When the sharks start feeding on each other, you know the food supply is running out. – good friend of mine in NYC who wishes to remain anonymous
How many times per week do you scratch head at some Marketwatch or Bloomberg or CNBC news headline which connects a non-sequitur news item with the reason behind a market move?
A friend who was a young junk bond research analyst when I traded junk bonds at Bankers Trust in the 1990’s told me an interesting story recently. He had just taken his first call from a reporter who was asking him why junk bonds were moving that day. After he got off the phone he walked over to the head of research and asked how to handle the call next time. She walked him over the Bloomberg and said: “Here’s what you do. Pull up the top headlines up on Bloomberg and – regardless of what the top 3 stories say – use those headlines as your answer to the reporter’s questions. Then hang up.”
Two days in a row now gold has inexplicably popped up and the dollar has tanked. Today, in fact, the dollar has gone off a cliff (click to enlarge):
Today at 8:55 the dollar dropped like it had a lead weight around its neck. Gold started moving higher much earlier than the dollar 2:00 a.m EST. Of course, Bloomberg News attributed the move in the dollar to the reports that Greece might be saved and the euro spiking higher. It also connected the move up in gold to the dollar plunge.
But when you look at the movements in both gold and the dollar, you can see that Bloomberg’s reasoning for gold moving higher is – well, for lack of a better term, an idiotic non-sequitur. New developments on “Grexit” have had no meaningful impact on the movement of gold during this whole Greek tragicomedy theatrical show. And as you can see from the graphs above, there was zero correlation between the movements of gold and the dollar overnight.
You’ll note the yellow circles I placed around some of the candlesticks in the graph on the right. As you can see, those particular 10-minute bars have unusually long “wicks” to the upside and the downside. Those “wick” denote both panic buying and selling, most likely (as in “100%”) triggered by Fed/bank and hedge fund computer programs.
Those particular candlesticks with long “wicks” reflect the fight going on between the official western sovereign forces trying to keep a lid on the price of gold and long side of the gold market. The candlesticks reflect “unnatural” energy being exerted in the paper gold market.
I would further hazard to offer the view that the unmistakable volatility in paper gold trading reflects the dwindling supply of physical gold in western vaults that can be used to deliver into the fraudulently conveyed paper claims being issued on the Comex and the LBMA.
You might ask how I can make that assertion. It’s simple. Per this chart below from Nick Laird at www.goldchartsrus.com, you can see that India and China combined are importing an amount of gold that equals world mine production:
Minus scrap recycling, the balance of the gold being consumed by the rest of the world has to be coming from Central Bank vaults and from the GLD Trust – the latter of which has dis-hoarded about 60 tonnes of gold since February despite the fact that the price of gold has been rising.
The other point of evidence is the situation developing on the Comex. Again, I’m not forecasting a short-squeeze this month in Comex gold. However, as of yesterday, there’s still 5,088 open June contracts – that’s 508k ozs vs. 370k “registered” ozs as of last night. There’s no reason for the bullion banks to delay delivery notices unless they are going to try and shake out the standing longs in order to avoid the pressure of coming up with enough gold to deliver.
I would thus suggest that unusual amount of gold volatility we are seeing yesterday and today – and the volatility does not crank up until after the Asian physical markets are closed and the London/NYC phony paper markets are in full swing – is the unequivocal signal the paper purveyors of gold are starting to feel a lot more pressure from the Asian demand for physical gold. Indeed, the sharks are running out of food.