Tag Archives: silver

Gold May Be Set Up For A Pleasant Holiday Season Rally

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

In what has become a recent routinized pattern in the price of gold (and silver), the market rallies during peak Indian gold market hours and then sells off when London opens. After the customary price take-down when the Comex floor trading opens, gold and (and silver) typically recoup the overnight sell-off. In short, there seems to be epic price discovery battle going on between paper derivative gold and the physical gold market and that won’t take much to ignite a massive move higher.

The recent sell-off in gold has triggered massive gold demand from India. Recall that India had been dormant since June, when the Government increased the import duty by 25% on imported kilo bars. But the lower price of world gold, combined with India’s peak seasonal gold buying period has unleashed India’s gold importation beast.

Based on premiums being paid for gold after taking into account the import duty, Indian importation is running full-tilt.

Despite repeated attempts to take the price of gold lower, Indian physical demand has put a floor under the market, at least for now, and poses a potential threat to the record level of net short interest in Comex futures by the banks and hedgers…The rest of my commentary came be found at  Gold-Eagle.com.

CME Pledged Gold: Did The Comex Rescue HSBC

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

A couple days after the CME allowed clearing members to use warehouse warrants as collateral for the mandatory performance bond, the new form of collateral was implemented by HSBC.

With help from Craig Hemke (TF Metals Report) it appears as if the Comex activated a low-grade rescue of HSBC.  Chris Powell at GATA believes this “hypothesis fits the decades-long practice of the international gold price suppression scheme of governments, central banks, and bullion banks. That is, to keep metal moving around so fast that it can be applied to pressure points before its real owners notice that it’s missing — to make a single ounce of gold seem to be in as many as a hundred places at once.”

On November 4 authorization for traders on the New York Commodities Exchange to use “London gold” and Comex gold warrants as collateral was tripled, raised from $250 million to $750 million. HSBC now has used $340 million, or 45.3 percent, of its new collateral limit. It seems more than coincidental that HSBC took advantage of the collateral increase so soon after it was put into effect.

I see the rule change as a low-grade bailout of HSBC, analogous to the Fed’s low grade bailout of the big banks with the “repo” “quantitative easing.” The rule change also flags HSBC as the largest trader in the commitment-of-trader category that designates the percentage of the long and short contracts held by the four largest traders on the Comex.

Assuming, as is likely, that HSBC’s short position was largely put on at lower gold prices, the bank is probably getting hammered with a mark-to-market loss.

Here is the issue that needs to be answered but likely never will be: Do any of the warrants HSBC has pledged as collateral involve gold not owned by HSBC?

In my opinion, probably all the gold in these warrants is not really owned by the bank.

Most likely HSBC is using for collateral purpose gold that does not belong to the bank — customer gold. That is outright hypothecation.

I wonder if the agreement signed by the vault operators allows them to hypothecate gold held in the vault and not owned by the bank.

Now here’s where it gets even more interesting. Assume HSBC is short those warrants pledged as performance bond collateral and the price of gold moves a lot higher. Then HSBC is getting killed technically being short gold collateral it has pledged for its own liability but doesn’t own. How does the bank remedy this?

It uses an exchange-for-phyiscal or privately negotiated transaction using “London gold.” Since HSBC is the vault operator for the major gold exchange-traded fund GLD, this London gold EFP/PNT would likely use GLD vault gold that may or may not have been hypothecated.

HSBC is likely getting financially squeezed to a major extent on its Comex futures short position and the CME bailed it out by changing the collateral and performance bond margin rules.

—–

Repos, Money Printing and Paper Gold: It’s One Massive Manipulation

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

The paper gold derivative open interest on the Comex continues to hit success all-time highs.  This is no coincidence, as the Fed has restarted the money printing press in what ultimately will be a catastrophically failed effort to prevent the coming global credit and derivatives melt-down.  The successive daily all-time highs in the stock market, believe it or not, is evidence that the wheels are coming off the global financial system.

The melt-up in paper gold contracts mirrors the melt-up in the Dow/SPX – both are frauds. Kerry Lutz me invited onto this FinancialSurvivalNetwork.com podcast to discuss the truth behind the repo programs and why the asset bubbles blown by the Fed could be getting ready to pop:

Click on this LINK or on the graphic below to listen/download the show:

You can learn more about  Investment Research Dynamics newsletters by following these links (note: a miniumum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

The Real Stock Market Is Declining

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

The major stock indices – the Dow, SPX and Nasdaq –  have wafted up to all-time highs on a cloud of Central Bank printed money.  Interestingly, most of the stocks in all three indices are below to well below their all-time highs.  Breadth of the move is shockingly thin.  Very few stocks are responsible for pushing the indices higher. The Dow’s move last Friday, for instance, was primarily attributable to AAPL (by far the biggest contributor), MSFT, HD, UTX and JPM. Of those, only AAPL, UTX and JPM hit their all-time high on Friday.  MSFT and HD were close.

Many of the Dow stocks are down significantly this year. If you find this hard to believe, run the 1yr charts of the 30 Dow stocks. I’m certain the same is true for the SPX and Naz.

Despite the appearance of the stock market moving higher, most of the stocks that make up the 2800 stocks on the NYSE are well below their all-time and/or YTD highs. There’s plenty of money to be made shorting stocks despite the headline, mainstream media and White House’s euphoria over the stock market’s performance. Moreover, short interest in the SPY ETF has plunged to a level that has, in the past, led to sharp sell-offs in the stock market.

And then there’s this, which is the best measure of the real rate of return stocks:

Over the past 52 weeks through November 6th, the S&P 500 has declined 10.5% when measured in terms of gold – i.e. real money.  Money printing at a rate in excess of real wealth output diminishes the marginal value of the currency.  Because the price of gold moves inversely with the inherent value of the dollar, the chart above reflects the effect of dollar devaluation on financial assets.

Thus,  the real upward movement of the stock market highly deceptive in terms of both the number of stocks in the NYSE participating in move higher and in terms of using real money to measure the price of stocks.

With The Return Of QE, Mining Stocks Are Cheap

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

There’s a strong probability that the Fed’s “non-QE” QE operations will morph into a full-blown money printing program that will exceed the one implemented starting in late 2008. The same fundamentals variables that fueled a massive move in the the precious metals sector from late 2008 thru mid-2011 have resurfaced with a vengeance.

The pullback in gold, silver and the mining stocks that began in early September appears to have run its course. Currently the entire sector is technically and fundamentally set-up for a big run into the end of the year. The re-activation of Indian imports last week for the first time since June will give the coming bull move a powerful boost.

Bill Powers of MiningStockEducation.com invited me back onto his podcast to discuss some of the stocks that I believe will outperform the sector. These three ideas are among several that I cover in my Mining Stock Journal:

**************

The Mining Stock Journal  covers several mining stocks that I believe are extraordinarily undervalued relative to their upside potential. I also present opportunistic recommendations on select mid-tier and large-cap miners that should outperform their peers.  You can learn more about this newsletter here:   Mining Stock Journal information.

Subscriber feedback: “I am a professor of aerospace engineering. I have studied and invested in junior mining stocks for 25 years. I have learned much about this sector. The stocks that you have recommended since starting MSJ have outperformed the other junior investment services that I follow. Perhaps one reason is that, because your service has a smaller circulation, you can find and recommend smaller companies that have not been discovered and cannot be recommended by services with huge circulations.”

The Fed Cranks Up Its Printing Press

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

“Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Helicopter Ben Bernanke’s address to the National Economic Club, 2002

It took the Fed more than 4 1/2 years to remove from the banking system just $750 billion of the $4.5 trillion in money it printed. The Fed stopped the removal process (“Quantitative Tightening”) at the beginning of September. But just 13 days later the Fed began adding liquidity back into the banking system via its repo operations. 42 days later, the Fed’s balance sheet has spiked up by $253 billion and is back over $4 trillion:

41% of that $253 billion ($104 billion) was put into the banking system in the last three days of this past week.

Apparently the repo/term repo operations were not enough.  On October 11th, the Fed announced that it was going to purchase at least $60 billion T-bills per month through at least the 2nd quarter of 2020.  The rationale was “in light of recent and expected increases in the Federal Reserves non-reserve liabilities” (link).  “Non-reserve liabilities” refers specifically to “currency in circulation.” The only way to increase currency in circulation is to create it. Thus, the above rationale is a decorative phrase for “money printing.”

The problems in the banking system targeted by the Fed’s money printing are likely getting worse by the day.  The Fed has now conducted three outright money printing operations since October 11th. Each operations has been progressively more over-subscribed. Today’s operation of $7.5 billion had nearly $6 of demand for every $1 printed and offered.

As I have asserted since the Fed’s repo operations commenced, the problem is significantly more profound than the “quarter-end liquidity” needs of corporations and banks. I suggested that the liquidity injection program would quickly increase in size and duration, ultimately morphing into permanent QE/balance sheet growth/money printing.

While some of the money being printed will be used absorb the massive amount of new Treasury issuance, the nexus of the problem is seeded in the big bank balance sheets and business operations. The problems leading up to the 2008 crisis were never fixed – just papered over. Furthermore, the legislation that was promoted to prevent a repeat of 2008 and protect the taxpayers was nothing more than window dressing which enabled the banks to hide their massive fee-generating recklessness (Dodd-Frank, Consumer Financial Protection Bureau).

The “Too Big To Fail” bank balance sheets collectively are close to double their size in 2008. A frighteningly large portion of these assets are sub-prime or near-sub-prime loans plus OTC derivatives that have been well-hidden off-balance-sheet. One of the regulatory initiatives put into effect in 2010 enabled banks to hide their total derivatives holdings behind a nebulous concept called “net derivatives exposure.” The “net” metric supposedly measures a bank’s unhedged net economic risk exposure, netting out off-setting hedges with counterparties.

But counterparty defaults were one of the key detonators of the 2008 financial melt-down. Unfortunately, Congress and the Fed have enabled the banks, after monetizing their catastrophic business decisions in 2008, to create a financial Frankenstein that is now financially apocalyptic in scale. The rapid escalation of the repo operations is evidence that the fuses on the various financial bombs have been lit.

Repo Operations, Money Printing, Gold And Mining Stocks

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

The Fed is printing money again – this time disguised as “repo operations” instead of “QE.” The price of gold and silver rallied over the summer anticipating an easier monetary policy. The economic problems and financial system excesses are two to three times larger than in 2008. This will necessitate a money printing/QE/balance sheet expansion operation that dwarfs the $4.5 trillion printed the first time around. Plus most of the money printed from 2009 to late 2014 is still in the banking system.

The scale of the inevitable money printing policy will not stimulate economic activity but it will act as rocket fuel for the precious metals market – gold, silver and mining stocks. Ten years of Central Bank money printing has pushed debt issuance, malinvestment, moral hazard and fraud to levels that well-exceed the levels when Lehman collapsed.

Craig “Turd Ferguson” Hemke invited me back onto his “Thursday Conversation” podcast to discuss the the Fed cranking back up its money printing machine and the implications for gold, silver and mining stocks. Click on the link above or the graphic below to listen:

***************

In the latest issue of the Mining Stock Journal, I review several junior mining stocks plus I recommend a larger cap silver/gold/lead/zinc producer that has been sold off irrationally and which will report great earnings in Q3 and Q4 vs the same quarters in 2018.

You can learn more about  Investment Research Dynamics newsletters by following these links (note: a miniumum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

The Fed’s Money Printing Escalates

Financial Markets, , , , ,

Last week the Fed announced that it was going to start buying $60 billion in T-Bills per month at least into Q2 2020.  The Fed will also rollover the proceeds as the T-Bill’s mature. The rationale was to address the decline in the “non-reserve” liabilities of the Fed.  So what are “non-reserve” liabilities?  Federal Reserve Notes.

The directive as written was “Fed Speak” which means that the Fed would print $60 billion per month for the next 4-6 to months cumulatively.  If it’s only 4 months, it means that the Fed will be printing at least a quarter trillion dollars which apparently will be become permanently part of the Fed’s balance sheet.

Chris Marcus invited me onto this Arcadia Economics podcast to discuss probably reasons why the Fed has ramped up its money printing operations despite explaining a month ago that it was only temporary to address quarter-end issues:

***************

You can learn more about  Investment Research Dynamics newsletters by following these links (note: a miniumum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

Fed Delivers More QE “Light” And Gold Responds

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

On October 4th, as I expected would happen, the Fed announced that it was extending its overnight and term repo operations out to November 26th (the November 12th two-week term repo matures on the 26th).

The Fed added 7 more 2-week  “term repos, ” plus a 6-day “term repo,” with the next three operations upped to $45 billion. It extended the overnight repos until at least November 4th.  Well then, I guess the “end of quarter” temporary liquidity issue with corporate tax payments was not the problem.

Follow the money -The Fed’s repo operation extension further validates the analysis in my last post in which I made the case that an escalation in the non-performance of bank assets (loan delinquencies and defaults and derivatives), caused by contracting economic activity, has created a liquidity void in the banking system that is being “plugged” by the Fed. The Fed’s balance sheet has increased $186 billion since August 28th.

Not only did the Fed end “QT” (balance sheet reduction) two months earlier than originally planned in January, the Fed has effectively reversed in the last 5 weeks all of the QT that occurred since March 28th.

The evolution of Orwellian propaganda terminology for “money printing” has been quite amusing. It seems that the Fed has subtly inserted the phrase “balance sheet growth” into its lexicon. While Jerome Powell referenced “organic balance sheet growth” in his press circus after the last FOMC meeting,  expect that it will be considered politically/socially incorrect to use “QE” or “money printing” instead of “balance sheet growth” in reference to this de facto banking system bailout.

Meanwhile,  thank the Fed for providing the amount of money printing/currency devaluation needed to offset China’s absence from the physical gold market for the last week:

Given the technical set-up in gold plus the enormity of the Comex bank/commercial short position in paper gold, many gold market participants, including me, expected a much bigger price-attack on gold during Golden Week than has occurred. In fact, gold has held up well, with the December future testing and holding $1500 three times in the last week. Business activity in China, including gold and silver trading, resumes tonight.

The Fed’s QE Light program will likely transition into outright permanent money printing before the end of 2019. The November meeting is scheduled for the end of this month (Oct 29-30). But I doubt the Fed will turn its repo money printing into permanent money printing – aka “POMO” or “balance sheet growth” – until the December FOMC meeting (Dec 10-11).

An Unavoidable Global Debt Implosion

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

“[Whatever] the repo failure involved, it is likely to prove a watershed moment, causing US bankers to more widely consider their exposure to counterparty risk and risky loans, particularly leveraged loans and their collateralised form in CLOs. a new banking crisis is not only in the making, for which the repo problem serves as an early warning, but it could escalate quite rapidly.” Alasdair Macleod, “The Ghost of Failed Bank Returns”

The delinquency and default rate on consumer and corporate debt is rising. This creates funding gaps and cash flow shortfalls at banks. In a fractional banking system, banks only have to put up $1 of reserve for every $9 of money loaned. When the value of the loans declines because of non-performance, it requires capital – cash liquidity – to make up the shortfall in debt service payments received by the banks. In simple terms, the banks are staring at a systemic “margin call.”

To be sure, the current repo funding shortfall may subside. But it will not fix the underlying causes (Deutsche Bank, CLO Trusts, subprime debt, consumer debt, derivatives), which are likely leading up to another round of what happened in 2008 – only worse this time.

Chris Marcus of  Arcadia Economics  invited me to discuss my thoughts on the meaning behind the sudden need for the Fed to inject $10’s of billions into the overnight bank lending system:

***************

You can learn more about  Investment Research Dynamics newsletters by following these links (note: a miniumum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information