The Fed On Gold Price Manipulation

Lately various media outlets have been swamped with stories and allegations of precious metal manipulation ranging from the arcane, to the bizarre to the outright ridiculous. At issue is not that these claims of price fraud are unfounded - they very well may be completely true - but without a notarized facsimile of an actual trade ticket signed by Brian Sack, or his replacement Simon Potter, or any of the BIS traders confirming they are indeed selling gold on behalf of the Fed, BOE, ECB, SNB or BOJ simply to keep the price of the metal down, what such constant factless accusations (and no, sorry, a chart showing that the price of gold may go up or go down sharply indicates merely that and nothing about the underlying factors for such a move) do is to habituate the broader public to the real issues surrounding precious metal, and other asset class, manipulation. So instead of searching for circumstantial evidence which one can easily find everywhere, we decided to go straight to the source. To do that we go back to a post we wrote back in September of 2009, based on an internal previously confidential Fed document, which conveniently enough explains everything vis-a-vis gold manipulation and leaves nothing to speculation or misinterpretation. Zero Hedge presents the smoking gun that may provide responses to all the various open questions regarding the Fed's Modus Operandi in the gold arena which answer the core question - motive - courtesy of a declassified memorandum, written by none other than the then Fed Chairman, and addressed to the president of the United States.

Group On -> Group Off: The Infamous 'Matterhorn' Formation

Group-On, Group-Off is not the title of the new Karate Kid movie but we couldn't resist but highlight the sheer lunacy of this market...
 

 

Mike “Mish” Shedlock Answers: Is Global Trade About To Collapse; And Where Are Oil Prices Headed?

As markets continue to yo-yo and commentators deliver mixed forecasts, investors are faced with some tough decisions and have a number of important questions that need answering. On a daily basis we are asked what’s happening with oil prices alongside questions on China’s slowdown, why global trade will collapse if Romney wins, why investors should get out of stocks, why the Eurozone is doomed, and why we need to get rid of fractional reserve lending. Answering these and more, Mike Shedlock's in-depth interview concludes: "The gold standard did one thing for sure. It limited trade imbalances. Once Nixon took the United States off the gold standard, the U.S. trade deficit soared (along with the exportation of manufacturing jobs). To fix the problems of the U.S. losing jobs to China, to South Korea, to India, and other places, we need to put a gold standard back in place, not enact tariffs."

The Reality Of The Rest Of Draghi's 'Believe-Me' Speech

While it is probably not surprising that so many decided to focus on those few words of relevance to an implicitly self-aggrandizing crowd of long-only risk-takers and commission-makers; the truth is that, as UBS notes, "Draghi was stating a fact, not changing a policy". Putting the fateful sentence in the context of the rest of his speech/interview is critical and most importantly, we agree with UBS' Justin Knight's opinion that Draghi did nothing more than make a technical observation on an impairment in monetary policy transmission (as we discussed here). Regardless, if our interpretation is correct, then the rally in peripheral bonds should unwind quickly. The size of the move probably has knocked many shorts out of the market.

Germany vs the ECB..the noise gets louder/Bad Dallas Mfg report/silver and gold withstand another raid prior to first day notice

Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 3 hours ago

Good evening Ladies and Gentlemen: Gold closed at up today to the tune of $1.80 at $1619.70.   However the star of the show was silver rising by 54 cents to $28.04.  Something happened today which has not happened in many years.  The cartel could not whack silver and especially gold into it's  big delivery month of August. Since I have been following gold and silver at the comex, today was the

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This Week's US Economic Calendar

Gold Daily and Silver Weekly Charts - Silver Would Not Be Denied

SP 500 and NDX Futures Daily Charts - Not Even Enough Volume for End of Month Rally

 

Debt Bomb, Debt Bomb, You're A Debt Bomb: A Bailout, Oooh, You Turn Me On

When all you can do is cry and sit on your hands - since no-one is actually trading given today's volumes - here is some Monday Mirth. Comedian Dominic Frisby explains the Debt Bomb in all its 'global financial crisis stripped bare' beauty: "mal-investment, oooh you turn me on."

Treasury Admits It Underestimated Debt Needs, Predicts Ceiling Breach In 2012; $600 Billion More Debt In Second Half

Back on April 30, when the US Treasury, together with the TBAC chaired by Matt Zames (who as everyone knows is being groomed to take over JPMorgan after Jamie gracefully steps down) sat down put together its latest debt funding needs projection, we openly mocked the numbers when we said "Now obviously we are all for the US needing less debt, however we wonder: did the US discover some magical source of tax revenue: last we checked the companies with $100+ billion in cash were paying virtually zero taxes, and US workers were making less and less courtesy of more and more jobs being converted into temp jobs with lower wages, and less withheld tax as a result." Sure enough, minutes ago the Treasury just admitted what we and our readers knew all along: in its quarterly Treasury refunding appetizer, it noted that during the "September 2012 quarter, Treasury expects to issue $276 billion in net marketable debt, assuming an end-of-September cash balance of $60 billion.  This borrowing estimate is $12 billion higher than announced in April 2012.  The increase is primarily due to lower receipts, higher outlays, redemptions of portfolio holdings by the Federal Reserve System, and higher issuances of State and Local Government securities." In other words: if only it wasn't for that pesky lack of revenue and excess spending our mocking would have been for nothing. Alas, it was spot on, and as a result instead of needing $253 billion in fiscal Q4, the US will need $272 billion (after having a $5 greater financing need in Q3 as also expected).

VIX, Credit, And Treasuries Warn As Stocks Yawn

Equities traded in a very narrow range (aside from an early day-session stop-run) amid extremely low volume in equity cash and futures markets and ended the day modestly lower (holding the post-Draghi gains). However, a funny thing happened on the way to the equity bull market; HY and IG credit have underperformed since mid-day Friday, VIX (+1.3vols to 18.03%) has risen notably since the open on Friday - completely shrugging off equity's strength, and while Treasuries saw a great deal of ugliness at the end of last week - and a pull back would be expected - they notably outperformed (relatively speaking) their equity cousins today. The USD gained 0.25% today as the EUR dropped a notable 0.5% but only WTI reacted to that (by dropping 0.67% today) while Copper and Gold trod water and Silver spurted to a high-beta 1.7% gain (crossing back above its 50DMA for the first time since mid-March). As Unilever and Texas Industries issue debt at record-low coupons we also note that IG/HY advance-declines lines are extremely high and along with implied-skewness in SPY options suggests a very high level of complacency.




Daily Readers...Knew this would happen 3 years ago...

The World’s Gold Is Moving From West To East

Did you know that, according to Capgemini and the Royal Bank of Canada’s latest World Wealth Report, there are now more millionaires in Asia than North America…? An estimated 3.37 million individuals in the Asia-Pacific region have a liquid net worth of over US$1 million. That compares to 3.35 million in North America. The same trend is evident in the gold market. While the current world hubs for gold trading and storage are London, Zurich, and New York, stores of physical metal are also beginning to migrate east. Gold storage facilities are springing up all over Asia like mushrooms after a summer rain. Back in 2009, the Hong Kong Airport Authority set up the first secure gold storage facility inside the confines of the Hong Kong Airport. This September, Malca-Amit, the Tel Aviv-based diamonds and precious metals company is opening a second state of the art facility at the airport, which will have capacity for 1,000 metric tons of gold. That compares to the 4,582 tons that the US government claims is in Fort Knox, and the record 2,414 million tons that the world’s exchange traded gold funds collectively held – mostly in London– as of July 5th.

NYSE Volume At Lowest 'Non-Holiday' Run-Rate Of The Year

Today's NYSE total volume has a run-rate around 15-20% below its average for this time of day. This is 2 standard deviations below average and most notably the lowest non-holiday day/week volume so far. At the same time, volume in the futures market is even worse with S&P 500 e-mini futures (ES) trading volumes around 30% below their recent average. It is perhaps no surprise then that ES is jiggling in a narrow 3pt range between its lows and its VWAP/unch level.

Charting The Diminishing Multiple Expansion Benefits Of Fed Action

The expanding-multiple-dependent US equity market that we have discussed numerous times (most recently here) appears to have hit a snag. While we noted the almost perfect correlation between forward-looking P/Es and the market during the last three years - and the clear hope-iness nature of said multiple expansion (and reality contraction) - what we failed to note until now is the significantly diminishing multiple-expansion impact from each of the Fed's actions. QE1 created a plus-4x multiple expansion (from ~10 to ~14), QE2 created a plus 1.5x pop in multiples, and Operation Twist around the same. Critically though, as soon as the Fed-sponsored money-supply 'flow' expansion ended, so the P/E multiple-expansion ended (and indeed reversed very quickly). It really is about the flow; and the threat of a crack-addicted market's requirement for perpetual QE.

Brazilian Drugs Lords Show More Integrity Than Central Bankers, Refuse To Sell Crack To Their People

Just over three short years ago, as equity markets were re-surging on a wave of taxpayer-funded bailout euphoria, we wrote "There is nothing that can be done at this point to prevent the administration from leeching every last dollar out of its taxpayers to benefit the terminally addicted and zombied bank system". We, in the imagined words of Ryan Lochte on Saturday, "Nailed It" as we see a market now so bereft of any human-based reaction to reality and merely a product of a drug-peddling central bank that appears to have become self-aware in its omnipotence. To wit, the present day; as we are teased and tickled day after day with the promise of more CB crack if we are just good boys and BTFD, the sad nay terrible fact is that even the most 'say hello to my little friend' of drug-dealers - those of the Brazilian Favelas - have decided to refuse to sell their 'crack' to their own people since it "also brought destruction in [the] community". Maybe, just maybe, the Fed will up its level of conscience this week to that of Brazilian drug-dealers.

EU Ombudsman To Probe Mario Draghi's Conflicts Of Interest

First some German dares to suggest Mario Draghi's ECB should be sued for getting a "bigger than god complex", and now the EU's ombudsman has the temerity to suggest Mario Draghi may have conflicts of interest due to his previous jobs, most notably at Goldman Sachs, a topic beaten to death on these pages... and various other factors.  From Spiegel: "As soon as you took office, there were discussions about his past in the U.S. investment bank Goldman Sachs - now has Mario Draghi, head of the European Central Bank, and problems with the EU ombudsman. It's about the membership of an influential banking lobby organization." What are the "other factors": well, one is Draghi's presence in the Group of 30 which as we have explained previously, is the real behind the scenes central planning group which decides the fate and future of the world (an extended write up here). The other factor? Mario's son Giacomo, who just happens to work as an interest rate trader at Morgan Stanley London.

In The News Today

July 30, 2012, at 7:31 pm
by Daniel Duval

Jim Sinclair’s Commentary

Geithner is on a trip to fix the problems of the euro.

Jim Sinclair’s Commentary

Goodbye ICE.

ICE to transition all cleared OTC derivatives to futures Washington (Platts)–30Jul2012/343 pm EDT/1943 GMT
Intercontinental Exchange plans in January to transition to futures all cleared over-the-counter derivatives products listed on its OTC energy market in an attempt to prevent many of its customers from facing new derivatives reform rules, particularly in the US.
Under the plan announced by ICE Monday, cleared North American natural gas, electric power, environmental products and natural gas liquids swaps will be listed as futures on the energy division of ICE Futures US, while cleared oil products, freight and iron ore swaps will be listed as futures on ICE Futures Europe.
"We anticipate a seamless transition that will largely preserve existing methods of transacting in ICE’s markets." ICE President and Chief Operating Officer Chuck Vice said in a statement.
ICE said in a notice to brokers Monday the decision to transition all existing OTC cleared swap and option products to economically equivalent future and options products was made following input from ICE participants, as well as extensive reviews and analysis of the Dodd-Frank Wall Street Reform and Consumer Protection Act in the US and similar laws being drafted in Europe and Asia.
"We have concluded that, once implemented, these laws and regulations are likely to increase the cost and complexity for swaps market participants relative to futures markets participants," ICE said. "Therefore, in January 2013, ICE plans to transition all existing OTC cleared swap and option products to economically equivalent future and option products and list the products for trading at either ICE Futures US or ICE Futures Europe, as appropriate for each product, with all the products continuing to be cleared at ICE Clear Europe."
More…





Jim Sinclair’s Commentary

Historically central banks wait for the crisis to overrun them before grasping at every straw they can find. The end is so well predicted that earlier action may occur this time.

Euro zone crisis heads for September crunch By Jan Strupczewski
BRUSSELS | Sun Jul 29, 2012 1:50pm EDT
(Reuters) – Over the past couple of years, Europe has muddled through a long series of crunch moments in its debt crisis, but this September is shaping up as a "make-or-break" month as policymakers run desperately short of options to save the common currency.
Crisis or no crisis, many European policymakers will take their summer holidays in August. When they return, a number of crucial events, decisions and deadlines will be waiting.
"September will undoubtedly be the crunch time," one senior euro zone policymaker said.
In that month a German court makes a ruling that could neuter the new euro zone rescue fund, the anti-bailout Dutch vote in elections just as Greece tries to renegotiate its financial lifeline, and decisions need to be made on whether taxpayers suffer huge losses on state loans to Athens.
On top of that, the euro zone has to figure out how to help its next wobbling dominoes, Spain and Italy – or what do if one or both were to topple.
More…

 

Jim’s Mailbox

July 30, 2012, at 10:44 am
by Jim Sinclair

Dear Jim,

The spin and MOPE cannot change the following reality:



After "Rise of China" the big banks have created 700 trillion US dollar unregulated financial betting’s (OTC (Over The Counter) derivatives). The main part is interest bettings (in order to reduce the interest rates so governments and banks do not go broke), and they have put long interest rates in US, Germany and Japan to unrealistic and uneconomical levels. The OTC derivatives are under water and cannot be settled without the big banks all over the world are going broke.
Capital flight from countries in distress is funding creditor states at zero rates. “This can’t go on for long".


Debt, Debt, Debt!



CIGA Finn

Dear Finn,

My only comment is that the BIS unilaterally changed their computer method of calculating derivates to value to maturity and thereby reduced them from the real amount of one quadrillion, one hundred and forty four trillion to $700 trillion. It was a magical disappearing act that everyone without question has now accepted as the notional value outstanding. It is the best lie of this entire drama.

Jim

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