Something extraordinary occurred this week. The Fed made a routine announcement. Fireworks began the next day. In 6 hours, the price of silver skyrocketed by 5%.
While we have warned about the problem with near-infinitely rehypothecated physical/funding commodities/metals, be they gold or copper, many times in the past, and most recently here, it was only this week that China finally admitted it has a major problem involving not just the commodities participating in funding deals - in this case copper and aluminum - but specifically their infinite rehypothecation, which usually results in the actual underlying metal mysteriously "disappearing", as in it never was there to begin with. It would appear our fears of global contagion (through various transmission channels) are now coming true as WSJ reports that as many as a half-dozen banks are trying to determine whether the collateral for loans they made to commodities traders was used fraudulently by a third party to obtain other loans. As we detailed previously, it appears the day when the Commodity Funding Deals finally end is fast approaching... and as we note below, why that will certainly be a watershed event.
It was all over the news last week, both mainstream and gold sites. Barclays was caught manipulating the gold price. This story is a big deal to the gold community.
We are not going to lament the folly of traders nor comment on the unemployment data. We watch the dynamic between price setters and the speculators trying to front run them.
Gold is a tangible commodity. It's a material good that can be held in the hand, bought and sold--and warehoused. You have to understand warehousing to understand the gold market.
What Is The Common Theme: Iron Ore, Soybeans, Palm Oil, Rubber, Zinc, Aluminum, Gold, Copper, And Nickel?Submitted by Tyler Durden on 03/18/2014 19:53 -0400
If you said a short list of commodities manipulated by the Too Big To Prosecute banks, you are probably right, but the answer we were looking for is that these are all the various, and increasingly more ridiculous, commodities that serve to make up the bulk of China's hot money flow (those flows into China which are not reflected in the current account flows or FDI) facilitating synthetic structures, also known as Chinese Commodity Funding Deals.
The dollar dropped a lot this week, though most would say gold and silver spiked. Gold owners have 4% more dollars and silver owners have 7.4% more. How much less are those dollars worth?
In this part, we look at the question: Is gold a currency? Professor Tom Fischer answers, “Yes, gold is a currency with the symbol XAU”.
It is still all about the Yen carry which overnight tumbled to the lowest level since November, dragging the Nikkei down by 4.8% which halted its plunge at just overf 14,000, only to stage a modest rebound and carry US equity futures with it, even if it hasn't helped the Dax much which moments ago dropped to session lows and broke its 100 DMA, where carmakers are being especially punished following a downgrade by HSBC of the entire sector. Also overnight the Hang Seng entered an official correction phase (following on from the Nikkei 225 doing the same yesterday) amid global growth concerns and has filtered through to European trade with equities mostly red across the board. Markets have shrugged off news that ECB's Draghi is seeking German support in the bond sterilization debate, something which we forecast would happen a few weeks ago when we pointed out the relentless pace of SMP sterilization failures, with analysts playing down the news as the move would only add a nominal amount of almost EUR 180bln to the Euro-Area financial system. Elsewhere, disappointing earnings from KPN (-4.3%) and ARM holdings (-2.5%) are assisting the downward momentum for their respective sectors.
A widening bid-ask spread in silver would be tantamount to the metal losing its moneyness.
Doing some detective work.
The selloff in silver has had an unexpected effect on silver spreads.
Think sentiment in gold and silver are the same? They violently diverged this year. The difference could have a profound impact on your trades.
At times silver metal is being dumped in quantity in the spot market, and at other times paper silver is being bought aggressively in the futures market.