Non-farm payroll report comes out and Spoos [SPX futures] go down 32 handles. Gold starts off up $4, now down $6. This is totally rigged. I’m going to Vegas, at least the tables are more level then these markets and I get free booze and some really hot chicks. – reader comment after employment report hit the tape
Despite the rhetoric coming from the Richmond Fed’s Lacker, there will be no interest rate hikes in September. It’s not about the fictitious and indisputably managed and manipulated non-farm payroll report, it’s about the catastrophic degree of leverage in the banking system.
All along, despite the disingenuous pretenses of helping “main street,” the Fed’s money printing has been targeted specifically at keeping the big banks from collapsing and to enable them the continue sucking wealth out of the U.S. economic system. Secondarily, it’s enabled the U.S. Treasury to continue issuing debt obligations that will never be repaid.
There will be no interest rate hike in September, or in 2015 for that matter.
In order to support this intended monetary policy, the Fed has to discourage investors from converting fiat paper money into real money – gold and silver – by creating shock and awe terror in the paper precious metals markets (hey, it worked with 9/11 and we got the Patriot Act, Detainee Bill, Homeland Security Act and an unfettered NSA).
Here’s what this anti-gold terrorism looks like in the paper gold trading market – click to enlarge – the time-scale on the x-axis is MST:
As you can see, after a quick initial move up, an avalanche of paper selling hit the paper market, driving the paper price of gold below where it was when the report hit the tape. We would have expected a big move up in gold as the logical response to a jobs report which badly missed Wall Street’s consensus estimate, and thus convincing the hedge fund algos once and for all that there would be no rate hike in September.
Between the 8:30 a.m. (EST) report release and 9:00 a.m., over 42,000 paper gold contracts traded, most of them “sell” orders. This is 4.2 million ounces, or the equivalent of 122 tonnes of paper gold. 122 tonnes is more than the amount of gold that India is said to have imported in August – Business Standard, Mumbai
Of course, this action in the paper gold markets on Fridays, especially non-farm payroll report Fridays, has become standard operating procedure for the Fed. With all of the physical gold trading markets closed for the weekend, the Fed is free to operate unfettered from the pressure that physical demand exerts on the paper gold pornography. In fact, China has been closed for the past two days, which has alleviated temporarily China’s inexorable demand for physical gold that is delivered in to China.
To give you an idea of the extreme degree to which the bullion banks – backed by the Fed and the U.S. Treasury – have gone in order to keep a lid on the price of gold using paper, you’ll note that the ratio of paper gold outstanding to the amount of gold being reported as available to deliver has spiked back up to 126:1:
I sourced this graph from Jesse’s Cafe Americain and recommend reading the the accompanying commentary: LINK
In any other commodities market on the CME, if the ratio of the amount of paper to the amount of available underlying physical commodity approaches anywhere near even a 2:1 ratio, the CFTC cracks down the “manipulator.” For some reason the paper gold and silver markets have the dubious distinction of existing free from any legal regulation by the U.S. Government and the bureaucracies that exist that are supposed to enforce the rules governing market manipulation.
Meanwhile, retail demand for U.S. mint gold and silver eagles surged this summer. From June to August silver eagle purchases were up 126% over the same period last year. And gold eagle purchases tripled from Jun-Aug this year vs. last year (data source: SRSRocco Report).
I won’t go into the flow of gold from west into India and China. Imports into those two countries will hit all-time record highs this year. That’s a lot of Pet Rocks being bought with U.S. fiat currency.
Without question the extreme intervention in the paper precious metals markets – NYC and London – is serving the purpose of hiding the fact that the Fed will not be raising interest rates this year, or next. In fact, the next policy move will be more money printing. Or “QE4” if you want to call it that. But until the Fed sells its Treasury and mortgage holdings, for now what is occurring is pure money printing. And more of it is coming.