The Fed Hits Gold Futures, Pumps Up The Stock Market

We all realize by now that the U.S. Government has an obvious agenda to manipulate the price of gold in order to defend the reserve status of the U.S. dollar.   It is this status that gives the U.S. Government its “superpower” abilities.  It is also becoming increasingly obvious that the U.S. economy is quickly deteriorating again despite the $4 trillion in printed money thrown into the banking system.

The Fed engineered two distinct mini “flash crashes” this morning:

Untitled(Click on image to enlarge)

As you can see, over 4,000 contracts hit the Globex computer system right around 4:40 a.m.  which drove the price of gold below the key $1350 technical level.  This was over 11% of the total volume that had traded up to that point in time from when Globex trading opened at 6 p.m. the previous evening.   And then at 7:45 a.m.  another 5,051 gold futures contract bomb was detonated, which drove the price of gold down another $5.

Given that the housing market and retail sales/consumer are obviously on the verge of falling like an elevator in Empire State Building which has broken loose from its support cable, and given that Russia has now twice successfully challenged the geopolitical hegemony of the U.S.,  the Government/Fed is even more desperate to do what needs to be done to defend the dollar.

If the Fed wants to engineer a “correction” or price hit on gold that’s fine.  But it becomes patently absurd when the Fed at the same time pumps up the most overvalued stock market in history.

This is going to end very badly – it’s just a question of when.

16 thoughts on “The Fed Hits Gold Futures, Pumps Up The Stock Market

  1. The “Fed” is nothing more than a criminal enterprise, not unlike the Mafia.
    For the sake of the American people and their children, the Fed should be terminated TODAY and every “executive” their hung by the highest lamp post.
    END THE FED.

  2. Dave,

    I got an article emailed to me from SeekingAlpha a few days ago, wherein the author stated that the feds reverse repos more than offset the amount of QE in the past few months. He speculated (in so many words) that weakness in the dollar and fear of a currency collapse drove the fed to issue the reverse repos and take more liquidity out than QE was putting in to strengthen the dollar. I have not seen this anywhere else. Do you believe this is the case – fed panic and reverse repos to strenghthen the greenback? If so, we are almost done with the chirade, because stopping QE blows up the stock, bond and housing markets, while continuing blows up the dollar. The noose draws tighter!

    1. Did he have the data to back it up? I don’t believe that is the case. They haven’t done much in the way of reverse repos lately. I’m pretty sure the reason they were doing reverse repos to put collateral out into the banking system to enable banks to do more repo activity. The Fed created a massive collateral shortage when it hoovered up the short term stuff in QE1/2. The “twist” was to lower longer term rates PLUS put short term collateral into the marketplace.

      Repos are the synthetic oil of the banking system.

      At any rate, I’d like to see this guy’s work. I would be surprised if he can back up his view with actual data/facts. The Excess Reserve account at the Fed has been spiking higher. If the reverse repos were off-setting QE, that would not be the case.

          1. Ok. I can’t believe SA let this article by the edit Nazis. Because I’m bearish on the stock market/housing, they make me document and prove everything.

            Remember I said that, if what this guy said was true, the bank Excess Reserves account at the Fed would be declining?

            This guy is an idiot. First of all, the operations to which he refers are overnight reverse repos. They unwind the next day. http://www.newyorkfed.org/markets/omo/dmm/temp.cfm

            Here’s the deal. This particular reverse repo operation is still being tested. It’s not a Fed/bank operation. It’s a tri-party repo operation. There’s a bank to bank repo market but everything repo deal has to go from bank -> Fed -> other bank.

            This newer system has included non-bank parties like money funds and GSEs, etc.

            Here’s why: the banks still need to do overnight repos for short term liquidity purposes. But because the Twist operation was designed to let the Fed unload short term Treasuries – the paper used as colleteral in overnight repos – and buy longer Treasuries, the Fed has created shortage of repo collateral that is available for tradition bank/Fed repos. And banks are starved liquidity, which is why we have QE in the first place. Enter the money market funds.

            Prior to the implementation of this system, money market funds/GSEs were not allowed to be part of the tri-party repo system. Only banks.

            The tri-party repo system being tested enables the Fed to marry either cash or collateral sitting a money market funds and GSEs with the cash and collateral sitting at the banks, without disturbing the Fed’s balance sheet. The the transaction by law has to routed through the Fed but it lets the banks and money market funds etc do repos with each other. See how that works? Notice also that it’s apparently still being “tested.” LOL. It think there’s a lot of computer software kinks that have to worked out.

            The other aspect of these transactions is that it does not disturb ANY of the money that has been printed for QE. In fact, it actually enables the banks to earn a skim on cash that they might not be able to otherwise earn because this system has vastly expanded the universe of repo parties.

            If anything, this system reflects the Fed’s desperation to generate a lot more overnight systemic liquidity. It has NOTHING to do with the Fed’s fears that there’s too much systemic liqudity.

            I hope all this makes sense. This is why this system is not being discussed on bubblevision as being a counter to QE. It’s actually just the opposite because of the fact that it actually INCREASES the money floating around the financial system.

  3. …and if you’re going to abolish the Fed do away with the I.R.S. also. It was created as a result of the Fed.

    Fed…yeah right ! more like private counterfeiting operation for the elite.

  4. Ok Dave, I see what you are saying. Yes, that makes sense and explains why nobody else is suggesting that QE has effectively been negated.

    1. I seriously can’t believe that article got by the SA editors. It is completely wrong in its analysis. The reverse repos to which he refers do not remove liquidity from the system at all. I guess there’s a lot of garbage that gets posted on SA.

  5. What do you think WEEKLY options will do for those players already reliant on monthly?
    And is the CME being proactive, anticipating the new gold markets to come, and
    competing exchanges in Asia and the Middle East including many physical-only venues?
    Is a new CME weekly trading “platform” a final hat tip to, or accomodation for the hedgers and speculators (who cannot exit their longstanding business models as fast as others)?
    But similar to writing naked options, the CME may still have the Hobson’s Choice the Fed appears to be facing.
    http://www.reuters.com/article/2014/03/20/cme-group-metals-options-idUSL2N0MH19020140320
    EXCERPT:
    “CME Group to launch gold, silver, copper weekly options in April
    NEW YORK, March 20 Thu Mar 20, 2014 2:03pm EDT
    (Reuters) – U.S. derivatives exchange operator CME Group Inc said on Thursday it will launch gold, silver, copper weekly option contracts, offering shorter durations than the current monthly options, beginning in April…”

  6. Sure Dave.
    It’s business as usual, standard operating procedure. Do they want everyone aboard these things or what? :)
    Then there’s to be a time when too many(just enough LOL) will be snuggled onto the starboard of the ship, listing on a “perfect storm” day that the insiders stayed home, hatching more schemes, black swans or just battening down the hatches.
    Another risk, when there’s limited room for splashing around in those little dark pools, at a time when these overmargined, debt burdened players depend on the Fed to prevent illiquid “markets” in their treacherously narrow shipping lanes and when they’re all notoriously drunk with having consumed every drop and taken every risk and leveraged every last body part like sharks in a frenzy:
    At some point, they turn on each other, as they’ve long since lost their senses.
    On top of this there’s Perfect Storm, in which even sharks get swept away.
    There’s and growing a lot of contagion risk.
    There’s 1.5 quadrillion derivative mountain growing without oversight, a market clearing mechanism, an identifiable counterparty, a credible capitalization, a public market, a recognized, accepted pricing mechanism or standardized accounting for any clod of that earth. Just debt dominoes like credit bubbles wafted from country to country, junk municipal and corporate bonds, undercapitalized borrowers backing low quality consumer, auto and student loans, underfunded pensions, refinanced and home equity loans, cash “savings” and certificates of deposit/CD’s (underinsured by the FDIC), inflated away and subject to bail-ins.
    Garbage repackaged and structured into top tier, high-rated, kosher stamped “investment products”, corporate junk, municipal junk, sovereign debt notes, T-bills, Treasuries, TIPS ad nauseum.to the point of economic and social dislocation
    Banking, auto and insurance bailouts were inevitable offspring of the incestuous government mergers and corporatization that brought us offshoring, outsourcing and “Free Trade” treason like NAFTA, CAFTA and GAAT.
    Finally, looking at mortgage, equity, debt and credit bubbles encircling the globe,
    under the shadow of sovereign debt, interest rate swaps, currency swaps, credit default swaps, collateralized debt obligations, mortgage backed securities et al, be riding (high) the crest of the wave, a swell to end all swells…
    “catching the next wave” must entail real effort (within a sea change) and standard open rules of navigation, blue skies of transparency, intolerance of pirates and seaworthy vessels.
    http://www.telegraph.co.uk/finance/china-business/10712339/Tumbling-Chinese-yuan-sets-off-carry-trade-rout-triggers-derivatives-contracts.html

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