Over the Weekend Governments decided they did not like the direction of the stock market, especially the increasingly in trouble and insolvent banks.
Governments are intent in either kicking the can down the road or papering over the problem by monetizing toxic sovereign debt where possible.
With news like this and a bunch of POMO dollars to crank up the futures market, we have a perfect storm of MOPE. For anyone looking at the big picture, you have a perfect opportunity to sell, because despite all the talk coming out of Europe, they delayed their monthly meeting, and announced that they would be "discussing" ways to support the banks. Gee whiz, that means they will "continue" talking.
In the meantime, its apparent that the Problem in China with banks is worse than we thought with China announcing that they will be buying more of their increasingly insolvent banks.
To me, we see a full court Kick the Can Down the Road and we'll bail the banks no matter what Propaganda piece. Now, how are people in Germany really going to feel about that?
Things are if anything worse now than before last Friday because its apparent that no has any real solutions and there is NO political will to do anything. Additionally, there is no political will, outside the Fed, to bail increasingly distressed US Banks.
My guess is that the really smart money is using this POMO/MOPE pump day to exit stocks while Mom and Pop and some algorithmic funds are riding the short term momentum. Dangerous market to be in.
I am in cash with a small hedge against a market crash. I believe we could easily have 500 – 1000 sell off at just about any time on any vaguely exogenous data and I still see no data to support any meaningful growth or job creation in Q4.
While I believe a short term accross the board liquidation is commencing in virtually all asset classes which will take gold and silver down short term, I believe that ultimately gold and silver will be the ultimate safe havens as the historical and trusted form of hard cold cash. In general I believe that there is no better long term store of value than gold and silver, the bi-metal standard for real money but if we get a major market sell off as a result of the political, banking and derivatives dysfunction unfolding in Europe, China and the United States and the impact that all of the above is having on global GDP growth going foward (which I see as turning negative in short order), which I believe we will, even gold and silver could see substantial short term impact. I don't have a number in mind but it was enough for me to close out my ETF positions while not selling physical precious metals.
I could be wrong and Standard Bank's analyst could be correct but given that the EFSF funds, if approved, are a drop in the bucket for what is likely to be needed and looking more carefully at the emerging liquidity problems in China and the slowing economy, I don't see where global GDP growth is going to come from anytime soon.
After much reading, research and trying to challenge my own paradigm, it seems apparent to me that everything hinges on China and whether Europe can pull together and this from the standpoint of the EU, ECB and the internal political workings of the various governments and it depends on whether China has a hard or soft landing, which part has to do with their credit markets and their ability and willingness to devalue their currency to support their own banks.
At the end of the line I see a currency war and all fiat currencies being devalued. In the short run (next 18 months) I see a hard landing in China, Europe unable to find common ground to bail its banks out and the Fed having its hands tied to go into more QE (a blessing a curse).
As a result, while I will not sell any physical precious metals, I am for the time being selling my ETF positions in my retirement accounts because I see a complete wave of combined failure to monetize and hence defaults and a derivatives and concurrent stock market melt down of large order on the horizon. At the end of all this the only real money left standing will be gold and silver and barter for that matter. In the short term I see a massive derivatives based meltdown in just about every asset class, much like the Lehman debacle.
I am taking a large loss on my ETF positions from their highs but a significant gain since I started investing in them several years ago. I should have seen this coming sooner and I was wrong. I am going short the stock markets. I could be wrong again here but I want to share my thoughts with those who listen to me. I hope that I am not created in the Narcissistic model of Darwin. I want to be able to view my mind and if I find that there is a mistake in my reasoning, which in this case was "that Europe would be able to Monetize its own bad debt and would do so willingly, and also that China would continue to be able grow even as the rest of the major economies are contracting." At this point, it appears that the Central Banks simply don't have the ability to overcome the derivatives markets through monetization and that in the process of broad based default, starting in Europe and finally returning to the United States, the stock markets will begin to reflect the future economic depression that is coming and all asset classes, including commodities, stocks, and even gold and silver will be sold down. The difference is that gold and silver will rise from the ashes as the true money but in the short term US Bonds will be the short term recipient of inflows and so will the US dollar, unit it becomes evident that the US is also heading towards a depression and will default and then all bets are off and gold will be the only investment to be in.
I could be wrong about all this but I have enough gut level feeling about it that I sold my retirement gold and silver ETFs today and am going short. I don't believe anything short of direct government hiring can put American's back to work quickly and stimulate the economy and given the total gridlock between the Tea Party and the President, I don't think the government will be able to do anything effective quickly. I am very sad about what I see and also I am happy that my analysis of what the central banks and governments could do to monetize debt was for the time being wrong.
I will shift back to my previous paradigm if I see all of the following occurring:
1. China moving towards a resolution of its banks developing liquidity and GDP contraction problems
2. Anything that looks vaguely politically feasible for the EU to come together to monetize their un-repayable debt.
3. The Federal Reserve Stepping Up with QE 3 on Steroids
4. The US Government Actually doing Something that Will Actually Stimulate Economic Growth.
For now, I see all 4 points being relatively solid "No's". The more I look at it, the more I see that the lynch pen, China, appears to be going down and without strong growth in China, all bets are off as far as growth in Europe and the US.
Again, I could be wrong. I am sharing with you so that you can weigh these thoughts for yourself. Evolution requires questioning the prevailing paradigm. In this case I am questioning my own paradigm, my own wisdom or lack thereof.
Hope this post is of benefit.
Among the sea of spun news, clear and massive ongoing market manipulations by the panicking Derivatives Nightmare Financial Amalgamations and the Central Banks that work with them, there is one publication that speaks with clarity and presents data, and a point of view with calm and conviction that I trust. Cutting through the spin and MOPE and the daily manipulations and raids and propaganda, Jesse speaks the truth and he does it with calm. This is a must read. The first few quotes are his way of saying, the giant raid you saw over the last week on gold and silver was definitely initiated by Western Central banks that were aiming for "Dramatic Effect" and also probably to keep a few of the largest derivatives players who have been doing their bidding to keep the price of gold down for years from having a commercial signal failure in their heavily concentrated long term short positions.
There are great charts and nice formatting in this article and I suggest you click on the link and see them, rather than just reading these excerpts:
"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.
Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded.
The US Fed was very active in getting the gold price down. So was the U.K."
Sir Eddie George, Bank of England, September 1999
"That day the U.S. 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 Volcker, Nikkei Weekly 2004
“Central banks stand ready to lease gold in increasing quantities should the price rise.”
Alan Greenspan, US Federal Reserve Bank, 24 July 1998
As an aside, the lease rates for gold went negative about four days before the recent bear raids in the metals markets began. This was most likely due to an excess of fresh supply being offered on the markets by the Western central banks. The bullion banks saw this and dropped their bids to take full advantage of the knowledge of this operation, or more properly, subsidy.
The central bank gold is leased to the bullion banks, like the market makers at the LBMA. Among these are JPM, GS, HBSC, BofA, DB, and Barclays. The gold is then sold into the bullion markets in London, or used as collateral for leveraged paper transactions. With a lag, this additional supply affects the futures and ETF trades with additional leverage in New York.
The week of Nov 21 may be one of particular interest to US investors in precious metals. The cross currents may make it even more volatile than this August with its 'Night of the Long Knives.' Or perhaps the banking metals bears have their eyes to the future and are pre-emptively striking now.
There is a an option expiration for December 2011 contracts that week, on November 22. December is a big delivery month, so fireworks are always expected. And we are entering a seasonally strong period for the precious metals.
The US 'Super-Committee' to resolve the debt crisis will be facing a November 23 deadline to vote on a plan which they will present to the Congress and the President on Dec 2. This will avoid triggering 'automatic cuts' to take place in 2013.
November will be the real kick off month for the US presidential elections.
On November 22 the US will release its first estimate of 4Q GDP.
On November 23 the Fed will release its latest FOMC Minutes.
The November Jobs Report will be released the following Friday on December 2.
And of course, November 24 begins a four day holiday weekend for Thanksgiving, including the famous 'Black Friday' for US retailers.
Oct. 14: House and Senate committees must submit recommendations to the committee by this date.
Nov. 23: Deadline for the committee to vote on a plan with $1.5 trillion in deficit reduction.
Dec. 2: Deadline for the committee to submit report and legislative language to the president and Congress.
Dec. 23: Deadline for both houses to vote on the committee bill.
Jan. 15, 2012: Date that the “trigger” leading to $1.2 trillion of future spending cuts goes into effect, if the committee’s legislation has not been enacted.
As the previous articles point out, central banks have continued to keep the value of real money hidden and the results of long term debt monetization (from the past and going forward) hidden. None the less, the value remains and will long after this giant debt creating ponzie machine implodes. It is appears to me that they know this and want to be the ones holding the gold when it does. This article provides a look at one side of the banking plutocracies play book on how to scare as many people as possible into selling them their gold at lower prices.
Market analyst Izabella Kaminska this month examined the collapse in gold lease rates and concluded that central banks likely have been trying to stuff gold into the market by various back doors, resulting in the placement of borrowed gold at exchange-traded funds like GLD and thus in gold price suppression as well.
Drawing on research by gold price suppression litigator Reginald H. Howe, Kaminska writes:
"While the likes of GLD insist that every share outstanding is matched by a gold bar — and this is almost definitely true — what they can't claim is that there's a way to differentiate gold with previous claims on it from gold without previous claims on it within its reserves (i.e., borrowed gold). It is consequently entirely possible that gold ETFs are sitting on mountains of borrowed central bank gold.
"GLD's defence, of course, is that prior claims on its reserves are not their concern. They are the liablity of the party that delivered the gold to GLD (almost certainly a bullion bank). Thus it is the bullion bank that risks being squeezed on delivery in the physical market, not GLD.
"Of course, with a negative interest rate for borrowing gold, the bullion banks are being more than compensated for the risk of a squeeze. On top of everything they can always create new GLD shares ad infinitum, if needs be. (At least until all central bank gold stock has been lent into gold ETFs, arguably forcing central banks to replenish the gold lending pool via market purchases.)
"In the above scenario — in which bullion banks are possibly recycling borrowed gold into GLD shares to sell into the market — these short sales will put pressure on GLD units themselves."
Kaminska's commentary is a bit too obscurely headlined "Why Gold Forward Rate Inversion Is Important" and you can find it at FT Alphaville here:
It has now become apparent that China has joined the Western Banking Price Suppression scheme even as Europe Prepares a plan for vast monetization of toxic sovereign debt. It is apparent that China has agreed to help support the effort to use silver as a lever to drive down gold prices because they've been convinced that the People of the world, includng their own see that the dollar and the euro will be the target of endless monetization because currencies are based on debt alone and since that deb is increasingly seen as not repayable, they no that people and more more countries realize that in the long haul those currecies will be worth less. If this is the G20 coordinated response to the European Debt crisis then you can feel certain there is one thing you can not trust anymore, its the One World Government and their phony monopoly money in my opinion.
"…Wondering what caused the dramatic plunge in gold and silver earlier? Wonder no more: the CME's counterpart in China, the Shanghai Gold Exchange, decided to follow through with an identical, if more substantial, action to that undertaken by the CME on Friday, and announced an increase in the Silver T+D contract margin from 15% to 18%, a 20% bump; the SGE also noted an increase in the price range limit from 12% to 15%, which will be promptly fulfilled, as margin hikes traditionally tend to lead to a sudden spike in vol, contrary to well-meaning expectations. There was a second announcement, slightly more cryptic one, noting that if volatility were to persist, the SGE would outright halt silver trading (although the Google Translation of this previously unseen form announcement is a little sketchy). Expect to see more exchange intervention in precious metals today. Regardless, those who bought silver 15% lower a whopping, oh, two hours ago, courtesy of the out and out sheer panic, are quite grateful to the Chinese. …"
Talk about the most dishonest manipulative practices of the Central Banks. Even as they plan to print trillions of new euros to bail out the insolvent banks they are using every resource to paint Gold and Silver. This doesn't help their credibility with me or anyone else who believes in honest money. The Central Banks and the government officials of these nations believe you can print all the money you want to monetize debt and then use every illegal method possible to manipulate the most trusted and long term demonstratable store of value, real hard cold cash, gold and silver, which have withstood the test of every fiat currency, each of which has collapsed along with every corrupted empire from long before the times of ancient Rome.
This plan is necessary to prevent a global cascading financial melt down. What is not necessary is for the central banks to destroy the investments of millions of honest citizens who hold gold and silver as real money to deal with what invevitably will be the long term push inflation from such large scale monetization of the unrepayble debt that that continues to accrue and which will continue to accrue as "austerity" causes a massive recessionary slow down in GDP and correlated drop off in tax receipts.
This plan is further confirmation that our credit based system now requires Quantitative Easing, QE to Infinity and Beyond and in even larger quanity that anyone ever imagined. The outright blatant attack on real money in "free markets" by coordinated attack of central banks is worse than any type of price rigging and shows that these banks have no operational concept of the terms, "transparency," "honesty", "truly free and fair markets," "ethical banking," or financial integrity in my opinion.
Here is the article link to the Telegraph Article that shows that the printing presses are ready to crank up. So why on Earth would gold and silver be down under such conditions. See the last several articles I have posted to get an idea.
There seems to be more and more question and secretive operations about physical gold and this story is just one example of the degree the authorities will go to make people think that Gold and Silver are the only real money left on Earth, outside the Yuan perhaps.
Where is Mexico's gold, and is it really gold at all
"…In the essay appended here, the Mexican journalist Guillermo Barba reports that the Bank of Mexico refuses to disclose where it is keeping the 93 tonnes of gold it claimed to have purchased this year, apparently doesn't even know the form of the gold it claims to have purchased, and thus for its new gold reserves may be only an unsecured creditor of banks that are members of the London Bullion Market Association, home of fractional-reserve gold banking and primary mechanism of the gold price suppression scheme.
Barba thus has demonstrated how easy it is for basic journalism to expose the gold price suppression scheme — just by putting simple and obvious questions to central banks and publicizing their refusal or inability to answer. With his essay Barba has done more journalism on this issue than The New York Times, The Wall Street Journal, the Financial Times, and all the world's mainstream news agencies combined. If only one of those news organizations would emulate him. But perhaps at least some Mexican news organizations will pursue his work now.
GATA's thanks go once again to the president of the Mexican Civic Association for Silver, Hugo Salinas Price, who spoke at GATA's Gold Rush 2011 conference in London this month and who translated Barba's essay into English.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
And Where Is Banco de Mexico's Gold?
By Guillermo Barba
Friday, September 23, 2011
The title of this article should have an obvious reply, but that is not the case.
Thanks to two requests for information made to the Banco de Mexico (Banxico), Mexico's central bank, based on the Federal Law for Transparency, we can say that it is probable that the gold in Mexico's international reserves is not in the country.
The requests were made by someone who never imagined how complicated it would be to obtain an answer to the question: How many bars of gold make up the recent acquisition of 93 tonnes of gold made by Banxico in the first quarter of 2011?
The bank's first denial of information was not long in coming: "We inform you that the information that you request is classified as reserved."
Two months later, after posing a request for revision, besides a procedure for remedying the non-compliance of a request for delivery of information, the Unit for Liaison of Banxico responded in August with written communication OFI007-4632, which increased doubts: "The gold that composes the reserve in question is made up of bars that may have a minimum and maximum of gold. The bars with minimum content weigh approximately 10.9 kilos, while those with maximum content have an approximate weight of 13.4 kilos. The information is published by the London Bullion Market Association. … Due to the variability of the content of gold in the bars, it is not possible to specify with certainty the exact number of bars purchased."
Having received this reply, we asked the central bank: In what country or countries is the gold that forms part of the international reserves of Mexico physically located?
The answer, coded OFI007-4934 (documents of which this writer possesses copies), dated September 19, is extraordinary: "The Information Committee of Banco de Mexico … confirms the classifications made by the Administrative Unit and, therefore, access to the requested information will not be granted, since it is classified as reserved."
I'm not the only one who see's thing the way I do. All it takes is a whiff of real deflation, US bank failures resulting from the euro debt contagion (not at all limited to Greece) and QE to infinity and beyond and then no amount of central bank manipulation will stop money flowing to real value and not debt soaked and doomed debt based fiat currencies.
2:35p ET Sunday, September 25, 2011
Dear Friend of GATA and Gold:
Fund manager Michael Pento, interviewed by King World News, attributes the pullback in gold, silver, and commodities to disappointment that the Federal Reserve's latest bond market intervention didn't create more money and to intervention in the gold market by increasingly desperate central banks. You can find an excerpt from the interview at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Don't forget to view the Front Line Video that outlines how the current B team of Greenspan and Summers, the master of Gold price supression brought us to this point: Brooksley Born an American Hero
Great article. You won't read about this in the United States mainstream financial press anytime soon:
"…Is gold becoming the new currency? The Swiss stock exchange will soon offer clients the possibility of having post-trade profits paid out in gold.
Introducing the new service, post-trade specialists operating on the Swiss stock exchange Six Securities Services (a subsidiary of Six Group, owner of the Swiss stock exchange) said the new payment versus delivery service using gold was the first of its kind in the world and would operate “exactly like” a new currency.
The Swiss stock exchange and Scoach Switzerland, the stock market for structured products, plan to introduce the listing and trading of products in XAU gold units (equal to one troy ounce of gold) in October.
Clients wishing to take advantage of the new payment versus delivery service will need to have an account denominated in XAU gold with Six Securities Services, as they would have an account in euros, francs or dollars, Six spokesman Alain Bichsel told swissinfo.ch.
And although there is no minimum requirement on the amount a client has in the gold account, the account will need to be stocked well enough to cover the proposed trade – as with any other currency, says the company.
Gold will be valued in dollars and stocked at Six’s gold warehouse facilities in Olten, northern Switzerland. Gold account keeping fees have yet to be determined.
“Gold is like the new currency,” Bichsel explained. “You can trade about 23 currencies on the Swiss stock exchange. It works exactly the same as a new currency.”
Bichsel said the service was a world first and was being introduced because of the current economic climate which was seeing a high demand for “the security of gold”.
The price of gold has jumped from around $1,400 (SFr1,260) an ounce in January to peak at nearly $1,900 in August and is currently trading at around $1,730 an ounce.
Professor of finance at St Gallen University and director of the Swiss Institute of Banking Manuel Ammann said the volumes of gold products that have been traded in recent times had increased significantly.
One reason for that, he said, was that as economic conditions force more central banks, including the Swiss National Bank, to pursue policies of weakening their currencies, trust in traditional currencies is eroding.
“Gold has appreciated a lot and there’s not so much trust in paper currencies,” Ammann told swissinfo.ch. “This means that more and more people start thinking of new means of how their purchasing power can be maintained.”
According to Bichsel the service has been introduced following consultations with stock exchange customers who asked for the possibility of trading with gold. He said the service would be open to anybody with permission to trade on the stock exchange, regardless of the size of the client.
Exactly who those clients will be remains the great unknown. Bichsel says observers will have to wait until the service officially begins to see what happens. He said while the service is here to stay, there are no plans to introduce it on other stock exchanges.
“Theoretically it’s open to everybody, so it’s not closed to only big fortunes or big banks,” he said. “The market will show us if it’s needed or if it works.”
Ammann said that although he could see a “potential niche” in the use of gold as a settlement currency, it was difficult to see broader applications of the offer.
“I can see a certain application in terms of gold products or structured products on gold, or funds denominated in gold or things like that where a settlement currency in gold could facilitate in the setting up such products,” Ammann said.
However, he added that while the service had potential, “the interpretation of gold being a new shadow currency or parallel currency is probably going a bit too far”.
“Perhaps the Swiss exchange is now a really early mover and has a lot of foresight in that respect, but currently I see no immediate threat that we are all going to be soon thinking in terms of gold when we go shopping!”
Sophie Douez, swissinfo.ch…"