Tag Archives: gold futures

Gold May Be On The Cusp Of A Big Upward Price Reset

Financial Markets, Gold, Market Manipulation, Precious Metals, , ,

Precious metals investors may be getting an unexpected Christmas present this year, beginning with the sudden $25 jump in gold on Tuesday and Wednesday. From what I’m hearing, a shortage of physically deliverable gold is developing in London. In fact, Alasdair Macleod and Egon von Greyerz have both alluded to this development.

The action this past week fits the information. Given the size of the derivative short position (futures, LBMA forwards, leased gold, OTC derivatives, hypothecated gold) in London and New York, if obligated counterparties begin to default on delivery demands, the precious metals sector could become explosive next year.

The ability to suppress the price of gold has become problematic for the western bullion banks as evidenced by all-time high open interest in Comex gold, especially relative to the amount of gold reportedly held by Comex vaults. As of Monday, the open interest was 734k contracts representing 73.4 million ozs of paper gold. This is 8.4x more than the total amount of gold reported to be in Comex vaults as of Tuesday and 58.5x more than the amount “registered” gold, which is gold that is designated as available for delivery.

In the last few years the open interest has averaged around 450k (ballpark) contracts. When the price of gold ran toward $1900 in 2011, the highest weekly open interest was 542k the week of July 17, 2011. The last time gold was trading around the $1500 level, which was March 2013, the open interest was in the 420k area. The point here is that an increasing amount of paper gold is required in order for the banks to contain the rate at which the price of gold discovers price discovery.

More significant, every aggressive attempt this year by the bullion banks to push the gold price lower has been countered with a swift rally: “For months the usual central bank-inspired smashes in the gold futures markets have not been having much effect, even as GATA consultant Robert Lambourne has reported increasing intervention in the market by the Bank for International Settlements” – Chris Powell, GATA.

The quote just above is from a must-read essay by GATA’s Chris Powell in which he lays out the case supporting the view that the New York and London gold markets are getting squeezed:

“The Comex has just quickly authorized a vast expansion in what bullion banks can use as collateral for their selling — ‘pledged gold’ held off the exchange, supposedly in London, for whose existence and unimpairment there is no public evidence.

Amid these indications of shortages, the open interest in gold futures on the Comex keeps hitting record highs. The bullion banks selling the contracts seem to be acting as if the gold supply itself is infinite, not just the supply of gold paper.”

I highly recommend reading the rest of Chris Powell’s article:  The signs swirl all around us, so is the reset at hand?   If the theory, which is supported by evidence, of a developing shortage of physical gold on the Comex and the LBMA is correct, the prices of both gold and silver could become explosive in 2020.

Gold Is Going Higher – But Brace Yourself For Volatility

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Short of a raid orchestrated by the central planners to fasten tighter the cap on gold (which remains a real possibility given the historical record), the yellow metal shouldn’t encounter much price resistance until above $1,500/oz.  – Adam Taggart, Peak Prosperity

I agree with the statement above from Adam Taggart but an aggressive price attack by the banks who operate the Comex is inevitable.  In fact, based on the big jump in gold contract open interest and the spike up in EFP/PNT transactions – Privately Negotiated Transactions /Exchange for Physicals – it’s likely the banks have been setting the trap for another massive open interest liquidation price control operation.

Let me explain.  The banks are unconstrained by the amount of paper contracts they print and feed into the market to supply the demand from the hedge funds, who are the primary buyers. By unconstrained, I mean that the amount of gold represented by paper derivative open interest is far greater than the amount of actual physical gold held in Comex vaults.  Gold and silver are the ONLY commodity contract products for which this disparity between open interest and underlying supply of the physical commodity is allowed to occur.

As an aside, if the Comex were a true price discovery market, the amount of gold/silver represented by the paper contracts would be tied closely to the amount of gold held in Comex vaults.  When hedge funds rush in to buy futures, the market makers would then be required to wait until an entity holding contracts was willing to sell. This is how a bona fide price discovery market functions using price to clear the market’s supply and demand.

Instead, with CME gold and silver contracts, the banks print up new paper contracts to satiate buying demand.

Last week when the price of gold began to spike higher in response the FOMC policy statement released on Wednesday, the price of gold began soar.  Between Wednesday and Friday, the open interest in gold contracts spiked up by over 50,000 contracts – nearly 10%. This amount of paper represents over 5 million ozs of gold. As of Friday, the Comex warehouse report shows just 322,910 ozs of gold available for delivery (“registered”) and 7.6 million total ozs of gold. But the total open interest is 572,000 contracts, or 57.2 million ozs of gold, nearly 8x the amount of total gold held in Comex vaults.

But wait, there’s more.  During periods of aggressive price control, the activity of PNT/EFP’s also soars.  These transactions avoid settlement in 100 oz Comex bars per basic contract terms. Instead, it’s way for the banks to “deliver” under the terms of the Comex contract without producing and delivering the actual physical bar, recording the serial number on the bar under the receiving party’s name and moving the bar into an allocated account. It’s an extension of the fractional bullion system that is used to manipulate the gold price. It allows the banks to deliver phantom gold in lieu of delivering real bars.

On Tuesday the PNT/EFP volume was 8k and 5.9k respectively. On Wednesday the volume was 11.5k and 9.1k. On Thursday, when gold was soaring over $1400, the volume in PNT/EFP’s was  30k and 22k respectively.  On Friday the volume was 21k and 11.3.

On average, the daily volume of these two transactions is typically under 10k – except when the banks are aggressively implementing price management operations.

The banks use these transactions, along with feeding tens of thousands of newly printed gold contracts to the hedge funds. This drives up the open interest.  On Friday, May 31st, the open interest in Comex gold was 465k contracts.  The current open interest of 572k is approaching the level at which the price of gold was attacked on the Comex in each of the last three years.

The process is set up by letting the hedge fund algos chase the price higher and accumulate an excessively large net long position in gold contracts,  At the same time, the banks feed contracts into the buying frenzy and accumulate an offsetting net short position.  As the operation cycles through, the banks force the price lower by attacking the stop-loss levels set by the hedge funds as they chase the price higher.  The banks use the concomitant hedge fund selling to cover their shorts, thereby reaping enormous profits.

In September 2016, gold ran higher during the summer and the open interest had reached close to 600k. The price gold was dropped from $1200 to $1070.  In September 2017, the gold contract o/i reached over 580k and gold subsequently was taken down from the high $1300’s to $1125.  Then, in January 2018, the open interest once again was over 580k contract and the gold price was taken down from $1350 to $1200.

In all three price control cycles, the open interest fell below 500k as the banks unloaded long positions and the banks covered their shorts.

This is a long-winded way of explaining why I believe that sometime in the next 10 trading days  the market should expect an aggressive attempt by the banks to attack the gold price on the Comex – and to some degree on the LBMA.  We’ll know I’m right if we get a series of “fishing line” price drops sometime between now and the July 4th holiday. Fridays and pre-holiday trading days, when volume is light, is a favorite time for the banks to begin taking down the gold price.

The good news is, if you follow the sequence I described above from 2016 to now, the price of gold is establishing a series of higher highs and higher lows.  This tells us that the western Central Bank/bullion bank effort to control the price of gold is limited in its success.  This is likely because of immense demand from eastern hemisphere buyers (Central Banks, investors, citizens) who require actual physical delivery.

Furthermore, if I’m wrong about an imminent price attack to take the price of gold lower, it means that the Central Banks/bullion banks have lost control of the market – at least for the time being – and the market is experiencing Bill “Midas” Murphy’s “commercial signal failure.”  If this turns out to be the case, and it is ultimately an inevitability, strap in for some fun if you own physical gold, silver and mining stocks.

Former FOMC Member Admits The Fed Manipulates Asset Prices

Financial Markets, Gold, Market Manipulation, Precious Metals, U.S. Economy, , , ,

The Fed often treats financial markets as a beast to be tamed, a cub to be coddled, or a market to be manipulated. It appears in thrall to financial markets, and financial markets are in thrall to the Fed, but only one will get the last word. – Former FOMC member, Kevin Warsh – The Fed Needs New Thinking

Please note, a large portion of the source links, plus the idea for this commentary, were sourced from GATA’s latest dispatch regarding the possible appointment of Warsh as the next Fed Chairman.

The quote above is from former FOMC board member,  Kevin Warsh, who appears to be Trump’s top candidate to assume the Fed’s mantle of manipulation from Janet Yellen.   By way of relevant reference, Warsh happens to be the son-in-law of Ronald Lauder,  who is a good friend of Trump’s.  He is also a former Steering Committee member of the Bilderberg Group.    GATA has published a summary reprise of direct evidence from previous written admissions by Warsh the the Fed actively manages financial asset prices, “including bolstering the share price of public companies” (from link above).

In addition to stocks, Warsh admitted in the same essay that, “The Fed seeks to fix interest rates and control foreign-exchange rates simultaneously” (same link above). This task is impossible without suppressing the price of gold, something which began in earnest in 1974 when, under the direction of then Secretary of State, Henry Kissinger, paper gold futures contracts were introduced to the U.S. capital markets. This memo, written by the Deputy assistant Secretary of State for International Finance and Development, was sent to Kissinger and Paul Volcker in March 1974: Gold and the Monetary System:  Potential U.S.-EC Conflict (note:  the source-link is from GATA – it was discovered in the State Department archives by Goldmoney’s John Butler).

The nature of discussions after that memo, the minutes of which are now publicly available, center around the fact that several European Governments were interested in re-introducing gold into the global monetary system.  This movement was in direct conflict with the interests of U.S. elitists and banking aristocrats, as U.S. had successfully established  the petro-dollar as the reserve currency.

In 2009 GATA sent a Freedom Of Information Act request to the Fed in an attempt to get access to documents involving the Fed’s use of gold swaps (this letter written by Warsh confirms the existence of the use of gold swaps).  Warsh, who was the FOMC’s “liaison” between the Fed and Wall Street, wrote a letter back to GATA denying the request.

The fact that Warsh has openly acknowledged that the Fed manipulates assets, including an implicit admission that the Fed seeks to suppress the price of gold,  might give some in the gold community some hope that Warsh, if appointed to the Chair of the Fed, might reign in the Fed’s over interference in the financial markets.

On the contrary, I believe this makes him a bigger threat to democracy, capitalism and freedom than any of his recent predecessors.  Warsh is better “pedigree’d” and politically connected than either Bernanke or Yellen.  His high level involvement in the Bilderberg Group ties him directly to the individual aristocrats who are considered to be the most financially and politically powerful in the western world.    Without a doubt he has far more profound understanding of the significance of gold as a monetary asset than any modern Federal Reserve FOMC member except, perhaps, Alan Greenspan.

The good news for the gold investing community is that it becomes increasingly evident that China, together with Russia and several other eastern bloc countries, is working to remove the dollar as the reserve currency and reintroduce gold into the global monetary system.  A contact and subscriber to my Mining Stock Journal who happens to live and work in Shanghai has sent further evidence  (and here) that China is working toward launching a gold-backed yuan oil futures contract.

This will be a complete game-changer.  It’s also likely why the western Central Banks have doubled their efforts to keep the price of suppressed over the last 6  weeks.   My contact believes there’s a possibility that the contract will be rolled out after Xi is “re-elected” toward the end of October (the Party Congress convenes after the week-long National Holiday observance).

My personal view is that China will work more gradually to roll out a futures contract that effectively “disconnects” the petro-dollar and the dollar’s reserve status in order to minimize the adverse, albeit temporary, consequences of this.  The first iteration could be a simple yuan-denominated contract to get the system working.  The foremost consequence of this, of course, will be the massive transfer of wealth and power from the United States and its European vassal countries to the emerging global power in the eastern hemisphere.

Should You Use Leverage With Precious Metals And Mining Stocks?

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While I will maintain, until proven wrong by the test of time, that Bitcoin and Cryptocurrencies are nothing more than a temporary fad, investing with a long term outlook (20-30 years) gives the investor the best probability of generating life-style changing wealth.

William Powers, of MiningStockEducation.com, invited onto his podcast to discuss using leverage in precious metals and mining stock investing.  We discuss greed/fear, using margin with mining stocks, volatility, options, futures and the leveraged ETFs.

The problem for most investors, and the reason many have not made a lot of money – or might have lost money – in the precious metals sector is the inability to invest with a long term perspective.  Since 2001, gold has outperformed every asset class.  The mining stocks, in general as measured using the HUI index, have outperformed the Dow/Naz since 2001.

If your reason to be invested in a sector is still valid, there’s no reason to sell investments in that sector.  Have the reasons for investing precious metals as a hedge against a collapsing U.S. economic and political system, and thereby a collapse in the U.S. dollar, changed? Have the problems taking the U.S. down been fixed?  The answer is pretty obvious, which means you should be holding your precious metals investments, even if you bought them in early 2011.   In fact, if you bought then, you should be buying more now.  I know I have been adding to my holdings gradually since early 2016.

The next issue of the Mining Stock Journal will be published this Thursday.  I’ll be reviewing a junior stock that  has gone parabolic and a mid-cap producer that has been hammered hard but is poised to bounce back just as sharply.  You can learn more about the MSJ here – new subscribers get all of the back-issues:  Mining Stock Journal information.

Is The Pullback In Gold Over?

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The price of gold ran up 20% since the beginning of 2016 through early March.  In response to “overbought” readings in the popular momentum indicators, the superficial gold commentators become short term bearish.  Additionally, based on what appeared too be a heavy “off-sides” in the bullion bank net short position vs. the hedge fund net long position in Comex gold futures, per the Commitment of Traders report, the “big price correction” side of the ship deck became heavily mobbed with short-term timing forecasts.

About two weeks ago, I decided to roll up my shirt sleeves and dirty up my hands with the COT data compiled by my business partner going back to early 2005.  What I found in terms the current net short / net long positioning between the bullion banks and the hedge funds might surprise a lot of observers.  Of course, I presented the information to the subscribers of my Mining Stock Journal in the March 17th issue (along with a relatively undiscovered “de-risked” junior mining stock idea with substantial upside, risk-adjusted).

As it turns out, while the net short position of the criminal banks is above the average net short position from 2005 to present, it’s not even remotely close to the net short position historically that has signaled an imminent price-smash operation.   Currently the net short position is 200k contracts.  But the highest that net short since 2005 has been is well over 300k.  The net short position was well over 200k for large portions of 2010.

In other words, while there is some concern that the cartel is set up to force the price of gold lower by bombarding the Comex computer system with paper gold detonators, the comparative historical statistics suggest that gold has lot more upside and the open interest has a lot of room to expand before the cartel is in a position to throttle gold lower.

In fact, a case can be made that the current pullback in the price of gold may be winding down – click on image to enlarge:

Untitled1

As you can see in the graph above, gold has nearly pulled back to its 50 dma (dark blue line) and the momentum indicators (RSI, MACD) have moved from “overbought” to a neutral position.  The RSI may be actually be turning back up (green box).

As we’ve seen with official intervention in all markets,  it’s nearly impossible to forecast directional moves with any degree of accuracy.  However, there’s a case to be made that the cartel is having problems forcing the price of gold lower.  On several occasions in the last two weeks, gold has been slammed in overnight trading only to snap-back.  Monday was a prime example, as gold was smacked hard for $10 down to $1210 in Asian trading but bounced back to close nearly unchanged from last Thursday’s close of $1221.

The fact that Indian jewelers are still on strike and thereby choking off Indian imports makes gold’s resilience even more remarkable.  At some point, India will have to start importing heavily in order to facilitate seasonal, festival-related gold buying in May.

Even more interesting is the behavior of the mining stocks.  The HUI index ran up 83% from Jan 19 to March 16.  A price correction had to be expected.  While it looks like the miners are still vulnerable to a bigger price decline than the current 7% pullback, don’t forget that the HUI more than doubled between late October and December 31st in 2008.

I’m preparing to chat with the CEO of junior gold mining stock that has been largely unnoticed by U.S. investors, retail and institutional.  But a strategic buyer recently bought a 20% stake in this company and also plunked down a considerable sum of cash for a  1.5% net smelter royalty.  I will be presenting this idea in the next issue of the Mining Stock Journal, which should be out either Thursday or Friday.  This issue will also include proprietary market commentary and other “goodies.”

Rigged Jobs Report Triggers Extreme Backwardation In Gold

Financial Markets, Gold, Market Manipulation, Precious Metals, , , ,

I really don’t like going too far “off the rails” in looking for explanations to occurrences that are completely dislocated from reality.  An example of an occurrence that is entirely disconnected from reality is the 300:1 paper gold to deliverable gold ratio on the Comex. The only explanation for that is that entities operating the Comex are implementing extreme measures to limit the upward movement of the price of gold.   How can there be any other explanation when there is no other futures market in the history of the world in which the ratio of the paper futures contracts outstanding were 300x greater than the amount of the underlying physical commodity available for delivery into those markets.

Try this exercise:  Imagine where the price of gold would be if gold futures trading were removed from the equation.   Too be sure, it would reduce the number of hedge funds involved in trading the gold market via futures.  But the market would be left to find a market clearing price based on the actual amount of physical gold available for delivery and the amount of gold being demanded by buyers for actual delivery.

Occasionally an event occurs in the gold market which points to the extreme degree of artificiality imposed on the market.  It’s a variable that occurs outside of the control of the banks and Central Banks who are highly motivated to keep a lid on the price of gold.

This event is known as backwardation.  Backwardation occurs in a futures market when the spot price of the commodity – in this case gold – exceeds the futures price.  For a lot of technical reasons, futures markets should almost never experience backwardation except in extreme circumstances.   If you can sell your gold at the spot price and buy a futures contract to “guarantee” the delivery of the gold you sold in the future at a lower price than what you get paid today to sell at spot, you’ll do that trade all day long until you run our of gold to sell.  It’s free money – also known as arbitrage.  Arbitrage opportunities should quickly remove backwardation from any futures market.

Only in the gold market it’s not free money.  When gold goes into backwardation it’s because investors who have gold are not willing to engage in “free money” arbitrage because are unwilling to risk the possibility that their futures counterparty will be unable to deliver gold in the future.  In other words they don’t trust the future availability of physical gold.  The risk of delivery default by the counterparty removes the “free” aspect of arbitrage from gold market backwardation.

Today when the phony employment report hit the tape – at the exact moment – 10,800 UntitledDecember futures hit the Comex in the first minute.  This drove the futures price down nearly $20.   (click on image to enlarge).  This is 1.8 million ounces of paper gold. Yesterday’s Comex vault report shows that there were only 151.3k ozs of gold reported to be available to deliver into the December contract.  This is manipulation in the extreme.

Of course, the unintended consequence of this is that this artificial market activity cause extreme backwardation in the gold market.  This is best illustrated with this graphic posted on Twitter by Sandeep Jaitly (@bullionbasis), who is a fund manager:

Untitled1Without getting into the “gory” details of futures trading terminology, this graph shows what happened between the spot price of gold and the futures price of gold. The red line represents the backwardation in the market that occurred when the futures prices were slammed at 8:30 EST. It represents the annualized rate of return you would earn if you sold your gold in the spot market and bought December futures to replace the gold you sold. This of course assumes that you actually receive delivery of the gold.

Another way to think about the backwardation that occurred today in the futures market is that the spot market did not “believe” that the big hit in the futures market when the employment report hit the tape had any basis reality other than that it was a massive paper manipulation operation.  We know this because the spot market price did not adjust accordingly when the futures price was smashed.

The graph above reflects the backwardation that occurred in the Comex futures market. Backwardation in the London LMBA “physical bullion” market has been persistent since 2013.   Prior to 2013, backwardation was an extremely rare occurrence in the gold market.  It happened briefly in 2000/2001 – when the 20 year bear market in gold ended – and it occurred briefly in 2008, just before gold began a run from $700 to $1900.

The fact backwardation in London has been occurring with persistent frequency and lingering for extended periods of time reflects the extreme “disconnect” between the paper gold and physical gold markets.   It reflects a gold market in which the price is being kept artificially low with paper gold because backwardation would only occur when demand for physical gold now is greater than the promised supply of that gold in the future.

Several market indicators are now signalling the amount of intensity being exerted by the elitists to keep the entire global financial system from collapsing.  Negative rates in the European sovereign yield curves which extend out several years now;  the high volatility in the stock markets;  the growing divergence between high yield bond prices – which are quasi-equit –  and the S&P 500;  the negative 10-yr interest rate swap spread;  the very large and very frequent Fed reverse repos; and, of course, the backwardation in the gold futures market, which directly reflects the amount of manipulation required to keep the price capped.

There’s no telling how long this fraud can last, but there will be a lot of people who wished that they had loaded on the Wall Street Journal’s “Pet Rock” when the price was low because at some point acquiring possession of physical gold and going to be extremely difficult and expensive.

The Gold Supply On The LBMA Is Extremely Tight

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They can expand leverage [gold hypothecation, leasing, futures, forwards, derivatives] freely given the craven silence of the regulators and professional courtesy amongst the looting class. But they cannot create more physical bullion, and therein lies their limits.  – “Jesse” of Jesse’s Cafe Americain

The following commentary is just in case anyone was wondering about the existence of “backwardation” on the LBMA, which indicates that the immediate and near-term supply of gold (or silver) is extremely tight.   Backwardation occurs when the spot price of gold is above the future or forward price of gold.  It means entities that need or want gold immediately are willing to pay more now for gold rather than buy a futures contract or LBMA forward at a lower price  and wait for a delivery promised at a future date.

Conversely, it means that current holders of gold are unwilling or less willing to sell their gold now and buy a future/forward at a lower price.  They are unwilling to risk the possibility that they may not receive their gold at that future date.

In its essence, backwardation means that investors prefer physical gold over cash.  It also reflects a distrust of the ability of a seller of futures/forwards to deliver gold at the pre-specified date.

But the GOFO rate is an even better indicator of backwardation and scarcity of immediate supply of gold.  GOFO is probably the “purest” form of measuring the degree to which shortages exist because, unlike leasing, futures and forwards, the entity borrowing the gold from the lender has to put up full cash collateral.  It tells you that immediately available gold is not around and it reflects the fact the borrower is willing to not only pay interest on the gold borrowed (like leasing) BUT is willing to collateralize the valued of the loan 100% with cash.

GOFO transactions still occur and GOFO rates are available even though the LBMA intentionally stopped publishing the GOFO rates in January this year.  The following data was hypothecated from a Commerzbank daily report on the London bullion market:

UntitledYou’ll note that the GOFO rates are negative out to three months. This tells us there are shortages and expected shortages of available gold out to three months. The higher rate for 1 week relative to 3 months measures the relative tightness of the market but it also tells us the market is pricing in the probability that gold “might” become more readily available in 3 months. Take care of the problem now and worry about the future in the future.

You’ll also note that from September 22 to September 23 the GOFO curve became more negative.  This indicates that the market is growing even tighter.  Please note:  did not say that wholesale gold is not available in London.   But the GOFO rate tells us that the market is not only willing to pay a price to get its hands on gold now – the negative GOFO rate – but the market is also willing to collateralize that gold loan with cash.  The negative GOFO rate, in other words, reflects slight hints of desperation.

I would suggest that today’s $23 move up in the price of gold on Comex options expiry day – an event on which gold is usually slammed hard in the paper market – is a direct reflection of the growing scarcity of immediately available “wholesale” gold bars which can be purchased on the global market.

Questions About Analyzing Gold Futures COT Data

Financial Markets, Gold, Market Manipulation, Precious Metals, U.S. Economy, , ,

GATA’s Treasurer and Co-founder, Chris Powell, forwarded an inquiry to me from a precious metals market participant who had some questions about sourcing and analyzing gold futures trading data, like the Commitment of Traders (COT) report.  I thought I would share the questions and my response because I think it will help clarify a subject that has been heavily cloaked in opacity and confusion by Wall Street and the Government (CFTC).   Here was the inquiry:

As you can see by the Zeal chart – Zeallc.com LINK –  the shorting of gold futures has risen to 200K contracts, which is at least a 16 year high.  While I realize that this is only one component of the manipulation of the gold price, I would like to follow it more closely.  Do you know where I can get the most recent data on gold shorts?

When I look at this – COT LINK –  it appears the 200K number comes from the commercial shorts only.  But why would Zeal only focus on the commercial shorts and not the net position?

When I look at this chart – Gold futures COT chart –  I’m very confused as to what I should be paying attention to.  What would you be paying attention to when looking to see what the trends are on the Comex?  Any suggestions are appreciated.

Those were great questions and I wanted to share that inquiry plus my response:

With regard to monitoring the long/short positions of gold/silver, you answered your own question.  This is the source:

http://www.cftc.gov/MARKETREPORTS/COMMITMENTSOFTRADERS/INDEX.HTM

If you want to follow the daily changes in open interest you can look here:

http://www.cftc.gov/MARKETREPORTS/COMMITMENTSOFTRADERS/INDEX.HTM

That report is updated for gold/silver around 10:00 a.m. every day, reflecting the previous day’s trade settlements.  It does not show which trading categories bought or sold, just the overall changes in open interest.

The shorting of gold futures is the primary “visible” component of manipulation.  The other components – OTC derivatives, leases and hypothecation are all behind the scenes, hidden from sight and it’s impossible to track those activities.  I believe that the more insidious exertion of manipulation occurs in those activities and that’s why it’s hidden from public view.

Adam Hamilton is behind the times.  Historically the commercial gross short position in gold and silver moved inversely with the price.  When the shorts were high, the price had been manipulated lower.  Then the commercials would reverse it by covering their shorts at a big profit, their gross short position would decline significantly and the short covering would drive the price higher.

The managed money “hedge funds” would take the other side and always lose money.

NOW the managed money – via algorithm-driven HFT trading – seems to have begun to piggy-back the the commercial selling momentum. That’s why now we are seeing large managed money shorts when the price is going lower.

To be honest with you, there’s so much fraud and corruption going on in the reporting of all of this information that it’s really pointless spending the time collecting the data, analyzing it and trying to understand it.  JPM was fined recently by the CFTF (a small, meaningless $650k fine) for stuffing commercial trade tickets into the managed money account bucket.  I guarantee you they still are doing this.

Also, there’s so may “eyeballs” now vs. 10 years ago looking at it that it’s largely removed any value from the information content (and that content is subject to high degrees of reporting fraud anyway).

People like Hamilton and Ted Butler make a lot of money selling newsletters analzying the COT data, so they will defend the value of doing so and the veracity of the data to the bitter end.

But the bottom line is that I wouldn’t spend much time trying to figure out what’s going by looking at the COT and open interest numbers. It’s become a waste of time.

I no longer put much energy in this endeavor, after having spend the better part of the last 15 years looking at the numbers religiously.  I now briefly scan the COT weekly and o/i numbers daily just out of intellectual curiosity to see where they stand and to confirm every week that my view on what I just laid out above is correct.

It is correct and will remain correct until the system collapses.

Hope that helps.

The Price Of Gold Gets “Curiouser And Curiouser!”

Financial Markets, Gold, Market Manipulation, Precious Metals, U.S. Economy, , , , , , ,

I’m an atheist.   But if I’m wrong, God help this country.  –  Investment Research Dynamics

“Edward Bernays was Sigmund Freud’s nephew. He believed that the population had to be manipulated in a democracy to keep order. As I mentioned yesterday, Bernays was instrumental in getting women to smoke for his cigarette company client and to get the American people to support a CIA overthrow of a Guatemalan government that was uncooperative with United Fruit Company. Bernays uses the lowest instincts of humans and appeals to those “animal spirits” over their better judgement to influence mass viewpoints.”  This summary of the roots of modern U.S. propaganda techniques was sent to me by Jay Taylor, LINK.

Josef Goebbels implemented Bernays’ theories and techniques in crafting the infamous Nazi Germany  propaganda machine.  As Naom Chomsky chronicles in his preface to Bernays’ book, “Propaganda,” the U.S. Government and U.S. corporations hired Bernays in late 1920’s in order to utilize his techniques on the American public.  The rest, as they say, is history…anyone remember 9/11?

The propaganda effort against gold was ramped up starting in mid-December 2014. Around the same time, the blatantness of the effort to push down the price of gold and push up the S&P 500 and Dow intensified.  Both John Embry and I independently noticed both occurrences.  If it looks, walks and quacks like a duck…

The anti-gold propaganda took on extraordinary proportions last week as a prelude to Sunday nights vicious paper raid on the price of gold.  The media’s anti-gold media terrorism culminated with this silly, farcical article entitled, “Let’s Be Honest About Gold:  It’s a Pet Rock.”  Perhaps the most absurdly misleading article ever written about gold.

Paul Craig Roberts was at one time an editor and columnist for the Wall St. Journal.  He told me yesterday that he hasn’t been able to pick the WSJ to read for many years because of the high degree of fraudulent propaganda it now publishes.  I bet most of you were not aware that the WSJ is owned by the same propagandist who owns Fox News – Rupert Murdoch.

It was also around December that I started writing analysis of the economic data which showed that the U.S. economy was starting to hit a wall.  The most obvious signal was the fact that retail sales declined .9% in the month of December before the effect of inflation is removed.  I am convinced that the effort to push down the price of gold, and the corresponding media effort to publish highly misleading and negative reports about gold is directly related to an effort to cover-up the fact that the U.S. is systemically starting to collapse.

The elitists running the system know better than any of us what is really going on in the real economy as they have access to the unmanipulated, raw data – something to which they go to great lengths to prevent we plebeians from seeing.

The greatest amount of effort to cover up the truth about what is happening beneath the surface headlines is the effort being exerted to push the price of gold lower.  The truth is that the U.S. nothing a but gigantic bloated, debt-addicted Ponzi scheme that is quickly losing its global economic and military hegemony while the U.S. elitists steal everything in sight from the middle class.

If gold were allowed to trade freely, it would be priced at a significantly higher level than where it is now.  The problem is that a rising price of gold would signal to a large portion of the population that something is drastically wrong with the U.S. financial, economic and political system.

Perhaps the “poster child” for the propaganda and “thought control” behind the effort to drive the price of gold lower is this graphic which shows the price of gold in relation to the size of the Fed’s balance sheet (source:  Paul Mylchreest, Gold and the Silver Stand-off, edits are mine) – click to enlarge:

FedBalGold

As you can see, there was a high correlation between the directional movement in the price of gold and the growth in the size of the Fed’s balance sheet from “QE” (let’s be honest, “QE” is just a politically correct term for “money printing”).

However, and this is a key point, I would assert with confidence that, in fact, the price of gold began to rise at more rapid rate than the rise in the Fed’s balance sheet because of the leveraging effect of the high-powered banking reserves created by QE.

In other words,  every dollar printed enabled banks to extend leverage which has the unmitigated affect of creating even more money (most of this leverage has gone into the stock and bond markets).  Why?  Because every dollar of bank reserve “equity” can be leveraged in the form of debt.  Debt behaves like money until it is repaid, which means debt issuance has the outright effect of increasing the money supply. This is the fundamental principle underpinning “fractional reserve” banking.

Having said that, you can also see where the price of gold is pushed below the growth in the Fed’s balance sheet.  This is the unmitigated, unequivocal mark of outright official intervention in the gold market.  See my post yesterday for one of the primary ways in which this is implemented – LINK.

In one sense, the U.S. Government does not have a choice other than make an attempt to keep a lid on the price of gold in order to perpetuate the fraud it has created since 1971.  I said about 12 years ago that the elitists who control this country will hold up the system with printed money until they’ve swept every last crumb of middle class wealth off the table and into their own pockets.

If they were unable to control the price of gold, their scheme would fail.   It will ultimately fail anyway, as history has already spoken on this matter, but many of them will manage to escape this country with a significant amount of stolen wealth.  In fact, I would bet my last nickel that many of them, like Warren Buffet, the Rockefeller clan and the big banks, for instance, have amassed a large amount of gold that is being safekept in some remote area of the globe.  Certainly not in a U.S./UK/EU bank or Central Bank vault.  We know what happens to gold that disappears down those rabbit holes.

At some point this scheme to control the price of gold will fail – badly.  At that point it will be too late for most people to do anything about it because the price will shoot up vertically, in step-function.  Similar to the price of movement of the  tech stocks that are enjoying the collateral affects of the Fed’s money bubble.

That day (Feb 12, 1973) the United States announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.   – Paul Volker reflecting in November 2004 on the day the U.S. devalued the dollar vs. the yen – source link

Jay Taylor: Turning Hard Times Into Good Times

Financial Markets, Gold, Market Manipulation, Precious Metals, , , , ,

I will be making my first appearance on Jay Taylor’s “Turning Hard Times Into Good Times” internet radio show – Voice of America – on Tuesday, July 21 at 3:25 p.m. EST/2:25 CST/12:25 PST. You can access the live link or the podcast on demand here: Jay Taylor/Voice of America.

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