Tag Archives: gold eagles

A Slow Motion Short Squeeze In Gold

The inexorable rise in the price of gold, despite the concerted effort among the BIS, western Central Banks, CME and LBMA using paper derivatives to keep a lid on the price gold reflects the likelihood that a short-squeeze in physical gold bullion is percolating.

Former copper futures trader and Chairman of GATA, Bill Murphy, calls this a “commercial signal failure,” which occurs when the demand for the fulfillment of the physical commodity underlying a paper derivative overwhelms the ability of the entities short the contracts to fulfill the terms of the contract.  Soon this slow motion short squeeze will transition into “fast” time.

Chris Marcus and I discuss the likelihood of this development on the Comex:


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Oil, Gold and Bitcoin

The falling price of oil did not garner any mainstream financial media attention until today, when U.S. market participants woke up to see oil (both WTI and Brent) down nearly $2. WTI briefly dropped below $43. The falling price of oil reflects both supply and demand dynamics. Demand at the margin is declining, reflecting a contraction in global economic activity which, I believe the data shows, is accelerating. Supply, on the other hand, is rising quickly as U.S. oil producers – specifically distressed shale oil companies – crank out supply in order to generate the cash flow required to service the massive energy sector debt load.

I am quite surprised by the rapid fall of oil (WTI basis) from the $50 level, because I concluded earlier this year that the Fed was attempting to “pin” the price of oil to $50:

The graph above is a 5-yr weekly of the WTI continuous futures contract. Oil bottomed out in early 2016 and had been trending laterally between the mid-$40’s and $55. I read an analysis in early 2016 that concluded that junk-rated shale oil companies would implode if oil remained in the low $40’s or lower for an extended period of time. Note that some of the TBTF banks who underwrote shale junk debt were stuck with unsyndicated senior bank debt (i.e. they were unable to find enough investors to relieve the banks of this financial nuclear waste). Thus, the Fed has been working to keep the price of oil levitating in the high $40’s/low $50’s, in part, to prevent financial damage to the big banks who have big exposure to shale oil debt.

The problem for the Fed is that it can’t control the global supply of oil. There’s too many players. With oil pinned in that trading range, U.S. oil companies have been pumping out oil as quickly as possible. The oil drilling rig count has risen for 22 weeks – Oilpro.com – the longest consecutive streak since 1987. Rising production from the U.S. and elsewhere is keeping global stockpiles high, especially relative to demand. As a result, you get chart of the price of oil that looks like the one above. Oil is now well below both the 50/200 dma plus the RSI and MACD are pointing straight south, indicating a high probability of lower prices for awhile. Also, note the rising volume in conjunction with the falling price. This is indicates that market participants have been and continues to be better sellers.

The Fed is thus unable to pin the price of oil to $50 on a sustainable basis. Why? Because it has no control over the global supply and demand, which prevents control the price of oil for any meaningful period of time (just ask OPEC about that). Similar to the Fed’s price-management of oil, the Fed has been keeping gold pinned under $1300 since early November in an effort to prevent a rising price of gold from undermining the dollar’s reserves status and signalling the escalating economic and financial distress in the U.S. This is despite rising demand for physical gold coming from numerous eastern hemisphere countries. As long as the Fed (and western Central Banks) can continue delivering physical gold into the massive demand vortex in the eastern hemisphere, it can somewhat successfully manage the price.

Also similar to oil, the Fed has no control over the supply and demand of gold, except to the extent that the Fed/western Central Banks are still holding gold that can be leased out or custodial gold that can be hypothecated for the purpose of enabling a continuous flow of physically deliverable to gold the east. But the difference between oil and gold is that the supply of mined gold is relatively fixed (and has been over a long period of time). At some point the western Central Banks will run out of access to enough gold that can be delivered to buyers who paid to settle their purchases upfront. At that point, the chart of the price of gold will look like the recent graph of Bitcoin, Ethereum, etc.

This brings up a quick point about the cryptocurrencies. When the U.S. blocked Iran’s access to the SWIFT trade settlement system, India began to pay for the oil it imports from Iran with gold. These were very large-dollar transactions. We have yet to hear any reports of sovereign nations using Bitcoin or other cryptos for payment to settle trade agreements. However, we do know that there is a lot of worldwide interest in the practice of trading bitcoin, with many people looking to make a fortune for themselves through trading. Once you find a valid bitcoin trader login, you too can start to trade the commodity yourself. For me, this highlights yet another difference between the use of gold as a currency vs the cryptos. I want to make it clear that I’m not in the anti-cryptocurrency camp, but I do believe that, ultimately, precious metals (gold and silver) are much more functional as a form of money than the cryptos. Nevertheless, various cryptocurrencies can have their uses, such as this new crypto IOTA, read this iota kurs on how IOTA plan to be the crypto for connected IoT devices all around the world, allowing transactions between smart devices, the possibilities and applications of this can be limitless, given the future of IoT devices.. Bitcoin debuted for peer-to-peer transactions in 2009. Gold has functioned for this purpose for over 5,000 years. My preference in this situation is to bet big on the form of money that has pedigree.

Essential Commodities: Gold, Silver And Popcorn

JBGJ regards Indians buying less gold as cash crunch bites primarily as evidence that FOBs (Friends of Bloomberg) are not in gold. If India’s domestic gold market was as weak as presented there would be a significant discount to the world price…In reality the Government has struck a shattering blow at the trust Indians have in holding wealth in any form accessible to the Authorities. When things finally unglue, India’s propensity to hold gold will probably be found to have risen – John Brimelow’s Gold Jottings report – LINK.

Yesterday’s sell-off in gold occurred after the Comex floor had closed for the day.  The period of time between when the Comex closes  – 1:30 p.m. EST – and the CME’s Globex computer system trading closes for about an hour – 5 p.m. EST – is one of the least liquid trading periods of the 23 hour, 5-day trading week.  It makes that period of time susceptible to manipulative price take-downs.

As it so happens, likely not coincidentally, Janet Yellen began speaking about monetary policy at 2 p.m. EST.  She stated that the Fed expects a few interest rate hikes per year until 2019.  Geez, that would take the Fed funds rate up to maybe 2%?  Of course, helped along the by the bullion banks, the hedge fund trading algos grabbed the soundbytes spewing forth from Yellen and concomitantly sold paper gold and bought dollars.  The dollar spiked up and gold was taken down to $1200.  It traded below $1200 overnight on the “fumes” of yesterday.

Gold, silver and the mining stocks have had a nice move from late December to now.  They will not go straight up.  Technically the sector was set up to be susceptible to trading activity related to Fed soundbyte propaganda like yesterday.   This is yet another buying opportunity.  Buy a little every month when the price gets taken down in the paper market. According to the Indian data presented by Brimelow, India is a huge buyer of gold below $1200.   China is a steady buyer regardless of the price.

The Trump presidency will usher in a period in which Orwell’s prophecies will shift into overdrive.  Popular mistrust of anything and everything Government will accelerate and Big Government’s attempt to counter-act this movement will take place in the form of intensified propaganda and a further reduction in  civil rights.  Along with this influx of political and media chaos will be an increasing distrust of fiat paper “fake” currency, which means the public will likely buy even more gold and silver than it did in 2016.  Note:  the U.S. mint sold a record amount of gold eagles in 2016.

In today’s episode of the Shadow of Truth, we continue our discussion of the precious metals sector, including some analysis of the gold / silver ratio:

SoT Market Update: Anti-Gold Propaganda

It comes as no surprise that a report on counterfeit gold coins hits the media right about the same time that several Fed officials are once again threatening the world with a gargantuan one-quarter of one percent nudge up in the Fed funds rate.   Both are targeted at throwing cold water on investor demand for gold and assisting the Fed with pushing the price of gold lower.   The entire U.S. propaganda apparatus has become Orwell on steroids.

Comex options expiration for June gold – the current “front-month” gold contract – is Wednesday. Typically this is a signal that the metals are going to be boomeranged lower temporarily.   In scanning the put/call open interest ladder, interestingly there’s a sizeable imbalance in which the there’s at least twice as many open puts are there are calls.  I can’t recall seeing that (although I’m sure it’s occurred), as typically it’s the other way around.  It will be interesting to see how this plays out.

Rory Hall (The Daily Coin) and I discussed the alleged “flood of fake gold/silver coins” hitting the market and where the stock market may be headed in our current Shadow of Truth Market Update:

Gold Looks Ready To Spike Higher – JPM Gets It Wrong Again

These are the most gold-friendly readings in almost 2 months. India is getting ready to participate in the world gold market again. India’s gold imports drop 80.48% to $972.9 million in March documents what a heavy blow the Indian gold retailers strike struck to global gold. JBGJ guesstimates March imports at around 24 tonnes meaning some 120 tonnes of demand was lost in March.  – From John Brimelow’s Gold Jottings.

The quote above from Brimelow’s Gold Jottings report is in reference to the fact that gold import price premiums in excess of the import duty India’s gold market began to appear again.

Since the big move higher through early March, gold has been surprisingly “resilient” up to this point from repeated attempts to manipulate the price lower. The most common occurrence has been attempted “flash crashes” during early Asian trading. Interestingly, gold has tended to rally after the London a.m. fix and into the NY Comex floor trading hours. Perhaps most surprising is that the bullish activity has occurred in the absence of demand from India. India’s jewelers have been on strike since March 1, which has effectively closed down India’s massive gold import machine (excerpt from the latest issue of the Mining Stock Journal).


The graph above (click to enlarge) shows the big “cup/handle” formation that has formed in gold since its extraordinary move since mid-December.   “Extraordinary” because the gold market has had to endure strong headwinds in the form of a literal avalanche of anti-gold propaganda from the financial media, financial cable networks, Wall Street banks and even some of gold’s supporter.

As you can see from that graph, gold has been “oscillating” sideways, digesting the 21% bottom to top move it made in a short period of time.  Perhaps most impressive about the move is its durability despite a continuous flood of paper gold thrown at the market by the Comex bullion banks, per the CFTC’s Commitment of Traders report.  In fact, the latest report released last Friday showed a big spike higher in the bullion bank net short position in both paper gold and paper silver.  Typically this signals an imminent, manipulate price-plunge, enabling the Comex operators to cover their shorts at a handsome profit.

Too be sure, the technical formation in the graph above could break either way.  From a technical standpoint, it would not be atypical to see the price of gold to pullback to the “rim” of the cup (112 area on GLD) or even down to the 200 dma (red line, 109.40).

But the market manipulators will not be getting help from India, who’s elephantine appetite for gold at this time of year appears to be picking back up or from the public, which has been converting paper fiat dollars into gold at a record rate per this report on gold eagles sales by SRSRocco.com.

JP Morgan’s mining stock analyst issued a report on Agnico Eagle (AEM) in which he made the assertion that, “the company’s exploration efforts have yielded good results, resulting in an increase in the share price, even against declining gold prices.”  Hmmm.  I wonder what kind of smokable material JPM’s analyst has been putting into his pipe (click to enlarge:


Can someone please show me where on that graph that AEM’s price is rising “against falling gold prices?”  Just eye-balling it, I would say that AEM’s price movement is about 85-90% correlated with that of gold’s.
Too be sure, AEM is one of the few large cap mining stocks that I would ever consider owning.  And I will alert subscribers to the Mining Stock Journal when I see a trading opportunity in AEM stock.  However, currently I would recommend finding high quality juniors.  We had two stocks in the fund I co-manage that were up 24% and 20% today.  And my latest issue of the Mining Stock Journal features a stock that is below 30 cents and could easily double or triple once the general market discovers it.  Currently I’m distributing every back-issue of the MSJ to new subscribers, but that offer will end soon.

Massive Shortages In Gold And Silver Developing – GLD Looting Continues

Renowned gold expert James Turk says prolonged gold backwardation like we are seeing now, where the spot price is higher than the future price, has never happened before. Turk contends, “No, never, and I am a student of monetary history as well, and I have never seen it happen like this in monetary history.  – James Turk on Greg Hunter’s USAWatchdog

The signs are everywhere.  We are seeing extreme “backwardation” in gold on the LBMA. Backwardation occurs when the spot price is higher than the future price for LBMA forward contracts.  It means that buyers of gold are willing to pay more for gold for immediate delivery than pay a lower price to receive delivery in the future (30-day, 60-day, etc).  It means that physical gold buyers do not trust the ability of the market to delivery physical gold in the future.

It is an unmistakable sign of physical gold shortages.

Not surprisingly, the LBMA suspended reporting the gold forward rate which was the best indicator of physical gold shortages in London, but we can still get reports on physical market conditions from London gold market participants, like James Turk.

To reinforce this information, Bill Murphy reported his latest conversation with his LBMA trader source in London (www.lemetropolecafe.com):

The essence of it is more confirmation that the BIG MONEY is buying down here at these price levels.More confirmation that silver is extremely difficult to buy in size. It takes two to four weeks for delivery. What is new is that buying gold in size is now becoming a thing … for our source says it now takes two weeks to buy in size.

Perhaps the most visible sign is the removal of gold from the GLD ETF.   The only way gold is removed from the Trust is when an Approved Participant bank redeems 100k share block in exchange for delivery of bars from the Trust. – (source:  John Titus of the “Best Evidence” Youtube channel, edits are mine) – click to enlarge:

GLD tonnage.001

Make no mistake about it, the bullion banks often can borrow GLD shares to scrape together 100k share lots in order to redeem gold. Or they can smash the gold price with paper and force weak holders of GLD to sell shares in the hands of the bullion banks.  In the last two weeks the short interest in GLD has soared 49% from 9.4 million shares to 14 million.  That represents roughly 46 tonnes.

The ongoing raid of GLD gold is perhaps the most direct evidence that the Central Banks and their bullion bank agents are struggling to find gold in which to deliver into Asia.  But speaking of which, something interesting is occurring on the Shanghai gold exchange.  In the last three days, 298 tonnes of gold have been delivered into the SGE.  While everyone monitors the amount of gold withdrawn from the SGE, the amount of gold flowing in to the SGE is just as important.   This is by far the most amount of gold that has been delivered into the SGE that I can recall.

I get my data from John Brimelow’s “Gold Jottings” report, which is invaluable for tracking the physical gold market outside of London.  He had this to say about the stunning flow of gold into China over the last three days:

Delivery Volume was 90.444 tonnes (Wednesday 112.454 tonnes) and open interest surged 48.374 tonnes (11.26%) to 477.920 tonnes. Since last Friday Shanghai open interest has risen 18.68%. Something is happening in gold in China. What is not immediately apparent.

Finally, to further reinforce the evidence of physical market shortages, we can monitor the gold lease rates, published by Kitco everyday.  I sourced this graph from Jesse’s Cafe Americain, who sourced it from Sharelynx – click to enlarge:

JessesCafeGold lease rates spike up like this when there is heavy demand from bullion banks to borrow physical gold from Central Banks in order to sell the gold into the market or deliver gold that can’t be readily procured in adequate quantities in the spot market.  It is one of the most visible signs that there is a shortage of physical gold on the market.

To be sure, the unprecedented degree manipulation of the gold price in the paper gold market reflects a serious desperation by the Central Banks and western Governments to cover up an enormous disaster fomenting beneath the heavily applied of veneer of “things are so good we need to raise interest rates in September” mantra.  In fact, the specific reason to keep a lid on the price of is to enable the Central Banks to maintain a zero interest rate policy.

The truth is, the Fed can’t afford to raise interest rates and anyone with two brain cells to rub together and a willingness to look at the truth knows that the Fed is trapped – unless it wants to crash the system for some reason.

We note that physical off-take of gold is spiking higher, with Reuters reporting yesterday that the South Koreans are buying gold in record sums while the US Mint reports that sales of gold coins in July were nearly 5 times what they were a year ago.  – John Brimelow, “Gold Jottings” report


Shanghai Gold Exchange Has Third Largest Withdrawal Week In Its History

I was exchanging emails with Eric King of King World News earlier this week and, in the context of the unprecedented degree of paper gold manipulation and anti-gold propaganda regurgitating from the financial media, I asked him if he thought what was happening signaled a bottom:

Yes I do think it’s the bottom, Dave.  The anti-gold propaganda is off the charts.  I have never seen it this bad.  Every bullion bank and mainstream media station is bashing gold.  – Eric King, King World News

I thought the “pet rock” article in the wall street journal was the height of the madness.  But an article featured by Marketwatch which suggested that gold might hit $350 and that its fair value is $875 is perhaps the culmination of absurdity.

The irony in this is that, while the U.S. propagandists who are pulling the proverbial rug out from under the American public and extracting as much wealth from the public as they can before the country collapses, the Chinese are accumulating physical gold – aka real money – at a record rate.

Meanwhile gold and silver eagle sales from the US Mint have begun to accelerate this summers.  My good friend and colleague of several years, “Jesse” of Jesse’s Cafe Americain posted commentary which succinctly encapsulates contrast between fact and fiction:

And as you may have seen in the posting from earlier today showing the sea change in leverage over even the past ten years there, it is seemingly getting a lot less physical all the time, even compared to just five or six years ago. Winning…Even the US Mint seems to be getting in on the act.  The mint sold 202,000 ounces of gold in the form of coins for the month of July, one of its largest monthly sales totals in several years.  

That’s a lot of pet rocks.  Do the math. I wonder where the poor, deluded ignoramuses who obviously do not understand finance are getting all that money to spend on such worthless trifles.  Does the US Mint take food stamps?

You can read the rest of his piece here:  Jesse’s Cafe Americain

In contrast to Jesse, the Wall Street Journal’s Jason “Gold is a pet rock” Zweig is perhaps the most pathetic journalist of our era…


Supply and Demand in the Gold and Silver Futures Markets

This article establishes that the price of gold and silver in the futures markets in which cash is the predominant means of settlement is inconsistent with the conditions of supply and demand in the actual physical or current market where physical bullion is bought and sold as opposed to transactions in uncovered paper claims to bullion in the futures markets.

The supply of bullion in the futures markets is increased by printing uncovered contracts representing claims to gold. This artificial, indeed fraudulent, increase in the supply of paper bullion contracts drives down the price in the futures market despite high demand for bullion in the physical market and constrained supply. We will demonstrate with economic analysis and empirical evidence that the bear market in bullion is an artificial creation.

The gold and silver markets are almost continuously manipulated with a web of paper gold and silver that consists largely of Comex futures, LBMA forward, OTC derivatives and Central Bank/bullion bank custodial hypothecation agreements.

Dr. Paul Craig Roberts and I apply the law of supply and demand – the foundation of economics and capitalism – to the dislocation between the paper bullion and physical bullion markets in order to demonstrate that the only possible conclusion is that these markets are highly manipulated.

The manipulation of the gold price by injecting large quantities of freshly printed uncovered contracts into the Comex market is an empirical fact. The sudden debunking of gold in the financial press is circumstantial evidence that a full-scale attack on gold’s function as a systemic warning signal is underway.

You can read the full article here:  Supply and Demand in the Gold and Silver Futures Markets.

GLD Continues To Be Looted While The Public Loads Up With Physical

From the day back in 2004 that I first read James Turk’s analysis of the GLD ETF, I had suspected that GLD had been created to take investor money and accumulate a large pile of 400 oz bullion bars that would be used eventually to manage the growing western Central Bank short position in paper gold.  Paper gold being the fraudulent, blunt instrument used to illegally manipulate the price of gold.

GLD’s objective is not to provide investors with the opportunity to own gold bullion by investing in the shares of an ETF. Rather, GLD is designed to track the price of gold. That objective is no different than what is accomplished by a gold futures contract or any of the dozens of numerous gold derivatives available these days. More to the point, futures and derivatives are sold even if the seller does not own the underlying gold bullion needed to deliver on its obligation. They are in practice fractional reserve systems, which allow liabilities for gold to far exceed the quantity of gold owned by the seller of that liability.  – James Turk, “Where Is The ETF’s Gold,” November 2004

In 2009 I wrote a reseach report on GLD in which I went through the GLD prospectus line by line and determined that the prospectus was specifically set up to enable the bullion banks – with HSBC suspiciously designated as the custodian of the GLD, as HSBC is the LBMA gold market counterpart in London to JP Morgan’s Comex silver market function – to amass gold in a legal structure that would enable the banks to finance the purchase of 400 oz ounce bars which could be leased or hypothecated via the “backdoor” web of subcustodians.   Shockingly, even the trustee and sponsor of the the GLD trust,  Bank of New York Mellon and the World Gold Council respectively, are not permitted to inspect the contents of HSBC’s vault without significant notice.  And inspection is allowed according the prospectus only intermittently.  Furthermore, no outside party is entitled to inspect any gold held by any subcustodian.  The list of horrors is endless and eventually I’ll update and republish my report from 2009.

Everyone likely remembers the infamous scene on CNBC back in 2011 when CNBC made a big production of putting Bob Pisani inside the GLD vault to show the world GLD’s gold. Pisani was directed toward a stack of bars that were in the GLD “allocated” section of the vault. Pisani randomly picked up a bar and it turned out that – much to the horror of everyone watching live – based on the bar’s serial number, the bar did not belong to the GLD Trust despite sitting on the GLD stack.

In a world governed by Rule of Law, the operations of GLD should have been suspended and a full independent audit of all of the GLD vaults, including the subcustodial vaults, would have commenced immediately.   But the world is governed by Rule Banks And Thieves and the episode was summarily dismissed.

It now looks like the looting of GLD is in full motion.  The “reported” holdings of GLD peaked in December 2012 at 1351 tonnes.  Since then, through last Friday, the number of bars “reported” has declined to 680.  The last time there were this many bars reported by the GLD Trust was September 19, 2008 (679 bars) and the price of gold was $869.

I say “reported” because the integrity of the daily reports are dependent on the reliability of HSBC.  See what I mean?  HSBC has been found guilty of fraud and market manipulation of almost all of its major business segments.  It would be highly improbable that the one area of its business that HSBC conducts honestly and ethically is in its precious metals operations.  More likely the fraud and corruption in this business segment is the nexus of the bank’s criminal behavior.

But let’s suspend disbelief for a moment.  According to the prospectus, the only mechanism by which gold bars can be removed is to amass shares in 100,000 “baskets” and turn them in to the Trust – BNY Mellon – in exchange for the equivalent amount of bars. It’s the only way gold is supposed to leave the Trust – in theory.  Of course, the language in the Prospectus enables the Trustee to deny share for gold redemption and I have heard of a few large funds who have tried to redeem shares for gold but have been denied.  In all probability, any gold redeemed and removed from the GLD vault has gone to the bullion banks for their use in delivering gold committed to large Asian buyers of paper gold issued and shorted in London.

It does not make sense that the amount of gold in GLD would decline with a fall in price. A fall in price would indicate a drop in demand for gold (or an increase in supply of the physical metal, which we know is not the case). For GLD to be losing gold indicates an increase in demand for physical gold.  The physical markets are dominated by purchasers, and suppliers cannot keep up with the demand.

As an example, we know that China is currently on pace to buy a record annual amount of gold based on the YTD withdrawals from the Shanghai Gold Exchange.  Contrary to reports from the World Gold Council and Reuters, movement into and out of the Shanghai Gold Exchange – LINK – has been rising, indicating that demand in China for gold is increasing.  In fact, China is on pace to buy up the total amount of gold produced annually by mines globally.

Then there is India.  The bullion premiums are evidence that Indian demand has increased significantly well ahead of its traditional autumn seasonal buying period.  According John Brimelow’s “Gold Jottings” report, ex-duty premiums in India were as high as $13.59 last Friday.  When this metric is positive, it indicates healthy import volume.  When it’s in the teens, it indicates aggressive buying.  This fact is confirmed by this article from the Hindu Times – Brisk Sales At Jewelry Shops As Gold Price Dips.

Furthermore, the U.S. Mint report record gold eagle sales in July:  Gold Eagles Hit Monthly Record In July.  It seems Americans are trading their fiat money for real money.  This is confirmed by this fact – 1/10th of an ounce gold eagle sales soared in July to their highest level since 1999 (source:  Smaulgld.com, edits are mine):


Unable to get silver, people turned to the 1/10th ounce gold coins. Who wants fiat money that pays negative interest rates?
The gold holdings of the GLD Trust are behaving inversely to the observed behavior of the global market for physical gold. If gold is in a bear market and people are selling rather than buying, GLD’s holdings should be rising, not falling from withdrawals.

By printing uncovered futures contracts, the bullion banks have artificially increased the supply of paper gold in the futures market where price is determined.  This artificial price created by manipulating the quantity of paper contracts implies a bear market.  Yet all evidence indicates rising demand for physical metal.

The ONLY explanation for this is that GLD is being looted by the bullion banks.

U.S. Financial Markets Have Lost All Credibility

The Fed no longer has credibility, and you can see that. The divergence between the futures markets and the Fed’s own projections about what they’re going to do about interest rates—this is a huge problem,” he told CNBC’s “Squawk Box.”  – Senator Pat Toomey on CNBC

Sorry Pat, the entire U.S. financial system has lost all credibility.  While the economic condition of the United States continues to deteriorate rather quickly, the S&P 500 and Nasdaq continue to push insanely higher on a historically unprecedented tidal wave of printed money.

“Printed money” is electronic money that is created BOTH by the Fed’s electronic printing press AND the electronic printing press that creates debt certificates.  Why the latter? Because debt behaves like money until that debt is repaid.  Simply printing money to repay existing debt while printing enough to issue more debt is not the definition of “repayment.”   This process in fact forces even more “printed” electronic money into the system.

This is why the broad measures of the stock market are moving higher despite deteriorating real economic fundamentals and it’s why housing prices have soared, despite mediocre transaction volume and a recent influx of supply.  All of that printed money is going into paper financial assets.  After all, with the financialization of mortgages, the housing market itself has become “financialized.” Just ask the Fed, it’s injected $1.7 trillion of printed money into the housing market via financialized mortgage paper.

Today’s action on the Comex is emblematic of the complete loss of legitimacy of the U.S. financial markets.   Gold and silver were slammed hard when the housing starts and permits data was released at 8:30 a.m. EST – click to enlarge image:


Here’s the problem with the highly questionable housing report: The big spike in housing starts occurred in multi-family units. Even if this this number is legitimate, the expansion in apartment buildings is occurring as a massive influx of rental buildings that have been in process over the last year are hitting the market.

In other words, the apartment rental building market is in the midst of a bubble that is bigger than the mid-2000’s bubble.  Not only can I confirm this fact in Denver – almost all new buildings, though not advertised, will give new tenants two free months as a move-in incentive – but I have been getting flooded with emails from readers from other large cities who are confirming the same dynamic in their area.  I will have a lot more on the housing market later.  What I have discovered is stunning.

If anything, the housing market data today should have received a very bearish response from the equity markets and a very bullish response from the gold and silver market.  Instead, the Fed is working overtime to prop up stocks and it dumped close to $350 million of paper gold onto the Comex in the span of one minute.

But not only was the housing market report bearish for the system, we learned right before that report that more layoffs are coming in the oil industry;  we learned right after that report that U of Michigan’s measure of consumer “confidence” dropped and missed Wall Street’s expectations by the most since 2006.

Furthermore, how can the price of silver be declining when the U.S. mint acknowledged last week that these is no supply for it to mint silver eagles?   This after huge spike in silver eagle sales in June.

So you see, Pat, its not just the Federal Reserve that has lost all credibility.  It’s the entire U.S. financial system.   The financial markets have become a complete fairytale.  In fact, the Fed lost all credibility back in 2012 when Ron Paul asked Ben Bernanke if gold was money, to which Bernanke replied, “no” after he uncontrollably flashed a facial expression which “tells” he’s about lie.  When further asked why Central Banks continue to buy and own gold, Bernanke flashed that “I’m about lie” expression again and stuttered, “out of tradition.”  Were we watching the modern version of “Fiddler On The Roof?”

At that split moment in time Bernanke’s hubris prevented him from responding with a credible answer. Anyone with any remaining shred of faith in Bernanke’s/the Fed’s credibility – his ethics, morals and spirituality – had their hopes nuked by hubris. It was perhaps the most fraudulent statement ever issued by a Central Banker.

After all, It sure seems like China, Russia and India are converting a lot of paper U.S. dollars into something that was summarily dismissed by the head of the Fed as being a “tradition.”