"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's free work will soon be available at www.traderdan.biz

Monday, October 31, 2011

Monthly Gold Charts - October 2011

I have to keep my comments brief today as it is time for Halloween!

Looks like precious metals owners got a back of tricks today instead of treats. The culprit was the intervention by the Japanese monetary authorities who hit the Yen with a barrage of selling and sent the markets into a tizzy. The subsequent rally in the US Dollar then had the mindless hedgies dumping everything they bought late last week as equities were trashed along with the commodity sector in general.

Copper and silver were both sold off and gold went along for the ride to the downside.

If some of you might have noticed the Treasury bond had a gargantuan 3 point rally after just suffering a three point sell off last Thursday. How's that for ridiculously insane price action. The entire business cycle, just completely changed over the course of the last 4 days. Tomorrow it could merely take 24 hours to re-reverse the business cycle again. This is what computerized trading algorithms have created. And to think this is somehow supposed to be the "smoothly functioning price discovery mechanism".

What happened in the Treasury markets is that the Japanese came into the Forex markets and bought a boatload and then some of US Dollars and had to do something with all those worthless slips of paper so they turned around and bought up the equivalent amount of intervention's worth of worthless Treasuries.

No doubt the officials at the Federal Reserve are glad to see the Japanese doing their Operation Twist for them but I suspect that they are not particularly happy about seeing the Dollar moving higher!

We'll see where the dips buyers surface once again, particularly as Asia moves further into its session.

Happy Halloween to all!


  1. Is this suggesting gold is fairly valued or should not care one iota what the government says the inflation rate is considering it removes things that go up like food, college, energy, healthcare..etc..

  2. Hi Dan,

    Would you mind posting your long term u.s bond to gold ratio chart again please?

    Kind regards.

  3. Hi Dan,

    Just listened to the KWN Weekly Metals Wrap earlier tonight. You mentioned traders were very long the USD. When you look back over the past couple years these levels of long positions by the 'Large Traders' has marked the beginning of a significant rally. Seems counter-intuitive to me. http://finviz.com/futures_charts.ashx?t=DX&p=w1 Your thoughts are much appreciated!

  4. Dan,
    Since you got experience i was curious if you can comment on this from Tf metals report website:

    Posted by Ann Barnhardt - October 31, AD 2011 11:14 AM MST
    Yes, I called it late last week and strongly urged MF customers to make a hasty exit stage right, but I absolutely did not see what happened this morning coming. This is utterly unprecedented. The Chicago Mercantile Exchange issued an email circular this morning (I received mine at 8:39 am MDT) stating that all MF Global positions were limited to LIQUIDATION ONLY and all MF employees and brokers and traders were banned from the floor of the exchange.

    Is this legal and is this something that really never happened before? Should people be worried about leaving money in the trading account you think?

  5. Concerning MF GLOBAL;

    I am posting the latest information in its entirety that I have from Dow Jones detailing what is taking place as the CME Group attempts to deal with the mess resulting from a firm that appears to have clearly violated all regulations and safeguards built into the system to protect their clients from exactly this thing.

    Traders were banned from the trading floor who were using firms that were clearing through MF GLOBAL (the count I had was 25 firms). The reason was that the monies backing the trades could not be verified to actually exist since the books of MF were so screwed up.

    Here is the article; it is copyrighted so I want to make sure it is properly attributed to Dow Jones.

    By Jacob Bunge and Doug Cameron

    CME Group Inc. (CME) on Tuesday sought to rally major clearing firms to take
    on parts of MF Global's client base, an effort that could free up some customer
    money trapped by the brokerage firm's collapse Monday, according to people
    familiar with the situation.

    The world's largest futures exchange group, which counted MF Global as one of
    its biggest customers, held a conference call Tuesday morning with major
    clearing members to outline the plan, and individual clearing firms were being
    contacted about participating, according to people close to the process.

    If successful, the effort would free up some of the cash that has been tied
    up after the New York firm filed for bankruptcy Monday, and discrepancies
    emerged in the level of client assets held by MF Global. CME's goal was to
    complete the effort within about 24 hours, one of the people familiar said.

  6. here is part two of the article:

    A spokeswoman for CME declined comment Tuesday.

    The swift downfall of MF Global has caught up many smaller futures and
    options brokers that relied upon the firm to clear their trades executed at
    major derivatives exchanges, including the Chicago Mercantile Exchange and New
    York Mercantile Exchange, both run by CME. As a clearing member, MF Global
    presided over the collateral posted by customers to back up outstanding trades.

    While MF Global's clients have been able to transfer trading positions to
    other trade-clearing companies, the collateral previously posted through MF
    Global has been stuck as regulators and exchanges investigated "possible
    deficiencies" in the level of customer assets held.

    Chicago-based investment firm Grant Park Funds, managing about $1 billion,
    was one example. On Tuesday the firm told its investors in a notice that 2.3%
    of its cash remains with MF Global, about $20 million, held in U.S. Treasury
    bills. Grant Park was in the process of transferring some positions to
    Jefferies Bache LLC, another clearing firm, said Pat Meehan, chief operating
    officer of the firm.

    The effort pursued by CME Tuesday could allow some of that collateral to
    shift to other clearing firms, according to people familiar with the matter.
    How much of the collateral moves remains in question, they said.

    CME officials were trying to match up different ranks of MF Global's customer
    base--such as individual investors, floor traders and hedge funds--with other
    clearing firms that already service such clients, according to one source.

    Separately, CME on Tuesday moved to ease barriers preventing clients from
    trading with an emergency rule that will allow some to find a new clearer and
    resume trading.

    CME and some other exchanges had previously required MF Global clients to
    secure a release from the failed broker before they could transfer business,
    frustrating customers and sparking criticism about the lack of information
    being provided.

    The Chicago group invoked an emergency rule allowing members of its four main
    exchanges in Chicago and New York to seek a new clearing member, without
    recourse to the now-bankrupt MF Global, so long they were "not in deficit

    A CME spokesman was not immediately able to identify the size of the client
    group that could benefit from the emergency rule.
    11-01-11 1712ET

    Copyright (c) 2011 Dow Jones & Company, Inc.


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