Wax On, Wax Off – Interest Rate Hike On, Interest Rate Hike Off

Non-farm payroll report comes out and Spoos [SPX futures] go down 32 handles. Gold starts off up $4, now down $6. This is totally rigged. I’m going to Vegas, at least the tables are more level then these markets and I get free booze and some really hot chicks.  – reader comment after employment report hit the tape

Despite the rhetoric coming from the Richmond Fed’s Lacker, there will be no interest rate hikes in September.  It’s not about the fictitious and indisputably managed and manipulated non-farm payroll report, it’s about the catastrophic degree of leverage in the banking system.

All along, despite the disingenuous pretenses of helping “main street,” the Fed’s money printing has been targeted specifically at keeping the big banks from collapsing and to enable them the continue sucking wealth out of the U.S. economic system.  Secondarily, it’s enabled the U.S. Treasury to continue issuing debt obligations that will never be repaid.

There will be no interest rate hike in September, or in 2015 for that matter.

In order to support this intended monetary policy, the Fed has to discourage investors from converting fiat paper money into real money – gold and silver – by creating shock and awe terror in the paper precious metals markets (hey, it worked with 9/11 and we got the Patriot Act, Detainee Bill, Homeland Security Act and an unfettered NSA).

Here’s what this anti-gold terrorism looks  like in the paper gold trading market – click to enlarge – the time-scale on the x-axis is MST:

Untitled1As you can see, after a quick initial move up, an avalanche of paper selling hit the paper market, driving the paper price of gold below where it was when the report hit the tape. We would have expected a big move up in gold as the logical response to a jobs report which badly missed Wall Street’s consensus estimate, and thus convincing the hedge fund algos once and for all that there would be no rate hike in September.

Between the 8:30 a.m. (EST) report release and 9:00 a.m., over 42,000 paper gold contracts traded, most of them “sell” orders.  This is 4.2 million ounces, or the equivalent of 122 tonnes of paper gold.  122 tonnes is more than the amount of gold that India is said to have imported in August – Business Standard, Mumbai

Of course, this action in the paper gold markets on Fridays, especially non-farm payroll report Fridays, has become standard operating procedure for the Fed.  With all of the physical gold trading markets closed for the weekend, the Fed is free to operate unfettered from the pressure that physical demand exerts on the paper gold pornography.  In fact, China has been closed for the past two days, which has alleviated temporarily China’s inexorable demand for physical gold that is delivered in to China.

To give you an idea of the extreme degree to which the bullion banks – backed by the Fed and the U.S. Treasury – have gone in order to keep a lid on the price of gold using paper, you’ll note that the ratio of paper gold outstanding to the amount of gold being reported as available to deliver has spiked back up to 126:1:


I sourced this graph from Jesse’s Cafe Americain and recommend reading the the accompanying commentary:  LINK

In any other commodities market on the CME, if the ratio of the amount of paper to the amount of available underlying physical commodity approaches anywhere near even a 2:1 ratio, the CFTC cracks down the “manipulator.”  For some reason the paper gold and silver markets have the dubious distinction of existing free from any legal regulation by the U.S. Government and the bureaucracies that exist that are supposed to enforce the rules governing market manipulation.

Meanwhile, retail demand for U.S. mint gold and silver eagles surged this summer.  From June to August silver eagle purchases were up 126% over the same period last year.  And gold eagle purchases tripled from Jun-Aug this year vs. last year (data source:  SRSRocco Report).

I won’t go into the flow of gold from west into India and China.  Imports into those two countries will hit all-time record highs this year.  That’s a lot of Pet Rocks being bought with U.S. fiat currency.

Without question the extreme intervention in the paper precious metals markets – NYC and London – is serving the purpose of hiding the fact that the Fed will not be raising interest rates this year, or next.  In fact, the next policy move will be more money printing.  Or “QE4” if you want to call it that.  But until the Fed sells its Treasury and mortgage holdings, for now what is occurring is pure money printing.  And more of it is coming.


16 thoughts on “Wax On, Wax Off – Interest Rate Hike On, Interest Rate Hike Off

  1. Dave– I let my reading get ahead of my comprehension and thought you wrote “Richmond Fed Slacker.” and your perspicacity amazed me. After re-reading I realized you were right either way. P.S.–Never draw to an inside straight.

  2. I hope there will be a rate hike this month. I love rollercoasters! Big rollercoasters for just 25 ridiculous basis points?! I call this bang for your bucks! 🙂

  3. Dave, love your work and your persistence in this stuff. I only have two quick comments for you. 1) I am a precious metals dealer in the Boston area who works with the largest wholesalers in the country, all of whom are sold out of retail silver in coin form. Not that this means anything because spot prices continue to fall but I find it an interesting point nonetheless. Premiums on all retail products have also risen dramatically for what it is worth but our phones are not exactly ringing off the hook.
    2) isn’t all this talk of the Comex getting a bit tiresome? Everyone knows 99% of people never take delivery from the Comex and whenever the big boys get into trouble they can raid GLD, swap, or lease gold with Central Banks around the world. Personally I think focusing on the Comex is sort of an exercise in futility and if they do every truly default on physical delivery they will just go to cash settlement anyway.
    3) Have you or anyone else in the metals community ever considered that the big boys are long the market in London via futures, forwards, or swaps and thus short the Comex as their hedge? Everyone says it is naked short selling because the metal is on deposit but I have a feeling that the regulators consider potential claims in London a long and thus they are allowing them to “hedge” via the Comex. It is the only thing I can think of that makes any sense as to how this market can continue to be so dysfunctional.
    Anyway, keep up the great work as always and I hope someday this market finds true and fair valuation long before everything blows up and we get there the hard way.
    Have a great long weekend and regards,
    Michael Rothschild

    1. Thanks for your feedback and comments. I have stated on this blog that I believe that the big bullion banks are very long physical gold and silver that they keep in vaults in Singapore and Hong Kong. They know the truth better than we do and they all know where this is headed.

      The highest level elite bankers are like blood suckers. They feed on their host until they’ve drained the host of all life, then go feed on the next host. They are almost done draining all the “blood” from this country and the west and they will shift their feeding activities to the east. I don’t know if China will be able to fend them off.

      1. My limited knowledge of “currency” isn’t demand for money almost infinite? wonder if small business offered 1/10 oz bit’s as gifts with their product’s and encourage the return of these tokens for any future service? Johnny Appleseed had some insight for ordinary people.

  4. Thanks Dave for your professional insight into the markets. I came back from having a training run together with my wife, sat down in front of German TV and watched their BS stock market ubdate. Can’t stand that crap, it really hurts; they were discussing a possible rate hike by the FED. No word about seven years of supposingly having a recovery despite interest rates sitting close to zero and economic data deteriorating once again. However, I disagree with you in regard to interest rate policy of th FED. I think they will raise rates a quarter of a point later this year, just to keep their credibility. It’s a complete facade, they know that the game is over, but they will try to keep the picture of having saved the economy in 2008 and put it back on track. Then……sometimes in the near future I expect a full blown false flag attack, plane crash in Chicago, New York,….biological/chemical stuff on board, something really big and ugly. Then FED then will switch into overdrive, QE4…..we were on track, saved the ecnonmy, but then this ……..happend bla bla bla. Not our fault. Smoke and mirror, it’s about distracting people from the actual problems: FIAT money printing by the central banks for decades now, corrupt governments and too big to fail banks.

    1. “I expect a full blown false flag attack”

      Let’s hope the purveyors of these shit shows hire someone who actually knows how to produce a video. The 1st ISIS beheading, Charlie Hebdo, and the Roanoke shooting all suffer from blatant continuity errors, betraying the fact that multiple takes were required for the finished product in each case.

      The deeply comatose sheep bleating in front of their TVs, of course, gobble this nauseous garbage up like it’s from McDonald’s dollar menu.

      Mon Dieu. I mean, if you have an essentially unlimited budget, you’d think nitwits like Rita Katz would have sense enough to hire a continuity person. Alas, you’d be wrong about that.

  5. QE4? Jim Willie says they are already printing as much as 40 billion per day to pay off derivatives and soak up treasuries. What leads me to believe him is that the Chinese can dump hundreds of billions of treasuries and the price doesn’t move. The FED is buying them!

  6. I don’t know how Lacker and Hoenig (and to a lesser degree, Bullard) put up with it. They’re about the only ones with a lick of common sense at the Fed (though Hoenig’s at the FDIC now), and they’re routinely ignored by TPTB there. If you’ve read any FOMC transcripts, you know those meetings are just dog and pony shows at which 50-70 wooden suits discuss the latest FED policy THAT IS SET IN STONE BEFOREHAND and encapsulated in staff reports that’ll never see the light of day due to the Fed’s ludicrous pretense to “independence.”

    The Federal Reserve is a sad and impotent hodgepodge of grocery clerks serving the likes of Lloyd Blankfein and Jamie Dimon. As such, it’s simply a criminal enterprise that carries out orders ultimately originating from the BIS.

    You can take what Lacker or any Fed official says with 2 tons of salt.

  7. Dave, Amazon’s froth has intelligence agencies bubbling all over each other, if not foaming at the mouth. Like the effort to preserve the fossil fuels paradigm with a gurgling whirlpool of poisonous petrodollars, they have met their WaterLew.

    [ https://www.lewrockwell.com/2015/09/no_author/the-cia-and-the-media/ ]
    “In 1999 the CIA established In-Q-Tel, a venture capital firm seeking to “identify and invest in companies developing cutting-edge information technologies that serve United States national security interests.” The firm has exercised financial relationships with internet platforms Americans use on a routine basis, including Google and Facebook. ..

    Today, however, “the firm supports many of the 17 agencies within the U.S. intelligence community, including the National Geospatial-Intelligence Agency (NGA), the Defense Intelligence Agency (DIA) and the Department of Homeland Security Science and Technology Directorate.” Matt Egan, “In-Q-Tel: A Glimpse Inside the CIA’s Venture Capital Arm,” FoxBusiness.com, June 14, 2013.
    At a 2012 conference held by In-Q-Tel CIA Director David Patraeus declared that the rapidly-developing “internet of things” and “smart home” will provide the CIA with the ability to spy on any US citizen should they become a “person of interest’ to the spy community,” Wired magazine reports. “‘Transformational’ is an overused word, but I do believe it properly applies to these technologies,’ Patraeus enthused, ‘particularly to their effect on clandestine tradecraft’ … ‘Items of interest will be located, identified, monitored, and remotely controlled through technologies such as radio-frequency identification, sensor networks, tiny embedded servers, and energy harvesters — all connected to the next-generation internet using abundant, low-cost, and high-power computing,” Patraeus said, “the latter now going to cloud computing, in many areas greater and greater supercomputing, and, ultimately, heading to quantum computing.” Spencer Ackerman, “CIA Chief: We’ll Spy on You Through Your Dishwasher,” Wired, March 15, 2012.
    In the summer of 2014 a $600 million computing cloud developed by Amazon Web Services for the CIA began servicing all 17 federal agencies comprising the intelligence community. “If the technology plays out as officials envision,” The Atlantic reports, “it will usher in a new era of cooperation and coordination, allowing agencies to share information and services much more easily and avoid the kind of intelligence gaps that preceded the Sept. 11, 2001, terrorist attacks.” “The Details About the CIA’s Deal With Amazon,” The Atlantic, July 17, 2014.”

    And as if that’s not voyeuristic enough to floor even the most jaded hacker, this wolf and pony show takes the heads in the cloud to bedroom windows:

    https://en.wikipedia.org/wiki/Amazon.com – Excerpt:

    “Main article: Amazon Prime Air
    60 Minutes announced on December 1, 2013 that Amazon Prime Air was a possible future delivery service expected to be in development for several more years. In concept, the process would use drones to deliver small packages (less than five pounds) within 30 minutes by flying short distances (10–20 km) from local Amazon Fulfillment Centers.[222][223] The project will require the FAA (Federal Aviation Administration) to approve commercial use of unmanned drones.[224]
    Such approval could be in place as early as 2015, and Amazon expects to be ready at that time.[225][226] In July 2014 it was revealed the company was developing its 8th and 9th drone prototypes, some that could fly 50 miles an hour and carry 5-pound packages, and had applied to the FAA to test them.[227]”

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