The bears are driving gold down into zones at which [Asian] physical demand will become prodigious. – John Brimelow, John Brimelow’s Gold Jottings Report
The economy is starting to collapse. All the non-Government-reported economic metrics are showing that the bottom is falling out of the demand side of GDP at all levels of the economic system – OEM, wholesale, middleman, retail.
The cable biz news networks have sent their emissaries out to the landmark Times Square/Herald Square stores in NYC to try and manufacture a story about “Black Friday.” Aside from the footage of the pre-dawn door openings at Macy’s – and at a few semi-ghetto area Walmarts around the country where fights broke out – there is no story. I just saw a clip of some blonde bimbo from Fox Biz at the Times Square Toys R US store – it was very quiet in the background aside from some curiosity seekers.
So why not cover up the truth by hiding the “canary in the coal mine” and blasting the price of gold? That’s exactly what happened on Friday morning at 8:00 a.m. EST:
As you can see from the graph to the left, the trading in gold during the Asian and early London hours was largely subdued. At 8:00 a.m. the Comex paper gold contract went into its now-familiar cliff-dive formation. Bare in mind that this is probably one of the most quite, low-volume trading periods of the entire week, as Asia and the Middle East are in bed and London’s paper gold market is starting to doze off the weekend. No one single other commodity or market index exhibited any unusual trading patterns or volume when gold was smashed. Even silver, after an initial “sympathy” sell-off, has held up remarkably well. This was an intentional raid on the gold market.
Between 8:00 a.m. and 8:30 a.m., 19,595 contracts were traded, largely dumped into the market. This is many multiples higher than the typical pre-Comex floor open volume. Make no mistake, any seller looking to move, 1.96 million ounces of paper gold – approximately 58 tonnes – would wait for the periods of time when the there’s is a lot more volume in order to mask the amount of paper he needs to sell AND to maximize the sale proceeds.
The sell operation put into motion did not have the slightest intent to maximize proceeds – it was sheer shock and awe. Interestingly, GOFO/lease rates in London are exhibiting the signs of increasing “stress” on the demand for physical gold deliveries. The GOFO rates posted this morning were negative out to three months and the rates for 1 week and 1 month had moved from -.30/-.20 to -.35/-.25, respectively. This means that any entity looking to borrow gold collateralized by a cash was willing to pay a higher rate to do so today than last week.
Interestingly the mining stocks seem to be looking “through” the extreme price suppression of the price of gold and have recently been diverging from the latest take-down:
Only time will tell if this positive divergence between the mining stocks and the price of gold is a harbinger of a big move higher in the price of gold. A lot of contrarian style analysts are starting to call for a big move up in the price of gold: Gold/Gold Stocks and Get Ready For a Year-End Gold Rally, for instance.
I believe that as it becomes more apparent to a wider audience that the U.S. economy is collapsing, big investors will be forced to dump their hideously overpriced stocks and find a hiding place, away from the fraud-infested paper assets. That hiding place will be physical gold.