEO Frank Suess happened to give an outstanding interview about the outlook for global currencies, gold and manipulation in the markets. These developments are significant and could mark a tipping point. Up until now, the currency and precious metals manipulation has been a topic associated with conspiracy theorists in the corners of the blogosphere. The interesting fact is that this news breaks out exactly at the time when most people are being trapped into the “economic recovery” news. With the markets hanging at the lips of the central bankers, it is fair to say that “the central banks are the markets.” Frank Suess points out that, for several decades now, central banks around the world, with the US Federal Reserve in the lead, haven’t allowed business and credit cycles to happen anymore. In fact, they have been fighting consistently every sign of recession with more money, resulting in a race to the bottom of world currencies. The effect of this on world currencies is that they are shuffling each other down in a see-saw pattern...
News that India may be folding on its capital controls had sent gold and silver surging this morning but following this morning's collapse in emergency claims benefits in the US (expected, but still shocking), precious metals are extending gains, Treasury yields are tumbling, and the USD is well offered. US and German stocks are also cracking lower (with chatter of a flash-crash in Germany's DAX). The more likely driver of all this weakness is that Nomura (or some large Japanese BoJ proxy) lost the 104 USDJPY anchor...
It appears the early (pre-market) strength in US equities provided just the right amount of stop-hunting room for longs to cover and sellers to re-appear as the S&P 500 tested up towards record highs (and unch year-to-date). US equities ran away from their JPY-related proxy briefly but have collapsed back down to it now as perhaps the tell was a push higher in VIX right from the open. VIX rose over 13% briefly - its highest in a week - as US equities (notably the Dow with no support from Visa or American Express to save its skin) tumbled. Treasuries have ben rallying since 0600ET - about the same time gold and silver were slammed. Precious metals are rallying admirably off the lows as stocks tumble (and the USD is unch on the day now)
UPDATE: Some chatter that the earlier drop occurred around a story on the overhauling the London Gold fix (amid all the manipulation talk).
With no apparent news - who needs news - the precious metals market participants have decided that now is the time to sell, sell, sell in huge volume and all of a sudden... Gold is down 1.3% - its biggest drop in a month; and silver is down 2.8% - its biggest drop in 5 weeks. Gold has dropped back down to test its 50DMA and silver has crossed back down through it. Bonds are modestly bid, stocks ar enot moving on this collapse and the USD is hardly budging.
EURUSD has topped out, BofAML's Macneil Curry notes, as the break of 1.3548 confirmed a bearish turn in the medium-term trend, targeting 18-month trendline support at 1.3144. Furthermore, Curry warns, longer-term charts suggest this could be the start of something significantly more bearish - targeting the 200-month average at 1.2187. Despite this USD strength, Curry adds, gold remains curiously bid and could squeeze to $1,399.
What if you could carry and exchange gold in the exact same manner as you do with the dollar bills in your wallet?
Shanghai Daily: "China may soon announce an increase in its official gold reserve from 1,054 tons to 2,710 tons, Jeffrey Nichols, managing director of American Precious Metals Advisors, said. The People’s Bank of China has not reported any increase in official gold holdings since 2009, when the central bank said the official reserve was at 1,054 tons, which accounted for only about 1 percent of its multi-trillion foreign exchange reserves. The PBOC has been “surreptitiously” adding to its official gold reserves. It has bought a total of 654 tons in 2009 through 2011, another 388 tons in 2012, and more than 622 tons last year, mostly from domestic mine production and secondary supplies, Nichols said in a commentary posted on NicholsOnGold.com yesterday. Central bank purchases comprise the smallest fraction of global gold demand — less than 10 percent. “If China announces an increase in gold reserves, there would be an immediate drag-up force in the gold market,” Albert Cheng, managing director of the industrial association World Gold Council for the Far East, told Shanghai Daily. China is the biggest gold consumer and producer in the world."
On this day in 1980, after more than doubling in the prior month, gold prices peaked amid "trading that reached delirious proportions" at a record $820. Between The Hunt Brothers precious metals miasma and rumors that the Soviet Union had invaded Iran, one trader at the time described gold's bull run as "like going to a strip show knowing the place is about to be raided." The exuberance described in the WSJ's headlines below echo so strongly forward into the current "buying opportunity" that any dip represents in the US equity market... and just as it is never different this time, the WSJ reported, "no one wants to leave until they're sure the party is over."
A common argument that has been made to explain the precipitous decline of the price of precious metals in 2013 (in spite of the significat demand for the physical bullion) is of investors’ disenchantment with gold and silver, which had been piling up in exchange traded products as a way for investors to gain exposure to the metals. However if redemptions are a symptom of investors' disenchantment with precious metals as an investment, shouldn't silver have suffered the same dramatic redemptions fate as gold? Indeed it should have, but we think the reason silver ETFs were not raided like gold was that Central Banks do not have a silver supply problem, they have a gold problem...
Germany's blowback against gold manipulation is accelerating. Following yesterday's report that Bafin took a hard line against precious metals manipulation, after its president Eike Koenig said possible manipulation of precious metals "is worse than the Libor-rigging scandal", today the response has trickled down to Germany and Europe's largest bank, Deutsche Bank, which announced that it would withdraw from the appropriately named gold and silver price "fixing", as European regulators investigate suspected manipulation of precious metals prices by banks. As a reminder, Deutsche is one of five banks involved in the twice-daily gold fix for global price setting and said it was quitting the process after withdrawing from the bulk of its commodities business. The scramble away from gold fixing was certainly assisted by the recent first (of many) manipulation expose in the legacy media, when Bloomberg revealed "How Gold Price Is Manipulated During The "London Fix." And sure enough, with Germany already very sensitive to the topic of its gold repatriation, and specifically why it is taking so long, it was only a matter of time before any German involvement in gold manipulation escalated to the very top.
As we begin 2014, it is important to recognize the levels of INSANITY currently existent in the world enabling us to understand the apocryphal nature of the times we live in and prepare ourselves to meet the challenges it represents. The world is leveraged to an extent that has never before seen in history! Debt now masquerades as NOMINAL growth and REAL growth has ceased. Headline economic reports are now nothing more than POLITICALLY CORRECT HOAXES to FOOL the public at large and mask the betrayal of the public by the leaders who hold the reins of power. ECONOMIC Stagnation emerged after the 2008 Global financial crisis and in real terms has NEVER ENDED!
Often “a picture paints a thousand words” and the seven key gold charts below should make gold bears nervous. As the charts show, such sentiment, price action and oversold conditions tend to coincide with major lows in gold and silver prices and multi month price gains.
Gold and silver are rising notably this morning with little specific news aside from the Bafin precious metals manipulation furore. Silver bounced off $20 and is now over $20.40 and Gold is back over $1250. What is perhaps more notable is that the USD is higher once again which supports the fact that the relationship between precious metals and the US Dollar is at its weakest since October (as opposed to its more normal negatively correlated relationship). As Dean Popplewell notes, "we are seeing a short-term phenomenon of physical demand supporting gold and helping to negate the strength in the dollar," as sales of American Eagles coins in January have topped the previous month. However, the tumble in correlation on a longer-term scale suggests gold has more upside to go in the short-term.
2013 was a brutal year for precious metals investors. Santiago Capital's Brent Johnson begins his excellent presentation "#$1%!k##!!***#$$" with a mea culpa for the worst year in a dozen even as Santiago topped the list of precious metals funds. But crucially, Brent points out, "it is only half-time" in this fight and "if gold investors will stick with the fundamentals - which is very hard to do sometimes - the second half could be very rewarding." Simply put, he notes, the only reason the level of water in our economic bucket has increased slightly is not because the holes are fixed... but because we are pumping dollars in quicker than they are leaking out. "Excess Reserves are a ticking time bomb," Johnson adds, and the second half of this monetary game will be very different from the first.
Remember when banks were exposed manipulating virtually everything except precious metals, because obviously nobody ever manipulates the price of gold and silver? After all, the biggest "conspiracy theory" of all is that crazy gold bugs blame every move against them on some vile manipulator. It may be time to shift yet another conspiracy "theory" into the "fact" bin, thanks to Elke Koenig, the president of Germany's top financial regulator, Bafin, which apparently is not as corrupt, complicit and clueless as its US equivalent, and who said that in addition to currency rates, manipulation of precious metals "is worse than the Libor-rigging scandal." Hear that Bart Chilton and friends from the CFTC?